<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 1995.
REGISTRATION NO. 33-61755
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------
LA QUINTA INNS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1724417
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
WESTON CENTRE
112 E. PECAN STREET
P.O. BOX 2636
SAN ANTONIO, TEXAS 78299-2636
(210) 302-6000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
--------------------------
JOHN F. SCHMUTZ
VICE PRESIDENT -- GENERAL COUNSEL
LA QUINTA INNS, INC.
WESTON CENTRE
112 E. PECAN STREET
P.O. BOX 2636
SAN ANTONIO, TEXAS 78299-2636
(210) 302-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
COPIES TO:
John M. Newell Bruce K. Dallas
Latham & Watkins Davis Polk & Wardwell
633 West Fifth Street, Suite 4000 450 Lexington Avenue
Los Angeles, California 90071-2007 New York, New York 10017
(213) 485-1234 (212) 450-4000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to a dividend or interest reinvestment plans, check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
investment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION, ISSUED SEPTEMBER 19, 1995)
$100,000,000
LA QUINTA INNS, INC.
% SENIOR NOTES DUE 2005
-----------------
INTEREST PAYABLE AND
-------------------
THE SENIOR NOTES MAY NOT BE REDEEMED PRIOR TO MATURITY. THE SENIOR NOTES WILL BE
REPRESENTED BY GLOBAL NOTES REGISTERED IN THE NAME OF A NOMINEE OF THE
DEPOSITORY TRUST COMPANY, AS DEPOSITARY. BENEFICIAL INTERESTS IN THE
SENIOR NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED
ONLY THROUGH, RECORDS MAINTAINED BY THE DEPOSITARY (WITH RESPECT TO
PARTICIPANTS' INTERESTS) AND ITS PARTICIPANTS. EXCEPT AS DESCRIBED
IN THIS PROSPECTUS, SENIOR NOTES IN CERTIFICATED FORM WILL NOT
BE ISSUED IN EXCHANGE FOR THE GLOBAL NOTES.
------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 10 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT
IN THE SENIOR NOTES OFFERED HEREBY.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
PRICE % AND ACCRUED INTEREST
-------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC (1) AND COMMISSIONS (2) COMPANY (1)(3)
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
PER SENIOR NOTE....................... % % %
TOTAL................................. $ $ $
</TABLE>
---------
(1) PLUS ACCRUED INTEREST FROM , 1995.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITERS."
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $250,000.
------------------------
THE SENIOR NOTES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF
ACCEPTED BY THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN
LEGAL MATTERS BY DAVIS POLK & WARDWELL, COUNSEL FOR THE UNDERWRITERS. IT IS
EXPECTED THAT DELIVERY OF THE SENIOR NOTES WILL BE MADE ON OR ABOUT
, 1995 THROUGH THE BOOK-ENTRY FACILITIES OF THE DEPOSITORY
TRUST COMPANY, AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
-------------------
MORGAN STANLEY & CO.
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
NATIONSBANC CAPITAL MARKETS, INC.
, 1995
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY (THE
"OFFERING") TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED
IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SENIOR NOTES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.......................................................................... 3
Risk Factors................................................................................ 10
Use of Proceeds............................................................................. 11
Capitalization.............................................................................. 12
Selected Financial Data..................................................................... 13
Pro Forma Financial Data.................................................................... 15
Management's Discussion and Analysis of Financial Condition and Results of Operations....... 18
Business.................................................................................... 27
Description of Senior Notes................................................................. 34
Underwriters................................................................................ 45
Legal Matters............................................................................... 45
Experts..................................................................................... 46
Available Information....................................................................... 46
Incorporation of Certain Information by Reference........................................... 46
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR NOTES
OFFERED HEREBY OR THE COMPANY'S 9 1/4% SENIOR SUBORDINATED NOTES DUE 2003 AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE, OR
INCORPORATED BY REFERENCE, IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE
REQUIRES, THE "COMPANY" OR "LA QUINTA" REFERS TO LA QUINTA INNS, INC., TOGETHER
WITH ITS COMBINED SUBSIDIARIES, AND UNINCORPORATED JOINT VENTURES AND
PARTNERSHIPS. LA QUINTA-REGISTERED TRADEMARK- IS A REGISTERED TRADEMARK OF LA
QUINTA INNS, INC.
THE COMPANY
La Quinta is the second largest owner/operator of hotels in the United
States, with 236 inns and more than 30,000 rooms. La Quinta, which operates
primarily in the mid-priced segment of the lodging industry, achieved an average
occupancy percentage of 70.1% and an average daily room rate ("ADR") of $47.65
for the year ended December 31, 1994. Founded in 1968, the Company has inns
located in 29 states, with strategic concentrations in Texas, Florida and
California. La Quinta currently owns a 100% interest in 228 of its inns and a
50% or greater interest in an additional seven inns. La Quinta operates all of
its inns other than one licensed inn. La Quinta's business strategy is to
continue to expand its successful core business as an owner/operator in the
mid-priced segment of the lodging industry.
OWNERSHIP AND MANAGEMENT CONTROL
Unlike most major chains in the lodging industry, La Quinta owns and manages
all but one of the inns that carry its brand. The Company believes that much of
its success is attributable to this operating control, which allows the Company
to achieve a higher level of consistency in both product quality and service
than its competitors. In addition, its operating control gives La Quinta the
ability to offer new services, determine expansion strategies, set pricing and
make other marketing decisions on a system-wide or local basis as conditions
dictate, without consulting third-party owners, management companies or
franchisees as required of most other lodging chains.
BRAND IMAGE
La Quinta has taken major steps to assure uniform high quality at its inns.
In 1993 and 1994, the Company invested approximately $65 million in a
comprehensive chainwide image enhancement program designed to give all of its
inns a new, fresh appearance while preserving their unique character. The
program, which was substantially completed in mid-1994, featured new signage
displaying a distinctive new logo, along with exterior and lobby upgrades
including brighter colors, more extensive lighting, additional landscaping,
enhanced guest entry and a full lobby renovation with contemporary furnishings
and seating areas for continental breakfast.
As a result of its ability to provide consistently high-quality, convenient
accommodations and excellent value, the Company believes that it has established
La Quinta as a strong, well-regarded mid-priced brand. The Company believes that
its brand recognition and reputation have enhanced the performance of its
existing inns and should provide an advantage for inns added in the future.
FOCUSED GROWTH STRATEGY
La Quinta attributes its strong operating performance in large part to the
successful implementation of the strategic plan formulated by the Company's
senior management team after their arrival at the Company in 1992. Under this
plan, management has (i) substantially restructured the Company, purchasing its
partners' interests in 19 unincorporated joint ventures and partnerships since
1993, refinancing a majority of its outstanding debt, and instituting corporate
and operating-level cost controls, (ii) reimaged all La Quinta inns through the
system-wide image enhancement program, and (iii) demonstrated its ability to
grow the number of inns -- acquiring 11 inns in 1993, 15 inns in 1994 and nine
inns in the first six months of 1995 -- while increasing profitability.
The Company intends to focus both on INTERNAL GROWTH -- enhancing revenues,
cash flow and profitability at its current portfolio of inns, and EXTERNAL
GROWTH -- adding new inns through opportunistic acquisitions and conversions of
existing properties and selective new construction. The Company's external
growth strategy is to reinforce its presence in existing markets and expand
selectively into new markets. For the
3
<PAGE>
twelve months ended June 30, 1995, the Company generated $79.6 million of cash
flow after required interest payments, maintenance capital expenditures (assumed
to be 5% of room revenues), dividends, taxes and partner distributions,
providing an internal source of funding to support its growth plan.
FACILITIES AND SERVICES
The typical La Quinta inn contains approximately 130 spacious, quiet and
comfortably furnished guest rooms averaging 300 square feet in size. Guests at a
La Quinta inn are offered a wide range of amenities and services, including
complimentary continental breakfast, free unlimited local telephone calls,
remote-control televisions with a premium movie channel, a swimming pool,
same-day laundry and dry cleaning, fax services, 24-hour front desk and message
service, smoking/non-smoking rooms and free parking. La Quinta guests typically
have convenient access to food service at adjacent free-standing restaurants,
including national chains such as Cracker Barrel, IHOP, Denny's and Perkins. La
Quinta has an ownership interest in 126 of these adjacent restaurant buildings,
which it leases to restaurant operators.
La Quinta inns appeal to guests who desire high-quality rooms, convenient
locations and attractive prices, but who do not require banquet and convention
facilities, in-house restaurants, cocktail lounges or room service. By
eliminating the costs of these management-intensive facilities and services, La
Quinta believes it offers its customers exceptional value by providing rooms
that are comparable in quality to full-service hotels at lower prices.
CUSTOMER BASE AND MARKETING
La Quinta's combination of consistent, high-quality accommodations and good
value is attractive to business customers, who account for more than 50% of
rooms rented. These core customers typically visit a given area several times a
year, and include salespersons covering a specific territory, government and
military personnel and technicians. The Company also targets both vacation
travelers and senior citizens. For the convenience of these targeted customer
groups, inns are generally located near suburban office parks, major traffic
arteries or destination areas such as airports and convention centers.
La Quinta has developed a strong following among its customers; internal
customer surveys show that the average customer spends 16 nights per year in a
La Quinta inn. The Company focuses a number of its marketing programs on
maintaining a high number of repeat customers. For example, La Quinta promotes a
"Returns-Registered Trademark- Club" offering members preferred status and rates
at La Quinta inns, along with rewards for frequent stays. The Returns Club had
approximately 235,000 members as of June 30, 1995.
The Company markets directly to companies and other organizations through
its direct sales force of 40 sales representatives and managers. This sales
force calls on companies which have a significant number of individuals
traveling in the regions in which La Quinta operates and which are capable of
producing a high volume of room nights. The Company also provides a central
reservation system, "teLQuik-Registered Trademark-," which currently accounts
for advance reservations for approximately 27% of room nights. The teLQuik
system allows customers to make reservations by dialing 1-800-531-5900 toll
free, or from special reservations phones placed in all La Quinta inns. In
addition, approximately 47% of room nights reflect advance reservations made
directly with individual inns and forwarded to the central reservation system.
In total, advance reservations account for approximately 74% of room nights.
FINANCIAL PERFORMANCE
La Quinta's financial results reflect both the successful implementation of
its business strategy and improvements in the lodging industry in recent years.
During the five-year period from 1990 through 1994, the Company's revenue per
available room ("REVPAR," which is the product of occupancy percentage and ADR)
increased from $27.01 per night to $33.39 per night, a compound annual growth
rate of 5.4%; revenue increased from $226.8 million to $362.2 million, a
compound annual growth rate of 12.4%; EBITDA (as defined in footnote 4 under
"Summary Combined Financial Data") increased from $79.3 million to $148.7
million, a compound annual growth rate of 17.0%; and net income increased from
$2.2 million to $37.8 million. During this same period, the Company reduced its
annual corporate overhead expense from $21.6 million in 1990 to $18.6 million in
1994, a decrease of 13.9%. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
4
<PAGE>
La Quinta's operating results in the first six months of 1995 versus the
first six months of 1994 continued this positive trend: REVPAR increased 12.8%,
revenues increased 21.1%, EBITDA increased 37.8% and net income increased 65.0%.
These results illustrate the operating leverage inherent in the lodging industry
during these periods. As occupancy and ADR increase, a high percentage of the
additional revenue translates into net income due to the low marginal costs of
increasing occupancy and ADR. The operating leverage is also reflected in the
Company's EBITDA margin, which rose from 40.0% in the first six months of 1994
to 45.6% in the first six months of 1995.
AEW TRANSACTION
In March 1990, the Company formed a limited partnership, La Quinta
Development Partners, L.P. ("LQDP"), with AEW Partners, L.P. ("AEW") pursuant to
the LQDP Partnership Agreement. LQDP was established for the purpose of
acquiring competitors' inns and converting them to the La
Quinta-Registered Trademark- brand. La Quinta managed the inns owned by LQDP.
Prior to the transaction described below, La Quinta, the general partner of
LQDP, owned a 40% interest and AEW, the limited partner, owned a 60% interest in
LQDP. La Quinta contributed property with a fair value of approximately $44
million and $4 million in cash to LQDP, and AEW contributed cash of $3 million
and an additional $69 million in the form of a promissory note which was
subsequently funded. At June 30, 1995, LQDP owned 47 inns and 16 adjacent
restaurant buildings.
Under the terms of the LQDP Partnership Agreement, AEW had a right to
require that any inns proposed to be acquired by the Company instead be acquired
by LQDP. This right expired by its terms in March 1995. In addition, in
connection with the formation of LQDP in 1990, AEW paid $3 million for an
option, subject to certain vesting and other conditions, to convert two-thirds
of its ownership interest in LQDP into a specified number of shares of the
Company's Common Stock (adjusted for stock splits, cash dividends, and
distributions from LQDP to AEW).
On June 15, 1995, AEW notified the Company that it would exercise, subject
to certain conditions, its option to convert two-thirds of its ownership
interest in LQDP into 5,299,821 shares of the Company's Common Stock. AEW also
agreed to sell the remaining one-third of its ownership interest in LQDP to the
Company for a negotiated price of $48.2 million in cash (collectively, with the
conversion, the "AEW Transaction"). The AEW Transaction was consummated on July
3, 1995. The Company financed the cash portion of the AEW Transaction through
borrowings under its and LQDP's bank credit facilities. The shares issued upon
conversion were registered pursuant to a registration rights agreement and all
of such shares, together with 20,250 shares of Common Stock previously owned by
AEW, were sold in a public offering that was consummated in August 1995. AEW
bore all of the costs related to the registration and sale of the shares in such
public offering.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................ $100,000,000 principal amount of % Senior Notes due
2005 (the "Senior Notes").
Maturity Date..................... , 2005.
Interest Payment Dates............ and , commencing , 1996.
Redemption........................ The Senior Notes may not be redeemed prior to maturity.
Mandatory Sinking Fund............ None.
Ranking........................... The Senior Notes will be senior unsecured obligations of
the Company and will rank PARI PASSU with the Amended
Bank Credit Facility (as defined under "Use of
Proceeds"). Neither the Senior Notes nor the Amended
Bank Credit Facility are secured by any of the Company's
assets. The Senior Notes are effectively subordinated to
the repayment of indebtedness of the Company's sub-
sidiaries, of which $20.3 million was outstanding at
June 30, 1995, as adjusted for this Offering. See
"Description of Senior Notes -- General."
Certain Covenants................. The indenture (the "Indenture") governing the Senior
Notes will contain certain covenants that, among other
things, will limit the ability of the Company and its
subsidiaries to create liens, enter into sale and
leaseback transactions, and, with respect to the
Company, engage in mergers and consolidations or
transfer substantially all of the Company's assets. The
Indenture does not contain any restriction on the
payment of dividends or any financial covenants. The
Indenture does not contain provisions which would afford
Holders of the Senior Notes protection in the event of a
transfer of assets to a subsidiary and incurrence of
unsecured debt by such subsidiary, or in the event of a
decline in the Company's credit quality resulting from
highly leveraged or other similar transactions involving
the Company. See "Description of Senior Notes --
General" and "-- Certain Covenants."
Use of Proceeds................... The net proceeds from the sale of the Senior Notes will
be used to repay outstanding indebtedness. See "Use of
Proceeds."
</TABLE>
6
<PAGE>
SUMMARY COMBINED FINANCIAL DATA
The following table sets forth certain combined financial information of the
Company, its wholly-owned subsidiaries and its combined unincorporated
partnerships and joint ventures and is qualified in its entirety by, and should
be read in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the combined financial statements, the
notes thereto, and other financial, pro forma and statistical information
included or incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ------------
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues.................. $ 206,778 $ 170,806 $ 362,242 $ 271,850 $ 254,122 $ 240,888 $ 226,830
Direct and corporate operating
costs and expenses (1)......... 112,520 102,405 213,508 168,021 156,529 154,846 147,560
Depreciation, amortization and
fixed asset retirements........ 20,630 17,772 37,977 24,055 24,793 35,201 34,660
Performance stock option (2).... -- -- -- 4,407 -- -- --
Non-recurring cash and non-cash
charges (1).................... -- -- -- -- 38,225 7,952 503
Operating income................ 73,628 50,629 110,757 75,367 34,575 42,889 44,107
Net interest expense............ 19,804 17,530 37,439 26,219 27,046 30,271 32,304
Partners' equity (1)............ 8,976 5,522 11,406 12,965 15,081 9,421 8,408
Net (gain) loss on property
transactions................... -- -- (79) 4,347 (282) 1,012 (3)
Income tax expense.............. 17,087 10,755 24,176 12,416 526 787 1,223
Net earnings (loss) (1) (3)..... 27,761 16,822 37,815 20,301 (8,754) 129 2,175
OTHER DATA
EBITDA (4)...................... $ 94,258 $ 68,401 $ 148,734 $ 103,829 $ 97,593 $ 86,042 $ 79,270
EBITDA margin (5)............... 45.6% 40.0% 41.1% 38.2% 38.4% 35.7% 34.9 %
Capital expenditures (6)........ $ 16,417 $ 55,435 $ 75,248 $ 32,623 $ 15,529 $ 13,803 $ 17,696
Purchase and conversion of inns
(7)............................ 40,292 20,989 34,690 38,858 4,060 15,487 18,574
Purchase of partners' equity
(8)............................ -- 9,622 53,255 78,169 -- 3,546 --
Ratio of EBITDA to net interest
expense........................ 4.8x 3.9x 4.0x 4.0x 3.6x 2.8x 2.5 x
Ratio of earnings to fixed
charges (9).................... 3.5x 2.6x 2.8x 2.4x 1.2x 1.3x 1.3 x
OPERATING DATA
Number of inns (10)............. 236 224 228 221 212 212 210
Occupancy percentage (11)....... 72.3% 70.0% 70.1% 65.1% 65.6% 64.8% 66.0 %
ADR (12)........................ $50.87 $46.62 $47.65 $46.36 $44.33 $43.11 $40.93
REVPAR (13)..................... 36.79 32.61 33.39 30.20 29.06 27.92 27.01
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1995
-------------------
<S> <C>
BALANCE SHEET DATA
Total assets............................................................................... $ 885,082
Current installments of long-term debt..................................................... 15,242
Long-term debt, excluding current installments............................................. 465,997
Partners' capital.......................................................................... 100,105
Shareholders' equity....................................................................... 222,583
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
<FN>
--------------------------
(1) Non-recurring cash and non-cash charges include charges related to the
write-down of certain joint venture interests carried on the equity method,
land and computer equipment, severance and other employee-related costs and
charges associated with a series of studies to improve operating results.
For the year ended December 31, 1992, these charges also include a
$2,696,000 increase in the allowance for certain notes receivable related
to inns sold by the Company prior to 1985, and $210,000 related to other
corporate expense items. Results for the year ended December 31, 1992 were
impacted by an additional charge of $1,214,000 to partners' equity in
earnings and losses related to the reallocation of losses of a combined
unincorporated joint venture to the Company.
(2) Performance stock option relates to the costs of stock options which became
exercisable when the average price of the Company's Common Stock reached
$30 per share (pre-split) for twenty consecutive days. In 1993, performance
stock option expense and certain other options were accelerated as a result
of this condition being met. Currently, the Company has no options
outstanding that require recognition of additional compensation expense.
(3) Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 requires the use of the asset and liability method
of accounting for deferred income taxes. The Company recorded the impact of
SFAS 109's implementation, an increase in net income of $1,500,000, as the
cumulative effect of an accounting change in the combined statement of
operations for the year ended December 31, 1993. Prior years' financial
statements were not restated to apply the provisions of SFAS 109.
(4) EBITDA, as defined by the covenants in the Company's 9 1/4% Senior
Subordinated Notes due 2003, is earnings before net interest expense,
income taxes, depreciation, amortization and fixed asset retirements,
extraordinary items, partners' equity in earnings and losses, gain or loss
on property and investment transactions and other non-recurring cash and
non-cash charges. This definition differs from the traditional EBITDA
definition which does not include adjustments for extraordinary items,
partners' equity in earnings and losses, gain or loss on property and
investment transactions and other non-recurring cash and non-cash charges
as follows:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
---------------- -------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Extraordinary items.................. $ -- $ -- $ -- $ 619 $ 958 $1,269 $ --
Partners' equity in earnings and
losses............................. 8,976 5,522 11,406 12,965 15,081 9,421 8,408
(Gain) loss on property
transactions....................... -- -- (79) 4,347 (282) 1,012 (3)
Non-recurring cash and non-cash
charges and performance stock
option............................. -- -- -- 4,407 38,225 7,952 503
<FN>
EBITDA is not intended to represent cash flow or any other measure of
performance in accordance with generally accepted accounting principals
("GAAP"). EBITDA, as defined above, is included herein because management
believes that certain investors find it to be a useful tool for measuring
the ability to service debt.
(5) EBITDA margin represents EBITDA divided by total revenues.
(6) Represents capital expenditures other than those for purchase and
conversion of inns. Capital expenditures for the six months ended June 30,
1995 and 1994 and the years ended December 31, 1994 and 1993, include costs
related to the Company's image enhancement program.
(7) Included in the six months ended June 30, 1995 and 1994 and the years ended
December 31, 1994, 1993, 1992, 1991 and 1990 were conversion costs of
$5,624,000, $5,806,000, $8,891,000, $7,231,000, $4,060,000, $3,977,000 and
$4,788,000, respectively.
(8) Purchase of partners' equity in the six months ended June 30, 1994 and the
years ended December 31, 1994 and 1993 includes approximately $9,322,000,
$9,322,000 and $42,091,000, respectively, related to the acquisition of the
La Quinta Motor Inns Limited Partnership ("LQP").
(9) For purposes of calculating this ratio, earnings include net earnings
(loss) before income taxes, extraordinary items, and the cumulative effect
of accounting change, partners' equity in earnings and losses of combined
unincorporated ventures that have fixed charges, fixed charges net of
interest capitalized, and amortization of capitalized interest. Fixed
charges include interest expense on long-term debt (before capitalized
interest) and the portion of rental expense allocated to interest.
(10) Number of inns includes 40 managed inns and inns licensed to others in the
years ended December 31, 1992, 1991 and 1990 and includes nine managed inns
and inns licensed to others in the six months ended June 30, 1994 and the
year ended December 31, 1993, the results of which are not included in the
combined financial statements.
(11) The occupancy percentage represents total rooms occupied divided by total
available rooms. Total available rooms represents the number of La Quinta
rooms available for rent multiplied by the number of days in the reported
period.
(12) ADR represents total room revenues divided by the total number of rooms
occupied.
(13) REVPAR represents the product of occupancy percentage and ADR.
</TABLE>
8
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
The unaudited summary pro forma combined condensed statement of operations
and balance sheet data presented below reflect the statement of operations and
balance sheet data as reported in the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 and Quarterly Report on Form 10-Q for the six
months ended June 30, 1995, adjusted to give effect to (i) the AEW Transaction
as if the transaction had occurred at the beginning of the periods presented or
at the balance sheet date, respectively, and (ii) the sale of the Senior Notes
and the anticipated application of the estimated net proceeds therefrom. See
"Use of Proceeds." The following table is qualified in its entirety by, and
should be read in conjunction with, "Pro Forma Financial Data" and the combined
financial statements, the notes thereto, and other financial, pro forma and
statistical information included or incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
PRO FORMA FOR THE PRO FORMA FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1995(1) 1994(1)
------------------- ------------------------
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C>
STATEMENT OF OPERATIONS
Total revenues.................................................... $ 206,778 $ 362,242
-------- --------
Operating costs and expenses:
Direct and corporate............................................ 112,520 213,508
Depreciation, amortization, and fixed asset retirements......... 21,178 39,073
-------- --------
Total operating costs......................................... 133,698 252,581
-------- --------
Operating income.............................................. 73,080 109,661
-------- --------
Other (income) expenses:
Net interest expense............................................ 21,649 41,199
Partners' equity................................................ 1,400 2,128
Net gain on property transactions............................... -- (79)
-------- --------
Earnings before income taxes.................................... 50,031 66,413
Income tax expense.............................................. 19,062 25,635
-------- --------
Net earnings.................................................. $ 30,969 $ 40,778
-------- --------
-------- --------
Ratio of earnings to fixed charges................................ 3.2x 2.5x
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
AT
JUNE 30, 1995
------------------------
<S> <C>
BALANCE SHEET DATA
Total assets............................................................................ $ 937,163
Short-term borrowings and current installments of long-term debt........................ 15,242
Long-term debt, excluding current installments.......................................... 515,197
Partners' capital....................................................................... 6,586
Shareholders' equity.................................................................... 318,983
<FN>
------------------------
(1) Pro forma condensed statement of operations does not reflect a
non-recurring, non-cash item directly attributable to the AEW Transaction.
See "Pro Forma Financial Data."
</TABLE>
9
<PAGE>
RISK FACTORS
RISKS OF THE LODGING INDUSTRY
The Company's business is subject to all of the risks inherent in the
lodging industry. These risks include, among other things, adverse effects of
general and local economic conditions (particularly in geographic areas where
the Company has a high concentration of inns), changes in local market
conditions, oversupply of hotel space, a reduction in local demand for hotel
rooms, changes in travel patterns, changes in governmental regulations that
influence or determine wages, prices or construction costs, changes in interest
rates, the availability of credit and changes in real estate taxes and other
operating expenses. The Company's ownership of real property, including inns, is
substantial. Real estate values are sensitive to changes in local market and
economic conditions and to fluctuations in the economy as a whole. Due in part
to the strong correlation between the lodging industry's performance and
economic conditions, the lodging industry is subject to cyclical changes in
revenues and profits.
COMPETITION
The lodging industry is highly competitive. During the 1980's, construction
of lodging facilities in the United States at historically high levels resulted
in an excess supply of available rooms. This oversupply had an adverse effect on
occupancy levels and room rates in the industry. The oversupply has now largely
been absorbed, with growth in demand exceeding growth in supply in each of the
last three years. However, there can be no assurance that an oversupply will not
exist again in the future. Competitive factors in the industry include
reasonableness of room rates, quality of accommodations, brand recognition,
service levels and convenience of locations. The Company's inns generally
operate in areas that contain numerous other competitors, certain of which have
substantially greater financial resources than the Company. There can be no
assurance that demographic, geographic or other changes in markets will not
adversely affect the convenience or desirability of the locations of the
Company's inns. Furthermore, there can be no assurance that, in the markets in
which the Company's inns operate, competing hotels will not pose greater
competition for guests than presently exists, or that new hotels will not enter
such markets. See "Business -- Competition."
ACQUISITION AND DEVELOPMENT RISKS
The Company's growth strategy of acquiring inns for conversion and selective
development of new inns will subject the Company to pre-opening and conversion
costs. As the Company opens additional Company-owned inns, such costs may
adversely affect the Company's operating results. Newly opened inns historically
begin with lower occupancy and room rates that improve over time. While the
Company has in the past successfully opened or converted new inns, there can be
no assurance that the Company will be able to achieve its growth strategy.
Construction, acquisition and conversion of inns involves certain risks,
including the possibility of construction cost overruns and delays, site
acquisition cost and availability, uncertainties as to market potential, market
deterioration after acquisition or conversion, possible unavailability of
financing on favorable terms and the emergence of market competition from
unanticipated sources. Although the Company seeks to manage its construction,
acquisition and conversion activities so as to minimize such risks, there can be
no assurance that new inns will perform in accordance with the Company's
expectations.
SEASONALITY
The lodging industry is seasonal in nature. Generally, the Company's inn
revenues are greater in the second and third quarters than in the first and
fourth quarters. This seasonality can be expected to cause quarterly
fluctuations in the revenues, profit margins and net earnings of the Company.
ABSENCE OF A TRADING MARKET FOR THE SENIOR NOTES
The Senior Notes are a new issue of securities that have no established
trading market and may not be widely distributed. The Company has no present
plan to list any of the Senior Notes on a national securities exchange or to
seek the admission thereof to trading in the National Association of Securities
Dealers Automated Quotation System. The Underwriters have advised the Company
that they currently intend to make a market in the Senior Notes, but they are
not obligated to do so and may discontinue any such market making at any time
without notice. There can be no assurance that an active trading market will
develop for the Senior Notes or of the price at which the holders would be able
to sell their Senior Notes. The Senior Notes could trade at prices that may be
higher or lower than the initial offering price thereof depending upon many
factors including prevailing interest rates, the Company's operating results and
the market for similar securities.
10
<PAGE>
CERTAIN COVENANTS
The Indenture governing the Senior Notes does not contain any restriction on
the payment of dividends or any financial covenants. The Indenture does not
contain provisions which would afford Holders of the Senior Notes protection in
the event of a transfer of assets to a subsidiary and incurrence of unsecured
debt by such subsidiary, or in the event of a decline in the Company's credit
quality resulting from highly leveraged or other similar transactions involving
the Company. See "Description of Senior Notes -- General" and "-- Certain
Covenants."
USE OF PROCEEDS
The net proceeds from the sale of the Senior Notes in the Offering are
estimated to be approximately $99 million. The Company intends to use the net
proceeds of the Offering to repay indebtedness under the Company Bank Credit
Facility (as defined below) and the unsecured lines of credit of the Company's
wholly-owned limited partnership, LQDP. Both the Company Bank Credit Facility
and the LQDP Lines of Credit (as defined below) are with a syndicate of banks
and NationsBank of Texas, N.A., as administrative agent for the banks
thereunder.
The Company's current credit facility (the "Company Bank Credit Facility")
consists of a $75 million secured line of credit and a $141.5 million secured
term credit facility with maturities of May 1999 and May 1997-May 2002,
respectively, bearing interest at either LIBOR, the prime rate or the
certificate of deposit rate plus an applicable margin as defined in the related
credit agreement. As of September 18, 1995, the Company had borrowings under the
secured line of credit and the secured term credit facility in the aggregate
amounts of $30 million and $141.5 million, respectively, at average interest
rates of 6.63% and 7.00%, respectively.
The Company, through LQDP, also has a credit facility (the "LQDP Lines of
Credit") consisting of a $35 million unsecured line of credit and a $30 million
364-day unsecured line of credit with maturities of May 1997 and April 1996,
respectively, bearing interest at either LIBOR, the prime rate or the
certificate of deposit rate plus an applicable margin as defined in the related
credit agreement. As of September 18, 1995, LQDP had borrowings under the $35
million unsecured line of credit and the $30 million 364-day unsecured line of
credit in the aggregate amounts of $30 million and $30 million, respectively, at
average interest rates of 6.52% and 6.50%, respectively.
During the twelve month period ended June 30, 1995, borrowings under the
Company Bank Credit Facility and the LQDP Lines of Credit have been made (i) to
fund working capital needs in the ordinary course of business, (ii) in the
amount of $91.8 million for the acquisition of partnership interests, including
the AEW Transaction and (iii) in the amount of $45.3 million for the acquisition
of existing inns for conversion to the La Quinta brand.
On September 12, 1995, the Company completed definitive documentation to
amend and combine the Company Bank Credit Facility and the LQDP Lines of Credit
into an amended and restated credit facility of the Company (the "Amended Bank
Credit Facility") consisting of a $200 million unsecured line of credit and a
$50 million 364-day unsecured line of credit, with maturities of August 2000 and
August 1996, respectively. Borrowings under the Amended Bank Credit Facility
will bear interest at either LIBOR plus an applicable margin, as defined in the
Amended Bank Credit Facility, or the prime rate. The applicable margin is
determined quarterly based upon predetermined levels of indebtedness to cash
flows, as defined in the Amended Bank Credit Facility. As of the closing of this
Offering, borrowings under the Amended Bank Credit Facility will bear interest
at LIBOR plus 65 basis points or the prime rate. Initial revolving credit
advances and issuances of letters of credit under the Amended Bank Credit
Facility are conditioned upon the closing of this Offering and the sale of the
Senior Notes. This Offering is conditioned upon the consummation of the
transactions contemplated by the Amended Bank Credit Facility.
11
<PAGE>
CAPITALIZATION
The following table sets forth cash and cash equivalents, short-term
borrowings and current installments of long-term debt and the capitalization of
the Company as of June 30, 1995, and (i) as adjusted to give effect to the AEW
Transaction as if the AEW Transaction occurred on June 30, 1995, and (ii) Pro
Forma to reflect the AEW Transaction and the sale of the Senior Notes and the
anticipated application of the estimated net proceeds therefrom as if such
transactions occurred on June 30, 1995. For additional information, see "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the combined financial statements, the notes thereto,
and other financial, pro forma and statistical information included or
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1995
-----------------------------------------
ADJUSTED FOR
THE
ACTUAL AEW TRANSACTION PRO FORMA
-------- --------------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents....................................................... $ 6,694 $ 6,694 $ 6,694
-------- --------------- -----------
-------- --------------- -----------
Short-term borrowings and current installments of long-term debt................ $ 15,242 $ 45,242(1) $ 15,242(3)
-------- --------------- -----------
-------- --------------- -----------
Long-term debt, excluding current installments
Mortgage loans, maturing 1995-2016............................................ $ 88,355 $ 88,355 $ 88,355
Industrial development revenue bonds, maturing 1995-2012...................... 57,142 57,142 57,142
% Senior Notes due 2005..................................................... -- -- 100,000(3)
Bank secured term credit facility, maturing May 30, 1997-May 30, 2002......... 141,500 141,500 -- (3)
Bank secured line of credit, maturing May 31, 1999............................ 34,000 42,200(1) -- (3)
Bank unsecured line of credit, maturing May 31, 1997.......................... 25,000 35,000(1) -- (3)
Bank unsecured line of credit, maturing May 31, 2000.......................... -- -- 149,700(3)
9 1/4% Senior Subordinated Notes due 2003..................................... 120,000 120,000 120,000
-------- --------------- -----------
Total long-term debt, excluding current installments........................ 465,997 484,197 515,197
-------- --------------- -----------
Partners' capital............................................................... 100,105 6,586(1)(2) 6,586
Shareholders' equity............................................................ 222,583 318,983(2) 318,983
-------- --------------- -----------
Total capitalization........................................................ $788,685 $809,766 $840,766
-------- --------------- -----------
-------- --------------- -----------
<FN>
------------------------
(1) Adjusted to reflect borrowings of $48.2 million for the Company's
acquisition of one-third of AEW's interest in LQDP. Approximately $30
million of the $48.2 million purchase price was drawn on LQDP's 364-day
unsecured line of credit and is therefore reflected as short-term
borrowings. The remainder of the purchase price was borrowed under the
Company's and LQDP's bank credit facilities.
(2) Adjusted to reflect the conversion of two-thirds of AEW's interest in LQDP
and the credit to shareholders' equity for the fair market value of the
assets acquired ($96.4 million).
(3) Adjusted to reflect the issuance of the Senior Notes, the repayment of
existing indebtedness under the Company Bank Credit Facility and the LQDP
Lines of Credit, and the replacement of the Company Bank Credit Facility
and the LQDP Lines of Credit with the Amended Bank Credit Facility.
</TABLE>
12
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth certain combined financial information of the
Company, its wholly-owned subsidiaries and its combined unincorporated
partnerships and joint ventures and is qualified in its entirety by, and should
be read in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the combined financial statements, the
notes thereto, and other financial, pro forma and statistical information
included or incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, RATIOS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues..................................... $ 206,778 $ 170,806 $ 362,242 $ 271,850 $ 254,122 $ 240,888 $ 226,830
Direct and corporate operating costs and expenses
(1)............................................... 112,520 102,405 213,508 168,021 156,529 154,846 147,560
Depreciation, amortization and fixed asset
retirements....................................... 20,630 17,772 37,977 24,055 24,793 35,201 34,660
Performance stock option (2)....................... -- -- -- 4,407 -- -- --
Non-recurring cash and non-cash charges (1)........ -- -- -- -- 38,225 7,952 503
Operating income................................... 73,628 50,629 110,757 75,367 34,575 42,889 44,107
Net interest expense............................... 19,804 17,530 37,439 26,219 27,046 30,271 32,304
Partners' equity (1)............................... 8,976 5,522 11,406 12,965 15,081 9,421 8,408
Net (gain) loss on property transactions........... -- -- (79) 4,347 (282) 1,012 (3)
Income tax expense................................. 17,087 10,755 24,176 12,416 526 787 1,223
Earnings (loss) before extraordinary items and
cumulative effect of accounting change............ 27,761 16,822 37,815 19,420 (7,796) 1,398 2,175
Net earnings (loss) (1)(3)......................... 27,761 16,822 37,815 20,301 (8,754) 129 2,175
Earnings (loss) per share before extraordinary
items and cumulative effect of accounting
change............................................ 0.56 0.35 0.78 0.41 (0.17) 0.03 0.05
Net earnings (loss) per share (3)(4)............... 0.56 0.35 0.78 0.43 (0.19) -- 0.05
OTHER DATA
EBITDA (5)......................................... $ 94,258 $ 68,401 $ 148,734 $ 103,829 $ 97,593 $ 86,042 $ 79,270
EBITDA margin (6).................................. 45.6% 40.0% 41.1% 38.2% 38.4% 35.7% 34.9%
Capital expenditures (7)........................... $ 16,417 $ 55,435 $ 75,248 $ 32,623 $ 15,529 $ 13,803 $ 17,696
Purchase and conversion of inns (8)................ 40,292 20,989 34,690 38,858 4,060 15,487 18,574
Purchase of partners' equity (9)................... -- 9,622 53,255 78,169 -- 3,546 --
Ratio of EBITDA to net interest expense............ 4.8x 3.9x 4.0x 4.0x 3.6x 2.8x 2.5x
Ratio of earnings to fixed charges (10)............ 3.5x 2.6x 2.8x 2.4x 1.2x 1.3x 1.3x
Cash dividends declared per common share........... 0.05 0.05 0.10 0.05 -- -- --
OPERATING DATA
Inns owned 100%.................................... 181 167 176 166 89 89 83
Inns owned 40-82%.................................. 54 46 50 45 80 79 81
Inns managed (11).................................. -- 10 -- 9 40 40 40
Inns licensed (11)................................. 1 1 2 1 3 4 6
--------- --------- --------- --------- --------- --------- ---------
Number of inns..................................... 236 224 228 221 212 212 210
Occupancy percentage (12).......................... 72.3% 70.0% 70.1% 65.1% 65.6% 64.8% 66.0%
ADR (13)........................................... $ 50.87 $ 46.62 $ 47.65 $ 46.36 $ 44.33 $ 43.11 $ 40.93
REVPAR (14)........................................ 36.79 32.61 33.39 30.20 29.06 27.92 27.01
BALANCE SHEET DATA
Total assets....................................... 885,082 786,037 845,781 749,495 539,183 574,687 586,969
Current installments of long-term debt............. 15,242 32,620 39,976 22,491 21,711 22,116 24,002
Long-term debt, excluding current installments..... 465,997 427,366 448,258 414,004 274,824 316,014 341,902
Partners' capital.................................. 100,105 86,861 92,099 85,976 62,060 50,471 37,270
Shareholders' equity............................... 222,583 164,857 189,231 149,057 124,321 130,175 129,167
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
<FN>
------------------------------
(1) Non-recurring cash and non-cash charges include charges related to the
write-down of certain joint venture interests carried on the equity method,
land and computer equipment, severance and other employee-related costs and
charges associated with a series of studies to improve operating results.
For the year ended December 31, 1992, these charges also include a
$2,696,000 increase in the allowance for certain notes receivable related
to inns sold by the Company prior to 1985, and $210,000 related to other
corporate expense items. Results for the year ended December 31, 1992 were
impacted by an additional charge of $1,214,000 to partners' equity in
earnings and losses related to the reallocation of losses of a combined
unincorporated joint venture to the Company.
(2) Performance stock option relates to the costs of stock options which became
exercisable when the average price of the Company's Common Stock reached
$30 per share (pre-split) for twenty consecutive days. In 1993, performance
stock option expense and certain other options were accelerated as a result
of this condition being met. Currently, the Company has no options
outstanding that require recognition of additional compensation expense.
(3) Effective January 1, 1993, the Company adopted the provisions of SFAS 109.
SFAS 109 requires the use of the asset and liability method of accounting
for deferred income taxes. The Company recorded the impact of SFAS 109's
implementation, an increase in net income of $1,500,000, as the cumulative
effect of an accounting change in the combined statement of operations for
the year ended December 31, 1993. Prior years' financial statements were
not restated to apply the provisions of SFAS 109.
(4) Earnings (loss) per share are computed on the basis of the weighted average
number of common and common equivalent shares outstanding in each period
after giving effect to the three-for-two stock splits.
(5) EBITDA, as defined by the covenants in the Company's 9 1/4% Senior
Subordinated Notes due 2003, is earnings before net interest expense,
income taxes, depreciation, amortization and fixed asset retirements,
extraordinary items, partners' equity in earnings and losses, gain or loss
on property and investment transactions and other non-recurring cash and
non-cash charges. This definition differs from the traditional EBITDA
definition which does not include adjustments for extraordinary items,
partners' equity in earnings and losses, gain or loss on property and
investment transactions and other non-recurring cash and non-cash charges
as follows:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Extraordinary items................................... $ -- $ -- $ -- $ 619 $ 958 $ 1,269 $ --
Partners' equity in earnings and losses............... 8,976 5,522 11,406 12,965 15,081 9,421 8,408
(Gain) loss on property transactions.................. -- -- (79) 4,347 (282) 1,012 (3)
Non-recurring cash and non-cash
charges and performance stock
option............................................... -- -- -- 4,407 38,225 7,952 503
<FN>
EBITDA is not intended to represent cash flow or any other measure of
performance in accordance with GAAP. EBITDA, as defined above, is included
herein because management believes that certain investors find it to be a
useful tool for measuring the ability to service debt.
(6) EBITDA margin represents EBITDA divided by total revenues.
(7) Represents capital expenditures other than those for purchase and
conversion of inns. Capital expenditures for the six months ended June 30,
1995 and the years ended December 31, 1994 and 1993, include costs related
to the Company's image enhancement program.
(8) Included in the six months ended June 30, 1995 and 1994 and the years ended
December 31, 1994, 1993, 1992, 1991 and 1990 were conversion costs of
$5,624,000, $5,806,000, $8,891,000, $7,231,000, $4,060,000, $3,977,000 and
$4,788,000, respectively.
(9) Purchase of partners' equity in the six months ended June 30, 1994 and the
years ended December 31, 1994 and 1993 includes approximately $9,322,000,
$9,322,000 and $42,091,000, respectively, related to the acquisition of
LQP.
(10) For purposes of calculating this ratio, earnings include net earnings
(loss) before income taxes, extraordinary items, and the cumulative effect
of accounting change, partners' equity in earnings and losses of combined
unincorporated ventures that have fixed charges, fixed charges net of
interest capitalized, and amortization of capitalized interest. Fixed
charges include interest expense on long-term debt (before capitalized
interest) and the portion of rental expense allocated to interest.
(11) The operating results of managed inns and licensed inns are not included in
the combined financial statements.
(12) The occupancy percentage represents total rooms occupied divided by total
available rooms. Total available rooms represents the number of La Quinta
rooms available for rent multiplied by the number of days in the reported
period.
(13) ADR represents total room revenues divided by the total number of rooms
occupied.
(14) REVPAR represents the product of occupancy percentage and ADR.
</TABLE>
14
<PAGE>
PRO FORMA FINANCIAL DATA
The following tables are qualified in their entirety by, and should be read
in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the combined financial statements, the
notes thereto, and other financial, pro forma and statistical information
included or incorporated by reference in this Prospectus.
The unaudited pro forma combined condensed statement of operations presented
below includes the statement of operations as reported in the Company's
Quarterly Report on Form 10-Q for the six months ended June 30, 1995, and as
adjusted to reflect (i) the AEW Transaction, and (ii) the sale of the Senior
Notes and the anticipated application of the estimated net proceeds therefrom,
as if such transactions occurred on January 1, 1995.
<TABLE>
<CAPTION>
AEW SENIOR NOTES PRO FORMA
SIX MONTHS PRO FORMA PRO FORMA SIX MONTHS
ENDED ADJUSTMENTS ADJUSTMENTS ENDED
JUNE 30, -------------------------- -------------------------- JUNE 30,
1995 DEBIT CREDIT DEBIT CREDIT 1995(H)
----------- ------------ ------------ ------------ ------------ -----------
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Total Revenues........................... $ 206,778 $ 206,778
----------- -----------
Operating costs and expenses:
Direct and corporate................... 112,520 112,520
Depreciation, amortization, and fixed
asset retirements..................... 20,630 $ 548(A) 21,178
----------- -----------
Total operating costs................ 133,150 133,698
----------- -----------
Operating income..................... 73,628 73,080
----------- -----------
Other (income) expense:
Net interest expense................... 19,804 1,658(B) $ 3,875(F) $ 3,688(G) 21,649
Partners' equity....................... 8,976 $ 7,576(C) 1,400
----------- -----------
Earnings before income taxes........... 44,848 50,031
Income tax expense..................... 17,087 2,046(D) 71(D) 19,062
----------- ------ ------ ------ ------ -----------
Net earnings........................... $ 27,761 $ 4,252 $ 7,576 $ 3,875 $ 3,759 $ 30,969
----------- ------ ------ ------ ------ -----------
----------- ------ ------ ------ ------ -----------
Earnings per common and common equivalent
share:
Net earnings........................... $ 0.56 $ 0.57
----------- -----------
----------- -----------
Weighted average number of common and
common equivalent shares outstanding.... 49,256 5,300(E) 54,556
----------- ------ -----------
----------- ------ -----------
Ratio of earnings to fixed charges....... 3.5x 3.2x
----------- -----------
----------- -----------
The accompanying notes form a part of the unaudited pro forma combined condensed statement of operations.
<FN>
------------------------------
(A) Records additional depreciation expense on the addition of $37.3 million of
depreciable assets. The depreciation expense was calculated using the
straight line method based on a 34 year remaining life.
(B) Represents the interest expense on additional debt of $48.2 million
relating to the acquisition of AEW's interest in LQDP at the effective
weighted average interest rate under the Company's and LQDP's credit
facilities of 6.88% per annum.
(C) Represents the elimination of AEW's equity in earnings.
(D) Reflects income tax effect of pro forma adjustments assuming an effective
income tax rate of 38.1%.
(E) Reflects the increase in weighted average shares outstanding.
(F) Reflects interest expense due to the issuance of $100 million in Senior
Notes.
(G) Reflects interest expense eliminated due to the repayment of approximately
$99 million of existing indebtedness under the Company Bank Credit Facility
and the LQDP Lines of Credit.
(H) In the third quarter of 1995, the Company will record $46.4 million
associated with the exercise of AEW's conversion option as a deduction
presented below net earnings in the Statement of Operations (Conversion of
Partner's Interest into Common Stock) in arriving at net earnings available
to common shareholders. This non-recurring, non-cash item is directly
attributable to the AEW Transaction and is not reflected in the pro forma
condensed statement of operations above.
</TABLE>
15
<PAGE>
The unaudited pro forma combined condensed balance sheet of the Company
presented below includes the balance sheet as reported in the Company's
Quarterly Report on Form 10-Q for the six months ended June 30, 1995, and as
adjusted to reflect (i) the AEW Transaction, and (ii) the sale of the Senior
Notes and the anticipated application of the net proceeds therefrom, as if such
transactions occurred on June 30, 1995.
<TABLE>
<CAPTION>
AEW SENIOR NOTES
AT PRO FORMA ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
JUNE 30, -------------------------- -------------------------- AT JUNE 30,
1995 DEBIT CREDIT DEBIT CREDIT 1995
--------- ------------ ------------ ------------ ------------ -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets......................... $ 38,569 $ 38,569
Other non-current assets............... 24,983 $ 1,000(C) 25,983
Net property and equipment............. 821,530 $ 17,027(A) 872,611
34,054(B)
--------- ------------ ------------ -----------
$ 885,082 $ 51,081 $ 1,000 $ 937,163
--------- ------------ ------------ -----------
--------- ------------ ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities.................... $ 75,058 $ 30,000(A) $ 30,000(C) $ 75,058
Long-term debt, excluding current
installments.......................... 465,997 18,200(A) $ 31,000(C) 515,197
Deferred income taxes and other........ 21,339 21,339
Partners' capital...................... 100,105 $ 31,173(A) 6,586
62,346(B)
Shareholders' equity (net of treasury
stock)................................ 222,583 96,400(B) 318,983
--------- ------------ ------------ ------------ ------------ -----------
$ 885,082 $ 93,519 $ 144,600 $ 30,000 $ 31,000 $ 937,163
--------- ------------ ------------ ------------ ------------ -----------
--------- ------------ ------------ ------------ ------------ -----------
The accompanying notes form a part of the unaudited pro forma combined condensed balance sheet.
<FN>
------------------------------
(A) Records the purchase of one-third of AEW's interest in LQDP using proceeds
from the Company's and LQDP's credit facilities and the related elimination
of one-third of AEW's partner's capital. Approximately $30 million of the
$48.2 million purchase price was drawn on LQDP's 364-day unsecured line of
credit and therefore is included in current liabilities.
(B) Reflects the purchase of the assets and the related elimination of
two-thirds of AEW's partner's capital. Also, reflects the net of the $142.8
million of Common Stock issued in the AEW Transaction and the $46.4 million
which represents the non-recurring, non-cash item which will be recorded as
a deduction presented below net earnings in the Statement of Operations
(Conversion of Partner's Interest into Common Stock) in arriving at net
earnings available to common shareholders in the third quarter of 1995.
(C) Reflects the issuance of the Senior Notes, the repayment of existing
indebtedness under the Company Bank Credit Facility and the LQDP Lines of
Credit, and the replacement of the Company Bank Credit Facility and the
LQDP Lines of Credit with the Amended Bank Credit Facility.
</TABLE>
16
<PAGE>
The unaudited pro forma combined condensed statement of operations presented
below includes the statement of operations as reported in the Company's Form
10-K for the year ended December 31, 1994, and as adjusted to reflect (i) the
AEW Transaction and (ii) the sale of the Senior Notes and the anticipated
application of the estimated net proceeds therefrom as if such transactions
occurred on January 1, 1994.
<TABLE>
<CAPTION>
AEW SENIOR NOTES
PRO FORMA PRO FORMA PRO FORMA
YEAR ENDED ADJUSTMENTS ADJUSTMENTS YEAR ENDED
DECEMBER 31, -------------------------- -------------------------- DECEMBER 31,
1994 DEBIT CREDIT DEBIT CREDIT 1994(H)
------------- ------------ ------------ ------------ ------------ -------------
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Total revenues....................... $ 362,242 $ 362,242
------------- -------------
Operating costs and expenses:
Direct and corporate............... 213,508 213,508
Depreciation, amortization, and
fixed asset retirements........... 37,977 $ 1,096(A) 39,073
------------- -------------
Total operating costs............ 251,485 252,581
------------- -------------
Operating income................. 110,757 109,661
------------- -------------
Other (income) expense:
Net interest expense............... 37,439 3,316(B) $ 7,750(F) $ 7,306(G) 41,199
Partners' equity................... 11,406 $ 9,278(C) 2,128
Net gain on property
transactions...................... (79) (79)
------------- -------------
Earnings before income taxes....... 61,991 66,413
Income tax expense................. 24,176 1,631(D) 172(D) 25,635
------------- ------ ------ ------ ------ -------------
Net earnings....................... $ 37,815 $ 6,043 $ 9,278 $ 7,750 $ 7,478 $ 40,778
------------- ------ ------ ------ ------ -------------
------------- ------ ------ ------ ------ -------------
Earnings per common and common
equivalent share:
Net earnings....................... $ 0.78 $ 0.76
------------- -------------
------------- -------------
Weighted average number of common and
common equivalent shares
outstanding......................... 48,624 5,290(E) 53,914
------------- ------ -------------
------------- ------ -------------
Ratio of earnings to fixed charges... 2.8x 2.5x
------------- -------------
------------- -------------
The accompanying notes form a part of the unaudited pro forma combined condensed statement of operations.
<FN>
------------------------------
(A) Records additional depreciation expense on the addition of $37.3 million of
depreciable assets. The depreciation expense was calculated using the
straight line method based on a 34 year remaining life.
(B) Represents the interest expense on additional debt of $48.2 million
relating to the acquisition of AEW's interest in LQDP at the effective
weighted average interest rate under the Company's and LQDP's credit
facilities of 6.88% per annum.
(C) Represents the elimination of AEW's equity in earnings.
(D) Reflects income tax effect of pro forma adjustments assuming an effective
income tax rate of 38.6%.
(E) Reflects the increase in weighted average shares outstanding.
(F) Reflects interest expense due to the issuance of $100 million in Senior
Notes.
(G) Reflects interest expense eliminated due to the repayment of approximately
$99 million of existing indebtedness under the Company Bank Credit Facility
and the LQDP Lines of Credit.
(H) In the third quarter of 1995, the Company will record $46.4 million
associated with the exercise of AEW's conversion option as a deduction
presented below net earnings in the Statement of Operations (Conversion of
Partner's Interest into Common Stock) in arriving at net earnings available
to common shareholders. This non-recurring, non-cash item is directly
attributable to the AEW Transaction and is not reflected in the pro forma
condensed statement of operations above.
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis addresses the results of operations
for the six month periods ended June 30, 1995 (the "1995 Six Months") and June
30, 1994 (the "1994 Six Months") and the years ended December 31, 1994, 1993 and
1992.
The Company's financial statements include the accounts of the Company's
wholly-owned subsidiaries and unincorporated partnerships and joint ventures in
which the Company has at least a 40% ownership interest and over which it
exercises substantial legal, financial and operational control. References to
"Managed Inns" are to those inns in which the Company owns less than a 40%
interest and which are managed by the Company under long-term management
contracts.
On June 15, 1995, AEW notified the Company that it would exercise, subject
to certain conditions, its option to convert two-thirds of its ownership
interest in LQDP into 5,299,821 shares of the Company's Common Stock. AEW also
agreed to sell the remaining one-third of its ownership interest in LQDP to the
Company for a negotiated price of $48.2 million in cash. The AEW Transaction was
consummated on July 3, 1995. Upon conversion of the partnership interest into La
Quinta Common Stock, the Company issued 5,299,821 shares of the Company's Common
Stock having a fair market value of $142.8 million based on the July 3, 1995 New
York Stock Exchange closing price. During the third quarter of 1995, the Company
will record net assets acquired at their fair market value of $96.4 million and
a non-cash, non-recurring item of $46.4 million associated with the exercise of
AEW's conversion option as a deduction presented below net earnings in the
Statement of Operations (Conversion of Partner's Interest into Common Stock) in
arriving at net earnings available to common shareholders. This non-recurring,
non-cash item is directly attributable to the AEW Transaction.
During the second quarter of 1994, the Company purchased the limited
partner's interest in one of its combined unincorporated joint ventures which
owned one inn. On July 1, 1994, the Company purchased nine inns which it managed
and which were previously held in two unincorporated joint ventures with CIGNA
Investments, Inc. (the "CIGNA partnerships"). The Company has continued to
operate these properties as La Quinta inns. Also during 1995 and 1994, La Quinta
acquired nine and six additional inns, respectively, for conversion to the La
Quinta-Registered Trademark- brand.
During 1994, the Company entered into agreements with several Mexican
investor groups (the "Development Accord") for the purpose of developing 22 La
Quinta inns in 15 cities in Mexico. Each of the inns will be developed and 100%
owned by a Mexican investor group and managed by the Company under long-term
management agreements (pursuant to which the Company will receive management and
licensing fees). On December 20, 1994, the Mexican government allowed the peso
to trade freely against the U.S. dollar. As a result, the peso suffered a
significant, immediate devaluation against the U.S. dollar. This resulted in
economic conditions that have delayed commencement of construction of La Quinta
inns under the Development Accord. The construction of the first La Quinta inn
under the Development Accord is anticipated to begin when economic conditions in
Mexico stabilize.
The following chart shows certain historical operating statistics and
revenue data. References to occupancy percentages and ADR refer to Company Inns
(inns owned by the Company or by unincorporated partnerships and joint ventures
in which the Company owns at least a 40% interest). Managed Inns and the La
Quinta licensed inns are excluded from occupancy and ADR statistics for all
periods for purposes of comparability. All financial data is related to Company
Inns unless otherwise specified.
<TABLE>
<CAPTION>
COMPARATIVE OPERATING STATISTICS AND REVENUE DATA
----------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------------------- ----------------------------------
1995 1994 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT ADR)
<S> <C> <C> <C> <C> <C>
Inn revenue.......................................... $ 202,661 $ 166,003 $ 353,348 $ 258,529 $ 239,826
Restaurant rental and other.......................... 4,017 3,796 7,675 6,464 7,208
Management services.................................. 100 1,007 1,219 6,857 7,088
---------- ---------- ---------- ---------- ----------
Total revenues....................................... $ 206,778 $ 170,806 $ 362,242 $ 271,850 $ 254,122
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Occupancy percentage................................. 72.3% 70.0% 70.1% 65.1% 65.6%
ADR.................................................. $ 50.87 $ 46.62 $ 47.65 $ 46.36 $ 44.33
Available rooms (1).................................. 5,305 4,900 10,188 8,226 7,916
<FN>
------------------------------
(1) Available rooms represent the number of rooms available for sale multiplied
by the number of days in the period reported.
</TABLE>
18
<PAGE>
THE 1995 SIX MONTHS COMPARED TO THE 1994 SIX MONTHS
TOTAL REVENUES increased to $206,778,000 in the 1995 Six Months from
$170,806,000 in the 1994 Six Months, an increase of $35,972,000, or 21.1%. Of
the total revenues reported in the 1995 Six Months, 98.0% were revenues from
inns and 2.0% were revenues from restaurant rentals and other revenues.
INN REVENUES are derived from room rentals and other sources such as charges
to guests for long-distance telephone service, fax machine use, vending
commissions, banquet revenues and laundry services. Inn revenues improved to
$202,661,000 in the 1995 Six Months from $166,003,000 in the 1994 Six Months, an
increase of $36,658,000, or 22.1%. The improvement in inn revenues was related
to an increase in occupancy percentage and ADR along with the revenues
associated with the acquisition of nine inns in the 1995 Six Months, the CIGNA
partnerships in July 1994 and six inns in the last half of 1994. Occupancy
percentage increased to 72.3% in the 1995 Six Months from 70.0% in the 1994 Six
Months. ADR increased to $50.87 in the 1995 Six Months from $46.62 in the 1994
Six Months. Improvements in both ADR and occupancy percentage are due, in part,
to the substantial completion of the Company's image enhancement program in
mid-1994, as well as general improvements in the hotel industry. In the 1994 Six
Months, the image enhancement program had only been partially completed.
RESTAURANT RENTAL AND OTHER REVENUES include rental payments from restaurant
buildings owned by La Quinta and leased to and operated by third parties.
Restaurant rental and other revenues increased to $4,017,000 in the 1995 Six
Months from $3,796,000 in the 1994 Six Months, an increase of $221,000, or 5.8%.
The increase is primarily the result of the additional restaurant buildings
owned by the Company through the acquisition of the CIGNA partnerships.
MANAGEMENT SERVICES REVENUE is primarily related to fees earned by the
Company for services rendered in conjunction with Managed Inns. Management
services revenue decreased to $100,000 in the 1995 Six Months from $1,007,000 in
the 1994 Six Months. The decrease is due to the acquisition of the CIGNA
partnerships in July 1994, eliminating the related management fees earned by the
Company.
DIRECT EXPENSES include costs directly associated with the operation of
Company Inns. In the 1995 Six Months approximately 42.2% of direct expenses were
represented by salaries, wages and related costs. Other major categories of
direct expenses include utilities, property taxes, repairs and maintenance and
room supplies. Direct expenses increased to $103,128,000 ($26.88 per occupied
room) in the 1995 Six Months from $93,149,000 ($27.18 per occupied room) in the
1994 Six Months. The increase in direct expenses period over period is primarily
attributable to the growth in number of inns and increase in occupancy. The
improvement in direct expenses per occupied room was primarily due to
efficiencies the Company achieved in labor costs, repairs and maintenance and
utilities expense and was partially offset by rising labor costs in regions with
low unemployment, increased credit card discounts resulting from a higher
percentage of guests paying with credit cards and increased property taxes.
CORPORATE EXPENSES include the costs of general management, office rent,
training and field supervision of inn managers and other marketing and
administrative expenses. The major components of corporate expenses are
salaries, wages and related expenses and information systems. Corporate expenses
increased to $9,392,000 ($1.77 per available room) in the 1995 Six Months from
$9,256,000 ($1.81 per available room, including Managed Inns) in the 1994 Six
Months, an increase of $136,000, or 1.5%. The decrease in corporate expenses on
a per available room basis is the result of the Company's efforts to control
fixed costs, while executing its growth plan in order to increase operating
profit.
DEPRECIATION, AMORTIZATION AND FIXED ASSET RETIREMENTS increased to
$20,630,000 in the 1995 Six Months from $17,772,000 in the 1994 Six Months, an
increase of $2,858,000, or 16.1%. This is due primarily to the increase in fixed
assets resulting from the acquisition of inns, including the CIGNA partnerships,
and additions from the image enhancement program. Depreciation, amortization and
fixed asset retirements also include retirements associated with the image
enhancement program and other capital improvements.
As a result of the above, OPERATING INCOME increased to $73,628,000 in the
1995 Six Months from $50,629,000 in the 1994 Six Months, an increase of
$22,999,000, or 45.4%. Additionally, operating margins were up 6.0 percentage
points, to 35.6% from 29.6%.
19
<PAGE>
INTEREST INCOME is primarily related to earnings on notes receivable and on
short-term investments of Company funds in money market instruments prior to
their use in operations or the acquisition of inns. Interest income decreased to
$579,000 in the 1995 Six Months from $1,069,000 in the 1994 Six Months, a
decrease of $490,000.
INTEREST ON LONG-TERM DEBT increased to $20,383,000 in the 1995 Six Months
from $18,599,000 in the 1994 Six Months, an increase of $1,784,000, or 9.6%. The
increase is primarily attributable to the increase in the outstanding balance on
the Company's credit facilities as a result of the acquisition of the CIGNA
partnerships and 15 inns since June 1994.
PARTNERS' EQUITY IN EARNINGS AND LOSSES reflects the interest of partners in
the earnings and losses of the combined joint ventures and partnerships which
are owned at least 40% and controlled by the Company. Partners' equity in
earnings and losses increased to $8,976,000 in the 1995 Six Months from
$5,522,000 in the 1994 Six Months. The increase is attributable to improvements
in operating performance of the inns and the increase in the number of inns in
LQDP. Occupancy for the LQDP inns increased 4.8 percentage points and ADR
increased by $3.78 in the 1995 Six Months compared to the 1994 Six Months. As of
June 30, 1995, LQDP owned and operated 47 inns, compared to 37 inns at June 30,
1994.
INCOME TAXES for the 1995 Six Months were calculated using an effective
income tax rate of 38.1%, compared to an effective income tax rate of 39.0% for
the 1994 Six Months. The effective income tax rate decrease reflects the
estimated impact of the difference between aggregate recorded cost and tax basis
of acquired assets from the AEW Transaction and a reduction of estimated state
income tax expense.
For the reasons discussed above, the Company reported NET EARNINGS of
$27,761,000, or $0.56 per share, in the 1995 Six Months compared to $16,822,000,
or $0.35 per share, in the 1994 Six Months, an increase in net earnings of
$10,939,000, or 65.0%.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
TOTAL REVENUES increased to $362,242,000 in 1994 from $271,850,000 in 1993,
an increase of $90,392,000, or 33.3%. Of the total revenues reported in 1994,
97.6% were revenues from inns, 2.1% were revenues from restaurant rentals and
other revenues and 0.3% were revenues from management services.
INN REVENUES increased to $353,348,000 in 1994 from $258,529,000 in 1993, an
increase of $94,819,000, or 36.7%. The increase in inn revenues was due
primarily to the acquisitions of La Quinta Motor Inns Limited Partnership
("LQP") and the CIGNA partnerships, an increase in ADR and occupancy percentage
and an increase in the number of available rooms. ADR increased to $47.65 in
1994 from $46.36 in 1993, an increase of $1.29, or 2.8%, while occupancy
increased 5.0 percentage points. The substantial completion of the Company's
image enhancement program contributed to the increases in ADR and occupancy.
Available rooms for 1994 were 10,188,000 as compared to 8,226,000 for 1993, an
increase of 1,962,000 available rooms, or 23.9%. The increase in the number of
available rooms was due to the acquisitions of five inns, the CIGNA partnerships
during 1994 and LQP in December of 1993.
RESTAURANT RENTAL AND OTHER REVENUES also include the Company's interest in
the earnings (accounted for using the equity method) of LQP through December 1,
1993, and miscellaneous other revenues, such as third party rental revenue from
an office building which also housed the Company's corporate offices through May
1993. Restaurant rental and other increased to $7,675,000 in 1994 from
$6,464,000 in 1993, an increase of $1,211,000, or 18.7%. This increase is
primarily the result of an increase in the number of wholly-owned restaurant
buildings leased to and operated by third parties due to the acquisition of LQP.
MANAGEMENT SERVICES REVENUE decreased to $1,219,000 in 1994 from $6,857,000
in 1993. Management fees decreased due to the consolidation of LQP in December
1993 and the acquisition of the CIGNA partnerships in July 1994, eliminating the
related management fees earned by the Company.
In 1994, approximately 41.9% of DIRECT EXPENSES were represented by
salaries, wages, and related costs. Other major categories of direct expenses
include utilities, property taxes, repairs and maintenance and room supplies.
Direct expenses increased to $194,894,000 ($27.30 per occupied room) in 1994
compared to $148,571,000 ($27.72 per occupied room) in 1993, an increase of
$46,323,000, or 31.2%. Direct expenses
20
<PAGE>
decreased to 53.8% in 1994 from 54.7% in 1993 as a percentage of total revenue,
primarily from a decrease in salaries and related benefit costs and property
taxes. The acquisitions of LQP and the CIGNA partnerships caused the increase of
direct expenses in total year over year.
CORPORATE EXPENSES decreased to $18,614,000 ($1.79 per available room,
including Managed Inns) in 1994 from $19,450,000 ($1.96 per available room,
including Managed Inns) in 1993, a decrease of $836,000, or 4.3%. As a percent
of total revenues, corporate expenses decreased to 5.1% in 1994 from 7.2% in
1993.
PERFORMANCE STOCK OPTION relates to the costs of stock options which became
exercisable when the average price of the Company's stock reached $30 per share
(pre-split) for twenty consecutive days. In 1993, performance stock option
expense and certain other options were accelerated as a result of this condition
being met (See note 5 of Notes to Combined Financial Statements). Currently, the
Company has no options outstanding that require recognition of additional
compensation expense.
DEPRECIATION, AMORTIZATION AND FIXED ASSET RETIREMENTS increased to
$37,977,000 in 1994 from $24,055,000 in 1993, an increase of $13,922,000, or
57.9%. The increase in depreciation, amortization and fixed asset retirements is
primarily due to the increase in depreciable assets resulting from the
acquisitions of LQP, the CIGNA partnerships, five inns in 1994 and 11 inns in
the latter part of 1993, and the Company's image enhancement program.
As a result of the above, OPERATING INCOME increased to $110,757,000 in 1994
from $75,367,000 in 1993, an increase of $35,390,000, or 47.0%.
INTEREST INCOME decreased to $1,421,000 in 1994 from $5,147,000 in 1993, a
decrease of $3,726,000, or 72.4%. The decrease in interest income is primarily
attributable to a decrease in interest earned on a note receivable from AEW (the
"AEW Note") due to the collection of the entire principal balance in December
1993.
INTEREST ON LONG-TERM DEBT increased to $38,860,000 in 1994 from $31,366,000
in 1993, an increase of $7,494,000, or 23.9%. The increase in interest expense
is attributable to the debt incurred to acquire LQP, the CIGNA partnerships and
certain of the limited partners' interests and debt assumed in connection with
the acquisition of LQP.
PARTNERS' EQUITY IN EARNINGS AND LOSSES decreased to $11,406,000 in 1994
from $12,965,000 in 1993, a decrease of $1,559,000, or 12.0%. The decrease in
partners' equity in earnings and losses is attributable to the acquisition of
various limited partners' interests in unincorporated partnerships and joint
ventures, partially offset by increases in the earnings of LQDP. As of December
31, 1994, LQDP owned and operated 42 inns compared to 37 inns as of December 31,
1993.
NET (GAIN) LOSS ON PROPERTY TRANSACTIONS increased to a gain of ($79,000) in
1994 from a loss of $4,347,000 in 1993. The loss in 1993 includes a $4,900,000
loss related to the Company's conveyance to the mortgagee of title to the
property on which the Company's headquarters were located.
INCOME TAXES for 1994 were calculated using an estimated effective income
tax rate of 39%.
For the reasons discussed above, the Company reported EARNINGS BEFORE
EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE of $37,815,000 in
1994 compared with $19,420,000 in 1993, an increase of $18,395,000, or 94.7%.
The Company reported EXTRAORDINARY ITEMS, NET OF INCOME TAXES of ($619,000)
in 1993. The 1993 extraordinary loss consisted of ($6,007,000), ($3,664,000) net
of income taxes, related to the early extinguishment and refinancing of certain
debt partially offset by an extraordinary gain of $4,991,000, $3,045,000 net of
income taxes, resulting from the Company's transfer of ownership to the
mortgagee of property on which the Company's headquarters were located.
The CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING FOR INCOME TAXES of
$1,500,000, or $0.03 per share in 1993, was the result of the implementation of
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes."
21
<PAGE>
For the reasons discussed above, the Company reported NET EARNINGS of
$37,815,000 in 1994 compared with $20,301,000 in 1993, an increase of
$17,514,000, or 86.3%.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
TOTAL REVENUES increased to $271,850,000 in 1993 from $254,122,000 in 1992,
an increase of $17,728,000, or 7.0%. Of the total revenues reported in 1993,
95.1% were revenues from inns, 2.4% were revenues from restaurant rentals and
other revenues and 2.5% were revenues from management services.
INN REVENUES increased to $258,529,000 in 1993 from $239,826,000 in 1992, an
increase of $18,703,000, or 7.8%. The increase in inn revenues was due primarily
to an increase in ADR, an increase in the number of available rooms and the
acquisition of LQP. ADR increased to $46.36 in 1993 from $44.33 in 1992, an
increase of $2.03, or 4.6%, while occupancy declined 0.5 percentage points. As
anticipated, the Company's image enhancement program caused temporary
construction-related disruption in normal business operations and occupancies at
inns undergoing the process. Also, management's decision to discontinue a coupon
promotion used in 1992 had a positive impact on ADR, but had the effect of
reducing occupancy in 1993. Available rooms for 1993 were 8,226,000 as compared
to 7,916,000 for 1992, an increase of 310,000 available rooms, or 3.9%. The
increase in the number of available rooms was due to the acquisition of 11 inns
during the year ended December 31, 1993 and the acquisition of LQP in December
of 1993.
RESTAURANT RENTAL AND OTHER REVENUES decreased to $6,464,000 in 1993 from
$7,208,000 in 1992, a decrease of $744,000, or 10.3%, primarily due to a
reduction in earnings related to investments accounted for on the equity method.
MANAGEMENT SERVICES revenue decreased to $6,857,000 in 1993 from $7,088,000
in 1992, a decrease of $231,000, or 3.2%. Management fees decreased due to there
being two less licensees and the consolidation of LQP in December 1993,
eliminating the related management fees charged by the Company to LQP for that
month.
DIRECT EXPENSES increased to $148,571,000 ($27.72 per occupied room) in 1993
compared to $135,474,000 ($26.11 per occupied room) in 1992, an increase of
$13,097,000, or 9.7%. In 1993, approximately 42.4% of direct expenses consisted
of salaries, wages, and related costs. As a percentage of total revenues, direct
expenses increased to 54.7% in 1993 from 53.3% in 1992. The increase in direct
expense resulted primarily
from the Company's implementation of a complimentary continental breakfast at
all La Quinta inns during the first quarter of 1993 (which amounted to $1.08 per
occupied room). The Company acquired 11 inns during 1993 and did not acquire or
convert any inns during 1992.
CORPORATE EXPENSES decreased to $19,450,000 ($1.96 per available room,
including Managed Inns) in 1993 from $23,961,000 ($2.46 per available room,
including Managed Inns) in 1992, a decrease of $4,511,000, or 18.8%. As a
percent of total revenues, corporate expenses decreased to 7.2% in 1993 from
9.4% in 1992. The 1992 corporate expenses included non-recurring charges of
$2,696,000 to increase the allowance for certain notes receivable based upon
estimates of the value of the real estate held as collateral for such notes and
evaluations of the financial condition of certain borrowers and $210,000 related
to other corporate expense items. The 1992 corporate expenses also include a
provision related to the settlement of certain litigation of $775,000. The 1992
corporate expenses, before non-recurring charges, were $21,055,000 ($2.16 per
available room, including Managed Inns). As a percent of total revenues,
corporate expenses in 1992, before non-recurring charges, were 8.3%.
The PROVISION FOR WRITE-DOWN OF PARTNERSHIP INVESTMENTS, LAND AND OTHER in
1992 includes charges related to the write-down of certain joint venture
interests, land previously held for future development, computer equipment and
other assets (see Note 8 of Notes to Combined Financial Statements).
SEVERANCE AND OTHER EMPLOYEE RELATED COSTS in 1992 consisted of costs
related to the severance of certain executive officers and other employees,
executive search fees and relocation costs for new officers.
22
<PAGE>
PERFORMANCE STOCK OPTION relates to the costs of stock options which became
exercisable when the average price of the Company's stock reached $30 per share
(pre-split) for twenty consecutive days. Performance stock option expense and
certain other options were accelerated as a result of this condition being met
(see Note 5 of Notes to Combined Financial Statements).
DEPRECIATION, AMORTIZATION AND FIXED ASSET RETIREMENTS decreased to
$24,055,000 in 1993 from $24,793,000 in 1992, a decrease of $738,000, or 3.0%.
The decrease in depreciation, amortization and fixed asset retirements was due
to assets which became fully depreciated during 1993 and the write-off of
computer equipment and signage in the prior year. Replacement and installation
of new computer equipment and signs was substantially completed in the latter
part of 1993.
As a result of the above, OPERATING INCOME increased to $75,367,000 in 1993
from $34,575,000 in 1992, an increase of $40,792,000, or 118.0%. Operating
income before a non-recurring, non-cash charge of approximately $4,407,000 to
recognize compensation expense related to the vesting of performance stock
options, increased to $79,774,000 in 1993 from $73,112,000 in 1992 before
write-downs, severance and employee related costs and other non-recurring
charges, an increase of $6,662,000, or 9.1%.
INTEREST INCOME decreased to $5,147,000 in 1993 from $6,041,000 in 1992, a
decrease of $894,000, or 14.8%. The decrease in interest income is primarily
attributable to principal reductions on the AEW Note of $16,700,000 and
$19,300,000 in September and December 1993, respectively, and the corresponding
reduction in interest earned thereon. As of December 31, 1993, the AEW Note had
been fully collected.
INTEREST ON LONG-TERM DEBT decreased to $31,366,000 in 1993 from $33,087,000
in 1992, a decrease of $1,721,000, or 5.2%. The decrease in interest expense is
attributable to the early extinguishment of approximately $117,000,000 of
certain high interest rate debt with proceeds from the Company's 9 1/4% Senior
Subordinated Notes due 2003 and bank financing which more than offset interest
on borrowings to purchase limited partners' interests. In addition, certain
Industrial Revenue Bond issues were refinanced to obtain more favorable interest
rates.
PARTNERS' EQUITY IN EARNINGS AND LOSSES decreased to $12,965,000 in 1993
from $15,081,000 in 1992, a decrease of $2,116,000, or 14.0%. The decrease in
partners' equity in earnings and losses is attributable to the acquisition of
limited partners' interests in 14 combined unincorporated partnerships and joint
ventures partially offset by increases in the earnings of LQDP. As of December
31, 1993, LQDP operated 37 inns compared to 28 inns as of December 31, 1992.
NET (GAIN) LOSS ON PROPERTY TRANSACTIONS decreased to a loss of $4,347,000
in 1993 from a gain of ($282,000) in 1992. The loss in 1993 includes a
$4,900,000 loss related to the Company's conveyance to the mortgagee of title to
the property on which the Company's headquarters were located.
INCOME TAXES for 1993 were calculated using an estimated effective income
tax rate of 39%.
For the reasons discussed above, the Company reported EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE of $19,420,000 in
1993 compared with a loss of ($7,796,000) in 1992, an increase of $27,216,000.
The Company reported EXTRAORDINARY ITEMS, NET OF INCOME TAXES of ($619,000)
in 1993 compared with ($958,000) in 1992. The 1993 extraordinary loss consisted
of ($6,007,000), ($3,664,000) net of income taxes, related to the early
extinguishment and refinancing of certain debt partially offset by an
extraordinary gain of $4,991,000, $3,045,000 net of income taxes, resulting from
the Company's transfer of ownership to the mortgagee of property on which the
Company's headquarters were located. The 1992 extraordinary loss was primarily a
result of the refinancing of three industrial revenue bond issues totaling
$12,910,000 in principal amount. In addition, the Company retired its 10%
Convertible Subordinated Debentures due 2002.
The CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING FOR INCOME TAXES of
$1,500,000, or $0.03 per share, in 1993 was the result of the implementation of
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes."
23
<PAGE>
For the reasons discussed above, the Company reported NET EARNINGS of
$20,301,000 in 1993 compared with a net loss of ($8,754,000) in 1992, an
increase of $29,055,000.
CAPITAL RESOURCES AND LIQUIDITY
In general, the Company has historically financed its development program
through partnerships with financial institutions, a public debt offering and
borrowings under the Company's credit facilities. During the six months ended
June 30, 1995 and June 30, 1994 and the years ended December 31, 1994 and 1993,
the Company funded a majority of its development program through LQDP. Most of
the Company's inns and adjacent restaurant land and buildings are pledged to
secure long-term debt of the Company. Distributions of cash, if any, from the
Company's joint ventures and partnerships are made from cash available after
payment of operating expenses, debt service, capital expenditures and
acquisition and development of new inns.
At June 30, 1995, the Company had $6,694,000 of cash and cash equivalents,
an increase of $4,105,000 from December 31, 1994. At June 30, 1995, the Company
had $74,650,000 available on its credit facilities.
In April 1995, the Company completed negotiations (i) to amend the Company's
then existing credit facilities and (ii) on behalf of LQDP, to amend LQDP's then
existing unsecured line of credit and to enter into a new unsecured line of
credit. As a result, the Company entered into the Company Bank Credit Facility
and the LQDP Lines of Credit. On September 12, 1995, the Company completed
definitive documentation to amend and combine the Company Bank Credit Facility
and the LQDP Lines of Credit into the Amended Bank Credit Facility. The Amended
Bank Credit Facility consists of a $200 million unsecured line of credit and a
$50 million 364-day unsecured line of credit with maturities of August 2000 and
August 1996, respectively. The Amended Bank Credit Facility is governed by
certain covenants, the most restrictive of which preclude the following: payment
of cash dividends in excess of defined limits, incurrence of debt above defined
limits, mergers or dispositions of substantial assets, and certain investments.
The Amended Bank Credit Facility also requires the maintenance of certain
financial ratios. Borrowings under the Amended Bank Credit Facility will bear
interest at either LIBOR plus an applicable margin, as defined in the Amended
Bank Credit Facility, or the prime rate. The applicable margin is determined
quarterly based upon predetermined levels of indebtedness to cash flows, as
defined in the Amended Bank Credit Facility. As of the closing of this Offering,
borrowings under the Amended Bank Credit Facility will bear interest at LIBOR
plus 65 basis points or the prime rate. Initial revolving credit advances and
issuances of letters of credit under the Amended Bank Credit Facility are
conditioned upon the closing of this Offering and the sale of the Senior Notes.
This Offering is conditioned upon the consummation of the transactions
contemplated by the Amended Bank Credit Facility. See "Use of Proceeds."
In July 1995, the Company financed the $48.2 million acquisition of
one-third of AEW's interest in LQDP by borrowing $30 million under LQDP's $30
million 364-day unsecured line of credit, and by borrowing the balance under the
Company Bank Credit Facility and LQDP's $35 million unsecured line of credit. As
of June 30, 1995, the Company would have had $93.9 million available under the
Amended Bank Credit Facility, after giving effect to the AEW Transaction and
this Offering.
On January 23, 1992, with the approval of the Company's Board of Directors,
the Company entered into two interest rate swap agreements (the "Agreements")
which exchanged the Company's variable rate interest payments for the fixed rate
interest payments of a major financial institution (the "Counterparty"). The
debt ("Notional Amount") underlying the Agreements is $16,890,000 and
$44,420,000. Under the Agreements, the Company effectively pays a fixed rate of
interest at 6.50% and 5.26% and the Counterparty pays a percentage of prime
interest rate and the variable rate demand note interest rate ("VRDN"). In the
event the VRDN rate exceeds the fixed interest rate of 5.26% or the percentage
of prime interest rate exceeds 6.5%, the Counterparty pays to the Company that
difference times the Notional Amount, on a monthly basis. Should the fixed
interest rate of 5.26% exceed the VRDN interest rate or the fixed interest rate
of 6.5% exceed the percentage of prime interest rate, the Company pays the
difference times the Notional Amount to the Counterparty, on a monthly basis.
These Agreements resulted in net payments to the Counterparty of $213,000,
$630,000, $1,040,000, $1,427,000 and $1,184,000 in the six months ended
24
<PAGE>
June 30, 1995 and 1994 and the years ended December 31, 1994, 1993 and 1992,
respectively. The Agreements expire on February 1, 1997, and the Notional
Amounts are reduced over the life of the Agreements by scheduled amortization
payments. At June 30, 1995, the Notional Amounts of debt remaining under the
Agreements are $10,657,000 and $35,400,000, which bear interest at a weighted
average variable interest rate of 6.63% and 3.93%, respectively. The VRDN rate
decreased from 4.32% at December 31, 1994 to 3.87% at June 30, 1995.
The Company is exposed to market risk associated with fluctuations in
interest rates. By entering into the interest rate swap agreements described
above, the Company reduced its exposure to rising interest rates on the
aforementioned variable interest rate debt and has effectively fixed the rate on
such debt at a level acceptable to the Company given the length of the
Agreements and the risk of interest rate changes. The Company is exposed to
credit risk to the extent that the Counterparty fails to perform under the
Agreements. The Company has mitigated its credit risk by entering into the
Agreements with a major financial institution, which has received an "A" rating
from Standard and Poor's Corporation and an "A2" rating from Moody's Investors
Service on senior unsecured debt. The Company regularly monitors the credit
ratings of the Counterparty and considers the risk of default remote.
Net cash provided by operating activities improved to $66,566,000 in the
1995 Six Months from $41,400,000 in the 1994 Six Months, an increase of
$25,166,000, or 60.8%. The increase was the result of the improvement in inn
revenue and operating margins. Net cash provided by operating activities
increased to $94,233,000 in 1994 from $78,043,000 in 1993, an increase of
$16,190,000, or 20.7%. The increase was primarily due to increased inn revenues
and an increase in accrued expenses due to the timing of payment. Net cash
provided by operating activities increased to $78,043,000 in 1993 from
$60,853,000 in 1992, an increase of $17,190,000, or 28.2%. The majority of the
increase was due to an increase in inn revenues as a result of increased
occupancy percentage and ADR.
Net cash used by investing activities decreased to ($55,233,000) in the 1995
Six Months from ($82,772,000) in the 1994 Six Months, a decrease of $27,539,000,
or 33.3%. The 1995 and 1994 capital expenditures include the purchase of nine
inns and six inns, respectively. The 1994 capital expenditures also include
expenditures of approximately $40,103,000 related to the Company's image
enhancement program and the purchase of the remaining units of La Quinta Motor
Inns Limited Partnership. Net cash used by investing activities increased to
$156,492,000 in 1994 from $145,027,000 in 1993, an increase of $11,465,000, or
7.9%. The increase was related to capital expenditures related to the image
enhancement program, purchase and conversion of inns, the purchase of units of
LQP and the acquisition of the CIGNA partnerships. Net cash used by investing
activities increased to $145,027,000 in 1993 from $15,166,000 in 1992, an
increase of $129,861,000. The increase was related to the acquisition of 82% of
LQP, the acquisition of the partners' interest in 14 unincorporated joint
ventures and partnerships, the acquisition of 11 inns and capital expenditures
related to the Company's image enhancement program.
Net cash used by financing activities was ($7,228,000) in the 1995 Six
Months compared to net cash provided by financing activities of $18,998,000 in
the 1994 Six Months. Payments on the Company's credit facilities, an increase in
dividends to shareholders and a reduction in the proceeds received on the
Company's credit facilities and long-term borrowings contributed to the increase
in cash used by financing activities. Net cash provided by financing activities
was $41,000,000 in 1994 compared to $77,971,000 in 1993. The decrease in cash
provided by financing activities was the result of the payments on the secured
line of credit and long-term borrowings, dividends to shareholders and purchase
of treasury stock. Net cash provided by financing activities in 1993 was
$77,971,000 compared to net cash used by financing activities of ($40,781,000)
in 1992. The increase was a result of the issuance of the 9 1/4% Senior
Subordinated Notes due 2003, the collection of the AEW Note and the decrease in
distributions to partners partially offset by payments on long-term debt.
During 1994, the Company repurchased a total of 373,000 shares (post-split)
of its Common Stock for approximately $7,115,000 under a plan approved by the
Board of Directors to repurchase up to $10,000,000 of its Common Stock.
Additional purchases will be made from time to time in the open market as deemed
appropriate by the Company.
25
<PAGE>
COMMITMENTS
In accordance with the unincorporated partnership or joint venture
agreements executed by the Company, La Quinta is committed to advance funds
necessary to cover operating expenses of joint ventures. Three unincorporated
partnerships and joint ventures executed promissory notes in which the Company
guaranteed to fund amounts not to exceed $650,000 in the aggregate. As of June
30, 1995, the Company had no advances outstanding to the unincorporated
partnerships and joint ventures.
The estimated additional cost to complete the conversion and renovation of
inns for which commitments have been made is $9,716,000 at June 30, 1995. The
Company broke ground for the new construction of one inn in June 1995 and one
inn in July 1995. The Company is committed to approximately $12,773,000 for the
completion of these inns. Funds on hand, committed and anticipated from cash
flow are sufficient to complete these projects.
In accordance with the requirements of an escrow agreement related to a pool
of mortgage notes executed by the Company and a third party lender, the Company
is required to make annual deposits into an escrow account for the purpose of
establishing a reserve for the replacement of furnishings, fixtures and
equipment used on or incorporated into the mortgaged properties. The Company
shall be relieved of its obligation to make such annual deposits for any year in
which the escrow account has an aggregate balance of $2,431,000. At June 30,
1995 and June 30, 1994, the Company had reserved the full amount.
In 1993, the Company entered into a ten year operating lease for its
corporate headquarters in San Antonio. In addition, the Company entered into a
ten year lease in December 1993 to house the Company's reservation facilities.
Funds on hand, anticipated from future cash flows and available under the
Company Bank Credit Facility and the LQDP Lines of Credit, or the Amended Bank
Credit Facility, are sufficient to fund operating expenses, debt service and
other capital requirements through at least the second quarter of 1996. The
Company will evaluate from time to time the necessity of other financing
alternatives.
SEASONALITY
The lodging industry is seasonal in nature. Generally, the Company's inn
revenues are greater in the second and third quarters than in the first and
fourth quarters. This seasonality can be expected to cause quarterly
fluctuations in the revenues, profit margins and net earnings of the Company.
INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
Statement requires the use of the asset and liability method of accounting for
deferred income taxes and was implemented in 1993. The impact of the Statement's
implementation has been disclosed in Note 4 of Notes to Combined Financial
Statements.
ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement,
which is effective for fiscal years beginning after December 15, 1995, requires
that an entity evaluate long-lived assets and certain other identifiable
intangible assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable.
Impairment loss meeting the recognition criteria is to be measured as the amount
by which the carrying amount for financial reporting purposes exceeds the fair
value of the asset. The Company plans to adopt this statement in 1996 and does
not expect adoption of the statement to have a material effect, if any, on the
Company's financial position or results of operations.
INFLATION
The rate of inflation as measured by changes in the average consumer price
index has not had a material effect on the revenues or net earnings (loss) of
the Company in the three most recent years.
26
<PAGE>
BUSINESS
La Quinta is the second largest owner/operator of hotels in the United
States, with 236 inns and more than 30,000 rooms. La Quinta operates primarily
in the mid-priced segment of the lodging industry. La Quinta achieved an average
occupancy percentage of 70.1% and an ADR of $47.65 for the year ended December
31, 1994. Founded in 1968, the Company has inns located in 29 states, with
strategic concentrations in Texas, Florida and California. La Quinta currently
owns a 100% interest in 228 of its inns and a 50% or greater interest in an
additional seven inns. La Quinta operates all of its inns other than one
licensed inn. La Quinta's business strategy is to continue to expand its
successful core business as an owner/operator in the mid-priced segment of the
lodging industry.
The Company was founded in San Antonio, Texas in 1968. La Quinta was
originally incorporated and became a publicly traded entity in 1972 and is
incorporated under the laws of the State of Texas. The principal executive
offices are located at Weston Centre, 112 E. Pecan Street, San Antonio, Texas
78299-2636, telephone (210) 302-6000.
OWNERSHIP AND MANAGEMENT CONTROL
Unlike most major chains in the lodging industry, La Quinta owns and manages
all but one of the inns that carry its brand. The Company believes that much of
its success is attributable to this operating control, which allows the Company
to achieve a higher level of consistency in both product quality and service
than its competitors. In addition, its operating control gives La Quinta the
ability to offer new services, determine expansion strategies, set pricing and
make other marketing decisions on a system-wide or local basis as conditions
dictate, without consulting third-party owners, management companies or
franchisees as required of most other lodging chains.
BRAND IMAGE
La Quinta has taken major steps to assure uniform high quality at its inns.
In 1993 and 1994, the Company invested approximately $65 million in a
comprehensive chainwide image enhancement program designed to give all of its
inns a new, fresh appearance while preserving their unique character. The
program, which was substantially completed in mid-1994, featured new signage
displaying a distinctive new logo, along with exterior and lobby upgrades
including brighter colors, more extensive lighting, additional landscaping,
enhanced guest entry and a full lobby renovation with contemporary furnishings
and seating areas for continental breakfast.
As a result of its ability to provide consistently high-quality, convenient
accommodations and excellent value, the Company believes that it has established
La Quinta as a strong, well-regarded mid-priced brand. The Company believes that
its brand recognition and reputation have enhanced the performance of its
existing inns and should provide an advantage for inns added in the future.
FOCUSED GROWTH STRATEGY; OWNERSHIP OF INNS
La Quinta attributes its strong operating performance in large part to the
successful implementation of a three-part strategic plan formulated by the
Company's senior management team after their arrival at the Company in 1992.
First, management substantially restructured the Company, which historically had
financed a large part of its development through partnerships and joint ventures
with financial institutions, by purchasing its partners' interests in 19
unincorporated joint ventures and partnerships since 1993. The Company also
refinanced a majority of its outstanding debt, and instituted corporate and
operating-level cost controls. Second, management reimaged all La Quinta inns
through the system-wide image enhancement program. Third, the Company
demonstrated its ability to grow the number of inns -- acquiring 11 inns in
1993, 15 inns in 1994 and nine inns in the first six months of 1995 -- while
increasing profitability.
The Company intends to focus both on INTERNAL GROWTH -- enhancing revenues,
cash flow and profitability at its current portfolio of inns, and EXTERNAL
GROWTH -- adding new inns through opportunistic acquisitions and conversions of
existing properties and selective new construction. The Company's external
growth strategy is to reinforce its presence in existing markets and expand
selectively into new markets. At current prices, acquisition and conversion of
existing properties is generally more cost effective than new construction. The
Company estimates that its current average cost of aquiring and converting an
inn to the La Quinta
27
<PAGE>
brand is approximately $40,000 to $45,000 per room. The Company plans to
construct new inns in those strategic markets where acquisition and conversion
of existing inns at a discount to replacement cost is not available. The Company
estimates that the average cost to construct a new inn will be approximately
$50,000 to $55,000 per room. For the twelve months ended June 30, 1995, the
Company generated $79.6 million of cash flow after required interest payments,
maintenance capital expenditures (assumed to be 5% of room revenues), dividends,
taxes and partner distributions, providing an internal source of funding to
support its growth plan.
The following table describes the composition of inns in the La Quinta chain
at June 30, 1995 and as adjusted for the AEW Transaction, and at December 31,
1992:
<TABLE>
<CAPTION>
JUNE 30, 1995 DECEMBER 31, 1992
----------------------------------------------------- -------------------------
AS ADJUSTED ACTUAL ACTUAL
------------------------- ------------------------- -------------------------
LA QUINTA LA QUINTA LA QUINTA
TOTAL EQUIVALENT TOTAL EQUIVALENT TOTAL EQUIVALENT
INNS ROOMS ROOMS (1) INNS ROOMS ROOMS (1) INNS ROOMS ROOMS (1)
---- ------ ---------- ---- ------ ---------- ---- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Owned 100%.............................. 228 29,352 29,352 181 22,927 22,927 89 11,456 11,456
Owned 40-80%............................ 7 836 467 54 7,261 3,037 80 10,218 4,919
---- ------ ---------- ---- ------ ---------- ---- ------ ----------
Total Company owned and operated........ 235 30,188 29,819 235 30,188 25,964 169 21,674 16,375
Managed inns............................ -- -- -- -- -- -- 40(2) 4,978 75
Licensed inns........................... 1 120 -- 1 120 -- 3 366 --
---- ------ ---------- ---- ------ ---------- ---- ------ ----------
236 30,308 29,819 236 30,308 25,964 212 27,018 16,450
---- ------ ---------- ---- ------ ---------- ---- ------ ----------
---- ------ ---------- ---- ------ ---------- ---- ------ ----------
<FN>
------------------------------
(1) Represents the Company's proportionate ownership interest in total rooms.
(2) Managed inns represent inns in LQP and the CIGNA partnerships, which were
subsequently acquired by the Company.
</TABLE>
FACILITIES AND SERVICES
The typical La Quinta inn contains approximately 130 spacious, quiet and
comfortably furnished guest rooms averaging 300 square feet in size. Guests at a
La Quinta inn are offered a wide range of amenities and services, including
complimentary continental breakfast, free unlimited local telephone calls,
remote-control televisions with a premium movie channel, a swimming pool,
same-day laundry and dry cleaning, fax services, 24-hour front desk and message
service, smoking/non-smoking rooms and free parking. La Quinta guests typically
have convenient access to food service at adjacent free-standing restaurants,
including national chains such as Cracker Barrel, IHOP, Denny's and Perkins. La
Quinta has an ownership interest in 126 of these adjacent restaurant buildings,
which it leases to restaurant operators.
La Quinta inns appeal to guests who desire high-quality rooms, convenient
locations and attractive prices, but who do not require banquet and convention
facilities, in-house restaurants, cocktail lounges or room service. By
eliminating the costs of these management-intensive facilities and services, La
Quinta believes it offers its customers exceptional value by providing rooms
that are comparable in quality to full-service hotels at lower prices.
To maintain the overall quality of La Quinta's inns, each inn undergoes
refurbishments and capital improvements as needed. Typically, refurbishing has
been provided at intervals of between five and seven years, based on an annual
review of the condition of each inn. In the six months ended June 30, 1995 and
1994 and each of the years ended December 31, 1994, 1993 and 1992, the Company
spent approximately $16.4 million, $55.4 million, $75.2 million, $32.6 million
and $15.5 million, respectively, on capital improvements to existing inns. The
amounts for the six months ended June 30, 1995 and 1994 and the years ended
December 31, 1994 and 1993 include expenditures related to the Company's image
enhancement program. As a result of these expenditures, the Company believes it
has been able to maintain a chainwide quality of rooms and common areas at its
inns that is more consistent than other national mid-priced hotel chains.
28
<PAGE>
CUSTOMER BASE AND MARKETING
La Quinta's combination of consistent, high-quality accommodations and good
value is attractive to business customers, who account for more than 50% of
rooms rented. These core customers typically visit a given area several times a
year, and include salespersons covering a specific territory, government and
military personnel and technicians. The profile of a typical La Quinta customer
is a college educated business traveler, age 25 to 54, who has a middle
management, white collar occupation or upper level blue collar occupation. The
Company also targets both vacation travelers and senior citizens. For the
convenience of these targeted customer groups, inns are generally located near
suburban office parks, major traffic arteries or destination areas such as
airports and convention centers.
La Quinta has developed a strong following among its customers; internal
customer surveys show that the average customer spends 16 nights per year in a
La Quinta inn. The Company focuses a number of its marketing programs on
maintaining a high number of repeat customers. For example, La Quinta promotes a
"Returns-Registered Trademark- Club" offering members preferred status and rates
at La Quinta inns, along with rewards for frequent stays. The Returns Club had
approximately 235,000 members as of June 30, 1995.
The Company focuses on reaching its target markets by utilizing advertising,
direct sales, repeat traveler incentive programs and other marketing programs
targeted at specific customer segments. The Company advertises primarily through
network and local radio, television networks and print advertisements which
focus on quality and value. The Company utilizes the same campaign concept
throughout the country with minor modifications made to address regional
differences. The Company also utilizes billboard advertisements along major
highways which announce a La Quinta inn's presence in upcoming towns.
The Company markets directly to companies and other organizations through
its direct sales force of 40 sales representatives and managers. This sales
force calls on companies which have a significant number of individuals
traveling in the regions in which La Quinta operates and which are capable of
producing a high volume of room nights.
The Company provides a central reservation system,
"teLQuik-Registered Trademark-," which currently accounts for advance
reservations for approximately 27% of room nights. The teLQuik system allows
customers to make reservations by dialing 1-800-531-5900 toll free, or from
special reservations phones placed in all La Quinta inns. The teLQuik system
enables guests to make their next night's reservations from their previous
night's La Quinta inn. In addition, approximately 47% of room nights reflect
advance reservations made directly with individual inns and forwarded to the
central reservation system. In total, advance reservations account for
approximately 74% of room nights. In 1994, the Company completed a new
reservation center, which is a part of its program to improve operating results
by providing state-of-the-art technology in processing reservations more
efficiently. La Quinta, through its national sales managers, markets its
reservation services to travel agents and corporate travel planners who may
access teLQuik through the five major airline reservation systems.
29
<PAGE>
OPERATIONS
Management of the La Quinta chain is coordinated from the Company's
headquarters in San Antonio, Texas. Centralized corporate services and functions
include marketing, financing, accounting and reporting, purchasing, quality
control, development, legal, reservations and training.
Inn operations are currently organized into Eastern, Western and Central
divisions with each division headed by a Divisional Vice President. Regional
Managers report to the Divisional Vice Presidents and are each responsible for
approximately 12 inns. Regional Managers are responsible for the service,
cleanliness and profitability of the inns in their regions.
Individual inns are typically managed by resident managers who live on the
premises. Managers receive inn management training which includes an emphasis on
service, cleanliness, cost controls, sales and basic repair skills. Because La
Quinta's professionally trained managers are substantially relieved of
responsibility for food service, they are able to devote their attention to
assuring friendly guest service and quality facilities, consistent with
chain-wide standards. On a typical day shift, each inn manager will supervise
one housekeeping supervisor, eight room attendants, two laundry workers, two
general maintenance persons and three front desk service representatives.
At June 30, 1995, La Quinta employed approximately 7,400 persons, of whom
approximately 90% were compensated on an hourly basis. Approximately 280
individuals were employed at corporate and 7,120 were employed as inn managers
and employees. The Company's employees are not currently represented by labor
unions. Management believes its ongoing labor relations are good.
30
<PAGE>
PROPERTIES
At June 30, 1995, there were 236 inns located in 29 states with
concentrations in Texas, Florida and California. The states and cities in which
the inns are located are set forth in the following table:
ALABAMA
Birmingham
Huntsville (2)
Mobile
Montgomery
Tuscaloosa
ARIZONA
Phoenix (3)
Tucson (2)
ARKANSAS
Little Rock (5)
CALIFORNIA
Bakersfield
Costa Mesa
Fresno
Irvine
La Palma
Redding
Sacramento (2)
San Bernardino
San Diego (3)
San Francisco
Stockton
Ventura
COLORADO
Colorado Springs
Denver (7)
FLORIDA
Coral Springs
Daytona Beach
Deerfield Beach
Ft. Myers
Gainesville
Jacksonville (3)
Miami
Orlando (3)
Pensacola
Tallahassee (2)
Tampa (5)
GEORGIA
Atlanta (7)
Augusta
Columbus
Savannah (2)
ILLINOIS
Champaign
Chicago Metro Area (5)
Moline
INDIANA
Indianapolis (2)
Merrillville
KANSAS
Lenexa
Wichita
KENTUCKY
Lexington
LOUISIANA
Baton Rouge
Bossier City
Kenner
Lafayette
Monroe
New Orleans (5)
Slidell
Sulphur
MICHIGAN
Kalamazoo
MISSISSIPPI
Jackson (2)
MISSOURI
St. Louis
NEBRASKA
Omaha
NEVADA
Las Vegas (2)
Reno
NEW MEXICO
Albuquerque (3)
Farmington
Las Cruces
Santa Fe
NORTH CAROLINA
Charlotte (2)
OHIO
Columbus
OKLAHOMA
Oklahoma City (3)
Tulsa (3)
PENNSYLVANIA
Pittsburgh
SOUTH CAROLINA
Anderson
Charleston
Columbia
Greenville
TENNESSEE
Chattanooga
Kingsport
Knoxville (2)
Memphis (3)
Nashville (3)
TEXAS
Abilene
Amarillo (2)
Arlington
Austin (5)
Beaumont
Bedford
Brownsville
Clute
College Station
Corpus Christi (2)
Dallas Metro Area (12)
Del Rio
Denton
Eagle Pass
El Paso (3)
Fort Stockton
Fort Worth (2)
Galveston
Georgetown
Harlingen
Houston Metro Area (17)
Killeen
Laredo
Longview
Lubbock (2)
Lufkin
TEXAS (CONTINUED)
Midland
Nacogdoches
Odessa
Round Rock
San Angelo
San Antonio (11)
San Marcos
Temple
Texarkana
Tyler
Victoria
Waco
Wichita Falls
UTAH
Layton
Salt Lake City
VIRGINIA
Bristol
Hampton
Richmond
Virginia Beach
WASHINGTON
Seattle (2)
Tacoma
WYOMING
Casper
Cheyenne
Rock Springs
LICENSED
LA QUINTA INNS
TEXAS
McAllen
OTHER
OWNED INNS
(operated under other brands)
GEORGIA
Columbus
TEXAS
El Paso
La Marque
San Antonio
31
<PAGE>
Typically, food service for La Quinta guests is provided by adjacent, free
standing restaurants. At June 30, 1995, the Company had an ownership interest in
126 restaurant buildings adjacent to its inns. These 126 restaurant buildings
are owned by the Company or its partnerships and joint ventures, which own the
related inn. These restaurant buildings generally are leased pursuant to
build-to-suit leases that require the operator to pay, in addition to minimum
and percentage rentals, all expenses, including building maintenance, taxes and
insurance. The Company's ownership interests in such restaurant buildings are as
follows, after giving effect to the AEW Transaction:
<TABLE>
<CAPTION>
RESTAURANT BUILDINGS
-----------------------
<S> <C>
Owned 100%..................................................... 121
Owned 50-67%................................................... 5
---
126
---
---
</TABLE>
One hundred and sixty-five of the Company's inns, including associated
restaurants, were pledged, at June 30, 1995, to secure long-term debt maturing
in various years from 1995 to 2015. (See note 2 of Notes to Combined Financial
Statements.) Following the execution of the Amended Bank Credit Facility, 75
inns, including associated restaurants, will be pledged as collateral to secure
long-term debt.
COMPETITION
Each La Quinta inn competes in its market area with numerous full service
lodging brands, especially in the mid-priced segment, and with numerous other
hotels, motels and other lodging establishments. Chains such as Hampton Inns,
Courtyard by Marriott, Fairfield Inns and Drury Inns are direct competitors of
La Quinta. Other well-known competitors include Holiday Inns, Ramada Inns, Red
Roof Inns and Comfort Inns. There is no single competitor or group of
competitors of La Quinta that is dominant in the lodging industry. Competitive
factors in the industry include reasonableness of room rates, quality of
accommodations, degree of service and convenience of locations.
The lodging industry in general, including La Quinta, may be adversely
affected by national and regional economic conditions and government
regulations. The demand for accommodations at a particular inn may be adversely
affected by many factors including changes in travel patterns, local and
regional economic conditions and the degree of competition with other lodging
establishments in the area. See "Risk Factors -- Risks of the Lodging Industry"
and "-- Competition."
LICENSING
The Company selectively licensed the name "La Quinta-Registered Trademark-"
to others for operations in the United States until February 1977, at which time
La Quinta discontinued its domestic licensing program to unrelated third
parties. One inn remains in operation under a licensing agreement.
During 1994, the Company entered into agreements with several Mexican
investor groups (the "Development Accord") for the purpose of developing 22 La
Quinta inns in 15 cities in Mexico. Each of the inns will be developed and 100%
owned by a Mexican investor group and managed by the Company under long-term
management agreements (pursuant to which the Company will receive management and
licensing fees). On December 20, 1994, the Mexican government allowed the peso
to trade freely against the U.S. dollar. As a result, the peso suffered a
significant, immediate devaluation against the U.S. dollar. This resulted in
economic conditions that have delayed commencement of construction of La Quinta
inns under the Development Accord. The construction of the first La Quinta inn
under the Development Accord is anticipated to begin when economic conditions in
Mexico stabilize.
"La Quinta-Registered Trademark-," "teLQuik-Registered Trademark-" and
"Returns-Registered Trademark- Club" have been registered as service marks by La
Quinta with the U.S. Patent and Trademark Office and variously in Mexico,
Canada, the United Kingdom and the Netherland Antilles.
EMPLOYMENT AND OTHER GOVERNMENT REGULATION
The lodging industry is subject to numerous federal, state and local
government regulations, including those relating to the preparation and sale of
food and beverage (such as health and liquor license laws) and building and
zoning requirements. Also, the Company is subject to laws governing its
relationship with employees, including minimum wage requirements, overtime,
working conditions and work permit requirements. An increase in the minimum wage
rate, employee benefit costs or other costs associated with
32
<PAGE>
employees, could adversely affect the Company. Both at the federal and state
level from time to time, there are proposals under consideration to increase the
minimum wage. Under the Americans with Disabilities Act of 1990 (the "ADA"), all
public accommodations are required to meet certain federal requirements related
to access and use by disabled persons. Although the Company has taken actions to
comply with the ADA, no assurance can be given that a material ADA claim will
not be asserted against the Company. These and other initiatives could adversely
affect the Company as well as the lodging industry in general.
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws often impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. In addition, certain environmental laws and
common law principles could be used to impose liability for release of
asbestos-containing materials ("ACMs") into the air, and third parties may seek
recovery from owners or operators of real properties for personal injury
associated with exposure to released ACMs. Environmental laws also may impose
restrictions on the manner in which property may be used or business may be
operated, and these restrictions may require expenditures. In connection with
the ownership or operation of hotels and adjacent restaurant land and buildings,
the Company may be potentially liable for any such costs or liabilities.
Although the Company is currently not aware of any material environmental claims
pending or threatened against it, no assurance can be given that a material
environmental claim will not be asserted against the Company. The cost of
defending against claims of liability or of remediating a contaminated property
could have a material adverse affect on the results of operations of the
Company.
LEGAL PROCEEDINGS
In September 1993, a former officer of the Company filed suit against the
Company and certain of its directors and their affiliate companies (the "La
Quinta Defendants"). The suit, entitled WALTER J. BIEGLER V. LA QUINTA MOTOR
INNS, INC., ET AL., is pending in the U.S. District Court for the Western
District of Texas, San Antonio Division. The suit alleges breach of an
employment agreement, misrepresentation, wrongful termination, self-dealing,
breach of fiduciary duty, usurpation of corporate opportunity and tortious
interference with contractual relations. Compensatory damages of $2,500,000 and
exemplary damages of $5,000,000 are sought in the action. The court has pending
before it the La Quinta Defendants' motion for summary judgment. The parties
subsequently filed a required, joint Pre-Trial Order, in which the plaintiff has
conceded a number of his claims. As yet, no trial date has been set for this
action. The Company is vigorously defending against this suit.
Actions for negligence or other tort claims occur routinely as an ordinary
incident to the Company's business. Several lawsuits are pending against the
Company which have arisen in the ordinary course of the business, but none of
these proceedings involves a claim for damages (in excess of applicable excess
umbrella insurance coverages) involving more than 10% of current assets of the
Company. The Company does not anticipate any amounts which it may be required to
pay as a result of an adverse determination of such legal proceedings and the
matter discussed above, individually or in the aggregate, or any other relief
granted by reason thereof, will have a material adverse effect on the Company's
financial position or results of operations.
The Company has established a paid loss program (the "Paid Loss Program")
for inns owned and managed by the Company for commercial general liability
insurance, automobile liability insurance and workers' compensation and
employer's liability insurance. In addition to the Paid Loss Program, the
Company has purchased excess umbrella liability policies and extended coverage
property insurance and such other insurance as is customarily obtained for
similar properties and which may be required by the terms of loan or similiar
documents with respect to the inns. In connection with the general liability,
workers' compensation and automobile coverages, all inns participate in the Paid
Loss Program, under which claims and expenses are shared pro rata, with excess
umbrella insurance being maintained to cover losses, claims and costs in excess
of the deductible limits per matter of $500,000 for general liability, $500,000
for workers' compensation and $250,000 for automobile coverage. All pro rata
expenses and premiums under the Paid Loss Program and such other insurance as is
customarily obtained with respect to inns owned by persons other than the
Company constitute direct operating expenses of said inns under the terms of the
respective management agreements. General liability is allocated pro rata based
on the number of rooms at each respective inn. Worker's compensation is
allocated based on the amount of payroll and auto liability is allocated based
on the number of vehicles at each respective inn.
33
<PAGE>
DESCRIPTION OF SENIOR NOTES
The Senior Notes will be issued under an Indenture (the "Indenture") to be
dated as of September 15, 1995 between the Company and U.S. Trust Company of
Texas, N.A., as trustee (the "Trustee"). The following description of certain
provisions of the Indenture and the Senior Notes summarizes the material terms
thereof but does not purport to be complete, and such summaries are subject to
the detailed provisions of the Indenture to which reference is hereby made,
including the definition of certain terms used herein and those terms made a
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended, and for other information regarding the Senior Notes. The Indenture has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part. Numerical references in parentheses below are to sections in the
Indenture. Wherever particular sections or defined terms of the Indenture are
referred to, such sections or defined terms are incorporated herein by reference
as part of the statement made, and the statement is qualified in its entirety by
such reference.
GENERAL
The Indenture provides for issuance from time to time of debentures, notes
(including the Senior Notes) or other evidences of indebtedness by the Company
("Securities") in an unlimited amount. Additional Securities may be issued under
the Indenture from time to time.
The Senior Notes offered hereby constitute a series of notes under the
Indenture, which series is limited to $100,000,000 aggregate principal amount.
The Senior Notes will mature on , 2005.
Each Senior Note will bear interest from , 1995 at the
rate of % per annum, payable semi-annually (to holders of record at the close
of business on the or immediately preceding the
interest payment date) on and of each year
beginning , 1996.
The Senior Notes are not redeemable at the option of the Company prior to
maturity.
The Senior Notes will be issued in registered form only, without coupons.
The Senior Notes will be issuable in denominations of $1,000 or multiples
thereof. The Senior Notes will be issued as book-entry notes and will be subject
to the terms set forth below under "-- Global Securities." Securities not issued
as book-entry notes may be presented for registration, registration of transfer
or exchange at the office or agent of the Company which is currently located in
New York, New York. Subject to the limitations provided in the Indenture, such
services will be provided without charge, other than any tax or other
governmental charge payable in connection therewith. (SECTION 2.7).
The Indenture does not contain any restriction on the payment of dividends
or any financial covenants. The Indenture does not contain provisions which
would afford the Holders of the Senior Notes protection in the event of a
transfer of assets to a subsidiary and incurrence of unsecured debt by such
subsidiary, or in the event of a decline in the Company's credit quality
resulting from highly leveraged or other similar transactions involving the
Company.
The Senior Notes will be unsubordinated and unsecured obligations of the
Company ranking PARI PASSU with all existing and future unsubordinated and
unsecured obligations of the Company. As of June 30, 1995 after giving effect to
this Offering and the AEW Transaction, the Company had approximately $149.7
million of debt that is PARI PASSU with the Senior Notes, $140.4 million of
secured debt, $20.3 million of debt at subsidiaries and $120 million of debt
that is, by its terms, subordinated to the Senior Notes. Claims of Holders of
Senior Notes will be effectively subordinated to the claims of holders of the
debt of the Company's subsidiaries with respect to the assets of such
subsidiaries. In addition, claims of Holders of Senior Notes will be effectively
subordinated to the claims of holders of secured debt of the Company and its
subsidiaries with respect to the collateral securing such claims and claims of
the Company as the holder of general unsecured intercompany debt will be
similarly effectively subordinated to claims of holders of secured debt of its
subsidiaries.
34
<PAGE>
GLOBAL SECURITIES
Securities, including the Senior Notes, issued in the form of fully
registered global Securities (a "Registered Global Security") will be deposited
with The Depository Trust Company (the "Depositary") or a nominee thereof.
Unless and until it is exchanged in whole or in part for Securities in
definitive registered form, a Registered Global Security may not be transferred
except as a whole by the Depositary for such Registered Global Security to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor of such Depositary or a nominee of such successor. The Depositary
currently accepts only securities that are denominated in U.S. dollars.
Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Depositary for such Registered
Global Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Registered Global Security, the Depositary
for such Registered Global Security will credit, on its book-entry registration
and transfer system, the participants' accounts with the respective principal
amounts of the Securities represented by such Registered Global Security
beneficially owned by such participants. The accounts to be credited will be
designated by any dealers, underwriters or agents participating in the
distribution of such Securities. Ownership of beneficial interests in such
Registered Global Security will be shown on, and the transfer of such ownership
interests will be effected only through, records maintained by the Depositary
for such Registered Global Security (with respect to interests of participants)
and on the records of participants (with respect to interests of persons holding
through participants). The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to own, transfer or
pledge beneficial interests in Registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the owner of record of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Securities represented by such Registered Global Security for all purposes
under the Indenture. Except as set forth below, owners of beneficial interests
in a Registered Global Security will not be entitled to have the Securities
represented by such Registered Global Security registered in their names, and
will not receive or be entitled to receive physical delivery of such Securities
in definitive form and will not be considered the owners or holders thereof
under the Indenture. Accordingly, each person owning a beneficial interest in a
Registered Global Security must rely on the procedures of the Depositary for
such Registered Global Security and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder of record under the Indenture. The Company
understands that under existing industry practices, if the Company requests any
action of holders or if any owner of a beneficial interest in a Registered
Global Security desires to give or take any action which a holder is entitled to
give or take under the Indenture, the Depositary for such Registered Global
Security would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instruction of beneficial owners holding through
them.
Payments of principal of, premium, if any, and interest on Securities
represented by a Registered Global Security registered in the name of the
Depositary or its nominee will be made to such Depositary or its nominee, as the
case may be, as the registered owner of such Registered Global Security. None of
the Company, the Trustee or any other agent of the Company or agent of the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
such Registered Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company expects that the Depositary for any Securities represented by a
Registered Global Security, upon receipt of any payment of principal, premium,
if any, or interest in respect of such Registered Global Security, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in such Registered Global Security as
shown on the records of such Depositary. The Company also expects that payments
by participants to owners of beneficial interests in such
35
<PAGE>
Registered Global Security held through such participants will be governed by
standing customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such participants.
If the Depositary for Securities represented by a Registered Global Security
notifies the Company that it is at any time unwilling or unable to continue as
Depositary or ceases to be eligible under applicable law, and a successor
Depositary eligible under applicable law is not appointed by the Company within
90 days, the Company will issue such Securities in definitive form in exchange
for such Registered Global Security. In addition, the Company may at any time
and in its sole discretion determine not to have any of the Securities of a
series represented by one or more Registered Global Securities and, in such
event, will issue Securities of such series in definitive form in exchange for
all of the Registered Global Security or Registered Global Securities
representing such Securities. Any Securities issued in definitive form in
exchange for a Registered Global Security will be registered in such name or
names as the Depositary shall instruct the Trustee. It is expected that such
instructions will be based upon directions received by the Depositary from
participants with respect to ownership of beneficial interests in such
Registered Global Security.
SAME-DAY SETTLEMENT IN RESPECT OF GLOBAL NOTES
So long as any Senior Notes are represented by Global Securities registered
in the name of the Depositary or its nominee, such Senior Notes will trade in
the Depositary's Same-Day Funds Settlement System, and secondary market trading
activity in such Senior Notes will therefore be required by the Depositary to
settle in immediately available funds. No assurance can be given as to the
effect, if any, of settlement in immediately available funds on trading activity
in the Senior Notes.
CERTAIN COVENANTS
The following covenants apply to all series of Securities, including the
Senior Notes.
RESTRICTIONS ON LIENS. The Indenture provides that the Company will not,
and will not permit any Restricted Subsidiary (as defined herein) to, create or
incur any Lien (as defined herein) on any shares of stock, indebtedness or other
obligations of a Restricted Subsidiary (as defined herein) or any Principal
Property (as defined herein) of the Company or a Restricted Subsidiary, whether
such shares of stock, indebtedness or other obligations of a Restricted
Subsidiary or Principal Property are owned at the date of the Indenture or
thereafter acquired, unless the Company secures or causes such Restricted
Subsidiary to secure the outstanding Securities equally and ratably with all
indebtedness secured by such Lien, so long as such indebtedness shall be so
secured. This covenant shall not apply in the case of: (i) the creation of any
Lien on any shares of stock, indebtedness or other obligations of a Subsidiary
or any Principal Property acquired after the date of the Indenture (including
acquisitions by way of merger or consolidation) by the Company or a Restricted
Subsidiary contemporaneously with such acquisition, or within 180 days
thereafter, to secure or provide for the payment or financing of any part of the
purchase price thereof, or the assumption of any Lien upon any shares of stock,
indebtedness or other obligations of a Subsidiary or any Principal Property
acquired after the date of the Indenture existing at the time of such
acquisition, or the acquisition of any shares of stock, indebtedness or other
obligations of a Subsidiary or any Principal Property subject to any Lien
without the assumption thereof, provided that every such Lien referred to in
this clause (i) shall attach only to the shares of stock, indebtedness or other
obligations of a Subsidiary or any Principal Property so acquired and fixed
improvements thereon; (ii) any Lien on any shares of stock, indebtedness or
other obligations of a Subsidiary or any Principal Property existing at the date
of the Indenture; (iii) any Lien on any shares of stock, indebtedness or other
obligations of a Subsidiary or any Principal Property in favor of the Company or
any Restricted Subsidiary; (iv) any Lien on any Principal Property being
constructed or improved securing loans to finance such construction or
improvements; (v) any Lien on shares of stock, indebtedness or other obligations
of a Subsidiary or any Principal Property incurred in connection with the
issuance of tax-exempt governmental obligations (including, without limitation,
industrial revenue bonds and similar financings); (vi) any mechanics',
materialmen's, carriers' or other similar Liens arising in the ordinary course
of business with respect to obligations which are not yet due or which are being
contested in good faith; (vii) any Lien on any shares of stock, indebtedness or
other obligations of a Subsidiary or any Principal Property for taxes,
assessments or governmental charges or levies not yet delinquent, or already
36
<PAGE>
delinquent but the validity of which is being contested in good faith; (viii)
any Lien on any shares of stock, indebtedness or other obligations of a
Subsidiary or any Principal Property arising in connection with legal
proceedings being contested in good faith, including any judgment Lien so long
as execution thereon is stayed; (ix) any landlord's Lien on fixtures located on
premises leased by the Company or a Restricted Subsidiary in the ordinary course
of business, and tenants' rights under leases, easements and similar Liens not
materially impairing the use or value of the property involved; (x) any Lien
arising by reason of deposits necessary to qualify the Company or any Restricted
Subsidiary to conduct business, maintain self-insurance, or obtain the benefit
of, or comply with, any law; and (xi) any renewal of or substitution for any
Lien permitted by any of the preceding clauses (i) through (x), provided, in the
case of a Lien permitted under clause (i), (ii) or (iv), the indebtedness
secured is not increased nor the Lien extended to any additional assets.
(SECTION 4.3(A)) Notwithstanding the foregoing, the Company or any Restricted
Subsidiary may create or assume Liens in addition to those permitted by the
preceding sentence of this paragraph, and renew, extend or replace such Liens,
provided that at the time of such creation, assumption, renewal, extension or
replacement, and after giving effect thereto, Exempted Debt (as defined herein)
does not exceed 15% of Combined Net Worth (as defined herein). (SECTION 4.3(B)).
RESTRICTIONS ON SALE AND LEASE-BACK TRANSACTIONS. The Indenture provides
that the Company will not, and will not permit any Restricted Subsidiary to,
sell or transfer, directly or indirectly, except to the Company or a Restricted
Subsidiary, any Principal Property as an entirety, or any substantial portion
thereof, with the intention of taking back a lease of such property, except a
lease for a period of three years or less at the end of which it is intended
that the use of such property by the lessee will be discontinued; PROVIDED that,
notwithstanding the foregoing, the Company or any Restricted Subsidiary may sell
any such Principal Property and lease it back for a longer period (i) if the
Company or such Restricted Subsidiary would be entitled, pursuant to the
provisions of Section 4.3(a) described above under "-- Restrictions on Liens",
to create a Lien on the property to be leased securing Funded Debt (as defined
herein) in an amount equal to the Attributable Debt (as defined herein) with
respect to such sale and lease-back transaction without equally and ratably
securing the outstanding Securities or (ii) if (A) the Company promptly informs
the Trustee of such transaction, and (B) the Company causes an amount equal to
the fair value (as determined by Board Resolution of the Company) of such
property to be applied: (1) to the purchase of other property that will
constitute Principal Property having a fair value at least equal to the fair
value of the property sold, or (2) to the retirement within 120 days after
receipt of such proceeds, of Funded Debt incurred or assumed by the Company or a
Restricted Subsidiary (including the Securities); PROVIDED further that, in lieu
of applying all of or any part of such net proceeds to such retirement, the
Company may, within 75 days after such sale, deliver or cause to be delivered to
the applicable Trustee for cancellation either debentures or notes evidencing
Funded Debt of the Company (which may include the Securities) or of a Restricted
Subsidiary previously authenticated and delivered by the applicable Trustee, and
not theretofore tendered for sinking fund purposes or called for a sinking fund
or otherwise applied as a credit against an obligation to redeem or retire such
notes or debentures, and a certificate of an officer of the Company (which shall
be delivered to the Trustee) stating that the Company elects to deliver or cause
to be delivered such debentures or notes in lieu of retiring Funded Debt as
hereinabove provided. If the Company shall so deliver debentures or notes to the
applicable Trustee and the Company shall duly deliver such officer's
certificate, the amount of cash which the Company shall be required to apply to
the retirement of Funded Debt under this provision of the Indenture shall be
reduced by an amount equal to the aggregate of the then applicable optional
redemption prices (not including any optional sinking fund redemption prices) of
such debentures or notes, or, if there are no such redemption prices, the
principal amount of such debentures or notes; PROVIDED, that in the case of
debentures or notes which provide for an amount less than the principal amount
thereof to be due and payable upon a declaration of the maturity thereof, such
amount of cash shall be reduced by the amount of principal of such debentures or
notes that would be due and payable as of the date of such application upon a
declaration of acceleration of the maturity thereof pursuant to the terms of the
indenture pursuant to which such debentures or notes were issued. (SECTION
4.4(A)) Notwithstanding the foregoing, the Company or any Restricted Subsidiary
may enter into sale and lease-back transactions in addition to those
37
<PAGE>
permitted by this paragraph without any obligation to retire any outstanding
Securities or other Funded Debt, PROVIDED that at the time of entering into such
sale and lease-back transactions and after giving effect thereto, Exempted Debt
does not exceed 15% of Combined Net Worth. (SECTION 4.4(B)).
CERTAIN DEFINITIONS
The term "Attributable Debt" as defined in the Indenture means when used in
connection with a sale and lease-back transaction referred to above under "--
Restrictions on Sale and Lease-back Transactions", on any date as of which the
amount thereof is to be determined, the product of (a) the net proceeds from
such sale and lease-back transaction multiplied by (b) a fraction, the numerator
of which is the number of full years of the term of the lease relating to the
property involved in such sale and lease-back transaction (without regard to any
options to renew or extend such term) remaining on the date of the making of
such computation and the denominator of which is the number of full years of the
term of such lease measured from the first day of such term.
The term "Combined Net Worth" as defined in the Indenture means, at any date
of determination, the combined shareholders' equity of the Company, as set forth
on the then most recently available combined balance sheet of the Company and
its combined subsidiaries and joint ventures.
The term "Exempted Debt" as defined in the Indenture means the sum, without
duplication, of the following items outstanding as of the date Exempted Debt is
being determined: (i) indebtedness of the Company and its Restricted
Subsidiaries incurred after the date of the Indenture and secured by liens
created or assumed or permitted to exist pursuant to Section 4.3(b) of the
Indenture described above under "-- Restrictions on Liens" and (ii) Attributable
Debt of the Company and its Restricted Subsidiaries in respect of all sale and
lease-back transactions with regard to any Principal Property entered into
pursuant to Section 4.4(b) of the Indenture described above under "--
Restrictions on Sale and Lease-back Transactions."
The term "Funded Debt" as defined in the Indenture means all indebtedness
for money borrowed, including purchase money indebtedness, having a maturity of
more than one year from the date of its creation or having a maturity of less
than one year but by its terms being renewable or extendible, at the option of
the obligor in respect thereof, beyond one year from the date of its creation.
The terms "Holder" or "Securityholder" as defined in the Indenture mean the
registered holder of any Security with respect to registered Securities and the
bearer of any unregistered Security or any coupon appertaining thereto, as the
case may be.
The term "Lien" as defined in the Indenture means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind, or any other type of preferential arrangement that has the practical
effect of creating a security interest, in respect of such asset. For the
purposes of the Indenture, the Company or any Subsidiary shall be deemed to own
subject to a Lien any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
The term "Original Issue Discount Security" as defined in the Indenture
means any Security that provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the maturity
thereof pursuant to Section 6.2 of the Indenture.
The term "Principal Property" as defined in the Indenture means land, land
improvements, buildings and associated equipment owned or leased pursuant to a
capital lease and used by the Company or a Restricted Subsidiary primarily in
the hotel business, but shall not include any such property financed through the
issuance of tax exempt governmental obligations (including, without limitation,
industrial revenue bonds and similar financings).
The term "Restricted Subsidiary" as defined in the Indenture means any
Subsidiary organized and existing under the laws of the United States of America
and the principal business of which is carried on within the United States of
America which owns or is a lessee pursuant to a capital lease of any Principal
Property other than:
38
<PAGE>
(i) each Subsidiary the major part of whose business consists of
finance, banking, credit, leasing, insurance, financial services or other
similar operations, or any combination thereof;
(ii) each Subsidiary formed or acquired after the date hereof for the
purpose of acquiring the business or assets of another Person and which does
not acquire all or any substantial part of the business or assets of the
Company or any Restricted Subsidiary; and
(iii) the following unincorporated partnerships and joint ventures, each
of which currently owns one inn: La Quinta -- Houston I.H. 10, Ltd.; La
Quinta San Antonio -- South Joint Venture; La Quinta Austin Motor Hotel,
Ltd.; La Quinta -- Dallas Central Expressway, Ltd.; LQ Motor Inn Venture --
Austin No. 530; La Quinta -- Wichita, Kansas, No. 532, Ltd.; and LQ -- West
Bank Joint Venture;
PROVIDED, HOWEVER, that any Subsidiary may be declared a Restricted Subsidiary
by Board Resolution, effective as of the date such Board Resolution is adopted;
PROVIDED FURTHER, that any such declaration may be rescinded by further Board
Resolution, effective as of the date such further Board Resolution is adopted.
The term "Subsidiary" as defined in the Indenture means with respect to any
Person, any corporation, association or other business entity of which more than
50% of the outstanding Voting Stock (as defined in the Indenture) is owned
directly or indirectly, by such Person and one or more other Subsidiaries of
such Person.
RESTRICTIONS ON MERGERS AND SALES OF ASSETS
Under the Indenture, the Company shall not consolidate with, merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially as
an entirety in one transaction or a series of related transactions) to, any
Person (other than a consolidation with or merger with or into a Subsidiary or a
sale, conveyance, transfer, lease or other disposition to a Subsidiary) or
permit any Person to merge with or into the Company unless: (a) either (i) the
Company shall be the continuing Person or (ii) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
that acquired or leased such property and assets of the Company shall be a
corporation organized and validly existing under the laws of the United States
of America or any jurisdiction thereof and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, all of the
obligations of the Company on all of the Securities and under the Indenture and
the Company shall have delivered to the Trustee an opinion of counsel stating
that such consolidation, merger or transfer and such supplemental indenture
complies with this provision and that all conditions precedent provided for in
the Indenture relating to such transaction have been complied with and that such
supplemental indenture constitutes the legal, valid and binding obligation of
the Company or such successor enforceable against such entity in accordance with
its terms, subject to customary exceptions; and (b) an officers' certificate to
the effect that immediately after giving effect to such transaction, no Default
(as defined in the Indenture) shall have occurred and be continuing and an
opinion of counsel as to the matters set forth in clause (a) shall have been
delivered to the Trustee. (SECTION 5.1). The meaning of the term "all or
substantially all of the assets" has not been definitely established and is
likely to be interpreted by reference to applicable state law if and at the time
the issue arises, and will be dependent on the facts and circumstances existing
at the time. Accordingly, there may be uncertainty as to whether a Holder of
Senior Notes can determine whether a sale of "all or substantially all of the
assets" has occurred and exercise any remedies such Holder may have as a result
thereof.
EVENTS OF DEFAULT
Events of Default defined in the Indenture with respect to the Securities of
any series are: (a) the Company defaults in the payment of the principal of any
Security of such series when the same becomes due and payable at maturity, upon
acceleration, redemption or mandatory repurchase, including as a sinking fund
installment, or otherwise; (b) the Company defaults in the payment of interest
on any Security of such series when the same becomes due and payable, and such
default continues for a period of 30 days; (c)(i) default by the Company or any
Restricted Subsidiary in the payment when due at maturity of any Funded Debt
(other than Funded Debt that is non-recourse to the Company and its Restricted
Subsidiaries) in excess of $15,000,000, whether such Funded Debt is outstanding
at the date of the Indenture or is
39
<PAGE>
thereafter outstanding, and the continuation of such default for the greater of
any period of grace applicable thereto or ten days from the date of such default
or (ii) an event of default, as defined in any indenture, agreement or
instrument evidencing or under which the Company and/or any Restricted
Subsidiary has at the date of the Indenture or shall thereafter have outstanding
at least $15,000,000 aggregate principal amount of Funded Debt, shall happen and
be continuing and such Funded Debt shall have been accelerated so that the same
shall be or become due and payable prior to the date on which the same would
otherwise have become due and payable, and such acceleration shall not be
rescinded or annulled or such indebtedness shall not be discharged, within ten
days; (d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture with respect to any
Security of such series or in the Securities of such series and such default or
breach continues for a period of 30 consecutive days after written notice to the
Company by the Trustee or to the Company and the Trustee by the Holders of 25%
or more in aggregate principal amount of the Securities of all series affected
thereby; (e) an involuntary case or other proceeding shall be commenced against
the Company or any Restricted Subsidiary with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 days; or an order for relief shall be entered against the Company
or any Restricted Subsidiary under the federal bankruptcy laws as now or
hereafter in effect; (f) the Company or any Restricted Subsidiary (i) commences
a voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for relief
in an involuntary case under any such law, (ii) consents to the appointment of
or taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Restricted Subsidiary or
for all or substantially all of the property and assets of the Company or any
Restricted Subsidiary or (iii) effects any general assignment for the benefit of
creditors; or (g) any other Event of Default established with respect to any
series of Securities issued pursuant to the Indenture occurs. (SECTION 6.1)
The Indenture provides that if an Event of Default described in clauses (a)
or (b) of the immediately preceding paragraph with respect to the Securities of
any series then outstanding occurs and is continuing, then, and in each and
every such case, except for any series of Securities the principal of which
shall have already become due and payable, either the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Securities of any such
affected series then outstanding under the Indenture (each such series treated
as a separate class) by notice in writing to the Company (and to the Trustee if
given by Securityholders), may declare the entire principal (or, if the
Securities of any such series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of such series
established pursuant to the Indenture) of all Securities of such affected
series, and the interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately due
and payable. If an Event of Default described in clauses (c), (d) or (g) of the
immediately preceding paragraph with respect to the Securities of one or more
but not all series then outstanding or with respect to the Securities of all
series then outstanding occurs and is continuing, then, and in each and every
such case, except for any series of Securities the principal of which shall have
already become due and payable, either the Trustee or the Holders of not less
than 25% in aggregate principal amount (or, if the Securities of any such series
are Original Issue Discount Securities, the amount thereof accelerable as
described in this paragraph) of the Securities of all such affected series then
outstanding under the Indenture (treated as a single class) by notice in writing
to the Company (and to the Trustee if given by Securityholders), may declare the
entire principal (or, if the Securities of any such series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of such series established pursuant to the Indenture) of all
Securities of all such affected series, and the interest accrued thereof, if
any, to be due and payable immediately, and upon any such declaration the same
shall become immediately due and payable. If an Event of Default described in
clause (e) or (f) of the immediately preceding paragraph occurs and is
continuing, then the principal amount (or, if any Securities are Original Issue
Discount Securities, such portion of the principal as may be specified in the
terms thereof established pursuant to the Indenture) of all the Securities then
outstanding and interest accrued thereon, if any, shall be and become
immediately due and payable, without any notice or other action by any Holder or
the Trustee to
40
<PAGE>
the full extent permitted by applicable law. Upon certain conditions such
declarations may be rescinded and annulled and past defaults may be waived by
the Holders of a majority in principal of the then outstanding Securities of all
such series that have been accelerated (voting as a single class). (SECTION 6.2)
The Indenture contains a provision under which, subject to the duty of the
Trustee during a default to act with the required standard of care, (i) the
Trustee may rely and shall be protected in acting or refraining from acting upon
any resolution, certificate, officers' certificate, opinion of counsel (or
both), statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence or indebtedness or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper person or persons and the Trustee need not investigate
any fact or matter stated in the document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as it
may see fit; (ii) before the Trustee acts or refrains from acting, it may
require an officers' certificate and/or an opinion of counsel, which shall
conform to the requirements of the Indenture and the Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or opinion; subject to the terms of the Indenture, whenever in the
administration of the trusts of the Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering or omitting any action under the Indenture, such matter (unless other
evidence in respect thereof be specifically prescribed in the Indenture) may, in
the absence of negligence or bad faith on the part of the Trustee, be deemed to
be conclusively proved and established by an officers' certificate delivered to
the Trustee, and such certificate, in the absence of negligence or bad faith on
the part of the Trustee, shall be full warrant to the Trustee for any action
taken, suffered or omitted by it under the provisions of the Indenture upon the
faith thereof; (iii) the Trustee may act through its attorneys and agents not
regularly in its employ and shall not be responsible for the misconduct or
negligence of any agent or attorney appointed with due care by it under the
Indenture; (iv) any request, direction, order or demand of the Company mentioned
in the Indenture shall be sufficiently evidenced by an officers' certificate
(unless other evidence in respect thereof be specifically prescribed in the
Indenture); and any Board Resolution may be evidenced to the Trustee by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company; (v)
the Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by the Indenture at the request, order or direction of any of the
Holders, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction; (vi) the Trustee
shall not be liable for any action it takes or omits to take in good faith that
it believes to be authorized or within its rights or powers or for any action it
takes or omits to take in accordance with the direction of the Holders in
accordance with the Indenture relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under the Indenture; (vii) the
Trustee may consult with counsel and the written advice of such counsel or any
opinion of counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it under the Indenture in
good faith and in reliance thereon; and (viii) prior to the occurrence of an
Event of Default under the Indenture and after the curing or waiving of all
Events of Default, the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, officers'
certificate, opinion of counsel, Board Resolution, statement, instrument,
opinion, report, notice, request, consent, order, approval, appraisal, bond,
debenture, note, coupon, security, or other paper or document. (SECTION 7.2)
Subject to such provisions in the Indenture for the indemnification of the
Trustee and certain other limitations, the Holders of at least a majority in
aggregate principal amount (or, if any Securities are Original Issue Discount
Securities, such portion of the principal as is then accelerable under the
Indenture) of the outstanding Securities of all series affected (voting as a
single class), may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Securities of such series by
the Indenture; PROVIDED, that the Trustee may refuse to follow any direction
that conflicts with law of the Indenture, that may involve the Trustee in
personal liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders not joining in the giving of such
direction; and PROVIDED FURTHER, that the Trustee may take any other action it
deems proper that is not inconsistent with any directions received from Holders
of Securities pursuant to this paragraph. (SECTION 6.5)
41
<PAGE>
Subject to various provisions in the Indenture, the Holders of at least a
majority in principal amount (or, if the Securities are Original Issue Discount
Securities, such potion of the principal as is then accelerable under the
Indenture) of the outstanding Securities of all series affected (voting as a
single class) by notice to the Trustee, may waive, on behalf of the Holders of
all the Securities of such series, an existing Default or Event of Default with
respect to the securities of such series and its consequences, except a Default
in the payment of principal of or interest on any Security as specified in
clauses (a) or (b) of Section 6.1 of the Indenture or in respect of a covenant
or provision of the Indenture which cannot be modified or amended without the
consent of the Holder of each outstanding Security affected. Upon any such
waiver, such Default shall cease to exist, and any Event of Default with respect
to the Securities of such series arising therefrom shall be deemed to have been
cured, for every purpose of the Indenture; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereto. (SECTION 6.4)
The Indenture provides that no Holder of any Securities of any series may
institute any proceeding, judicial or otherwise, with respect to the Indenture
or the Securities of such series, or for the appointment of a receiver or
trustee, or for any other remedy under the Indenture, unless: (i) such Holder
has previously given to the Trustee written notice a continuing Event of Default
with respect to the Securities of such series; (ii) the Holders of at least 25%
in aggregate principal amount of outstanding Securities of all such series
affected shall have made written request to the Trustee to institute proceedings
in respect of such Event of Default in its own name as Trustee under the
Indenture; (iii) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to the Trustee against any costs, liabilities or
expenses to be incurred in compliance with such request; (iv) the Trustee for 60
days after its receipt of such notice, request and offer of indemnity has failed
to institute any such proceeding; and (v) during such 60-day period, the Holders
of a majority in aggregate principal amount of the outstanding Securities of all
such affected series have not given the Trustee a direction that is inconsistent
with such written request. A Holder may not use the Indenture to prejudice the
rights of another Holder or to obtain a preference or priority over such other
Holder. (SECTION 6.6)
The Indenture contains a covenant that the Company will file with the
Trustee, within 15 days after the Company is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports which the Company may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act. (SECTION 4.6)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides with respect to each series of Securities that,
except as otherwise provided in this paragraph, the Company may terminate its
obligations under the Securities of a series and the Indenture with respect to
Securities of such series if: (i) all Securities of such series previously
authenticated and delivered, with certain exceptions, have been delivered to the
Trustee for cancellation and the Company has paid all sums payable by it under
the Indenture; or (ii)(A) the Securities of such series mature within one year
or all of them are to be called for redemption within one year under
arrangements satisfactory to the Trustee for giving the notice of redemption,
(B) the Company irrevocably deposits in trust with the Trustee, as trust funds
solely for the benefit of the Holders of such Securities, for that purpose,
money or U.S. Government Obligations or a combination thereof sufficient (unless
such funds consist solely of money, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee), without consideration of any reinvestment, to
pay principal of and interest on the Securities of such series to maturity or
redemption, as the case may be, and to pay all other sums payable by it under
the Indenture, and (C) the Company delivers to the Trustee an officers'
certificate and an opinion of counsel, in each case stating that all conditions
precedent provided for in the Indenture relating to the satisfaction and
discharge of the Indenture with respect to the Securities of such series have
been complied with. With respect to the foregoing clause (i), only the Company's
obligations to compensate and indemnity the trustee under the Indenture shall
survive. With respect to the foregoing clause (ii), only the Company's
obligations to execute and deliver Securities of such series for authentication,
to set the terms of the Securities of such series, to maintain an office or
agency in respect of the Securities of such series, to have moneys held for
payment in trust, to register the transfer or exchange of Securities of such
series, to deliver Securities of such series for replacement or to be canceled,
to compensate and
42
<PAGE>
indemnify the Trustee and to appoint a successor trustee, and its right to
recover excess money held by the Trustee shall survive until such Securities are
no longer outstanding. Thereafter, only the Company's obligations to compensate
and indemnify the Trustee, and its right to recover excess money held by the
Trustee shall survive. (SECTION 8.1)
The Indenture provides that, except as otherwise provided in this paragraph,
the Company (i) will be deemed to have paid and will be discharged from any and
all obligations in respect of the Securities of any series, and the provisions
of the Indenture will no longer be in effect with respect to the Securities of
such series ("legal defeasance") and (ii) may omit to comply with any term,
provision or condition of the Indenture described above under "-- Certain
Covenants" (or any other specific covenant relating to such series provided for
in a Board Resolution or supplemental indenture which may by its terms be
defeased pursuant to the Indenture), and such omission shall be deemed not to be
an Event of Default under clauses (c), (d) or (g) of the first paragraph of "--
Events of Default" with respect to the outstanding Securities of a series
("covenant defeasance"); PROVIDED that the following conditions shall have been
satisfied: (A) the Company has irrevocably deposited in trust with the Trustee
as trust funds solely for the benefit of the Holders of the Securities of such
series, for payment of the principal of and interest on the Securities of such
series, money or U.S. Government Obligations or a combination thereof sufficient
(unless such funds consist solely of money, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof deliver to the Trustee) without consideration of any
reinvestment and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, to pay and
discharge the principal of and accrued interest on the outstanding Securities of
such series to maturity or earlier redemption (irrevocably provided for under
arrangements satisfactory to the Trustee), as the case may be; (B) such deposit
will not result in a breach or violation of, or constitute a default under, the
Indenture or any other material agreement or instrument to which the Company is
a party or by which it is bound; (C) no Default with respect to such Securities
of such series shall have occurred and be continuing on the date of such
deposit; (D) the Company shall have delivered to the Trustee an opinion of
counsel that (1) the Holders of the Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of the
Company's exercise of its option under this provision of the Indenture and will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (which opinion, in the case of a legal defeasance, shall be based
upon a change in law) and (2) the Holders of the Securities of such series have
a valid security interest in the trust funds subject to no prior liens under the
Uniform Commercial Code, and (E) the Company has delivered to the Trustee an
officers' certificate and an opinion of counsel, in each case stating that all
conditions precedent provided for in the Indenture relating to the defeasance
contemplated have been complied with. In the case of legal defeasance under
clause (i) above, the opinion of counsel referred to in clause (D)(1) above may
be replaced by a ruling directed to the Trustee received from the Internal
Revenue Service to the same effect. Subsequent to legal defeasance under clause
(i) above, the Company's obligations to execute and deliver Securities of such
series for authentication, to set the terms of the Securities of such series, to
maintain an office or agency in respect of the Securities of such series, to
have moneys held for payment in trust, to register the transfer or exchange of
Securities of such series, to deliver Securities of such series for replacement
or to be canceled, to compensate and indemnify the Trustee and to appoint a
successor trustee, and its right to recover excess money held by the Trustee
shall survive until such Securities are no longer outstanding. After such
Securities are no longer outstanding, in the case of legal defeasance under
clause (i) above, only the Company's obligations to compensate and indemnify the
Trustee and its right to recover excess money held by the Trustee shall survive.
(SECTIONS 8.2 AND 8.3)
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee may amend or
supplement the Indenture or the Securities of any series without notice to or
the consent of any Holder: (1) to cure any ambiguity, defect or inconsistency in
the Indenture; PROVIDED that such amendments or supplements shall not materially
and adversely affect the interests of the Holders; (2) to comply with Article 5
(which relates to the covenant regarding "-- Restrictions on Mergers and Sales
of Assets") of the Indenture; (3) to comply with any requirements of the
Securities and Exchange Commission in connection with the qualification of the
43
<PAGE>
Indenture under the Trust Indenture Act; (4) to evidence and provide for the
acceptance of appointment under the Indenture with respect to the Securities of
any or all series by a successor Trustee; (5) to establish the form or forms or
terms of Securities of any series or of the coupons appertaining to such
Securities as permitted under the Indenture; (6) to provide for uncertificated
or unregistered Securities and to make all appropriate changes for such purpose;
(7) to change or eliminate any provisions of the Indenture with respect to all
or any series of the Securities not then outstanding (and, if such change is
applicable to fewer than all such series of the Securities, specifying the
series to which such change is applicable), and to specify the rights and
remedies of the Trustee and the Holders of such Securities in connection
therewith; and (8) to make any change that does not materially and adversely
affect the rights of any Holder. (SECTION 9.1)
The Indenture also contains provisions whereby the Company and the Trustee,
subject to certain conditions, without prior notice to any Holders, may amend
the Indenture and the outstanding Securities of any series with the written
consent of the Holders of a majority in principal amount of the Securities then
outstanding of all series affected by such supplemental indenture (all such
series voting as one class), and the Holders of a majority in principal amount
of the outstanding Securities of all series affected thereby (all such series
voting as one class) by written notice to the Trustee may waive future
compliance by the Company with any provision of the Indenture or the Securities
of such series. Notwithstanding the foregoing provisions, without the consent of
each Holder affected thereby, an amendment or waiver, including a waiver
pursuant to Section 6.4 of the Indenture, may not: (i) extend the stated
maturity of the principal of, or any sinking fund obligation or any installment
of interest on, such Holder's Security, or reduce the principal amount thereof
or the rate of interest thereon (including any amount in respect of original
issue discount), or any premium payable with respect thereto, or adversely
affect the rights of such Holder under any mandatory redemption or repurchase
provision or any right of redemption or repurchase at the option of such Holder,
or reduce the amount of the principal of an Original Issue Discount Security
that would be due and payable upon the acceleration of the maturity thereof or
the amount thereof provable in bankruptcy, or change any place of payment where,
or the currency in which, any Security or any premium or the interest thereof is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the due date therefor; (ii) reduce the percentage in
principal amount of outstanding Securities of the relevant series the consent of
whose Holders is required for any such supplemental indenture, for any waiver of
compliance with certain provisions of the Indenture; (iii) waive a Default in
the payment of principal of or interest on any Security of such Holder; or (iv)
modify any of the provisions of this section of the Indenture, except to
increase any such percentage or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the Holder of each
outstanding Security affected thereby. A supplemental indenture which changes or
eliminates any covenant or other provision of the Indenture which has expressly
been included solely for the benefit of one or more particular series of
Securities, or which modifies the rights of Holders of Securities of such series
with respect to such covenant or provision, shall be deemed not to affect the
rights under the Indenture of the Holders of Securities of any other series or
of the coupons appertaining to such Securities. It shall not be necessary for
the consent of any Holder under this section of the Indenture to approve the
particular form of any proposed amendment, supplement or waiver, but it shall be
sufficient if such consent approves the substance thereof. After an amendment,
supplement or waiver under this section of the Indenture becomes effective, the
Company or, at the request of the Company, the Trustee shall give to the Holders
affected thereby a notice briefly describing the amendment, supplement or
waiver. The Company or, at the request of the Company, the Trustee will mail
supplemental indentures to Holders upon request. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture or waiver. (SECTION
9.2)
44
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective principal amounts of Senior Notes set forth opposite the names of
such Underwriters below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF SENIOR NOTES
------------------------------------------------------------------------------------------------ ----------------
<S> <C>
Morgan Stanley & Co. Incorporated...............................................................
Donaldson, Lufkin & Jenrette Securities Corporation.............................................
NationsBanc Capital Markets, Inc................................................................
----------------
Total......................................................................................... $ 100,000,000
----------------
----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Senior Notes are subject to
the approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the Senior
Notes if any are taken.
The Underwriters initially propose to offer part of the Senior Notes
directly to the public at the public offering price set forth on the cover page
hereof and part to certain dealers at a price that represents a concession not
in excess of % of the principal amount of the Senior Notes. Any Underwriter
may allow, and such dealers may reallow, a concession not in excess of % of
the principal amount of the Senior Notes to other Underwriters or to certain
other dealers. After the initial offering of the Senior Notes, the offering
price and other selling terms may from time to time be varied by the
Underwriters.
The Company does not intend to apply for listing of the Senior Notes on a
national securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Senior Notes, as permitted by
applicable laws and regulations. The Underwriters are not obligated, however, to
make a market in the Senior Notes and any such market making may be discontinued
at any time at the sole discretion of the Underwriters. Accordingly, no
assurance can be given as to the liquidity of, or trading markets for, the
Senior Notes.
When more than 10% of the proceeds of a public offering of debt securities
that meet certain ratings criteria are to be paid to a member of the National
Association of Securities Dealers, Inc. (the "NASD") participating in such
public offering or to an affiliate of such a member, Section 44 (c)(8) of the
NASD's Rules of Fair Practice requires disclosure of such fact. NationsBanc
Capital Markets, Inc., one of the Underwriters, is a member of the NASD and is
an affiliate of NationsBank of Texas, N.A. ("NationsBank"), the administrative
agent and one of the lenders under the Company Bank Credit Facility, the LQDP
Lines of Credit and the Company's unsecured line of credit. NationsBank will
receive more than 10% of the net proceeds from the public offering of Senior
Notes as a result of the use of such proceeds to repay loans made under the
Company Bank Credit Facility and the LQDP Lines of Credit. See "Use of
Proceeds."
From time to time, Morgan Stanley & Co. Incorporated and Donaldson, Lufkin &
Jenrette Securities Corporation have provided, and continue to provide,
investment banking services to the Company. NationsBanc Capital Markets, Inc.
and its affiliates have periodically provided and may in the future provide
banking and investment banking services to the Company.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
LEGAL MATTERS
Certain legal matters with respect to the Senior Notes offered hereby will
be passed upon for the Company by John F. Schmutz, Vice President -- General
Counsel of the Company and Latham & Watkins, Los Angeles, California and for the
Underwriters by Davis Polk & Wardwell.
45
<PAGE>
EXPERTS
The combined balance sheets of La Quinta Inns, Inc., as of December 31, 1994
and 1993, and the related combined statements of operations, shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1994 incorporated by reference herein and elsewhere in the
Registration Statement (as defined under "Available Information"), have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP
refers to the adoption of Statement of Financial Accounting Standards No. 109 in
1993.
With respect to the unaudited interim financial information for the
three-month periods ended March 31, 1995 and 1994 and three and six-month
periods ended June 30, 1995 and 1994, incorporated by reference herein, KPMG
Peat Marwick LLP has reported that they applied limited procedures in accordance
with professional standards for a review of such information. However, their
separate reports included in the Company's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1995 and June 30, 1995, and incorporated by
reference herein, state that they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. The accountants are not
subject to the liability provisions of Section 11 of the Securities Act of 1933
for their reports on the unaudited interim financial information because neither
of those reports is a "report" or a "part" of the registration statement
prepared or certified by the accountants within the meaning of Sections 7 and 11
of the Securities Act of 1933.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (together with all amendments, the
"Registration Statement") on Form S-3 under the Securities Act of 1933, as
amended ("Securities Act") with respect to the Senior Notes offered hereby. This
Prospectus, filed as a part of that Registration Statement, does not contain all
the information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. In addition, certain documents filed by the Company with the
Commission have been incorporated herein by reference. See "Incorporation of
Certain Information by Reference." For further information regarding La Quinta
and the Senior Notes offered hereby, reference is made to the Registration
Statement, including the exhibits and schedules thereto and the documents
incorporated herein by reference. The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549; and
at the regional offices of the Commission at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and at 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such materials can
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Common
Stock of the Company is listed on the New York Stock Exchange. Reports, proxy
statements and other information concerning the Company can also be inspected
and copied at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K (Commission file No. 1-7790) for
the fiscal year ended December 31, 1994 (filed with the Commission on March 15,
1995), the Company's Quarterly Report on Form 10-Q for the three month period
ended March 31, 1995 (filed with the Commission on May 15, 1995), the Company's
Current Report on Form 8-K (filed with the Commission on June 16, 1995) and the
Company's Quarterly Report on Form 10-Q for the six month period ended June 30,
1995 (filed with the Commission on July 26, 1995), are hereby incorporated by
reference.
46
<PAGE>
All documents filed by the Company pursuant to Sections 13(a),13(c),14 or
15(d) of the Exchange Act, after the date of this Prospectus and prior to the
termination of the offering of the securities offered by this Prospectus, shall
be deemed to be incorporated by reference in this Prospectus and be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus, or in
any other subsequently filed document that also is or is deemed to be
incorporated by reference, modifies or replaces such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified,
to constitute a part of this Prospectus.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon written or oral request of any
such person, a copy of any or all of the documents incorporated by reference
herein, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates. Written or oral requests for such copies should be directed to: La
Quinta Inns, Inc., 112 East Pecan Street, San Antonio, Texas 78205, Attention:
Investor Relations, telephone (210) 302-6000.
47
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the fees and expenses, other than
underwriting discounts and commissions, payable or reimbursable by the Company
in connection with the issuance and distribution of the Senior Notes:
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 34,483
Printing and Engraving Expenses................................... 40,000
Blue Sky Fees and Expenses........................................ 20,000
Trustee and Registrar Fees........................................ 20,000
Legal Fees and Expenses........................................... 100,000
Accounting Fees................................................... 19,000
Miscellaneous Expenses............................................ 16,517
---------
Total........................................................... $ 250,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02A(16) of the Texas Business Corporation Act, as amended (the
"TBCA"), empowers the Company to indemnify its directors, officers, employees
and agents in a variety of circumstances and to purchase and maintain liability
insurance for those persons, but only to the extent permitted by Article 2.02-1
of the TBCA.
Article 2.02-1 of the TBCA provides that a corporation may indemnify any
person who was, is or is threatened to be made a party to any suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative because the person is or was a director of the Company or is or
was serving at its request in the same or another capacity in another
corporation or business association against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred if it is determined: (i)
that the person conducted himself in good faith, (ii) that the person reasonably
believed his conduct, with respect to his official capacity, was in the best
interest of the Company, or, in all other cases, his conduct was at least not
opposed to the best interests of the Company, and (iii) in the case of any
criminal proceeding, that the person had no reasonable cause to believe his
conduct was unlawful.
Article Eleven of the Company's Restated Articles of Incorporation, as
amended (the "Articles"), and Article V of the Company's Amended and Restated
By-Laws, as amended (the "By-Laws"), provide for indemnification of directors,
officers, employees and agents of the Company in a variety of circumstances.
Article V of the By-Laws provides that the Company shall indemnify any person
who was, is, or is threatened to be made a named party or who is called as a
witness in any threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative, who is or
was a director or officer, to the fullest extent permitted by the TBCA, as now
existing or hereafter amended, including to the extent that any such action,
suit or proceeding may involve the negligence of a director or officer. In
addition, the Company has purchased and maintains insurance on behalf of
directors and officers of the Company against any liability asserted against
such persons and incurred by them in such capacity and arising out of their
status as directors or officers of the Company.
On November 15, 1990, the Board of Directors of the Company approved and
adopted the terms and provisions of two separate forms of indemnification
agreements (the "Agreements"), one for directors of the Company, including
subsidiaries, and the other for officers or key employees of the Company,
including its subsidiaries. The Agreements provide the Company's directors,
officers and key employees with a contractual right to indemnification for
actions taken by them in their respective roles or otherwise on behalf of the
Company. This contractual right insures that directors and officers will be
indemnified by the Company to the fullest extent permitted by Texas law even if
subsequent events result in a change in the control of the
II-1
<PAGE>
Company. There are two forms of the Agreement because the TBCA limits a
corporation's ability to indemnify its directors under any circumstance, but
allows a corporation to expand the statutory limits as to indemnification of
officers and employees.
The Agreements entered into between the Company and its directors beginning
in November 1990 and thereafter obligate the Company to indemnify a director who
was, is, or is threatened to be made a party or witness to any suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, because the person is or was a director of the Company against
judgments, penalties, fines, settlements, and reasonable attorneys' fees and
expenses actually incurred if it is determined: (i) that the director conducted
himself in good faith, (ii) that the director reasonably believed (a) with
respect to activities in his official capacity that his conduct was in the best
interests of the Company, (b) with respect with all other cases that his conduct
was at least not opposed to the best interests of the Company, and (iii) in the
case of any criminal proceeding, that the director had no reasonable cause to
believe that his conduct was unlawful. The Agreements entered into between the
Company and its officers beginning in November 1990 and thereafter do not
contain the foregoing limitations.
The Agreements also mandate the indemnification of directors or officers who
serve as witnesses in any proceeding (subject to certain limitations) and who
have been wholly successful as a party on the merits or otherwise in the defense
of any proceeding.
As to directors, the Agreements also limit indemnification to reasonable
attorneys' fees and expenses actually incurred if a director is found in a
proceeding to be liable to the Company or is found liable on the basis that he
received an improper benefit, and further absolutely prohibit any
indemnification of a director who has been found liable in a proceeding for
willful or intentional misconduct in the performance of his duties to the
Company.
Provisions authorizing indemnification or advancement of expenses contained
in the Company's Articles, By-Laws or the Agreements are valid only to the
extent that such provisions are consistent with provisions of Article 2.02-1 of
the TBCA. Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy expressed in the Act and is, therefore, unenforceable.
The Articles also contain a provision which eliminates certain potential
liability of directors of the Company for monetary damages to the full extent
permitted by the laws of the State of Texas as interpreted and applied by the
courts. The provision does not, however, eliminate the duty of care or the duty
of loyalty owed to the Company by its directors; instead, it only eliminates
monetary damage awards for actions or omissions by directors that breach the
duty of care owed to the Company and its shareholders. Moreover, this provision
does not in any way limit or eliminate the liability of directors of the Company
for (i) breaches of their duty of loyalty to the Company and its shareholders,
(ii) failing to act in good faith, intentional misconduct or knowing violations
of law, (iii) obtaining an improper personal benefit for themselves, (iv) any
liability expressly imposed by statute, or (v) an unlawful stock repurchase or
payment of dividends.
Furthermore, said limitation pertains solely to claims against a director
arising out of his role as a director and does not relieve a director, if he is
also an officer of the Company, from any liability arising from his role as an
officer. Finally, the provision does not apply to the responsibilities of
directors under any other law such as federal and state securities laws or
statutes expressly providing for liability of directors of corporations.
II-2
<PAGE>
ITEM 16. EXHIBITS.
The following exhibits are filed as part of the Registration Statement:
<TABLE>
<C> <S>
1 Underwriting Agreement.
*4(a) Form of Indenture between La Quinta Inns, Inc. and U.S. Trust Company of Texas,
N.A., as Trustee.
*4(b) Form of Senior Note of La Quinta Inns, Inc.
5(a) Opinion of John F. Schmutz, Esq. as to certain aspects of the legality of the
securities being registered.
5(b) Opinion of Latham & Watkins as to certain aspects of the legality of the
securities being registered.
10(a) Amended and Restated Credit Agreement (Facility A), dated as of September 12,
1995, among La Quinta Inns, Inc., Certain Lenders and NationsBank of Texas, N.A.,
as Administrative Lender.
10(b) Amended and Restated Credit Agreement (Facility B), dated as of September 12,
1995, among La Quinta Inns, Inc., Certain Lenders and NationsBank of Texas, N.A.,
as Administrative Lender.
10(c) Fifth Amended and Restated Master Covenant Agreement, dated as of September 12,
1995 between La Quinta Inns, Inc. and the Banks party thereto (NationsBank of
Texas, N.A.).
10(d) Fifth Amended and Restated Master Covenant Agreement, dated as of September 12,
1995 between La Quinta Inns, Inc. and the Banks party thereto (First Interstate
Bank of Texas, N.A.).
12 Computation of Ratio of Earnings to Fixed Charges.
*15 Awareness Letter of KPMG Peat Marwick LLP.
23(a) Consent of KPMG Peat Marwick LLP.
23(b) Consent of John F. Schmutz, Esq. (included in Exhibit 5(a)).
23(c) Consent of Latham & Watkins (included in Exhibit 5(b)).
*24 Powers of Attorney.
*25 Statement of Eligibility of Trustee on Form T-1.
<FN>
------------------------
* Previously filed.
</TABLE>
ITEM 17. UNDERTAKINGS.
(b) La Quinta hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of La Quinta's annual
report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(h) Certain arrangements indemnifying La Quinta, and officers, directors and
controlling persons of La Quinta are set forth in the Prospectus and in Item 15
above. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of La Quinta pursuant to the foregoing provisions, or otherwise, La
Quinta has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by La Quinta of expenses
incurred or paid by a director, officer or controlling person of La Quinta in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, La Quinta will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
(i) La Quinta hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by La Quinta pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed part of this Registration Statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements on Form S-3 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of San Antonio, State of Texas, on the 19th day of September, 1995.
LA QUINTA INNS, INC.
BY: /s/ WILLIAM C. HAMMETT, JR.
-----------------------------------
Name: William C. Hammett, Jr.
Title: Senior Vice President --
Accounting and
Administration
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
------------------------------------- --------------------------------- ------------------
<C> <S> <C>
* President, Chief Executive
------------------------------------- Officer and Director (Principal September 19, 1995
(Gary L. Mead) Executive Officer)
*
------------------------------------- Senior Vice President -- Finance September 19, 1995
(Michael A. Depatie) (Principal Financial Officer)
/s/ WILLIAM C. HAMMETT, JR. Senior Vice President Accounting
------------------------------------- and Administration (Principal September 19, 1995
(William C. Hammett, Jr.) Accounting Officer)
*
------------------------------------- Director September 19, 1995
(William H. Cunningham)
*
------------------------------------- Director September 19, 1995
(Donald J. McNamara)
*
------------------------------------- Director September 19, 1995
(Peter Sterling)
*
------------------------------------- Director September 19, 1995
(Thomas M. Taylor)
*By /s/ WILLIAM C. HAMMETT, JR.
----------------------------------
William C. Hammett, Jr.
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
------------ ----------------------------------------------------------------------------------------- -----------------
<C> <S> <C>
1 Underwriting Agreement.
*4(a) Form of Indenture between La Quinta Inns, Inc. and U.S. Trust Company of Texas, N.A., as
Trustee.
*4(b) Form of Senior Note of La Quinta Inns, Inc.
5(a) Opinion of John F. Schmutz, Esq. as to certain aspects of the legality of the securities
being registered.
5(b) Opinion of Latham & Watkins as to certain aspects of the legality of the securities being
registered.
10(a) Amended and Restated Credit Agreement (Facility A), dated as of September 12, 1995, among
La Quinta Inns, Inc., Certain Lenders and NationsBank of Texas, N.A., as Administrative
Lender.
10(b) Amended and Restated Credit Agreement (Facility B), dated as of September 12, 1995, among
La Quinta Inns, Inc., Certain Lenders and NationsBank of Texas, N.A., as Administrative
Lender.
10(c) Fifth Amended and Restated Master Covenant Agreement, dated as of September 12, 1995
between La Quinta Inns, Inc. and the Banks party thereto (NationsBank of Texas, N.A.).
10(d) Fifth Amended and Restated Master Covenant Agreement, dated as of September 12, 1995
between La Quinta Inns, Inc. and the Banks party thereto (First Interstate Bank of Texas,
N.A.).
12 Computation of Ratio of Earnings to Fixed Charges.
*15 Awareness Letter of KPMG Peat Marwick LLP.
23(a) Consent of KPMG Peat Marwick LLP.
23(b) Consent of John F. Schmutz, Esq. (included in Exhibit 5(a)).
23(c) Consent of Latham & Watkins (included in Exhibit 5(b)).
*24 Powers of Attorney.
*25 Statement of Eligibility of Trustee on Form T-1.
<FN>
------------------------
* Previously filed.
</TABLE>
<PAGE>
$100,000,000
LA QUINTA INNS, INC.
___% Senior Notes due 2005
UNDERWRITING AGREEMENT
September __, 1995
Morgan Stanley & Co.
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
NationsBanc Capital Markets, Inc.
c/o Morgan Stanley & Co.
Incorporated
1251 Avenue of the Americas
New York, New York 10020
Dear Sirs and Mesdames:
La Quinta Inns, Inc., a Texas corporation (the "Company"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"Underwriters") $100,000,000 principal amount of its ____% Senior Notes due
2005 (the "Securities") to be issued pursuant to the provisions of an
Indenture dated as of September ___, 1995 (the "Indenture") between the
Company and U.S. Trust Company of Texas, N.A., as Trustee (the "Trustee").
The Company wishes to confirm as follows its respective agreements with
you and the other several Underwriters on whose behalf you are acting, in
connection with the several purchases of the Securities by the Underwriters.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-3 under the Act (the "registration
statement"), including a prospectus subject to completion relating to the
Securities. The term "Registration Statement" as used in this Agreement
means the registration
<PAGE>
statement (including all financial schedules and exhibits), as amended at the
time it becomes effective or, if the registration statement became effective
prior to the execution of this Agreement, as supplemented or amended prior to
the execution of this Agreement. If it is contemplated, at the time this
Agreement is executed, that a post-effective amendment to the registration
statement will be filed and must be declared effective before the offering of
the Securities may commence, the term "Registration Statement", as used in
this Agreement, means the registration statement as amended by said
post-effective amendment. The term "Registration Statement" shall also
include any registration statement relating to the Securities that is filed
and declared effective pursuant to Rule 462(b) under the Act. The term
"Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the
Act and such information is included in a prospectus filed with the
Commission pursuant to Rule 424(b) under the Act, the term "Prospectus" as
used in this Agreement means the prospectus in the form included in the
Registration Statement as supplemented by the addition of the Rule 430A
information contained in the prospectus filed with the Commission pursuant to
Rule 424(b), PROVIDED that if a prospectus that meets the requirements of
Section 10(a) of the Act is delivered pursuant to Rule 434(c) under the Act,
then (i) the term "Prospectus" as used in this Agreement means the prospectus
subject to completion (as defined in Rule 434(g) under the Act) as
supplemented by (A) the addition of Rule 430A or other information contained
in the form of prospectus filed pursuant to Rule 434(c)(2) under the Act and
(B) the information contained in the abbreviated term sheet described in Rule
434(c)(3) under the Act, and (ii) the date of such Prospectus shall be deemed
to be the date of such abbreviated term sheet. The term "Prepricing
Prospectus" as used in this Agreement means the prospectus subject to
completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date
of the Prospectus. Any reference in this Agreement to the registration
statement, the Registration Statement, any Prepricing Prospectus or the
Prospectus shall be deemed to refer to and include the documents incorporated
by reference therein pursuant to Item 12 of Form S-3 under the Act as of the
date of the registration statement, the Registration Statement, such
Prepricing Prospectus or the Prospectus, as the case may be, and any
reference to any amendment or supplement to the registration statement, the
Registration Statement, any Prepricing Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after such date under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "Exchange Act"), that, upon
filing, are incorporated by reference therein, as required by paragraph (b)
of Item 12 of Form S-3. As used herein, the
-2-
<PAGE>
term "Incorporated Documents" means, at any time, the documents that at such
time are incorporated by reference in the registration statement, the
Registration Statement, any Prepricing Prospectus, the Prospectus, or any
amendment or supplement thereto.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees, subject
to all the terms and conditions set forth herein, to sell to each Underwriter
and, upon the basis of the representations, warranties and agreements of the
Company herein contained and subject to all the terms and conditions set
forth herein, each Underwriter agrees, severally and not jointly, to purchase
from the Company the principal amount of Securities set forth opposite the
name of such Underwriter in Schedule I hereto (or such principal amount of
Securities increased as set forth in Section 10 hereof) at ___% of such
principal amount plus accrued interest, if any, from September ___, 1995, to
the date of payment and delivery.
3. TERMS OF PUBLIC OFFERING. The Company has been advised by you that
the Underwriters propose to make a public offering of their respective
portions of the Securities as soon after the Registration Statement and this
Agreement have both become effective as in your judgment is advisable and
initially to offer the Securities upon the terms set forth in the Prospectus.
The Company is further advised by you that the Securities are to be offered
to the public initially at ____% of their principal amount (the "Public
Offering Price") plus accrued interest, if any, from September ___, 1995 to
the date of payment and delivery and to certain dealers selected by you at a
price that represents a concession not in excess of ____% of their principal
amount under the Public Offering Price, and that any Underwriter may allow,
and such dealers may reallow, a concession, not in excess of ____% of their
principal amount, to any Underwriter or to certain other dealers.
4. DELIVERY OF THE SECURITIES AND PAYMENT THEREFOR. Payment for the
Securities shall be made by wire transfer to an account specified by the
Company in immediately available funds at 10:00 A.M., New York city time on
September ___, 1995, or at such other time on the same or such other date,
not later than September ___, 1995, as shall be designated in writing by you.
The time and date of such payment are hereinafter referred to as the
"Closing Date."
Payment for the Securities shall be made against delivery to you for the
respective accounts of the several Underwriters of the one or more global
certificates representing the Securities registered in the name of Cede & Co.
with any transfer taxes payable in connection with the transfer of the
Securities to the Underwriters duly paid.
-3-
<PAGE>
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters as follows:
(a) The Company shall, if, at the time this Agreement is executed
and delivered, it is necessary for the Registration Statement or a post-
effective amendment thereto to be declared effective before the offering
of the Securities may commence, use its best efforts to cause the
Registration Statement or such post-effective amendment to become
effective at the earliest possible time. The Company shall comply fully
and in a timely manner with the applicable provisions of Rule 424,
Rule 430A and Rule 434 under the Act.
(b) The Company shall advise you promptly and, if requested by any
of you, confirm such advice in writing, (i) when the Registration
Statement has become effective, if and when the Prospectus or form of
prospectus is sent for filing pursuant to Rule 424 under the Act and when
any post-effective amendment to the Registration Statement becomes
effective, (ii) of the receipt of any comments from the Commission that
relate to the Registration Statement or any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement, or of the suspension of qualification of
the Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for such purpose by the Commission or any state
securities commission or other regulatory authority, and (iv) during the
period referred to in subsection (f) below, (A) of any change in the
Company's condition (financial or other), business, prospects, properties,
net worth or results of operations, or of the happening of any event,
including the filing of any information, document or report pursuant to
the Exchange Act, that makes any statement of a material fact made in the
Registration Statement untrue or that requires the making of any additions
to or changes in the Registration Statement in order to state a material
fact required by the Act to be stated therein or to make the statements
therein not misleading or that makes any statement of a material fact made
in the Prospectus (as then amended or supplemented) untrue or that
requires the making of any additions to or changes in the Prospectus (as
then amended or supplemented) in order to state a material fact required
by the Act to be stated therein or in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and (B) of the necessity to amend or supplement the Prospectus
(as then amended or supplemented) to comply with the Act or any other law.
If at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration
-4-
<PAGE>
Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption
of the Securities under any state securities or Blue Sky laws, the
Company shall use every reasonable effort to obtain the withdrawal or
lifting of such order at the earliest possible time.
(c) The Company shall furnish to each of you without charge (i) two
(2) conformed copies (plus one (1) additional similarly conformed copy to
your legal counsel) of the Registration Statement as first filed with the
Commission and of each amendment to it, including all exhibits filed
therewith, (ii) such number of conformed copies of the Registration
Statement as so filed and of each amendment to it, without exhibits, as
you may reasonably request, (iii) such number of copies of the
Incorporated Documents, without exhibits, as you may request, and (iv)
two (2) copies of each of the exhibits to the Incorporated Documents.
(d) The Company shall not file any amendment or supplement to the
Registration Statement, whether before or after the time when it becomes
effective, or make any amendment or supplement to the Prospectus, or,
prior to the end of the period of time referred to in subsection (f)
below, file any document pursuant to the Exchange Act that will, upon
filing, become an Incorporated Document, of which you shall not previously
have been advised and provided a copy within two business days (or such
reasonable amount of time as is necessitated by the exigency of such
amendment, supplement or document) prior to the filing thereof and to
which you shall reasonably object in writing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you
have requested, copies of each form of the Prepricing Prospectus. The
Company consents to the use, in accordance with the provisions of the Act
and with the state securities or Blue Sky laws of the jurisdictions in
which the Securities are offered by the several Underwriters and by
dealers, prior to the date of the Prospectus, of each Prepricing
Prospectus so furnished by the Company.
(f) Promptly after the Registration Statement becomes effective,
and from time to time thereafter for such period as in the reasonable
opinion of counsel for the Underwriters a prospectus is required by the
Act to be delivered in connection with sales by any Underwriter or dealer,
the Company shall expeditiously furnish to each Underwriter and each
dealer, without charge, as many copies of the Prospectus (and of any
amendment or supplement to the Prospectus) as you may reasonably request
for the purposes
-5-
<PAGE>
contemplated by the Act. The Company consents to the use of the
Prospectus and any amendment or supplement thereto by you or any
dealer in accordance with the provisions of the Act and with the state
securities or Blue Sky laws of the jurisdictions in which the Securities
are offered by the several Underwriters and by all dealers to whom
Securities may be sold, both in connection with the offering or sale of
the Securities and for such period of time thereafter as a prospectus is
required by the Act to be delivered in connection therewith.
(g) If during the period specified in subsection (f) above any event
shall occur as a result of which it becomes necessary, in the judgment of
the Company or in the reasonable opinion of counsel for the Underwriters,
to amend or supplement the Prospectus (as them amended or supplemented) in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary to amend
or supplement the Prospectus to comply with the Act or any other law, the
Company shall, as promptly as practicable, prepare and, subject to the
provisions of subsection (d) above, file with the Commission an
appropriate amendment or supplement to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will not, in
the light of the circumstances under which they were made, be misleading,
and the Prospectus, as so amended or supplemented, will comply with the
Act or such other law, and shall expeditiously furnish to you without
charge such number of copies thereof as you may reasonably request.
(h) Prior to any public offering of the Securities, the Company
shall cooperate with you and with counsel for the Underwriters in
connection with the registration or qualification of the Securities for
offering and sale by the Underwriters and by dealers under the state
securities or Blue Sky laws of such jurisdictions as you may request
(provided, that the Company shall not be obligated to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified
or to take any action that would subject it to consent to service of
process in suits, other than those arising out of the offering or sale of
the Securities, in any jurisdiction in which it is not now so subject).
The Company shall continue such qualification in effect so long as
required by law for distribution of the Securities and shall file such
consents to service of process or other documents as may be necessary or
appropriate in order to effect such registration or qualification
(provided, that the Company shall not be obligated to take any action
that would subject it to consent to service of process in suits, other
than those arising out of the offering or sale of the Securities, in
any jurisdiction in which it is not now so subject).
-6-
<PAGE>
(i) The Company shall make generally available to its security
holders as soon as reasonably practicable a consolidated earnings
statement covering a period of at least 12 months beginning after the
"effective date" (as defined in Rule 158 under the Act) of the
Registration Statement (but in no event later than 90 days after such
date) that shall satisfy the provisions of Section 11(a) of the Act.
(j) (i) For so long as any of the Securities are outstanding, the
Company shall mail to each of you without charge as soon as available, a
copy of each report of the Company mailed to stockholders or filed with
the Commission, and (ii) during the period specified in subsection (f)
above, from time to time such other information concerning the Company as
you may reasonably request.
(k) During the period beginning on the date hereof and continuing
to and including the Closing Date, the Company shall not offer, sell,
contract to sell or otherwise dispose of any debt securities of the
Company or warrants to purchase debt securities of the Company
substantially similar to the Securities (other than (i) the Securities and
(ii) commercial paper issued in the ordinary course of business), without
the prior written consent of Morgan Stanley & Co. Incorporated, which
shall not be unreasonably withheld.
(l) The Company shall use the proceeds from the sale of the
Securities in the manner described in the Prospectus under the heading
"Use of Proceeds".
(m) The Company shall not voluntarily claim, and shall actively
resist any attempt to claim, the benefit of any usuary laws against the
holders of the Securities.
(n) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provision hereof (otherwise than pursuant to the
second paragraph of Section 10 hereof or by notice given by you
terminating this Agreement pursuant to Section 10 or Section 11 hereof) or
if this Agreement shall be terminated by the Underwriters because of any
failure or refusal on the part of the Company to comply with the terms or
fulfill any of the conditions of this Agreement, the Company agrees to
reimburse you for all reasonable out-of-pocket expenses (including
reasonable fees and expenses of counsel for the Underwriters) incurred by
you in connection herewith.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
-7-
<PAGE>
(a) The Company and the transactions contemplated by this Agreement
meet the requirements for using Form S-3 under the Act. The registration
statement in the form in which it became or becomes effective and also in
such form as it may be when any post-effective amendment thereto shall
become effective and the Prospectus and any supplement or amendment
thereto when filed with the Commission under Rule 424(b) under the Act,
complied or will comply in all material respects with the provisions of
the Act; the Registration Statement does not and will not at any such
time contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Prospectus and any supplement
or amendment thereto will not at any such time contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
except that this representation and warranty does not apply (A) to
statements in or omissions from the registration statement or the
Prospectus made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by or on
behalf of any Underwriter through you expressly for use therein or (B) to
that part of the Registration Statement that constitutes the Statement of
Eligibility (Form T-1) under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), of the Trustee (the "Form T-1").
(b) Each Prepricing Prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement
thereto, or filed pursuant to Rule 424 under the Act, complied when so
filed in all material respects with the provisions of the Act.
(c) The Incorporated Documents heretofore filed, when they were
filed (or, if any amendment with respect to any such document was filed,
when such amendment was filed), conformed in all material respects with
the requirements of the Exchange Act, and any further Incorporated
Documents so filed will, when they are filed, conform in all material
respects with the requirements of the Exchange Act; no such document
when it was filed (or, if an amendment with respect to any such document
was filed, when such amendment was filed), contained an untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
and no such further document, when it is filed, will contain an untrue
statement of a material fact or will omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading.
-8-
<PAGE>
(d) All of the Company's subsidiaries (collectively, the
"Subsidiaries") are listed in an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, which is incorporated by
reference into the Registration Statement. The Company and each of the
Subsidiaries that is a "significant subsidiary" (as defined in Regulation
S-X under the Act) (collectively, the "Significant Subsidiaries") has been
duly organized, is validly existing (if applicable, as a corporation in
good standing) under the laws of its jurisdiction of organization and has
full corporate (or partnership) power and authority to carry on its
business as it is currently being conducted (and, in the case of the
Company, to execute, deliver and perform this Agreement) and to own,
lease and operate its properties, and each is duly qualified and is in
good standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to be so qualified could not reasonably be expected to have a material
adverse effect, singly or in the aggregate, on the condition (financial
or other), business, properties, net worth or results of operations of
the Company and the Subsidiaries, taken as a whole (a "Material Adverse
Effect").
(e) All of the issued and outstanding shares of capital stock of, or
other ownership interests in, each Significant Subsidiary have been duly
authorized and validly issued, and certain shares of capital stock of each
Significant Subsidiary are owned, directly or through Subsidiaries, by the
Company as set forth on Exhibit 21 to the Company's annual report on
Form 10-K for the fiscal year ended December 31, 1994. All such shares or
other ownership interests in each Significant Subsidiary are fully paid
and nonassessable, and are free and clear of any security interest,
mortgage, pledge, claim, lien or encumbrance (each, a "Lien"), except for
Liens that are in the aggregate immaterial to the business of the Company
and the Subsidiaries, taken as a whole. There are no outstanding
subscriptions, rights, warrants, options, calls, convertible securities,
commitments of sale, or Liens related to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of any
Significant Subsidiary.
(f) Neither the Company nor any of the Significant Subsidiaries is
in violation of or in default in the performance of any of their
respective charters or bylaws (or partnership agreements, as the case may
be) or any bond, debenture, note or any other evidence of indebtedness or
any indenture, mortgage, deed of trust or other contract, lease or other
instrument to which the Company or any of the Significant Subsidiaries is
a party or by which it or any of them is bound, or to which any of the
property or assets of
-9-
<PAGE>
the Company or any of the Significant Subsidiaries is subject, except as
could not, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(g) This Agreement has been duly and validly executed and delivered
by the Company, and constitutes a legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms
(assuming the due execution and delivery thereof by you), except as rights
to indemnity and contribution hereunder may be limited by Federal or state
securities laws, court decisions or public policy.
(h) The Indenture has been duly qualified under the Trust Indenture
Act and has been duly authorized by all necessary corporate action of the
Company, and when duly executed and delivered by the Company in accordance
with its terms (assuming the due execution and delivery thereof by the
Trustee), will be a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except to
the extent that a waiver of rights under any usury laws may be
unenforceable and subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws, now or hereafter
in effect, relating to or affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether
enforcement is sought at law or in equity).
(i) The Securities have been duly authorized by the Company and on
the Closing Date, the Indenture and the Securities will have been duly
executed by the Company and will conform in all material respects to the
descriptions thereof in the Prospectus. When the Securities are issued,
executed and authenticated in accordance with the Indenture and paid for
in accordance with the terms of this Agreement, the Securities will be
legal, valid and binding obligations of the Company enforceable against
the Company in accordance with their terms and entitled to the benefits
of the Indenture, except to the extent that a waiver of rights under any
usury laws may be unenforceable and subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar
laws, now or hereafter in effect, relating to or affecting creditors'
rights and remedies generally and to general principles of equity
(regardless of whether enforcement is sought at law or in equity).
(j) The execution and delivery of this Agreement, the Indenture and
the Securities by the Company and the performance of this Agreement, the
Indenture and the Securities (i) does not require any consent, approval,
authorization or order of or registration or filing with any
-10-
<PAGE>
court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be
required for the registration of the Securities under the
Act and the Trust Indenture Act and compliance with the
state securities or Blue Sky laws of various jurisdictions,
all of which have been or will be effected in accordance
with this Agreement) and (ii) will not conflict with or
result in a breach of any of the terms or provisions of, or
constitute a default or cause an acceleration of any
obligation under, any of the respective charters or bylaws
(or partnership agreements, as the case may be) of the
Company or any of the Significant Subsidiaries or any
material bond, note, debenture or other evidence of
indebtedness or any material indenture, mortgage, deed of
trust or other material contract, lease or other instrument
to which the Company or any of the Significant Subsidiaries
is a party or by which any of them is bound, or to which any
of the property or assets of the Company or any of the
Significant Subsidiaries is subject, or any order of any
court or governmental agency or authority entered in any
proceeding to which the Company or any of the Significant
Subsidiaries was or is a party or by which any of them is
bound or (solely with respect to actions by the Company or
the Significant Subsidiaries) violate any applicable
Federal, state or local law, rule, administrative regulation
or ordinance or administrative or court decree, any of the
foregoing of which could, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(k) Except as disclosed in the Registration Statement
and the Prospectus, there is no action, suit or proceeding
before or by any court or governmental agency or body,
domestic or foreign, pending against the Company or any of
the Significant Subsidiaries that is required to be
disclosed in the Registration Statement or the Prospectus,
or that could, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect or materially and
adversely to affect the performance of the Company's
obligations pursuant to this Agreement, the Indenture or the
Securities and, to the best of the Company's knowledge, no
such proceedings are contemplated or threatened. No action
has been taken with respect to the Company or any of the
Significant Subsidiaries, and no statute, rule or regulation
or order has been enacted, adopted or issued by any
governmental agency that suspends the effectiveness of the
Registration Statement, prevents or suspends the use of any
Prepricing Prospectus or suspends the sale of the Securities
in any jurisdiction referred to in Section 5(h) hereof; no
injunction, restraining order or order of any nature by a
Federal or state court of competent jurisdiction has been
issued with respect to the Company or any of the Significant
Subsidiaries that suspends the effectiveness of the
Registration Statement, prevents or suspends the use of any
- 11 -
<PAGE>
Prepricing Prospectus or suspends the sale of the Securities
in any jurisdiction referred to in Section 5(h) hereof;
other than the litigation matters or proceedings described
in the Prospectus under the captions "Business -- Legal
Proceedings", no action, suit or proceeding before any court
or arbitrator or any governmental body, agency or official
(domestic or foreign), is pending against or, to the best of
the Company's knowledge, threatened against, the Company or
any of the Significant Subsidiaries that, if adversely
determined, could, singly or in the aggregate, reasonably be
expected in any manner to invalidate this Agreement, the
Indenture or the Securities; and every request of the
Commission, or any securities authority or agency of any
jurisdiction, for additional information (to be included in
the Registration Statement or the Prospectus or otherwise)
has been complied with in all material respects. No
contract or document of a character required to be described
in the Registration Statement or the Prospectus or to be
filed as an exhibit to or incorporated by reference in the
Registration Statement is not so described or filed or
incorporated by reference as required.
(l) The firm of accountants that has certified or
shall certify the applicable consolidated financial
statements and supporting schedules of the Company filed or
to be filed with the Commission as part of the Registration
Statement and the Prospectus are independent public
accountants with respect to the Company and the
Subsidiaries, as required by the Act and the Exchange Act.
The consolidated financial statements, together with related
notes, set forth in the Prospectus and the Registration
Statement comply as to form in all material respects with
the requirements of the Act and the Exchange Act and fairly
present, in all material respects, the financial position of
the Company and the Subsidiaries at the respective dates
indicated and the results of their operations and their cash
flows for the respective periods indicated, in accordance
with generally accepted accounting principles in the United
States of America consistently applied throughout such
periods, except as disclosed in the notes to such financial
statements; and the other financial and statistical
information and the supporting schedules included in the
Prospectus and in the Registration Statement present fairly,
in all material respects, the information required to be
stated therein.
(m) Except as disclosed in the Registration Statement,
subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus,
(i) neither the Company nor any of the Significant
Subsidiaries has incurred any liabilities or obligations,
direct or contingent, that are material to the Company and
the Subsidiaries, taken as a whole, nor entered into any
- 12 -
<PAGE>
transaction not in the ordinary course of business that is
material to the Company and the Subsidiaries, taken as a
whole, (ii) there has been no decision or judgment in the
nature of litigation adverse to the Company or any of the
Significant Subsidiaries, and (iii) there has been no
material adverse change in the condition (financial or
other), business, net worth or results of operations of the
Company and the Subsidiaries, taken as a whole (any of the
above, a "Material Adverse Change").
(n) Neither the Company nor any of the Subsidiaries is
involved in any labor dispute nor, to the best of the
Company's knowledge, is any labor dispute imminent, other
than routine disciplinary and grievance matters, and the
Company is not aware (without any independent verification)
of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers
or contractors, that could reasonably be expected to result
in a Material Adverse Effect.
(o) The Company and each of the Significant
Subsidiaries possess such licenses, certificates,
authorizations, approvals, franchises, trademarks, service
marks, trade names, permits and other rights issued by
local, state, federal or foreign regulatory agencies or
bodies as are necessary to conduct the businesses now
conducted by them and the lack of which could reasonably be
expected to have a Material Adverse Effect on the Company
and the Subsidiaries, taken as a whole, and neither the
Company nor any of the Significant Subsidiaries has, to be
the best of the Company's knowledge, received any notice of
proceedings relating to the revocation or modification of
any such certificate, authorization, approval, franchise,
trademark, service mark, trade name, permit or right that,
if the subject of any unfavorable decision, ruling or
finding, could reasonably be expected to have a Material
Adverse Effect.
(p) The Company has not and, to the best of the
Company's knowledge, none of the Subsidiaries nor any
employee or agent of the Company has, directly or
indirectly, paid or delivered any fee, commission or other
sum of money or item or property, however characterized, to
any finder, agent, government official or other party, in
the United States or any other country, that is in any
manner related to the business or operations of the Company
that the Company knows or has reason to believe to have been
illegal under any federal, state or local laws of the United
States or any other country having jurisdiction; and the
Company has not participated, directly or indirectly, in any
boycotts or other similar practices in contravention of law
affecting any of its actual or potential customers.
- 13 -
<PAGE>
(q) All material tax returns required to be filed by
the Company or any of the Subsidiaries in any jurisdiction
have been filed, other than those filings being contested in
good faith, and all material taxes, including withholding
taxes, penalties and interest, assessments, fees and other
charges due or claimed to be due from such entities have
been paid, other than those being contested in good faith or
for which adequate reserves have been provided or those
currently payable without penalty or interest.
(r) Except as disclosed in the Prospectus or except as
could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect, (a) to the best
of the Company's knowledge, neither the Company nor the
Subsidiaries is in violation of any Federal, state or local
law or regulation relating to pollution or protection of
public heath or welfare or the environment, including,
without limitation, the storage, handling, transportation,
emissions, discharges, releases or threatened releases of
pollutants, contaminates, hazardous or toxic materials,
substances or wastes, or petroleum or petroleum products
("Environmental Laws"), (b) the Company and each of the
Subsidiaries have received all permits, licenses or other
approvals required of them under applicable Environmental
Laws to conduct their respective businesses, and the Company
and each of the Subsidiaries are in compliance with all
terms and conditions of any such permit, license or approval
and (c) neither the Company nor, to the best of the
Company's knowledge, any of the Subsidiaries, has received
any notice or communication from any governmental agency or
any written notice from any other person regarding violation
of or liability under Environmental Laws and (d) there is no
pending action or proceeding, or to the best of the
Company's knowledge, pending or threatened claim or
investigation against the Company or any of the Subsidiaries
regarding violation of or liability under Environmental Laws.
(s) To the best of the Company's knowledge, there are
no costs and liabilities associated with Environmental Laws
that could, in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(t) To the best of the Company's knowledge, neither
the Company nor any of the Subsidiaries has (A) violated any
Federal or state law relating to discrimination in the
hiring, promotion or pay of employees nor any applicable
wage or hour laws, nor any provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA") or the
rules and regulations promulgated thereunder, or (B) engaged
in any unfair labor practice that, with respect to any
matter specified in clause (A) or (B) above, could
reasonably be expected to result, singly or in the
- 14 -
<PAGE>
aggregate, in a Material Adverse Effect. There is (i) no
significant unfair labor practice complaint pending against
the Company or any of the Subsidiaries or, to the best of
the Company's knowledge, threatened against any of them,
before the National Labor Relations Board or any state or
local labor relations board, and no significant grievance or
significant arbitration proceeding arising out of or under
any collective bargaining agreement is so pending against
the Company or any of the Subsidiaries or, to the best of
the Company's knowledge, threatened against any of them and
(ii) to the best of the Company's knowledge, no union
representation question existing with respect to the
employees of the Company or any of the Subsidiaries and, to
the best of the Company's knowledge, no union organizing
activities are taking place, except (with respect to any
matter specified in clause (i) or (ii) above) such as would
not, singly or in the aggregate, have a Material Adverse
Effect.
(u) To the best of the Company's knowledge, (i) each
of the Company and the Subsidiaries has good and marketable
title to all property (real and personal) described in the
Prospectus as being owned by it, in fee simple in the case
of real property (other than in the case of certain
buildings the land under which is leased to the Company
pursuant to long-term leases that are valid, subsisting and
enforceable against the Company), free and clear of all
liens, claims, security interests or other encumbrances
except such as are described in the Registration Statement
and the Prospectus or in a document filed as an exhibit to
the Registration Statement and (ii) all the property
described in the Registration Statement and the Prospectus
as being held under lease by each of the Company and the
Significant Subsidiaries is held by it under valid,
subsisting and enforceable leases, except (with respect to
any matter specified in clause (i) or (ii) above) such as
would not, singly or in the aggregate, have a Material
Adverse Effect.
(v) Other than as described in the Registration
Statement and the Prospectus, no holder of any security of
the Company has any right to require registration of any
security of the Company because of the filing of the
registration statement or consummation of the transactions
contemplated by this Agreement, except such rights as have been
satisfied or waived.
(w) The Company has complied with all provisions of
Florida Statutes, Section 517.075, relating to issuers doing
business with Cuba.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The
Company agrees to indemnify and hold harmless each of you and
each other Underwriter and each person, if any, who controls any
- 15 -
<PAGE>
Underwriter within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act from and against any and all
losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon
any untrue statement or alleged untrue statement of a material
fact contained in any Prepricing Prospectus or in the
Registration Statement or the Prospectus or in any amendment or
supplement thereto, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in
the case of the any Prepricing Prospectus or the Prospectus, in
the light of the circumstances under which they were made) not
misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission
that has been made therein or omitted therefrom in reliance upon
and in conformity with the information relating to such
Underwriter furnished in writing to the Company by or on behalf
of any Underwriter through you expressly for use in connection
therewith; provided, however, that the indemnification contained
in this subsection (a) with respect to any Prepricing Prospectus
shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling such Underwriter) on account of
any such loss, claim, damage, liability or expense arising from
the sale of the Securities by such Underwriter to any person if a
copy of the Prospectus shall not have been delivered or sent to
such person within the time required by the Act and the
regulations thereunder, and the untrue statement or alleged
untrue statement or omission or alleged omission of a material
fact contained in such Prepricing Prospectus was corrected in the
Prospectus, provided that the Company has delivered the
Prospectus to the several Underwriters in requisite quantity on a
timely basis to permit such delivery or sending. The foregoing
indemnity agreement shall be in addition to any liability that
the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought
against any Underwriter or any person controlling any Underwriter
in respect of which indemnity may be sought against the Company,
such Underwriter or such controlling person shall promptly notify
the parties against whom indemnification is being sought (the
"indemnifying parties"), and such indemnifying parties shall
assume the defense thereof, including the employment of counsel
and payment of all fees and expenses. Such Underwriter or any
such controlling person shall have the right to employ separate
counsel in any such action, suit or proceeding and to participate
in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Underwriter or such controlling
person unless (i) the indemnifying parties have agreed in writing
to pay such fees and expenses, (ii) the indemnifying parties have
failed to assume the defense and employ counsel, or (iii) the
named parties to any such action, suit or proceeding (including
any impleaded parties) include both such Underwriter or such
- 16 -
<PAGE>
controlling person and the indemnifying parties and such
Underwriter or such controlling person shall have been advised by
its counsel that representation of such indemnified party and any
indemnifying party by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or
not such representation by the same counsel has been proposed)
due to actual or potential differing interests between them (in
which case the indemnifying party shall not have the right to
assume the defense of such action, suit or proceeding on behalf
of such Underwriter or such controlling person). It is
understood, however, that the indemnifying parties shall, in
connection with any one such action, suit or proceeding or
separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the
reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all
such Underwriters and controlling persons, which firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, and
that all such fees and expenses shall be reimbursed as they are
incurred. The indemnifying parties shall not be liable for any
settlement of any such action, suit or proceeding effected
without their written consent, but if settled with such written
consent, or if there be a final judgment for the plaintiff in any
such action, suit or proceeding, the indemnifying parties agree
to indemnify and hold harmless any Underwriter, to the extent
provided in the preceding paragraph, and any such controlling
person from and against any loss, claim, damage, liability or
expense by reason of such settlement or judgment.
(c) Each Underwriter agrees, severally and not
jointly, to indemnify and hold harmless the Company, its
directors, its officers who sign the Registration Statement and
any person who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, to
the same extent as the foregoing indemnity from the Company to
each Underwriter, but only with respect to information relating
to such Underwriter furnished in writing by or on behalf of such
Underwriter through you expressly for use in the Registration
Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or
proceeding shall be brought against the Company, any of its
directors, any such officer or any such controlling person based
on the Registration Statement, the Prospectus or any Prepricing
Prospectus, or any amendment or supplement thereto, and in
respect of which indemnity may be sought against any Underwriter
pursuant to this subsection (c), such Underwriter shall have the
rights and duties given to the indemnifying parties by subsection
(b) above (except that if the Company shall have assumed the
defense thereof such Underwriter shall not be required to do so,
but may employ separate counsel therein and participate in the
defense thereof, but the fees and expenses of such counsel shall
be at such Underwriter's expense), and the Company, its
- 17 -
<PAGE>
directors, any such officer and any such controlling person shall
have the rights and duties given to the Underwriters by
subsection (b) above. The foregoing indemnity agreement shall be
in addition to any liability that any Underwriter may otherwise
have.
(d) If the indemnification provided for in this
Section 7 is unavailable to an indemnified party under subsection
(a) or (c) above in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then an indemnifying
party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the
Securities, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company
on the one hand and the Underwriters on the other in connection
with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts
and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The
relative fault of the Company on the one hand and the Under-
writers on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the
Company on the one hand or by the Underwriters on the other hand
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement
or omission.
(e) The Company and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this
Section 7 were determined by a pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by
any other method of allocation that does not take account of the
equitable considerations referred to in subsection (d) above.
The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities and expenses referred to
in subsection (d) above shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 7, no
- 18 -
<PAGE>
Underwriter shall be required to contribute any amount in excess
of the amount by which the total price of the Securities
underwritten by it and distributed to the public exceeds the
amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section
7 are several in proportion to the respective principal amounts
of Securities set forth opposite their names in Schedule I hereto
(or such principal amounts of securities increased as set forth
in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement
of any pending or threatened action, suit or proceeding in
respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action,
suit or proceeding.
(g) Any losses, claims, damages, liabilities or
expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be
paid by the indemnifying party to the indemnified party as such
losses, claims, damages, liabilities or expenses are incurred.
The indemnity and contribution agreements contained in this
Section 7 and the representations and warranties of the Company
set forth in this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation made by or
on behalf of any Underwriter or any person controlling any
Underwriter, the Company, its directors or officers or any person
controlling the Company, (ii) acceptance of any Securities and
payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter or any person
controlling any Underwriter, or to the Company, its directors or
officers, or any person controlling the Company, shall be
entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 7.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The
several obligations of the Underwriters to purchase the
Securities hereunder are subject to the following conditions:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the registration statement or
a post-effective amendment thereto to be declared effective
before the offering of the Securities may commence, the
registration statement or such post-effective amendment
- 19 -
<PAGE>
shall have become effective not later than 5:30 P.M., New
York City time, on the date hereof, or at such later date
and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424, 430A and 434 under
the Act shall have been timely made; no stop order
suspending the effectiveness of the registration statement
shall have been issued and no proceeding for that purpose
shall have been instituted or, to the knowledge of the
Company or any Underwriter, threatened by the Commission,
and any request of the Commission for additional information
(to be included in the registration statement or the
Prospectus or otherwise) shall have been complied with to
your satisfaction.
(b) Subsequent to the effective date of this
Agreement, there shall not have occurred (i) any downgrading
or any notice of any intended or potential downgrading or of
any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any
of the Company's securities by any "nationally recognized
statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act,
(ii) any change in or affecting the condition (financial or
other), business, properties, net worth, or results of
operations of the Company or the Subsidiaries not
contemplated by the Prospectus, that, in your reasonable
opinion, would materially adversely affect the market for
the Securities, or (iii) any event or development relating
to or involving the Company or any officer or director of
the Company that makes any statement made in the Prospectus
untrue in any material respect or that, in the opinion of
the Company and its counsel or the Underwriters and their
counsel, requires the making of any addition to or change in
the Prospectus in order to state a material fact required by
the Act or any other law to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, if
amending or supplementing the Prospectus to reflect such
event or development would, in your reasonable opinion,
materially adversely affect the market for the Securities.
(c) You shall have received on the Closing Date, an
opinion of Latham & Watkins, counsel for the Company, dated
the Closing Date and addressed to the several Underwriters,
to the effect that:
(i) the Securities, when executed and
authenticated in accordance with the terms of the
Indenture and delivered to and paid for by you in
accordance with the terms of this Agreement, will
constitute valid and binding obligations of the Company
enforceable against the Company in accordance with
their terms, subject to applicable bankruptcy,
- 20 -
<PAGE>
insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws then or thereafter in
effect relating to or affecting rights and remedies of
creditors, and to general principles of equity
(regardless of whether enforcement is sought in a
proceeding at law or in equity) and to the discretion
of the court before which any proceeding therefor may
be brought;
(ii) the Indenture, assuming due authorization,
execution and delivery thereof by the Trustee, will be
a valid and binding agreement of the Company,
enforceable against the Company in accordance with its
terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and
similar laws then or thereafter in effect relating to
or affecting rights and remedies of creditors, and to
general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in
equity) and to the discretion of the court before which
any proceeding therefor may be brought;
(iii) the Securities and the Indenture conform in
all material respects to the descriptions thereof
contained in the Registration Statement and the
Prospectus under the heading "Description of Senior Notes";
(iv) The Registration Statement and all post-effective
amendments, if any, have become effective under the Act and,
to the best of such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued
under the Act and no proceedings therefor have been initiated by
the Commission; and any required filing of the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) or Rule 434 under the
Act has been made in the manner and within the time period required
by Rule 424(b) and Rule 430A under the Act; the Indenture has
been duly qualified under the Trust Indenture Act;
(v) To the best of such counsel's knowledge no
consent, approval, authorization or order of, or filing
with, any federal or New York court or governmental
agency or body is required to be obtained or made by
the Company for the consummation of the sale of the
Securities by the Company pursuant to this Agreement,
except (A) such as have been obtained under the Act and
the Trust Indenture Act and (B) such as may be required
under the state securities laws in connection with the
purchase and distribution of the Securities by the Underwriters;
-21-
<PAGE>
(vi) The Registration Statement and the Prospectus
comply as to form in all material respects with the
requirements for registration statements on Form S-3
under the Act and the rules and regulations of the
Commission thereunder; it being understood, however,
that such counsel need express no opinion with respect
to (A) the financial statements, schedules and other
financial and statistical data included in the
Registration Statement or the Prospectus or
incorporated therein or (B) the Form T-1. In passing
upon the compliance as to form of the Registration
Statement and the Prospectus, such counsel may assume
that the statements made and incorporated by reference
therein are correct and complete;
(vii) Neither the purchase of the Securities by the
Underwriters nor the sale of the Securities by the
Company pursuant to the terms of this Agreement will
result in the breach of or a default under those
agreements identified to such counsel by an officer of
the Company as material to the Company; and
(viii) The statements set forth in the Prospectus in
the first, second and seventh paragraphs under the
heading "Underwriters", insofar as such statements
constitute a summary of legal matters, are accurate in
all material respects.
Such opinion may be limited to the internal laws of the
State of New York and the Federal laws of the United States.
Such counsel may rely as to factual matters on certificates
of officers of the Company and of state officials, in which
case their opinion shall state that they are so doing. Such
opinion also shall take further exceptions that shall be
reasonably acceptable to the Underwriters.
In addition, such counsel shall state that such counsel
has participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants for the Company,
representatives of the Underwriters and their counsel, at
which the contents of the Registration Statement and
Prospectus and related matters were discussed and, although
such counsel need not pass upon and need not assume any
responsibility for, the accuracy, completeness or fairness
of the statements contained in the Registration Statement
and the Prospectus and such counsel may state that they have
made no independent check or verification thereof, during
the course of such participation, (relying as to materiality
to a large extent upon the statements of officers and other
representatives of the Company), no facts came to such
counsel's attention that caused such counsel to believe that
the Registration Statement (as amended or supplemented, if
-22-
<PAGE>
applicable, and including the Incorporated Documents), at
the time such Registration Statement or any post-effective
amendment became effective, contained an untrue statement of
a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus (including
the Incorporated Documents) as amended or supplemented, as
of its date and as of the Closing Date, contained an untrue
statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made,
not misleading; it being understood that such counsel need
express no belief with respect to (i) the financial
statements, schedules and other financial and statistical
data included in the Registration Statement or the
Prospectus or incorporated therein or (ii) the Form T-1.
(d) You shall have received on the Closing Date, an
opinion of John F. Schmutz, Esq., Vice President and General
Counsel of the Company, dated the Closing Date and addressed
to the several Underwriters, to the effect that:
(i) To the best of such counsel's knowledge, no
authorization, approval, consent or order of, or
registration or filing with, any court or governmental
authority or agency is required to be obtained or made
by the Company for the valid sale of the Securities to
you, except (A) such as have been obtained under the
Act and the Trust Indenture Act and (B) such as may be
required under the state securities or Blue Sky laws or
regulations of any jurisdiction in the United States in
connection with the purchase and distribution of the
Securities by the Underwriters;
(ii) The Company has corporate power and authority
to enter into this Agreement, the Indenture and the
Securities and each of this Agreement, the Indenture
and the Securities has been duly authorized by all
necessary corporate action by the Company, and each of
this Agreement and the Indenture has been duly executed
and delivered by the Company;
(iii) Neither the purchase of the Securities by the
Underwriters nor the sale of the Securities by the
Company pursuant to the terms of this Agreement will
conflict with or constitute a breach of or a default
under the certificate or articles of incorporation or
bylaws, or other organizational documents, of the
Company or any of the Significant Subsidiaries or the
terms of any material agreement or instrument to which
the Company or any of the Significant Subsidiaries is a
party or by which any of them is bound, or to which any
of the properties of the Company or any of the
-23-
<PAGE>
Significant Subsidiaries is subject, or will result in
the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company
or any of the Significant Subsidiaries, or result in
any violation of any statute, rule or regulation
applicable to the Company or, to the best of such
counsel's knowledge, any judgment, injunction, order or
decree of any court or governmental agency or body
having jurisdiction over the Company or any of the
Significant Subsidiaries or any of their respective
properties;
(iv) Each of the Company and, to the best of such
counsel's knowledge, the Significant Subsidiaries that
is a corporation has been duly incorporated and is
validly existing and is a corporation in good standing
under the laws of its jurisdiction of its
incorporation, and each of the Company and, to the best
of such counsel's knowledge, the Significant
Subsidiaries has the corporate (or partnership) power
and authority and all necessary governmental
authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all
governmental regulatory officials and bodies to own and
operate its properties and to conduct its business as
described in the Registration Statement and the
Prospectus and is duly qualified to do business as a
foreign corporation and is in good standing under the
laws of each jurisdiction in which such qualification
is required wherein it owns or leases material property
or conducts business, except where the failure so to
qualify could not reasonably be expected to have a
Material Adverse Effect;
(v) All of the issued and outstanding capital
stock of, or other ownership interests in, each
Significant Subsidiary has been duly authorized and
validly issued, and is fully paid and nonassessable
and, except as otherwise set forth in the Registration
Statement and the Prospectus, certain shares of capital
stock of, or other ownership interests in, each
Significant Subsidiary are owned by the Company, either
directly or through Subsidiaries, as set forth on
Exhibit 21 to the Company's annual report on Form 10-K
for the fiscal year ended December 31, 1994, free and
clear of any perfected security interest or, to the
best of such counsel's knowledge, any other security
interests, claims, liens, equities or encumbrances;
(vi) Except as described in the Registration
Statement and the Prospectus, there is no holder of any
security of the Company or any other person who has the
right, contractual or otherwise, to cause the Company
-24-
<PAGE>
to sell or otherwise issue to them, or to permit them
to underwrite the sale of, the Securities or the right
to have any securities of the Company included in the
registration statement or the right, as a result of the
filing of the registration statement, to require
registration under the Act of any securities of the
Company, except such rights as have been satisfied or
waived;
(vii) To the best of such counsel's knowledge
(A) there are no franchises, contracts, indentures,
mortgages, leases, loan agreements, notes or other
agreements or instruments to which the Company or any
Significant Subsidiary is a party or by which any of
them may be bound that are required to be described in
the Registration Statement or the Prospectus or to be
filed as exhibits to or incorporated by reference in
the Registration Statement other than those described
therein or filed or incorporated by reference as
exhibits thereto, (B) no default exists in the due
performance or observance of any obligation, agreement,
covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or
other instrument, except for defaults that would not,
singly or in the aggregate, have a Material Adverse
Effect and (C) the statements in the Prospectus under
the caption "Business -- Legal Proceedings" insofar as
they relate to statements of law or legal conclusions,
are accurate in all material respects;
(viii) The Company and the Significant Subsidiaries
own all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by
them or any of them or necessary for the conduct of
their respective businesses, and such counsel is not
aware of any claim to the contrary or any challenge by
any other person to the rights of the Company and the
Significant Subsidiaries with respect to the foregoing;
(ix) To the best of such counsel's knowledge,
there is no current, pending or threatened action, suit
or proceeding before any court or governmental agency,
authority or body or any arbitrator involving the
Company or any of the Significant Subsidiaries or any
of their respective properties of a character required
to be disclosed in the Registration Statement and the
Prospectus that is not adequately so disclosed;
(x) At the time it became effective and on the
Closing Date, the Registration Statement (except for
(A) financial statements, the notes thereto and related
schedules and other financial, numerical, statistical
-25-
<PAGE>
or accounting data included or incorporated therein or
omitted therefrom and (B) the Form T-1, as to which no
opinion need be expressed) and the Prospectus complied and
complies as to form in all material respects with the
applicable requirements of the Act; and each of the
Incorporated Documents (except for financial
statements, the notes thereto and related schedules and
other financial, numerical, statistical or accounting
data included therein or omitted therefrom, as to which
no opinion need be expressed) complies as to form in
all material respects with the Exchange Act;
(xi) The statements in the Registration Statement
and the Prospectus, insofar as they are descriptions of
contracts, agreements or other legal documents, or
refer to statements of law or legal conclusions, are
accurate and present fairly the information required to
be shown; and
(xii) Neither the Company nor any of the
Subsidiaries is an "investment company" required to be
registered under Section 8 of the Investment Company
Act of 1940, as amended (the "Investment Company Act"),
or an entity "controlled by an investment company"
required to be registered under Section 8 of the
Investment Company Act.
Such opinion may be limited to the internal laws of the
State of Texas and the Federal laws of the United States.
Such opinion shall take further exceptions that shall be
reasonably acceptable to the Underwriters.
In addition, such counsel shall state that such counsel
has participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants for the Company, your
representatives and your counsel, at which the contents of
the Registration Statement and Prospectus (including the
Incorporated Documents) and related matters were discussed
and, although such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement and the Prospectus, on the basis of the foregoing,
relying as to the factual matters underlying the
determination of materiality to a large extent upon the
statements of officers and other representatives of the
Company, no facts came to such counsel's attention that
caused such counsel to believe that the Registration
Statement (as amended or supplemented, if applicable, and
including the Incorporated Documents), at the time such
Registration Statement or any post-effective amendment
became effective, contained an untrue statement of a
material fact or omitted to state a material fact required
-26-
<PAGE>
to be stated therein or necessary to make the statements
therein not misleading (other than information omitted
therefrom in reliance on Rule 430A under the Act), or the
Prospectus, as amended or supplemented, as of its date and
as of the Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; it
being understood that such counsel need express no belief
with respect to (i) the financial statements, schedules and
other financial and statistical data included in the
Registration Statement or the Prospectus or incorporated
therein or (ii) the Form T-1.
(e) You shall have received on the Closing Date an
opinion of Davis Polk & Wardwell, counsel for the
Underwriters, dated the Closing Date and addressed to the
several Underwriters, with respect to the matters referred
to in clauses (i), (ii), (iii), (iv), (v), (vi) and (viii)
and in the last paragraph of subsection (c) above and such
other related matters as you may request.
(f) You shall have received letters addressed to the
several Underwriters, and dated the date hereof and the
Closing Date from KPMG Peat Marwick LLP, independent
certified public accountants, substantially in the forms
heretofore approved by you.
(g) (i) No stop order suspending the effectiveness of
the Registration Statement shall have been issued and no
proceedings for that purpose shall have been taken or, to
the knowledge of the Company, shall be contemplated by the
Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company
nor any material increase in the short-term or long-term
debt of the Company (other than in the ordinary course of
business) from that set forth or contemplated in the
Prospectus (or any amendment or supplement thereto);
(iii) there shall not have been, since the respective dates
as of which information is given in the Registration
Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the
Registration Statement and the Prospectus (or any amendment
or supplement thereto), any Material Adverse Change;
(iv) the Company and the Subsidiaries shall not have any
liabilities or obligations, direct or contingent (whether or
not in the ordinary course of business), that are material
to the Company and the Subsidiaries, taken as a whole, other
than those reflected in the Registration Statement and the
Prospectus (or any amendment or supplement thereto); and
(v) all the representations and warranties of the Company
contained in this Agreement shall be true and correct in all
-27-
<PAGE>
material respects on and as of the date hereof and on and as
of the Closing Date as if made on and as of the Closing
Date, and you shall have received a certificate, dated the
Closing Date and signed by the chief executive officer and
the chief financial officer of the Company (or such other
officers as are acceptable to you), to the effect set forth
in this Section 8(g) and in Sections 8(b)(i) and 8(h) hereof.
(h) The Company shall not have failed at or prior to
the Closing Date to have performed or complied in all
material respects with any of its agreements herein
contained and required to be performed or complied with by
it hereunder at or prior to the Closing Date.
(i) The Company shall have furnished or caused to be
furnished to you such further certificates and documents as
you shall have reasonably requested.
(j) The Underwriters shall have received evidence
reasonably satisfactory to them that all liens, claims,
security interests and other encumbrances in favor of the
lenders under the Company Credit Facility (as defined in the
Prospectus under the caption "Use of Proceeds") to which any
property (real or personal) described in the Prospectus as being
owned by the Company is subject shall have been terminated by
such lenders prior to or simultaneously with the closing
hereunder.
All such opinions, certificates, letters and other
documents will be in compliance with the provisions hereof only
if they are reasonably satisfactory in form and substance to you
and your counsel.
Any certificate or document signed by any officer of
the Company and delivered to the Underwriters, or to counsel for
the Underwriters, shall be deemed a representation and warranty
by the Company to each Underwriter as to the statements made
therein.
9. EXPENSES. The Company agrees to pay the following
costs and expenses and all other costs and expenses incident to
the performance by the Company of its obligations hereunder:
(i) the preparation, printing or reproduction, and filing with
the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the
Prospectus, and each amendment or supplement to any of them;
(ii) the printing (or reproduction) and delivery (including
postage, air freight charges and charges for counting and
packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, the Incorporated
Documents, and all amendments or supplements to any of them, as
may be reasonably requested for use in connection with the
-28-
<PAGE>
offering and sale of the Securities; (iii) the preparation,
printing, authentication, issuance and delivery of the
Securities, including any stamp taxes in connection with the
original issuance and sale of the Securities; (iv) the printing
(or reproduction) and delivery of this Agreement, the Indenture,
the preliminary and supplemental Blue Sky Memoranda and all other
agreements or documents printed (or reproduced) and delivered in
connection with the offering of the Securities; (v) the
registration or qualification of the Securities for offer and
sale under the state securities or Blue Sky laws of the several
states as provided herein (including the reasonable fees,
expenses and disbursements of counsel for the Underwriters
relating to the preparation, printing or reproduction, and
delivery of the preliminary and supplemental Blue Sky Memoranda
and such registration and qualification); (vi) the filing fees
and the fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc.; (vii) the transportation
and other expenses incurred by or on behalf of Company
representatives in connection with presentations to prospective
purchasers of the Securities; and (viii) the fees and expenses of
the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company.
10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall
become effective: (i) upon the execution and delivery hereof by
the parties hereto; or (ii) if, at the time this Agreement is
executed and delivered, it is necessary for the registration
statement or a post-effective amendment thereto to be declared
effective before the offering of the Securities may commence,
when notification of the effectiveness of the registration
statement or such post-effective amendment has been released by
the Commission. Until such time as this Agreement shall have
become effective, it may be terminated by the Company by
notifying you, or by you, on behalf of the several Underwriters,
by notifying the Company.
If any one or more of the Underwriters shall fail or
refuse to purchase Securities that it or they are obligated to
purchase hereunder on the Closing Date, and the aggregate
principal amount of Securities that such defaulting Underwriter
or Underwriters are obligated but fail or refuse to purchase is
not more than one-tenth of the aggregate principal amount of
Securities that the Underwriters are obligated to purchase on the
Closing Date, each non-defaulting Underwriter shall be obligated,
severally, in the proportion that the principal amount of
Securities set forth opposite its name in Schedule I hereto bears
to the aggregate principal amount of Securities set forth
opposite the names of all non-defaulting Underwriters or in such
other proportion as you may specify, to purchase the Securities
that such defaulting Underwriter or Underwriters are obligated,
but fail or refuse, to purchase; PROVIDED that in no event shall
the principal amount of Securities that any Underwriter has
-29-
<PAGE>
agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 10 by an amount in excess of one-ninth
of such principal amount of Securities without the written
consent of such Underwriter. If any one or more of the
Underwriters shall fail or refuse to purchase Securities that it
or they are obligated to purchase on the Closing Date and the
aggregate principal amount of Securities with respect to which
such default occurs is more than one-tenth of the aggregate
principal amount of Securities that the Underwriters are
obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such
Securities by one or more non-defaulting Underwriters or other
party or parties approved by you and the Company are not made
within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting
Underwriter or the Company. In any such case that does not
result in termination of this Agreement, any of you or the
Company shall have the right to postpone the Closing Date, but in
no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and the Prospectus
or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such
default of any such Underwriter under this Agreement. The term
"Underwriter" as used in this Agreement includes, for all
purposes of this Agreement, any party not listed in Schedule I
hereto who, with your approval and the approval of the Company
purchases Securities that a defaulting Underwriter is obligated,
but fails or refuses, to purchase.
Any notice under this Section 10 may be given by
telegram, telecopy or telephone but shall be subsequently
confirmed by letter.
11. TERMINATION OF AGREEMENT. This Agreement shall be
subject to termination in your absolute discretion, without
liability on the part of any Underwriter to the Company by notice
to the Company if prior to the Closing Date (i) trading in
securities generally on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market shall have been
suspended or materially limited, (ii) a general moratorium on
commercial banking activities in New York or Texas shall have
been declared by either federal or state authorities, or
(iii) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis
or change in political, financial or economic conditions, the
effect of which on the financial markets of the United States is
such as to make it, in your reasonable judgment, impracticable or
inadvisable to commence or continue the offering of the
Securities at the offering price to the public set forth on the
cover page of the Prospectus or to enforce contracts for the
resale of the Securities by the Underwriters. Notice of such
-30-
<PAGE>
termination may be given to the Company by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
12. INFORMATION FURNISHED BY THE UNDERWRITERS. The
statements set forth in the last paragraph on the cover page, the
stabilization legend on the inside cover page, and the statements
in the third paragraph under the caption "Underwriters" in any
Prepricing Prospectus and in the Prospectus constitute the only
information furnished by or on behalf of the Underwriters through
you expressly for use therein as such information is referred to
in Sections 6(a) and 7 hereof.
13. MISCELLANEOUS. Except as otherwise provided in
Sections 5, 10 and 11 hereof, notice given pursuant to any
provision of this Agreement shall be in writing and shall be
delivered (i) if to the Company, at the office of the Company at
Weston Centre, 112 E. Pecan Street, P.O. Box 2636, San Antonio,
Texas 78299-2636, Attention: John F. Schmutz, Esq., Vice
President and General Counsel; or (ii) if to the Underwriters,
care of Morgan Stanley & Co. Incorporated, 1251 Avenue of the
Americas, New York, New York 10020, Attention: [ ].
This Agreement has been and is made solely for the
benefit of the several Underwriters, the Company, its directors
and officers and the other controlling persons referred to in
Section 7 hereof and their respective successors and assigns, to
the extent provided herein, and no other person shall acquire or
have any right under or by virtue of this Agreement. Neither the
term "successor" nor the term "successors and assigns" as used in
this Agreement shall include a purchaser from any Underwriter of
any of the Securities in his status as such purchaser.
13. APPLICABLE LAW; COUNTERPARTS. This Agreement
shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be
performed within the State of New York.
This Agreement may be signed in various counterparts
that together constitute one and the same instrument. If signed
in counterparts, this Agreement shall not become effective unless
at least one counterpart hereof shall have been executed and
delivered on behalf of each party hereto.
-31-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
Very truly yours,
LA QUINTA INNS, INC.
By:__________________________________
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
NationsBanc Capital Markets, Inc.
Acting severally on behalf
of themselves and on behalf
of the other several
Underwriters named herein.
By Morgan Stanley & Co.
Incorporated
By:_____________________________
Name:
Title:
-32-
<PAGE>
SCHEDULE I
LA QUINTA INNS, INC.
<TABLE>
<CAPTION>
Principal Amount
Underwriters of Securities
------------ -----------------
<S> <C>
Morgan Stanley & Co. Incorporated. . . . . . . . . .
Donaldson, Lufkin & Jenrette
Securities Corporation. . . . . . . . . . . . . . .
NationsBanc Capital Markets, Inc. . . . . . . . . . .
[NAMES OF OTHER UNDERWRITERS] . . . . . . . . . . . . -----------------
Total . . . . . . . . . . . . . . . . . . . . . . . =================
</TABLE>
-1-
<PAGE>
EXHIBIT 5(a)
LA QUINTA INNS, INC.
112 E. Pecan Street
San Antonio, Texas 78299
September 19, 1995
La Quinta Inns, Inc.
112 E. Pecan Street
San Antonio, TX 78299-2636
Re: REGISTRATION STATEMENT NO. 33-61755;
$100,000,000 AGGREGATE PRINCIPAL AMOUNT
OF SENIOR NOTES DUE 2005
Ladies and Gentlemen:
In connection with the registration of $100,000,000
aggregate principal amount of Senior Notes due 2005 (the
"Securities") by La Quinta Inns, Inc., a Texas corporation (the
"Company"), under the Securities Act of 1933, as amended (the
"Act"), on Form S-3 filed with the Securities and Exchange
Commission (the "Commission") on August 11, 1995 (File No.
33-61755), as amended by Amendment No. 1 filed with the Commission
on September 7, 1995, and Amendment No. 2 filed with the
Commission on September 20, 1995 (collectively, the
"Registration Statement"), you have requested my opinion with
respect to the matters set forth below.
In my capacity as Vice President-General Counsel of the
Company in connection with such registration, I am familiar with
the proceedings taken and proposed to be taken by the Company in
connection with the authorization and issuance of the Securities,
and for the purposes of this opinion, have assumed such
proceedings will be timely completed in the manner presently
proposed. In addition, I, or members of my staff, have made such
legal and factual examinations and inquiries, including an
examination of originals or copies certified or otherwise
identified to my satisfaction of such documents, corporate
records and instruments, as I have deemed necessary or
appropriate for purposes of this opinion.
<PAGE>
La Quinta Inns, Inc.
September 19, 1995
Page 2
In my examination, I have assumed the genuineness of
all signatures, the authenticity of all documents submitted to me
as originals, and the conformity to authentic original documents
of all documents submitted to me as copies.
I am opining herein as to the effect on the subject
transaction only of the internal laws of the State of Texas and I
express no opinion with respect to the applicability thereto, or
the effect thereon, of the laws of any other jurisdiction or as
to any matters of municipal law or the laws of any other local
agencies within the State of Texas.
Capitalized terms used herein without definition have
the meanings ascribed to them in the Registration Statement.
Subject to the foregoing and the other matters set
forth herein, it is my opinion that as of the date hereof the
Securities have been duly authorized by all necessary corporate
action of the Company.
I consent to your filing this opinion as an exhibit to
the Registration Statement and to the reference to me contained
under the heading "Legal Matters."
Very truly yours,
/s/ John F. Schmutz
John F. Schmutz
Vice President-General Counsel
<PAGE>
EXHIBIT 5(b)
LATHAM & WATKINS
633 West Fifth Street
Suite 4000
Los Angeles, California 90071
(213) 485-1234
September 19, 1995
La Quinta Inns, Inc.
112 E. Pecan Street
San Antonio, Texas 78299-2636
Re: Registration Statement No. 33-61755; $100,000,000
AGGREGATE PRINCIPAL AMOUNT OF SENIOR NOTES DUE 2005
Ladies and Gentlemen:
In connection with the registration of $100,000,000
aggregate principal amount of Senior Notes due 2005 (the
"Securities") by La Quinta Inns, Inc., a Texas corporation (the
"Company"), under the Securities Act of 1933, as amended (the
"Act"), on Form S-3 filed with the Securities and Exchange
Commission (the "Commission") on August 11, 1995 (File No. 33-
61755), as amended by Amendment No. 1 filed with the Commission
on September 7, 1995, and Amendment No. 2 filed with the
Commission on September 20, 1995 (collectively, the "Registration
Statement"), you have requested our opinion with respect to the
matters set forth below.
In our capacity as your counsel in connection with such
registration, we are familiar with the proceedings taken and
proposed to be taken by the Company in connection with the
authorization and issuance of the Securities, and for the
purposes of this opinion, have assumed such proceedings will be
timely completed in the manner presently proposed. We have also
assumed for purposes of this opinion that each of the Securities
and the Indenture has been duly authorized by all necessary
corporate action by the Company. In addition, we have made such
legal and factual examinations and inquiries, including an
examination of originals or copies certified or otherwise
identified to our satisfaction of such documents, corporate
records and instruments, as we have deemed necessary or
appropriate for purposes of this opinion.
<PAGE>
La Quinta Inns, Inc.
September 19, 1995
Page 2
In our examination, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us
as originals, and the conformity to authentic original documents
of all documents submitted to us as copies.
We are opining herein as to the effect on the subject
transaction only of the internal laws of the State of New York,
and we express no opinion with respect to the applicability
thereto, or the effect thereon, of the laws of any other
jurisdiction or as to any matters of municipal law or the laws of
any other local agencies within the State of New York.
Capitalized terms used herein without definition have
the meanings ascribed to them in the Registration Statement.
Subject to the foregoing and the other matters set
forth herein, it is our opinion that as of the date hereof the
Securities, when executed, authenticated and delivered by or on
behalf of the Company against payment therefor in accordance with
the terms of the Indenture, will constitute valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms.
The opinion rendered in the preceding paragraph
relating to the enforceability of the Securities is subject to
the following exceptions, limitations and qualifications: (i) the
effect of bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors; (ii) the effect
of general principles of equity, whether enforcement is
considered in a proceeding in equity or law, and the discretion
of the court before which any proceeding therefor may be brought;
and (iii) the unenforceability under certain circumstances under
law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a
liability where such indemnification or contribution is contrary
to public policy.
To the extent that the obligations of the Company under
the Indenture may be dependent upon such matters, we assume for
purposes of this opinion that the Trustee is duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization; that the Trustee is duly qualified
to engage in the activities contemplated by the Indenture; that
the Indenture has been duly authorized, executed and delivered by
the Trustee and constitutes the legal, valid and binding
obligation of the Trustee, enforceable against the Trustee in
accordance with its terms; that the Trustee is in compliance,
generally and with respect to acting as a trustee under the
Indenture, with all applicable laws and regulations; and that the
Trustee has the requisite organizational and legal power and
authority to perform its
<PAGE>
La Quinta Inns, Inc.
September 19, 1995
Page 3
obligations under the Indenture.
We consent to your filing this opinion as an exhibit to
the Registration Statement and to the reference to our firm
contained under the heading "Legal Matters."
Very truly yours,
/s/ Latham & Watkins
<PAGE>
EXHIBIT 10(a)
==============================================================================
$200,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
(Facility A)
AMONG
LA QUINTA INNS, INC.
CERTAIN LENDERS
AND
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE LENDER
September 12, 1995
==============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINED TERMS.......................................... 1
Section 1.2 AMENDMENTS AND RENEWALS................................ 20
Section 1.3 CONSTRUCTION........................................... 20
ARTICLE 2
ADVANCES
Section 2.1 THE ADVANCES........................................... 21
(a) REVOLVING CREDIT ADVANCES.............................. 21
(b) THE SWING LINE LOANS................................... 21
(c) BID RATE ADVANCES...................................... 21
Section 2.2 MANNER OF BORROWING AND DISBURSEMENT................... 22
Section 2.3 INTEREST............................................... 26
(a) ON BASE RATE ADVANCES.................................. 26
(b) ON LIBOR ADVANCES...................................... 26
(c) ON SWING LINE ADVANCES................................. 26
(d) ON BID RATE ADVANCES................................... 27
(e) INTEREST IF NO NOTICE OF SELECTION OF INTEREST
RATE BASIS............................................. 27
(f) INTEREST AFTER AN EVENT OF DEFAULT..................... 27
Section 2.4 FEES................................................... 27
(a) FACILITY FEE........................................... 27
(b) CLOSING FEE............................................ 28
(c) OTHER FEES............................................. 28
Section 2.5 PREPAYMENT............................................. 29
(a) VOLUNTARY PREPAYMENTS.................................. 29
(b) MANDATORY PREPAYMENT................................... 29
(c) PREPAYMENTS, GENERALLY................................. 29
Section 2.6 REDUCTION OF COMMITMENT................................ 29
(a) VOLUNTARY REDUCTION.................................... 29
(b) MANDATORY REDUCTION.................................... 30
(c) GENERAL REQUIREMENTS................................... 30
Section 2.7 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE LENDER...... 30
Section 2.8 PAYMENT OF PRINCIPAL OF ADVANCES....................... 30
(a) END OF INTEREST PERIOD................................. 30
(b) COMMITMENT REDUCTION................................... 30
(c) MATURITY DATE.......................................... 31
Section 2.9 REIMBURSEMENT.......................................... 31
<PAGE>
Section 2.10 MANNER OF PAYMENT...................................... 31
Section 2.11 LIBOR LENDING OFFICES.................................. 32
Section 2.12 SHARING OF PAYMENTS.................................... 32
Section 2.13 CALCULATION OF RATES................................... 33
Section 2.14 BOOKING LOANS.......................................... 33
Section 2.15 TAXES.................................................. 33
Section 2.16 LETTERS OF CREDIT...................................... 36
(a) THE LETTER OF CREDIT FACILITY.......................... 36
(b) REQUEST FOR ISSUANCE................................... 37
(c) DRAWING AND REIMBURSEMENT.............................. 37
(d) INCREASED COSTS........................................ 38
(e) OBLIGATIONS ABSOLUTE................................... 38
(f) COMPENSATION........................................... 40
(g) L/C CASH COLLATERAL ACCOUNT............................ 42
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCES AND THE
INITIAL LETTERS OF CREDIT............................. 43
Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF
CREDIT................................................ 45
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES........................ 46
(a) ORGANIZATION; POWER; QUALIFICATION.................... 47
(b) AUTHORIZATION......................................... 47
(c) COMPLIANCE WITH OTHER LOAN PAPERS AND CONTEMPLATED
TRANSACTIONS.......................................... 47
(d) LICENSES, ETC......................................... 47
(e) COMPLIANCE WITH LAW................................... 48
(f) TITLE TO PROPERTIES................................... 48
(g) LITIGATION............................................ 48
(h) TAXES................................................. 48
(i) FINANCIAL STATEMENTS; MATERIAL LIABILITIES............ 48
(j) NO ADVERSE CHANGE..................................... 49
(k) ERISA................................................. 49
(l) COMPLIANCE WITH REGULATIONS G, T, U AND X............. 50
(m) GOVERNMENTAL REGULATION............................... 50
(n) ABSENCE OF DEFAULT.................................... 50
(o) INVESTMENT COMPANY ACT................................ 51
-ii-
<PAGE>
(p) ENVIRONMENTAL MATTERS................................. 51
(q) CERTAIN FEES.......................................... 52
(r) NECESSARY AUTHORIZATIONS.............................. 52
(s) PATENTS, ETC.......................................... 52
(t) DISCLOSURE............................................ 52
(u) SOLVENCY.............................................. 52
Section 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC....... 53
ARTICLE 5
BUSINESS COVENANTS
Section 5.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING
PRACTICES, CORPORATE EXISTENCE........................ 53
Section 5.2 INSPECTION OF PROPERTIES AND BOOKS.................... 54
Section 5.3 MERGER AND SALE OF ASSETS............................. 54
Section 5.4 NET WORTH............................................. 55
Section 5.5 CONTINGENT LIABILITIES................................ 55
Section 5.6 INCURRENCE AND RETENTION OF DEBT...................... 55
Section 5.7 INVESTMENTS........................................... 56
Section 5.8 NOTICE OF LITIGATION.................................. 56
Section 5.9 TOTAL DEBT RATIO...................................... 56
Section 5.10 CASH FLOW RATIO....................................... 56
Section 5.11 SENIOR DEBT RATIO..................................... 56
Section 5.12 LIENS................................................. 57
Section 5.13 ACCOUNTING CHANGES.................................... 57
Section 5.14 AMENDMENT AND MODIFICATION OF SUBORDINATED DEBT
DOCUMENTS............................................. 57
Section 5.15 LEASE-BACKS........................................... 57
Section 5.16 ENVIRONMENTAL MATTERS................................. 57
Section 5.17 ERISA COMPLIANCE...................................... 58
Section 5.18 BUSINESS.............................................. 59
Section 5.19 DEBT.................................................. 59
Section 5.20 TRANSACTIONS WITH AFFILIATES.......................... 59
Section 5.21 USE OF PROCEEDS....................................... 59
Section 5.22 INDEMNITY............................................. 59
ARTICLE 6
INFORMATION
Section 6.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY THE
BORROWER.............................................. 61
Section 6.2 OFFICER'S CERTIFICATE................................. 63
-iii-
<PAGE>
ARTICLE 7
DEFAULT
Section 7.1 EVENTS OF DEFAULT..................................... 63
Section 7.2 REMEDIES.............................................. 66
ARTICLE 8
CHANGES IN CIRCUMSTANCES
Section 8.1 LIBOR BASIS DETERMINATION INADEQUATE.................. 67
Section 8.2 ILLEGALITY............................................ 67
Section 8.3 INCREASED COSTS....................................... 67
Section 8.4 EFFECT ON BASE RATE ADVANCES.......................... 69
Section 8.5 CAPITAL ADEQUACY...................................... 69
ARTICLE 9
AGREEMENT AMONG LENDERS
Section 9.1 AGREEMENT AMONG LENDERS............................... 70
(a) ADMINISTRATIVE LENDER................................. 70
(b) REPLACEMENT OF ADMINISTRATIVE LENDER.................. 70
(c) EXPENSES.............................................. 70
(d) DELEGATION OF DUTIES.................................. 71
(e) RELIANCE BY ADMINISTRATIVE LENDER..................... 71
(f) LIMITATION OF ADMINISTRATIVE LENDER'S LIABILITY....... 71
(g) LIABILITY AMONG LENDERS............................... 72
(h) RIGHTS AS LENDER...................................... 72
Section 9.2 LENDER CREDIT DECISION................................ 72
Section 9.3 BENEFITS OF ARTICLE................................... 72
ARTICLE 10
MISCELLANEOUS
Section 10.1 NOTICES............................................... 72
Section 10.2 EXPENSES.............................................. 73
Section 10.3 WAIVERS............................................... 73
Section 10.4 DETERMINATION BY THE LENDERS CONCLUSIVE AND BINDING... 74
Section 10.5 SET-OFF............................................... 74
Section 10.6 ASSIGNMENT............................................ 74
Section 10.7 COUNTERPARTS.......................................... 77
-iv-
<PAGE>
Section 10.8 SEVERABILITY.......................................... 77
Section 10.9 INTEREST AND CHARGES.................................. 77
Section 10.10 CONFIDENTIALITY....................................... 77
Section 10.11 HEADINGS.............................................. 78
Section 10.12 AMENDMENT AND WAIVER.................................. 78
Section 10.13 EXCEPTION TO COVENANTS................................ 78
Section 10.14 NO LIABILITY OF ISSUING BANK.......................... 79
Section 10.15 TERMINATION OF PARTICIPATIONS IN BOND LETTERS OF
CREDIT................................................ 79
Section 10.16 TERMINATION OF COMMITMENT............................. 79
SECTION 10.17 GOVERNING LAW.................................... 79
SECTION 10.18 WAIVER OF JURY TRIAL............................. 80
SECTION 10.19 ENTIRE AGREEMENT................................. 80
-v-
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1: LIBOR Lending Offices
Schedule 2: Existing Litigation
Schedule 3: Subsidiaries and Unincorporated Ventures
Schedule 4: Existing Investments
Schedule 5: Investment Policy
Schedule 6: Unincorporated Ventures to be Purchased
Schedule 7: Benefit Agreements With Former Employees
Schedule 8: Insolvent Unincorporated Ventures
Schedule 9: Existing Letters of Credit
Schedule 10: Significant Investments
Schedule 11: Guaranteed Contingent Obligations
Schedule 12: Existing Liens
Exhibit A: Revolving Credit Note
Exhibit B: Bid Rate Note
Exhibit C: Swing Line Note
Exhibit D: Subsidiary Guaranty
Exhibit E: Assignment Agreement
Exhibit F: Confidentiality Agreement
-vi-
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
(Facility A)
THIS AMENDED AND RESTATED CREDIT AGREEMENT (Facility A) is dated as of
September 12, 1995, among LA QUINTA INNS, INC., a Texas corporation
("Borrower"), the Lenders from time to time party hereto, and NATIONSBANK OF
TEXAS, N.A., a national banking association, as administrative agent for the
Lenders.
BACKGROUND
The Borrower, certain of the Lenders and the Administrative Lender are
parties to that Credit Agreement dated as of January 25, 1994 (said Credit
Agreement, as amended, the "Existing Credit Agreement"). The Borrower has
requested that the Lenders amend and restate the Existing Credit Agreement by
making a credit facility available to the Borrower in the maximum principal
amount of (i) $50,000,000 pursuant to the Facility B Credit Agreement (as herein
defined) and (ii) $200,000,000 pursuant to this Agreement. The Lenders have
agreed to provide the $200,000,000 credit facility, subject to the terms and
conditions set forth below.
In consideration of the mutual covenants and agreements contained herein,
and other good and valuable consideration hereby acknowledged, the parties
hereto agree that the Existing Credit Agreement is amended and restated in its
entirety, together with the Facility B Credit Agreement, as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINED TERMS. For purposes of this Agreement:
"ADDITIONAL COSTS" has the meaning set forth in Section 8.5 hereof.
"ADJUSTMENT DATE" means, for purposes of the Applicable Margin, the
facility fees payable pursuant to Section 2.4(a) hereof and the Letter of
Credit fees payable pursuant to Sections 2.16(f)(i) and 2.16(f)(ii) hereof,
(i) when the Applicable Margin and such fees are based on the Leverage Ratio,
the date of receipt by the Administrative Lender of the financial statements
required to be delivered pursuant to Section 6.1(a) or 6.1(b) hereof which
results in a change in the Applicable Margin and (ii) when the Applicable
Margin and such fees are based on the Index Debt Rating, the effective date
of any issuance of, or change in, the Index Debt Rating which results in a
change in the Applicable Margin.
"ADMINISTRATIVE LENDER" means NationsBank of Texas, N.A., a national
banking association, as administrative agent for Lenders, or such successor
administrative agent appointed pursuant to Section 9.1(b) hereof.
<PAGE>
"ADVANCE" means a Revolving Credit Advance, a Swing Line Advance or a
Bid Rate Advance and "ADVANCES" means Revolving Credit Advances, Swing Line
Advances and Bid Rate Advances.
"AFFILIATE" means any Person that directly or indirectly through one or
more Subsidiaries Controls, or is Controlled By or Under Common Control with,
the Borrower.
"AGREEMENT" means this Credit Agreement, as amended, modified,
supplemented and restated from time to time.
"AGREEMENT DATE" means the date of this Agreement.
"APPLICABLE ENVIRONMENTAL LAWS" means applicable laws pertaining to
health or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, "CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act
amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as
amended from time to time, "RCRA"), the Texas Water Code, and the Texas Solid
Waste Disposal Act.
"APPLICABLE LAW" means (a) in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies
or regulatory agencies applicable to such Person and its properties,
including, without limiting the foregoing, all orders and decrees of all
courts and arbitrators in proceedings or actions to which the Person in
question is a party, and (b) in respect of contracts relating to interest or
finance charges that are made or performed in the State of Texas, "APPLICABLE
LAW" shall mean the laws of the United States of America, including without
limitation 12 USC Sections 85 and 86, as amended from time to time, and any
other statute of the United States of America now or at any time hereafter
prescribing the maximum rates of interest on loans and extensions of credit,
and the laws of the State of Texas, including, without limitation, Article
5069-1.04, Title 79, Revised Civil Statutes of Texas, 1925, as amended ("Art.
1.04"), and any other statute of the State of Texas now or at any time
hereafter prescribing maximum rates of interest on loans and extensions of
credit; provided that the parties hereto agree that the provisions of Chapter
15, Title 79, Revised Civil Statutes of Texas, 1925, as amended, shall not
apply to Advances, this Agreement, the Notes or any other Loan Papers.
"APPLICABLE MARGIN" means the following per annum percentages,
applicable in the following situations:
- 2 -
<PAGE>
<TABLE>
<CAPTION>
BASE RATE LIBOR
APPLICABILITY BASIS BASIS
------------- -------- -----
<S> <C> <C>
CATEGORY 1 - The Leverage Ratio is not less than 3.50 to 1 0.00 0.70
or the Index Debt Rating is any two of the following: BB by
S&P, BB by ARA or Ba2 by Moody's
CATEGORY 2 - The Leverage Ratio is less than 3.50 to 1 but 0.00 0.55
not less than 3.00 to 1 or the Index Debt Rating is any two
of the following: BB+ by S&P, BB+ by ARA or Ba1 by Moody's
CATEGORY 3 - The Leverage Ratio is less than 3.00 to 1 but 0.00 0.45
not less than 2.50 to 1 or the Index Debt Rating is any two
of the following: BBB- by S&P, BBB- by ARA or Baa3 by Moody's
CATEGORY 4 - The Leverage Ratio is less than 2.50 to 1 but not 0.00 0.35
less than 2.0 to 1 or the Index Debt Rating is any two of the
following: BBB by S&P, BBB by ARA or Baa2 by Moody's
CATEGORY 5 - The Leverage Ratio is less than 2.00 to 1 or the 0.00 0.30
Index Debt Rating is any two of the following: BBB+ or better
by S&P, BBB+ or better by ARA or Baa1 or better by Moody's
</TABLE>
The Applicable Margin payable by the Borrower on the Revolving Credit Advances
outstanding hereunder shall be adjusted on each Adjustment Date if determined
based on the (i) Leverage Ratio, according to the performance of the Borrower
for the most recent fiscal quarter or (ii) the Index Debt Rating, according to
the most recent determination of the Index Debt Rating. For purposes of the
foregoing, (a) if the Index Debt Rating and the Leverage Ratio are in different
categories, the Applicable Margin shall be determined on whichever of the Index
Debt Rating or the Leverage Ratio falls within the superior (or numerically
higher) category, (b) if the Applicable Margin is determined based on the
Leverage Ratio and the financial statements of the Borrower setting forth the
Leverage Ratio are not received by the Administrative Lender by the date
required pursuant to Section 6.1(a) or 6.1(b), the Applicable Margin shall be
determined as if the Leverage Ratio is not less than 3.50 to 1 until such time
as the financial statements are received, (c) if the Index Debt Rating
established by ARA shall fall within a different category than both Moody's and
S&P, the Applicable Margin shall be determined by reference to Moody's or S&P,
whichever shall be the superior (or numerically higher) category, but not to
exceed two rating levels higher than the other rating agency. If the rating
system of Moody's, S&P or ARA shall change prior to the Maturity Date, the
Borrower and the Lenders shall negotiate in good faith to amend the references
to specific ratings in this definition to reflect such changed rating system.
"ARA" means Duff & Phelps Credit Ratings Company or Fitch Investor
Services or any other nationally recognized rating agency approved in writing
by the Determining Lenders which shall have a rating system identical to S&P.
- 3 -
<PAGE>
"ART. 1.04" has the meaning specified in the definition of "Applicable
Law."
"ASSIGNEES" means any assignee of a Lender pursuant to an Assignment
Agreement and has the meaning specified in Section 10.6 hereof.
"ASSIGNMENT AGREEMENT" has the meaning specified in Section 10.6 hereof.
"AUTHORIZED OFFICER" means any of the following officers of the
Borrower: President, Senior Vice President-Accounting & Administration, Senior
Vice President-Finance, Vice President & General Counsel or Vice
President-Treasurer.
"AUTHORIZED SIGNATORY" means such senior personnel of the Borrower as
may be duly authorized and designated in writing by the Borrower to execute
documents, agreements and instruments on behalf of the Borrower, and to request
Advances or Letters of Credit hereunder.
"BASE RATE ADVANCE" means a Revolving Credit Advance which the Borrower
requests to be made as a Base Rate Advance or which is reborrowed as a Base Rate
Advance, in accordance with the provisions of Section 2.2 hereof.
"BASE RATE BASIS" means, for any day, a per annum interest rate equal
to the higher of (a) the sum of (i) 0.50% plus (ii) the Federal Funds Rate on
such day plus (iii) the Applicable Margin, or (b) the sum of (i) the Prime
Rate on such day plus (ii) the Applicable Margin. The Base Rate Basis shall
be adjusted automatically as of the opening of business on the effective date
of each change in the Prime Rate to account for such change.
"BID RATE ADVANCE" means an Advance the interest rate on which is
determined by agreement between the Borrower and the Lender making such Advance
pursuant to Section 2.1(c) hereof.
"BID RATE NOTE" means each promissory note of the Borrower evidencing
Bid Rate Advances, substantially in the form of EXHIBIT B hereto, together
with any extension, renewal or amendment thereof or substitution therefor.
"BOND LETTERS OF CREDIT" has the meaning specified in the Existing
Credit Agreement.
"BORROWER" means La Quinta Inns, Inc., a Texas corporation.
"BUSINESS DAY" means a day on which banks are open for the transaction
of business in Dallas, Texas and New York, New York, and, with respect to any
LIBOR Advance, in London, England.
"CAPITAL LEASES" mean all capital leases and subleases, as defined in
the Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 13, dated November 1976, as amended.
- 4 -
<PAGE>
"CAPITAL STOCK" means, with respect to any Person, any capital stock,
partnership or joint venture interests of such Person and shares, interests,
participations or other ownership interests (however designated) of any Person
and any rights (other than debt securities convertible into corporate stock),
warrants or options to purchase any of the foregoing.
"CAPITALIZED LEASE OBLIGATIONS" means that portion of any obligation of
the Borrower or any Subsidiary as lessee under a lease which at the time would
be required to be capitalized on a balance sheet prepared in accordance with
GAAP.
"CHANGE OF CONTROL" means (a) any "person" or "group" (as such terms
are used for purposes of Sections 13(d) and 14(d) of the Exchange Act,
whether or not applicable), is or becomes the "beneficial owner" (as that
term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time, directly or indirectly, of more than 50% of the total voting power in
the aggregate of all classes of Capital Stock then outstanding of the
Borrower normally entitled to vote in elections of directors, PROVIDED, that
for the purposes of this clause (a), neither Thomas M. Taylor & Co., Trust
for the benefit of Mr. Taylor's son, Sid R. Bass, Inc., Lee M. Bass, Inc.,
The Bass Management Trust, Annie R. Bass Trust for Lee M. Bass, Ann R. Bass
Trust for Sid R. Bass, Peter Sterling Trusts nor Peter Sterling, each of
which is a principal shareholder of the Borrower as of the Agreement Date,
nor any person who on the Agreement Date is, or at any time thereafter
becomes, a member of any group which includes any of such entities and
persons, shall be deemed to be a "person" or "group" for purposes of this
definition, or (b) during any period of 24 consecutive months after September
12, 1995, individuals who at the beginning of such period constituted the
Board of Directors of the Borrower (together with any new directors whose
election by such Board or whose nomination for election by the shareholders
of the Borrower was approved by a vote of a majority of the directors then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved), cease
for any reason to constitute a majority of the Board of Directors of the
Borrower then in office.
"CODE" means the Internal Revenue Code of 1986, as amended, together
with all regulations thereunder.
"COMBINED" means, with respect to financial statements, the combined
accounts of the Borrower, its Subsidiaries and Unincorporated Ventures which
are included in the Borrower's Annual Report to Shareholders and in the
Borrower's Form 10-K filed with the Securities and Exchange Commission (the
"Combined Financial Statements").
"COMMITMENT" means $200,000,000, as reduced pursuant to Section 2.6
hereof.
"CONFIDENTIALITY AGREEMENT" has the meaning specified in Section 10.10
hereof.
- 5 -
<PAGE>
"CONSOLIDATED NET INCOME" means, for any period, determined in
accordance with GAAP on a Combined basis, consolidated net income for such
period.
"CONTROL" or "CONTROLLED BY" or "UNDER COMMON CONTROL" means
possession, directly or indirectly, of power to direct or cause the direction
of management or policies (whether through ownership of voting securities, by
contract or otherwise); provided, however, that in any event any Person which
beneficially owns, directly or indirectly, 10% or more (in number of votes)
of the securities having ordinary voting power for the election of directors
of a corporation shall be conclusively presumed to control such corporation.
"CONTROLLED GROUP" shall mean as of the applicable date, as to any
Person, all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) which are under common control with
such Person and which, together with such Person, are treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code; provided, however,
that the Subsidiaries and Unincorporated Ventures of the Borrower shall be
deemed to be members of the Borrower's Controlled Group.
"CURRENT MATURITIES" means, with respect to any Person, the principal
portion payable by such Person on Long Term Debt during the twelve-month period
immediately succeeding the date of determination.
"DEBT" of any Person means, at any date, without duplication, all
obligations, contingent or otherwise, (a) of such Person for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof), (b) of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) representing the
balance deferred and unpaid of the purchase price of any property or services
(other than accounts payable or other obligations arising in the ordinary
course of business), if and to the extent any of the foregoing described in
clauses (a), (b) and (c) would appear as a liability on the balance sheet of
such Person, (d) of such Person in respect of bankers' acceptances, letters
of credit or other similar instruments (or reimbursement obligations with
respect thereto), (e) of such Person under Capitalized Lease Obligations, (f)
all liabilities secured by a Lien on any asset of such Person to the extent
of the value of such asset, whether or not such liability is an obligation of
such Person, (g) all liability of others guaranteed by such Person (but only
to the extent of such guarantees), (h) to the extent not otherwise included,
obligations of such Person under currency risk-hedging agreements and
Interest Rate Protection Agreements, (i) the liquidation preference and any
mandatory redemption payment obligations (without duplication) of such
Person's Subsidiaries in respect of preferred stock issued by any such
Subsidiary, (j) in the case of such Person, the liquidation preference and
any mandatory redemption payment obligations (without duplication) in respect
of Disqualified Capital Stock, and (k) in the case of such Person, unfunded
vested benefits under any Plan.
"DEBTOR RELIEF LAWS" means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
debtor relief Laws affecting the rights of creditors generally from time to
time in effect.
- 6 -
<PAGE>
"DEFAULT" means an Event of Default and/or any of the events specified
in Section 7.1, regardless of whether there shall have occurred any passage of
time or giving of notice that would be necessary in order to constitute such
event an Event of Default.
"DEFAULT RATE" means a simple per annum interest rate equal to the
lesser of (a) the Highest Lawful Rate, or (b) the sum of the Prime Rate plus
three percent.
"DETERMINING LENDERS" means, on any date of determination, any
combination of the Lenders having at least 51% of the aggregate amount of the
Revolving Credit Advances (which for purpose of the calculation shall include
for each Lender an amount equal to the product of such Lender's Specified
Percentage multiplied by the aggregate principal amount of Swing Line Loans
outstanding) and advances under the Facility B Credit Agreement then
outstanding; provided, however, that if there are no Revolving Credit Advances
outstanding hereunder and no advances outstanding under the Facility B Credit
Agreement, "DETERMINING LENDERS" shall mean any combination of Lenders whose
Specified Percentages hereunder and under the Facility B Credit Agreement
aggregate at least 51%.
"DISQUALIFIED CAPITAL STOCK" means, with respect to any Person any
series or class of Capital Stock of such Person which is or may be required to
be redeemed, in whole or in part, or may be put to such Person or any of its
Subsidiaries, in whole or in part, at the option of the Holder thereof, on or
prior to the final maturity of the Senior Subordinated Notes, or is or may be
convertible or exchangeable into or exercisable for such Capital Stock on or
prior to the final maturity of the Notes; PROVIDED, that Capital Stock will
not be deemed to be Disqualified Capital Stock if it may only be so redeemed or
put solely in consideration of Qualified Capital Stock.
"DOMESTIC SUBSIDIARY" means any Subsidiary of the Borrower organized
under the laws of any state within the United States.
"EBITDA" means, for any period, determined in accordance with GAAP on a
Combined basis, the sum of (a) Operating Income, plus (b) nonrecurring,
non-cash charges which decrease Operating Income, plus (c) depreciation,
amortization and non-cash fixed asset retirements, minus (d) nonrecurring
credits which are included in Operating Income.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.
"ERISA EVENT" means, with respect to the Borrower and its Subsidiaries,
(a) a Reportable Event (other than a Reportable Event not subject to the
provision for 30-day notice to the PBGC under regulations issued under
Section 4043 of ERISA), (b) the withdrawal of any such Person or any member
of its Controlled Group from a Plan subject to Title IV of ERISA during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate under
Section 4041(c) of ERISA, (d) the institution of proceedings to terminate a
Plan by the PBGC, (e) the failure to make required contributions which could
result in the imposition of a lien under Section 412 of the Code or
- 7 -
<PAGE>
Section 302 of ERISA, or (f) any other event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan
or the imposition of any liability under Title IV of ERISA other than PBGC
premiums due but not delinquent under Section 4007 of ERISA.
"EVENT OF DEFAULT" means any of the events specified in Section 7.1,
provided that any requirement for notice or lapse of time has been satisfied.
"EXISTING CREDIT AGREEMENT" means that certain Amended and Restated
Credit Agreement, dated as of January 25, 1994, among the Borrower, the lenders
party thereto, and NationsBank of Texas, N.A., as Administrative Lender, as
amended, modified, supplemented or restated from time to time.
"EXISTING INVESTMENTS" means those Investments described on SCHEDULE 4
hereto.
"EXISTING LETTERS OF CREDIT" means those Letters of Credit outstanding
on the Agreement Date, as described on SCHEDULE 9 hereto.
"FACILITY B CREDIT AGREEMENT" means that certain Amended and Restated
Credit Agreement (Facility B), dated as of the Agreement Date, among the
Borrower, the lenders party thereto, and NationsBank of Texas, N.A., as
administrative lender, as amended, restated, supplemented or otherwise modified
from time to time.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of Dallas on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding
Business Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to the Administrative Lender on such day on such transactions as
determined by Administrative Lender.
"FEE LETTER" has the meaning specified in Section 2.4(c) hereof.
"FINANCIAL LETTER OF CREDIT" means any Letter of Credit issued under
the Letter of Credit Facility which is a "financial guarantee - type standby
letter of credit" as defined in Appendix A to 12 CFR Part 3 issued by the
Office of the Comptroller of the Currency.
"FOREIGN SUBSIDIARY" means any Subsidiary that is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles, set forth in the
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants, or their
- 8 -
<PAGE>
successors which are applicable in the circumstances as of the date in
question (except as stated in the last sentence of this definition). The
requisite that such principles be applied on a consistent basis shall mean
that the accounting principles observed in a current period are comparable in
all material respects to those applied in a preceding period, except as
otherwise required by the adoption of Statements by the Financial Accounting
Standards Board. Notwithstanding the foregoing, each determination and
computation with respect to financial covenants and ratios in this Agreement
shall be made in accordance with GAAP as in effect on the Agreement Date.
"GUARANTY" or "GUARANTEED", as applied to an obligation of another
Person, means and includes (a) a guaranty, direct or indirect, in any manner,
of any part or all of such obligation, and (b) an agreement, direct or
indirect, contingent or otherwise, the practical effect of which is to assure
in any way the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation, including, without
limiting the foregoing, any reimbursement obligations with respect to amounts
which may be drawn by beneficiaries of outstanding letters of credit.
"GUARANTY AGREEMENTS" means the Subsidiary Guaranty and any other
Guaranty executed by a Guarantor.
"GUARANTOR" means each Significant Subsidiary.
"HIGHEST LAWFUL RATE" means at the particular time in question the
maximum rate of interest which, under Applicable Law, the Lenders are then
permitted to charge on the Obligations. If the maximum rate of interest which,
under Applicable Law, the Lenders are permitted to charge on the Obligations
shall change after the date hereof, the Highest Lawful Rate shall be
automatically increased or decreased, as the case may be, from time to time as
of the effective time of each change in the Highest Lawful Rate without notice
to the Borrower. For purposes of determining the Highest Lawful Rate under the
Applicable Law of the State of Texas, the applicable rate ceiling shall be (a)
the indicated rate ceiling described in and computed in accordance with the
provisions of Section (a)(1) of Art. 1.04, or (b) if the parties subsequently
contract as allowed by Applicable Law, the quarterly ceiling or the annualized
ceiling computed pursuant to Section (d) of Art. 1.04; provided, however, that
at any time the indicated rate ceiling, the quarterly ceiling or the annualized
ceiling shall be less than 18% per annum or more than 24% per annum, the
provisions of Sections (b)(1) and (2) of said Art. 1.04 shall control for
purposes of such determination, as applicable.
"INCREASED ADVANCE COSTS" has the meaning specified in Section 8.3
hereof.
"INCREASED ADVANCE COSTS RETROACTIVE EFFECTIVE DATE" has the meaning
specified in Section 8.3 hereof.
"INCREASED ADVANCE COSTS SET DATE" has the meaning specified in Section
8.3 hereof.
- 9 -
<PAGE>
"INCREASED LETTER OF CREDIT COSTS" has the meaning specified in Section
2.16(d) hereof.
"INCREASED LETTER OF CREDIT COSTS RETROACTIVE EFFECTIVE DATE" has the
meaning specified in Section 2.16(d) hereof.
"INCREASED LETTER OF CREDIT COSTS SET DATE" has the meaning specified in
Section 2.16(d) hereof.
"INDEMNIFIED MATTERS" has the meaning specified in Section 5.22 hereof.
"INDEMNITEES" has the meaning specified in Section 5.22 hereof.
"INDEX DEBT RATING" means the rating applicable to the Borrower's
senior, unsecured, non-credit-enhanced long term indebtedness for borrowed
money ("Index Debt") or the implied rating established by Moody's, S&P or ARA
as if the Borrower had outstanding Index Debt.
"INSOLVENT UNINCORPORATED VENTURES" means those Unincorporated Ventures
specified on SCHEDULE 8 hereto.
"INTEREST EXPENSE" of any Person means, for any period, the aggregate
interest expense in respect of Debt (including amortization of original issue
discount and non-cash interest payments or accruals, and dividends on
Disqualified Capital Stock, but excluding amortization of Debt issuance costs)
of such Person and all commissions, discounts, other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and costs
associated with currency and Interest Rate Protection Agreements, all in
accordance with GAAP; PROVIDED, that interest expense attributable to that
portion of the Debt of another Person that is a direct or indirect, contingent
or primary, recourse obligation of such Person subsequent to the Agreement Date
shall be added thereto.
"INTEREST PERIOD" means (a) for any Base Rate Advance, the period
beginning on the day the Advance was made and ending on the Maturity Date, and
(b) for any LIBOR Advance, the period beginning on the day such Advance is made
and ending one, two, three, six months or twelve months thereafter (as the
Borrower shall select).
"INTEREST RATE PROTECTION AGREEMENT" means an interest rate swap, cap,
collar or similar interest rate protection agreement between the Borrower or
any Subsidiary and other Person.
"INVESTMENT" means, in one or a series of related transactions, any
direct or indirect acquisition of all or substantially all assets of any
Person, or any direct or indirect purchase or other acquisition of, or
beneficial interest in, capital stock or other securities of any other
Person, or any direct or indirect loan, advance (other than advances to
employees for moving and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution or
transfer of property, assets or value to, or investment, in any other Person,
including without limitation the incurrence or sufferance of Debt or the
purchase
- 10 -
<PAGE>
of accounts receivable of any other Person that are not current assets or do
not arise in the ordinary course of business.
"INVESTMENT POLICY" means that certain Amended and Restated La Quinta
Inns, Inc. Statement of Investment Policy as of October 1989 in effect on the
Agreement Date as specified on SCHEDULE 5 hereto.
"ISSUING BANK" means NationsBank of Texas, N.A. in its capacity as
issuer of the Letters of Credit.
"LENDER" means each financial institution shown on the signature pages
hereof so long as such financial institution maintains a Commitment or is owed
any part of the Obligations (including the Administrative Lender in its
individual capacity), and each Assignee that hereafter becomes party hereto
pursuant to Section 10.6 hereof.
"L/C CASH COLLATERAL ACCOUNT" has the meaning specified in Section
2.16(g) hereof.
"L/C RELATED DOCUMENTS" has the meaning specified in Section 2.16(e)
hereof.
"LETTERS OF CREDIT" means letters of credit under the Letter of Credit
Facility and letters of credit issued under the Existing Credit Agreement and
outstanding on the Agreement Date.
"LETTER OF CREDIT AGREEMENT" has the meaning specified in Section
2.16(b) hereof.
"LETTER OF CREDIT FACILITY" means the amount of Letters of Credit the
Issuing Bank may issue pursuant to Section 2.16(a) hereof.
"LEVERAGE RATIO" means, for any date of determination, the ratio of (i)
Total Debt as of the fiscal quarter immediately preceding the date of
determination to (ii) EBITDA, for the four consecutive fiscal quarters
preceding the date of determination. For purposes of calculation of EBITDA,
there shall be (i) included in EBITDA (without duplication) the EBITDA of any
assets acquired during any such four fiscal quarters and (ii) excluded from
EBITDA the EBITDA of any asset disposed during any such four fiscal quarters.
"LIBOR ADVANCE" means a Revolving Credit Advance which the Borrower
requests to be made as a LIBOR Advance or which is reborrowed as a LIBOR
Advance, in accordance with the provisions of Section 2.2 hereof.
"LIBOR BASIS" means, with respect to each LIBOR Advance for each
Interest Period, a rate per annum equal to the lesser of (a) the Highest Lawful
Rate or (b) the sum of the LIBOR Rate plus the Applicable Margin.
"LIBOR LENDING OFFICE" means, with respect to a Lender, the office
designated as its LIBOR Lending Office on SCHEDULE 1 attached hereto, and such
other office of the Lender or
- 11 -
<PAGE>
any of its affiliates hereafter designated by notice to the Borrower and the
Administrative Lender.
"LIBOR RATE" means, for any Interest Period, the interest rate per annum
(rounded upward to the nearest one-sixteenth (1/16th) of one percent) at which
deposits in United States Dollars are offered to the Administrative Lender by
leading banks reasonably selected by the Administrative Lender in the London
interbank market at approximately 11:00 a.m. (London time), two Business Days
before the first day of such Interest Period, in an amount approximately equal
to the principal amount of, and for a length of time approximately equal to the
Interest Period for, the LIBOR Advance sought by the Borrower.
"LIEN" means, with respect to any property, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, security interest, title
retention agreement, levy, execution, seizure, attachment, garnishment or
other encumbrance of any kind in respect of such property, whether or not
choate, vested or perfected.
"LOAN PAPERS" means this Agreement, the Notes, the Guaranty Agreements,
the Fee Letter, and any other document or agreement executed or delivered from
time to time by the Borrower, any Subsidiary or any other Person in connection
herewith or as security for all or any part of the Obligations.
"LOAN PARTY" means the Borrower and each Guarantor.
"LONG TERM DEBT" means any obligation which is due one year or more from
the date of creation thereof which under GAAP is shown as a liability, plus
(without duplication) amounts equal to the aggregate net rentals (after making
allowances for any interest, taxes or other expenses included therein) payable
more than one year from the date of creation thereof under Capital Leases.
"MAINTENANCE CAPITAL EXPENDITURES" means, for any date of determination,
an amount equal to the product of (a) 5% multiplied by (b) room revenues (as
disclosed in the Borrower's Form 10-K and 10-Q) of the Borrower, its
Subsidiaries and Unincorporated Ventures, for the four consecutive fiscal
quarters preceding the date of determination.
"MASTER COVENANT AGREEMENT" means the Fifth Amended and Restated Master
Covenant Agreement dated as of the Agreement Date, by and between the Borrower
and NationsBank of Texas, N.A., as such agreement may be amended, restated,
supplemented or otherwise modified from time to time.
"MATERIAL ADVERSE CHANGE OR EFFECT" means any act or circumstance or
event which (a) is material and adverse to the combined or consolidated
financial condition of the Borrower, its Subsidiaries and Unincorporated
Ventures as represented in the Combined Financial Statements most recently
delivered to the Lenders at the time of any determination thereof or be
material and adverse to the combined or consolidated business operations or
properties of the Borrower,
- 12 -
<PAGE>
its Subsidiaries and Unincorporated Ventures or (b) impairs the ability of
the Borrower, any Subsidiary or any other Person to perform in any material
respect their respective obligations under the Loan Papers.
"MATERIAL AMOUNT" means, as of the determination thereof, an amount
equal to the greater of (a) $1,000,000 or (b) the lesser of (i) $4,000,000 or
(ii) 1% of the consolidated revenues of the Borrower and its Subsidiaries
computed on a Combined basis for the fiscal year preceding the date of
determination.
"MATURITY DATE" means August 31, 2000, or the earlier date of
termination in whole of the Commitment pursuant to Section 2.6 or 7.2 hereof.
"MAXIMUM AMOUNT" means the maximum amount of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means, as to any Person, at any time, a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which such Person or any member of its Controlled Group is making, or is
obligated to make contributions or has made, or been obligated to make,
contributions.
"NECESSARY AUTHORIZATION" means any right, franchise, license, permit,
consent, approval or authorization from, or any filing or registration with,
any governmental or other regulatory authority necessary or appropriate to
enable the Borrower or any Subsidiary or Unincorporated Venture to maintain
and operate its business and properties.
"NET CASH PROCEEDS" means the aggregate amount of cash received by the
Borrower in respect of the sale of Capital Stock of the Borrower, less the sum
of all fees, commissions and other expenses incurred in connection with such
sale.
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, as determined in accordance with
GAAP.
"NET INTEREST EXPENSE" means, with respect to any Person for any period,
the sum of (i) Interest Expense of such Persons for such period minus (ii)
interest income of such Person for such period as reflected on an income
statement of such Person prepared in accordance with GAAP.
"NET WORTH" means an amount equal to the sum of the Capital Stock and
additional paid-in-capital plus retained earnings (or minus accumulated
deficit) of the Borrower and its Subsidiaries, less (i) treasury stock and
(ii) amounts attributable to the extent included, (1) to any write-up in book
value of assets resulting from a revaluation thereof subsequent to June 30,
1995, and (2) to Disqualified Capital Stock, all in accordance with GAAP.
- 13 -
<PAGE>
"NON-FINANCIAL LETTER OF CREDIT" means any Letter of Credit issued under
the Letter of Credit Facility which is a "performance-based standby letter of
credit" as defined in Appendix A to 12 CFR Part 3 issued by the Office of the
Comptroller of the Currency.
"NOTE" means any Revolving Credit Note, Swing Line Note or Bid Rate Note
and "NOTES" means the Revolving Credit Notes, the Swing Line Notes and the Bid
Rate Notes.
"NOTICE OF ISSUANCE" means the meaning specified in Section 2.16(b)
hereof.
"OBLIGATIONS" means (a) all obligations of any nature (whether matured
or unmatured, fixed or contingent, including the Reimbursement Obligations)
of the Borrower, any Subsidiary or any other Person to the Lenders and the
Issuing Bank under the Loan Papers as they may be amended from time to time,
and (b) all obligations of the Borrower, any Subsidiary or any other Person
for losses, damages, expenses or any other liabilities of any kind that any
Lender may suffer by reason of a breach by the Borrower, any Subsidiary or
any other Person of any obligation, covenant or undertaking with respect to
any Loan Paper.
"OBLIGOR" means Borrower or each other Person liable for performance of
any of the Obligations or the property of which secures any of the Obligations.
"OPERATING INCOME" means, with respect to any Person for any period, the
operating income (loss) of such Person, as determined in accordance with GAAP.
"OPERATING LEASE" means any operating lease, as defined in the Financial
Accounting Standard Board Statement of Financial Accounting Standards No. 13,
dated November, 1976 or otherwise in accordance with GAAP.
"OTHER TAXES" has the meaning specified in Section 2.15 hereof.
"PARENT COMPANY" means, with respect to financial statements, the
uncombined, consolidated financial statements of the Borrower and its
Subsidiaries, including equity method investments, as defined by GAAP, in
Unincorporated Ventures and designated "La Quinta Inns, Inc. (Parent Company
and Wholly-Owned Subsidiaries)" on the Borrower's audit report.
"PARTICIPANT" has the meaning specified in Section 10.6(c) hereof.
"PARTICIPATION" has the meaning specified in Section 10.6(c) hereof.
"PARTNERS' CAPITAL" means the equity in the net assets of Unincorporated
Ventures of all the partners or venturers (other than the Borrower or a
Subsidiary) of such Unincorporated Ventures, or minority interest holders, as
determined in accordance with GAAP.
"PAYMENT DATE" means the last day of the Interest Period for any
Advance.
- 14 -
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED INVESTMENT" means Investments in (i) wholly-owned Domestic
Subsidiaries (a) that are subject to the provisions of this Agreement, (b)
that concurrently therewith unconditionally guarantee the performance of the
Borrower's obligations under this Agreement and (c) that concurrently deliver
to the Lenders (1) an opinion acceptable to the Lenders with respect to the
validity and enforceability of such guarantee and (2) such other documents,
such as corporate resolutions, certificates of incumbency, by-laws and
articles of incorporation, as the Lenders shall reasonably require, (ii)
Investments in any Person other than a wholly-owned Subsidiary in any one or
a series of related transactions with a fair market value not in excess of
$25,000,000 in the aggregate for all Investments in all such Persons, (iii)
Investments for the purpose of satisfying the Borrower's or any Subsidiary's
guarantee obligations with respect to the Debt of any Person in which the
Borrower or any Subsidiary owned any interest and which obligation was in
existence as of the Agreement Date; (iv) Investments in Subsidiaries and
Unincorporated Ventures which do not guarantee the performance of the
Borrower's obligations under this Agreement made in the ordinary course of
business, consistent with past practices for the purpose of providing for the
day to day operating requirements of such Subsidiary or Unincorporated
Venture, PROVIDED, that such Investments shall (a) not be used for
acquisition or conversion of any inns and (b) be evidenced by a note or other
evidence of indebtedness and (c) not at any time exceed $10,000,000 in
aggregate principal amount, (v) Investments permitted by Sections II.B.,
II.C. (provided that, notwithstanding Section II.C.3. of the Investment
Policy, banks shall be required to have at least $150,000,000 in capital and
surplus), II.E. and II.H. of the Investment Policy, (vi) loans or advances to
employees as compensation for services in the ordinary course of business not
in excess of $2,000,000 aggregate principal amount, (vii) Investments in the
ordinary course of business, consistent with past practice, in the Borrower's
National Advertising Fund, (viii) Existing Investments, (ix) Investments in
Capital Stock of Subsidiaries and Unincorporated Ventures listed on SCHEDULE
3 hereto for the purpose of acquiring no less than 100% of the capital stock
or partnership interests, as appropriate, of such Subsidiaries and
Unincorporated Ventures, (x) Investments in notes payable to the Borrower as
a result of the sale of inns in an aggregate principal amount not in excess
of $10,000,000, provided that the Borrower shall obtain and continue to hold
a perfected first Lien (subject to Permitted Liens) in such inns, and (xi)
Investments in wholly-owned Foreign Subsidiaries (a) that are subject to the
provisions of this Agreement and (b) not to exceed in aggregate amount
$1,000,000 for all Investments in all Foreign Subsidiaries. For purposes of
the calculation of the amount of any Investments permitted hereunder,
Investments will be calculated at all times at the amount of the original
Investment with no reduction for write-offs or write-downs. No Investment
which is a Permitted Investment other than pursuant to clause (ii) of the
definition of "PERMITTED INVESTMENTS" shall reduce the amount of Investments
permitted pursuant to such clause (ii).
"PERMITTED LIENS" means, as applied to any Person:
- 15 -
<PAGE>
(i) any Lien in favor of the Administrative Lender or a trustee on its
behalf to secure the Obligations;
(ii) (a) Liens on real estate for real estate taxes not yet delinquent,
(b) Liens created by lease agreements to secure the payments of rental amounts
and other sums not yet due thereunder, (c) Liens on leasehold interests created
by the lessor in favor of any mortgagee of the leased premises, and (d) Liens
for taxes, assessments, governmental charges, levies or claims that are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on such Person's books, but only so
long as no foreclosure, restraint, sale or similar proceedings have been
commenced with respect thereto;
(iii) Liens of carriers, warehousemen, mechanics, laborers and materialmen
and other similar Liens incurred in the ordinary course of business for sums not
yet due or being contested in good faith, if such reserve or appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(iv) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;
(v) Easements, rights-of-way, restrictions and other similar
encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person;
(vi) Liens created to secure the purchase price of fixed assets acquired
by such Person, which is incurred solely for the purpose of financing the
acquisition of such assets and incurred at the time of acquisition, so long as
(a) each such Lien shall at all times be confined solely to the asset or assets
so acquired (and proceeds thereof), (b) the Liens were placed on such assets at
the time such assets were acquired and (c) the aggregate principal amount of
Debt secured by such Liens does not exceed, together with the principal amount
of Debt secured by Liens permitted pursuant to clause (vii) below, $25,000,000,
and refinancings thereof so long as any such Lien remains solely on the asset or
assets acquired and the amount of Debt related thereto is not increased;
(vii) Liens existing on any property acquired by such Person prior to the
acquisition of such property by such Person, provided (a) such Lien shall at all
times be confined solely to the property so acquired (and proceeds thereof) and
(b) the aggregate principal amount of Debt secured by such Liens does not
exceed, together with the principal amount of Debt secured by Liens permitted
pursuant to clause (vi) above, $25,000,000 and refinancings thereof so long as
any such Lien remains solely on the asset or assets acquired and the amount of
Debt related thereto is not increased;
(viii)Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (a) such Person shall have established adequate reserves for such
judgments or awards, (b) such judgments or awards shall
- 16 -
<PAGE>
be fully insured and the insurer shall not have denied coverage, or (c) such
judgments or awards shall have been bonded to the satisfaction of the Lenders;
(ix) Any Liens existing on the Agreement Date which are described on
SCHEDULE 12 hereto, and Liens resulting from the refinancing of the related
Debt, provided that the Debt secured thereby shall not be increased and the
Liens shall not cover additional assets of the Borrower;
(x) any obligations or duties, affecting any property, to any
municipality or public authority with respect to any franchise, grant, license
or permit which do not materially impair the use of any material property for
the purposes for which such property is held by such Person;
(xi) zoning laws or ordinances and municipal regulations which do not
materially impair the use of any material property for the purposes for which
such property is held by such Person;
(xii) Liens, minor irregularities in or deficiencies of title on any
property which do not materially impair the use of any material property for the
purposes for which such property is held by such Person; and
(xiii)Liens otherwise permitted or contemplated by the Loan Papers.
"PERSON" means and includes an individual, corporation, partnership,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
"PLAN" means an employee benefit plan as defined in Section 3(3) of
ERISA (including a Multiemployer Plan that is covered by Title IV of ERISA)
pursuant to which any employees of the Borrower, its Subsidiaries,
Unincorporated Ventures or any member of their Controlled Group participate;
PROVIDED, HOWEVER, "Plan" shall not include those agreements with former
employees of any of such Persons described on SCHEDULE 7 hereto, the
obligations pursuant to which do not exceed $450,000 in aggregate amount.
"PRIME RATE" means, at any time, the prime interest rate announced or
published by the Administrative Lender from time to time as its reference rate
for the determination of interest rates for loans of varying maturities in
United States dollars to United States residents of varying degrees of
creditworthiness and being quoted at such time by the Administrative Lender as
its "prime rate;" it being understood that such rate may not be the lowest rate
of interest charged by the Administrative Lender.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of the Borrower that
is not Disqualified Capital Stock.
- 17 -
<PAGE>
"QUARTERLY DATE" means the last Business Day of each February, May,
August and November, beginning November 30, 1995.
"REIMBURSEMENT OBLIGATIONS" means, in respect of any Letter of Credit as
at any date of determination, the sum of (a) the maximum aggregate amount which
is then available to be drawn under such Letter of Credit plus (b) the aggregate
amount of all drawings under such Letter of Credit and not theretofore
reimbursed by the Borrower.
"REFINANCING ADVANCE" means any Revolving Credit Advance which is used
to pay the principal amount (or any portion thereof) of a Revolving Credit
Advance at the end of its Interest Period and which, after giving effect to such
application, does not result in an increase in the aggregate amount of
outstanding Revolving Credit Advances.
"REGULATORY MODIFICATION RETROACTIVE EFFECTIVE DATE" has the meaning
specified in Section 8.5 hereof.
"REGULATORY MODIFICATION SET DATE" has the meaning specified in Section
8.5 hereof.
"RELEASE DATE" means the date on which the Notes have been paid, all
other Obligations due and owing have been paid and performed in full, and the
Commitment has been terminated.
"REPORTABLE EVENT" has the meaning specified in Section 4043(b) of
ERISA.
"REVOLVING CREDIT ADVANCE" means an Advance made pursuant to Section
2.1(a) hereof.
"REVOLVING CREDIT NOTE" means any Promissory Note of the Borrower
evidencing Revolving Credit Advances hereunder, substantially in the form of
EXHIBIT A hereto, together with any extension, renewal or amendment thereof or
substitution therefor.
"RIGHTS" means rights, remedies, powers and privileges.
"S&P" means Standard & Poor's Ratings Group, a Division of McGraw-Hill,
Inc., a New York corporation.
"S.E.C." means the United States Securities and Exchange Commission.
"SENIOR DEBT" means Total Debt of the Borrower, its Subsidiaries and
Unincorporated Ventures, as appropriate, other than Subordinated Debt.
"SENIOR NOTES" means the Borrower's $100,000,000 senior unsecured notes
due 2005.
"SENIOR SUBORDINATED NOTES" means the Borrower's $120,000,000 9-1/4%
Senior Subordinated Notes due May 15, 2003 issued pursuant to the Senior
Subordinated Note Indenture.
- 18 -
<PAGE>
"SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture pursuant to
which the Senior Subordinated Notes may be issued, as the same may be amended,
supplemented or otherwise modified.
"SIGNIFICANT INVESTMENTS" means those investments of the Borrower in the
joint ventures or partnerships set forth on SCHEDULE 10 hereto.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Borrower (a) the
revenues attributable to which for the then most recently completed four fiscal
quarters constituted (or, with respect to Subsidiaries acquired during such four
fiscal quarters, would have constituted had the revenues of such Subsidiary been
included for such period) 2.5% or more of the consolidated revenues of the
Borrower and its Subsidiaries for such period, or (b) the assets of which as of
the end of such period constituted 2.5% or more of the consolidated assets of
the Borrower and its Subsidiaries as of the end of such period.
"SOLVENT" means, with respect to any Person, that the fair value of the
assets of such Person (both at fair valuation and at present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and such Person does not
have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability discounted to present value
at rates believed to be reasonable by such Person.
"SPECIAL COUNSEL" means the law firm of Donohoe, Jameson & Carroll,
P.C., or such other legal counsel as the Administrative Lender may select.
"SPECIFIED PERCENTAGE" means, as to any Lender, the percentage indicated
beside its name on the signature pages hereof, or if applicable, specified in
its most recent Assignment Agreement.
"SUBSIDIARY" with respect to any Persons, means (a) a corporation at
least a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person or (b) a partnership, joint venture or
similar entity in which 100% of the ownership, capital, interest or profits is
at the time, directly or indirectly, owned by such Person, by such Person and
one or more Subsidiaries of such Person or by one or more Subsidiaries of such
Person.
"SUBSIDIARY GUARANTY" means the Guaranty executed by each Significant
Subsidiary guaranteeing payment and performance of the Obligations,
substantially in the form of EXHIBIT D
- 19 -
<PAGE>
hereto, as such agreement may be amended, modified, supplemented or restated
from time to time.
"SUBORDINATED DEBT" means any debt, obligation or liability (whether
primary, contingent or otherwise) of the Borrower, a Subsidiary or an
Unincorporated Venture which by its terms is subordinate in right of payment to
the Obligations, provided that the Banks approve the terms thereof prior to or
at the time of the issuance thereof.
"SWING LINE ADVANCE" means an Advance made pursuant to Section 2.1(b)
hereof.
"SWING LINE BANK" means NationsBank of Texas, N.A. and any successor
thereto appointed in accordance with Section 9.1(b) hereof.
"SWING LINE FACILITY" has the meaning specified in Section 2.1(b)
hereof.
"SWING LINE NOTE" means the Swing Line Note of the Borrower payable to
the order of the Swing Line Bank, substantially in the form of EXHIBIT C
hereto, together with any extension, renewal or amendment thereof or
substitution therefor.
"TAXES" has the meaning specified in Section 2.15 hereof.
"TOTAL DEBT" means, as of any date of determination, the sum (without
duplication) of (a) all Debt of the Borrower and its Subsidiaries, minus (b)(i)
the aggregate face amount of Bond Letters of Credit outstanding and (ii) all
Debt of the Borrower and its Subsidiaries of the type described in (a) clauses
(f) and (g) of the definition of "DEBT" herein which are set forth on
SCHEDULE 11 hereto and (b) clauses (h) and (k) of the definition of "DEBT"
herein.
"TRIBUNAL" means any state, commonwealth, federal, foreign territorial,
or other court or governmental department, commission, board, bureau, agency or
instrumentality.
"UCC" means the Uniform Commercial Code of Texas, as amended from time
to time.
"UNINCORPORATED VENTURES" means those Persons designated as
"Unincorporated Ventures" on SCHEDULE 3 hereto.
Section 1.2 AMENDMENTS AND RENEWALS. Each definition of an agreement in
this Article 1 shall include such agreement as amended to date, and as amended
or renewed from time to time in accordance with its terms, but only with the
prior written consent of the Determining Lenders.
Section 1.3 CONSTRUCTION. The terms defined in this Article 1 (except
as otherwise expressly provided in this Agreement) for all purposes shall have
the meanings set forth in Section 1.1 hereof, and the singular shall include the
plural, and vice versa, unless otherwise specifically required by the context.
All accounting terms used in this Agreement which are not
- 20 -
<PAGE>
otherwise defined herein shall be construed in accordance with GAAP on a
consolidated basis for the Borrower and its Subsidiaries, unless otherwise
expressly stated herein.
ARTICLE 2
ADVANCES
Section 2.1 THE ADVANCES.
(a) REVOLVING CREDIT ADVANCES. Each Lender severally agrees, upon the
terms and subject to the conditions of this Agreement, to make Revolving Credit
Advances to the Borrower from time to time up to and including the Maturity Date
in an aggregate amount not to exceed an amount equal to (i) its Specified
Percentage of the Commitment less (ii) an amount equal to its Specified
Percentage of the aggregate amount of all Reimbursement Obligations then
outstanding (assuming compliance with all conditions to drawing) for the
purposes set forth in Section 5.21 hereof. Notwithstanding the immediately
preceding sentence, at no time shall the sum of (i) the aggregate principal
amount of Revolving Credit Advances outstanding, plus (ii) the aggregate
principal amount of Swing Line Advances outstanding, plus (iii) the aggregate
principal amount of all Reimbursement Obligations, plus (iv) the aggregate
principal amount of Bid Rate Advances exceed the Commitment. Subject to Section
2.9 hereof, Revolving Credit Advances may be repaid and then reborrowed. Any
Revolving Credit Advance shall, at the option of the Borrower as provided in
Section 2.2 hereof (and, in the case of LIBOR Advances, subject to availability
and to the provisions of Article 8 hereof), be made as a Base Rate Advance or a
LIBOR Advance; provided that there shall not be outstanding to any Lender, at
any one time, more than six LIBOR Advances. On the Maturity Date unless sooner
paid as provided herein, the outstanding Revolving Credit Advances shall be
repaid in full.
(b) THE SWING LINE LOANS. The Borrower may request Swing Line Bank to
make, and Swing Line Bank may, if in its sole discretion it elects to do so,
make, on the terms and conditions hereinafter set forth, loans ("Swing Line
Loans") to Borrower from time to time on any Business Day during the period from
the date hereof until the Maturity Date in an aggregate amount not to exceed at
any time outstanding the lesser of (i) $10,000,000 and (ii) the sum of (a) the
Commitment, MINUS (b) the aggregate principal amount of Revolving Credit
Advances then outstanding MINUS (c) the aggregate principal amount of all
Reimbursement Obligations then outstanding (assuming compliance with all
conditions to drawing) (the "Swing Line Facility") minus (d) the aggregate
principal amount of all Bid Rate Advances then outstanding. Each Swing Line
Advance shall be in an amount not less than $50,000. Within the limits of the
Swing Line Facility, so long as the Swing Line Bank, in its sole discretion,
elects to make Swing Line Advances, Swing Line Advances may be repaid and then
reborrowed.
(c) BID RATE ADVANCES. Each Lender may, in its sole discretion and on
the terms and conditions set forth in this Agreement and such other agreements
that such Lender may enter into with the Borrower, make Bid Rate Advances to the
Borrower from time to time in an
- 21 -
<PAGE>
aggregate amount not in excess of the difference between (i) the Commitment
minus (ii) the sum of (a) the aggregate outstanding principal amount of all
Revolving Credit Advances, plus (b) the aggregate outstanding principal amount
of all Bid Rate Advances, plus (c) the amount of all Reimbursement Obligations
plus (d) the aggregate outstanding principal amount of all Swing Line Advances.
Each Bid Rate Advance shall be for a period of not less than 7 days and not more
than 90 days. The Lenders shall have no obligation hereunder to offer any Bid
Rate Advances and the Borrower may not request any Bid Rate Advances unless the
Index Debt Rating is any two of the following or better: BBB- by S&P, BBB- by
ARA or Baa3 by Moody's. Bid Rate Advances may not be prepaid without the prior
written consent of the Lender making such Bid Rate Advance.
Section 2.2 MANNER OF BORROWING AND DISBURSEMENT.
(a) In the case of Base Rate Advances other than a Refinancing Advance,
the Borrower, through an Authorized Signatory, shall give the Administrative
Lender prior to 10:30 a.m., Dallas, Texas time, on the date of any proposed Base
Rate Advance irrevocable written notice, or irrevocable telephonic notice
followed immediately by written notice (provided, however, that the Borrower's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given), of its intention to borrow or reborrow a Base Rate Advance
hereunder. Such notice of borrowing shall specify the requested funding date,
which shall be a Business Day, and the amount of the proposed aggregate Base
Rate Advances to be made by Lenders. Each Base Rate Advance shall have an
Interest Period beginning on the date such Advance is made and ending on the
Quarterly Date next following the date the Advance is made; provided that no
such Interest Period shall extend past the Maturity Date.
(b) In the case of LIBOR Advances, the Borrower, through an Authorized
Signatory, shall give the Administrative Lender at least three Business Days'
irrevocable written notice for LIBOR Advances, or irrevocable telephonic notice
followed immediately by written notice (provided, however, that the Borrower's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given), of its intention to borrow or reborrow a LIBOR Advance
hereunder. Notice shall be given to the Administrative Lender prior to 11:00
a.m., Dallas, Texas time, in order for such Business Day to count toward the
minimum number of Business Days required. LIBOR Advances shall in all cases be
subject to availability and to Article 8 hereof. For LIBOR Advances, the notice
of borrowing shall specify the requested funding date, which shall be a Business
Day, the amount of the proposed aggregate LIBOR Advances, to be made by Lenders
and the Interest Period selected by the Borrower, provided that no such Interest
Period shall extend past the Maturity Date.
(c) In the case of Swing Line Advances, the Borrower, through an
Authorized Signatory, shall give the Swing Line Bank and the Administrative
Lender prior to 12:00 noon, Dallas, Texas time, on the date of any proposed
Swing Line Advance irrevocable written notice or irrevocable telephonic notice
followed immediately by written notice (provided, however, that the Borrower's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given), of its intention to borrow or reborrow a Swing Line Advance.
Such notice of
- 22 -
<PAGE>
borrowing shall specify the requested funding date, which shall be a Business
Day, and the amount of the proposed Swing Line Advance.
(d) Subject to Sections 2.1 and 2.9 hereof, at least three Business Days
prior to each Payment Date for a LIBOR Advance, the Borrower, through an
Authorized Signatory, shall give the Administrative Lender irrevocable written
notice, or irrevocable telephonic notice followed immediately by written notice
(provided, however, that the Borrower's failure to confirm any telephonic notice
in writing shall not invalidate any notice so given), specifying whether all or
a portion of such LIBOR Advance outstanding on the Payment Date (i) is to be
repaid and then reborrowed in whole or in part as a Base Rate Advance or a LIBOR
Advance, or (ii) is to be repaid and not reborrowed; provided, however,
notwithstanding anything in this Agreement to the contrary, if on any Payment
Date a Default shall exist, such LIBOR Advance may only be reborrowed as a Base
Rate Advance. Upon such Payment Date, such LIBOR Advance shall, subject to the
provisions hereof, be so repaid and, as applicable, reborrowed.
(e) Subject to Sections 2.1 and 2.9 hereof, upon irrevocable written
notice to the Administrative Lender prior to 11:00 a.m., Dallas, Texas, time on
each Payment Date (or three Business Days if the Borrower wishes to reborrow a
LIBOR Advance, through an Authorized Signatory, or irrevocable telephonic notice
followed immediately by written notice (provided, however, that the Borrower's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given), the Borrower may repay a Base Rate Advance on its Payment
Date, and (i) reborrow all or a portion of the principal amount thereof as a
Base Rate Advance, (ii) reborrow all or a portion of the principal amount
thereof as one or more LIBOR Advances, or (iii) not reborrow all or any portion
of such Base Rate Advance. Upon such Payment Date or date of repayment, such
Base Rate Advance shall, subject to the provisions hereof, be so repaid and, as
applicable, reborrowed.
(f) The aggregate amount of Base Rate Advances to be made by the Lenders
on any day shall be in a principal amount which is at least $1,000,000 and which
is an integral multiple of $100,000; provided, however, that such amount may
equal the unused amount of the Commitment. The aggregate amount of LIBOR
Advances having the same Interest Period and to be made by the Lenders on any
day shall be in a principal amount which is at least $3,000,000 and which is an
integral multiple of $500,000.
(g) The Administrative Lender shall promptly notify the Lenders of each
notice (other than with respect to a Swing Line Advance or a Bid Rate Advance)
received from the Borrower pursuant to this Section. Failure of the Borrower to
give any notice in accordance with Sections 2.2(d) and (e) hereof shall result
in a repayment of any such existing Advance on the applicable Payment Date by a
Refinancing Advance which is a Base Rate Advance. Each Lender shall, not later
than 1:00 p.m., Dallas, Texas time, on the date of any Revolving Credit Advance
that is not a Refinancing Advance, deliver to the Administrative Lender, at its
address set forth herein, such Lender's Specified Percentage of such Revolving
Credit Advance in immediately available funds in accordance with the
Administrative Lender's instructions. Prior to 2:00 p.m., Dallas, Texas time,
on the date of any Revolving Credit Advance hereunder that
- 23 -
<PAGE>
is not a Refinancing Advance, the Administrative Lender shall, subject to
satisfaction of the conditions set forth in Article 3, disburse the amounts made
available to the Administrative Lender by the Lenders by (i) transferring such
amounts by wire transfer pursuant to the Borrower's instructions, or (ii) in the
absence of such instructions, crediting such amounts to the account of the
Borrower maintained with the Administrative Lender. All Revolving Credit
Advances shall be made by each Lender according to its Specified Percentage. No
Lender shall be relieved of its obligation to fund its Specified Percentage of
any Revolving Credit Advance notwithstanding the fact that at any time the
aggregate outstanding principal amount of all Bid Rate Advances made by such
Lender exceed its Specified Percentage of the Commitment.
(h) If, in its sole discretion, the Swing Line Bank elects to make the
requested Swing Line Advance, the Swing Line Bank shall, not later than 1:30
p.m., Dallas, Texas time, on the date of any Swing Line Advance, deliver to the
Administrative Lender at its address set forth herein, the amount of such Swing
Line Advance in immediately available funds in accordance with the
Administrative Lender's instructions. Prior to 2:00 p.m., Dallas, Texas time,
on the date of any Swing Line Advance, the Administrative Lender shall, subject
to the conditions set forth in Article 3, disburse the amount made available to
the Administrative Lender by the Swing Line Bank by (i) transferring such
amounts by wire transfer pursuant to the Borrower's instruction or (ii) in the
absence of such instructions, crediting such amounts to the account of the
Borrower maintained with the Administrative Lender. Forthwith upon demand by
the Swing Line Bank and in any event upon the making of the request or the
granting of the consent specified by Section 7.2 to authorize the Administrative
Lender to declare the Advances due and payable pursuant to the provisions of
Section 7.2, each Lender, including the Swing Line Bank, notwithstanding the
failure of the Borrower at such time to satisfy each condition specified in
Article 3, shall make by 12:00 noon (Dallas, Texas time) on the first Business
Day following receipt by such Lender of notice from the Swing Line Bank, a
Revolving Credit Advance which is a Base Rate Advance in an amount equal to the
product of (i) the Specified Percentage of such Lender times (ii) the aggregate
outstanding principal amount of the Swing Line Advances. The proceeds of such
Revolving Credit Advances shall be applied by the Administrative Lender to repay
the outstanding Swing Line Advance.
(i) BID RATE ADVANCES
(i) In the case of Bid Rate Advances, the Borrower, through an
Authorized Signatory, shall give the Administrative Lender (which shall
promptly notify the Lenders) prior to 11:00 a.m., Dallas, Texas time, at
least one Business Day prior to the proposed borrowing, irrevocable
written notice of its intention to borrow a Bid Rate Advance. Such notice
of borrowing shall specify (i) the requested funding date, which shall be
a Business Day, (ii) the aggregate amount of the proposed Bid Rate
Advances, (ii) the Interest Period selected by the Borrower, provided that
no Interest Period shall extend past the Maturity Date and (iv) any other
terms applicable thereto.
(ii) Each Lender shall, if, in its sole discretion, it elects to do
so, irrevocably offer to make one or more Bid Rate Advances to the
Borrower as part of such proposed
- 24 -
<PAGE>
borrowing at a rate or rates of interest specified by such Lender in its
sole discretion, by making a written quote to the Administrative Lender
(which shall give prompt notice thereof to the Borrower) before 9:30 a.m.,
Dallas, Texas time, on the date of such proposed borrowing, setting forth
the minimum amount and maximum amount of each Bid Rate Advance which such
Lender would be willing to make as part of the proposed borrowing (which
amounts may exceed such Lender's Specified Percentage of the Commitment)
and the rate or rates of interest therefor. If NationsBank of Texas, N.A.
elects to offer to make one or more Bid Rate Advances, it shall deliver
its written quote with respect to the proposed borrowing to the Borrower
prior to the Administrative Lender's receipt of any other Lender's written
quote for such proposed borrowing. The Administrative Lender shall notify
the Borrower of each written quote provided by each Lender with respect to
the proposed borrowing before 10:00 a.m., Dallas, Texas, on the date of
such proposed borrowing. If any Lender shall elect not to make such an
offer, such Lender shall so notify the Administrative Lender before 9:30
a.m., Dallas, Texas time, on the date of such proposed borrowing, and such
Lender shall not make any Bid Rate Advance as part of such borrowing. If
any Lender shall fail to respond to the Administrative Lender by such
time, such Lender shall be deemed to have elected not to make an offer.
(iii) The Borrower shall, in turn, before 10:30 a.m., Dallas, Texas
time, on the date of such proposed borrowing either
(A) cancel such proposed borrowing by giving the
Administrative Lender notice to that effect, or
(B) accept one or more of the offers made by any Lender or
Lenders pursuant to clause (ii) above, in its sole discretion, by
giving notice to the Administrative Lender of the amount of each Bid
Rate Advance (which amount shall be equal to or greater than the
minimum amount, and equal to or less than the maximum amount, for
which notification was given to the Borrower by the Administrative
Lender on behalf of such Lender for such Bid Rate Advance pursuant
to clause (ii) above) to be made by each Lender as part of such
borrowing, and reject any remaining offers made by the Lenders
pursuant to clause (ii) above by giving the Administrative Lender
notice to that effect.
(iv) If the Borrower notifies the Administrative Lender that such
proposed borrowing is cancelled pursuant to clause (iii)(a) above, the
Administrative Lender shall give prompt notice thereof to the Lenders and
such borrowing shall not be made.
(v) If the Borrower accepts one or more of the offers made by any
Lender or Lenders pursuant to clause (iii)(b) above, the Administrative
Lender shall in turn promptly notify each Lender of the date, rate of
interest, and amount of each Bid Rate Advance and the Lender making such
Advance.
- 25 -
<PAGE>
Section 2.3 INTEREST.
(a) ON BASE RATE ADVANCES.
(i) The Borrower shall pay interest on the outstanding unpaid
principal amount of each Base Rate Advance, from the date such Advance is
made until it is due (whether at maturity, by reason of acceleration, by
scheduled reduction, or otherwise) or repaid, which shall be payable as
set forth in Section 2.3(a)(ii) hereof, at a simple interest rate per
annum equal to the Base Rate Basis for such Base Rate Advance as in effect
from time to time, provided that interest on such Base Rate Advance shall
not exceed the Maximum Amount. If at any time the Base Rate Basis would
exceed the Highest Lawful Rate, interest payable on such Base Rate Advance
shall be limited to the Highest Lawful Rate, but the Base Rate Basis shall
not thereafter be reduced below the Highest Lawful Rate until the total
amount of interest accrued on such Advance equals the amount of interest
that would have accrued if the Base Rate Basis had been in effect at all
times.
(ii) Interest on each Base Rate Advance shall be computed on the
basis of a year of 365 or 366 days, as applicable, for the number of days
actually elapsed, and shall be payable in arrears on each Quarterly Date
and on the Maturity Date.
(b) ON LIBOR ADVANCES.
(i) The Borrower shall pay interest on the unpaid principal amount
of each LIBOR Advance, from the date such Advance is made until it is due
(whether at maturity, by reason of acceleration, by scheduled reduction,
or otherwise) or repaid, at a rate per annum equal to the LIBOR Basis for
such Advance. The Administrative Lender, whose determination shall be
conclusive, shall determine the LIBOR Basis on the second Business Day
prior to the applicable funding date and shall notify the Borrower and the
Lenders of such LIBOR Basis.
(ii) Subject to Section 10.9 hereof, interest on each LIBOR Advance
shall be computed on the basis of a 360-day year for the actual number of
days elapsed, and shall be payable in arrears on the applicable Payment
Date and on the Maturity Date; provided, however, that if the Interest
Period for such Advance exceeds three months, interest shall also be due
and payable in arrears on each Quarterly Date during such Interest Period.
(c) ON SWING LINE ADVANCES.
(i) The Borrower shall pay interest on the outstanding principal
amount of such Swing Line Advance, from the date such Swing Line Advance
is made until it is due (whether at maturity, by reason of acceleration or
otherwise) or repaid, which shall be payable as set forth in Section
2.3(c)(ii) hereof, equal to the Prime Rate in effect from time to time
minus 1/2%, but not higher than the Highest Lawful Rate.
- 26 -
<PAGE>
(ii) Interest on each Swing Line Advance shall be computed on the
basis of a year of 365 or 366 days, as applicable, for the number of days
actually elapsed, and shall be payable in arrears on each Quarterly Date
and on the Maturity Date.
(d) ON BID RATE ADVANCES. The Borrower shall pay interest on the
outstanding unpaid principal amount of each Bid Rate Advance at a per annum rate
equal to the interest rate agreed to by the Borrower and the Lender making such
Bid Rate Advance pursuant to Section 2.2(i) hereof. Interest on each Bid Rate
Advance shall be computed and shall be payable at such times as agreed upon
between the Borrower and the Lender making such Advance pursuant to Section
2.2(i) hereof.
(e) INTEREST IF NO NOTICE OF SELECTION OF INTEREST RATE BASIS. If the
Borrower fails to give the Administrative Lender timely notice of its selection
of a LIBOR Basis or an Interest Period for a LIBOR Advance, or if for any reason
a determination of a LIBOR Basis for any Advance is not timely concluded due to
the fault of the Borrower, the appropriate Base Rate Basis shall apply to such
Advance.
(f) INTEREST AFTER AN EVENT OF DEFAULT. (i) After an Event of Default
(other than an Event of Default specified in Section 7.1(f) hereof) and during
any continuance thereof, at the option of Determining Lenders, and (ii) after an
Event of Default specified in Section 7.1(f) hereof and during any continuance
thereof, automatically and without any action by the Administrative Lender or
any Lender, the Obligations shall bear interest at a rate per annum equal to the
Default Rate. Such interest shall be payable on the earlier of demand or the
Maturity Date, and shall accrue until the earlier of (i) waiver or cure (to the
satisfaction of the Determining Lenders) of the applicable Event of Default,
(ii) agreement by the Lenders to rescind the charging of interest at the Default
Rate, or (iii) payment in full of the Obligations. The Lenders shall not be
required to accelerate the maturity of the Advances, to exercise any other
rights or remedies under the Loan Papers, or to give notice to the Borrower of
the decision to charge interest at the Default Rate. The Lenders will undertake
to notify the Borrower, after the effective date, of the decision to charge
interest at the Default Rate.
Section 2.4 FEES.
(a) FACILITY FEE. Subject to Section 10.9 hereof, the Borrower agrees
to pay to the Administrative Lender, for the ratable account of the Lenders, a
facility fee on the daily average amount of the Commitment at the following per
annum percentages, applicable in the following situations:
<TABLE>
<CAPTION>
APPLICABILITY PERCENTAGE
------------- ----------
<S> <C>
CATEGORY 1 - The Leverage Ratio is not less than 3.50
to 1 or the Index Debt Rating is any two of the
following: BB by S&P, BB by ARA or Ba2 by Moody's 0.30
- 27 -
<PAGE>
CATEGORY 2 - The Leverage Ratio is less than 3.50 to 1
but not less than 3.0 to 1 or the Index Debt Rating is
any two of the following: BB+ by S&P, BB+ by ARA or
Ba1 by Moody's 0.25
CATEGORY 3 - The Leverage Ratio is less than 3.00 to 1
but not less than 2.0 to 1 or the Index Debt Rating is
any two of the following: BBB- or better by S&P, BBB-
or better by ARA or Baa3 or better by Moody's 0.20
CATEGORY 4 - The Leverage Ratio is less than 2.00 to 1
or the Index Debt Rating is any two of the following:
BBB+ or better by S&P, BBB+ or better by ARA or Baa1 or
better by Moody's 0.15
</TABLE>
Such fee shall accrue from the date of the initial Advance and shall be payable
(i) in arrears on each Quarterly Date and on the Maturity Date, fully earned
when due and, subject to Section 10.9 hereof, nonrefundable when paid and (ii)
computed on the basis of a year of 365 or 366 days, as applicable, for the
actual number of days elapsed. (a) If the Index Debt Rating and the Leverage
Ratio are in different categories, the facility fee shall be determined on
whichever of the Index Debt Rating or the Leverage Ratio falls within the
superior (or numerically higher) category, (b) if the facility fee is determined
based on the Leverage Ratio and the financial statements of the Borrower setting
the Leverage Ratio are not received by the Administrative Lender by the date
required pursuant to Section 6.1(a) or 6.1(b) hereof, the facility fee shall be
determined as if the Leverage Ratio is not less than 3.50 to 1 until such time
as the financial statements are received, (c) if the Index Debt Rating
established by ARA shall fall within a different category than both Moody's and
S&P, the facility fee shall be determined by reference to Moody's or S&P,
whichever shall be the superior (or numerically higher) category, but not to
exceed two rating levels higher than the other rating agency and (e) such fee
shall be adjusted on each Adjustment Date if determined based on the (i)
Leverage Ratio, according to the performance of the Borrower for the most recent
fiscal quarter or (ii) the Index Debt Rating, according to the most recent
determination of the Index Debt Rating. If the rating system of Moody's, S&P or
ARA shall change prior to the Maturity Date, the Borrower and the Lenders shall
negotiate in good faith to amend the references to specific ratings to reflect
such changed rating system.
(b) CLOSING FEE. Subject to Section 10.9 hereof, the Borrower agrees
to pay to the Administrative Lender, for the account of the Lenders a closing
fee equal to 0.10% of each Lender's portion of the Commitment. Such fee shall
be payable on the date of the initial Advance, fully earned when due and,
subject to Section 10.9 hereof, nonrefundable when paid.
(c) OTHER FEES. Subject to Section 10.9 hereof, the Borrower agrees
to pay to the Administrative Lender, for its account and not the account of the
Lenders, the fees provided for in the letter agreement ("Fee Letter"), dated as
of the Agreement Date, between the Borrower and the Administrative Lender on the
date and in the amounts specified therein.
- 28 -
<PAGE>
Section 2.5 PREPAYMENT.
(a) VOLUNTARY PREPAYMENTS. The principal amount of any Base Rate
Advance may be prepaid in full or in part at any time, without penalty and
without regard to the Payment Date for such Advance, upon notice as required for
a repayment of a Base Rate Advance as provided in Section 2.2(e) hereof. LIBOR
Advances may be voluntarily prepaid upon notice as required for repayments of
LIBOR Advances as provided in Section 2.2(d) hereof, but only so long as the
Borrower concurrently reimburses the Lenders in accordance with Section 2.9
hereof. The principal amount of any Swing Line Advance may be prepaid in full
or in part at any time, without penalty and without regard to the Payment Date
for such Advance. Any notice of prepayment shall be irrevocable.
(b) MANDATORY PREPAYMENT. On or before the date of any reduction of
the Commitment, the Borrower shall prepay outstanding Advances in an amount
necessary to reduce the same to an amount less than or equal to the Commitment
as so reduced. The Borrower shall first prepay all Base Rate Advances, second
prepay all Swing Line Advances and shall thereafter prepay LIBOR Advances. To
the extent that any prepayment requires that a LIBOR Advance be repaid on a date
other than the last day of its Interest Period, the Borrower shall reimburse
each Lender in accordance with Section 2.9 hereof. To the extent that
outstanding Advances and Reimbursement Obligations exceed the Commitment after
any reduction thereof, the Borrower shall repay any such excess amount and all
accrued interest thereon on the date of such reduction.
(c) PREPAYMENTS, GENERALLY. Any prepayment of an Advance shall be
accompanied by interest accrued on the principal amount being prepaid. Any
voluntary partial prepayment of a Base Rate Advance shall be in a principal
amount of $100,000 or an integral multiple thereof. Any voluntary partial
prepayment of a Swing Line Advance shall be in a principal amount of $50,000 or
an integral multiple thereof. All voluntary prepayments shall be applied in the
order directed in writing by the Borrower to the Administrative Lender. If the
Borrower fails to so direct the Administrative Lender or if the prepayment
occurs during the occurrence and continuance of an Event of Default, such
prepayment shall be applied in the inverse order of maturity.
Section 2.6 REDUCTION OF COMMITMENT.
(a) VOLUNTARY REDUCTION. The Borrower shall have the right, upon not
less than 10 Business Days' notice (provided no notice shall be required for a
termination in whole of the Commitment) by an Authorized Signatory to the
Administrative Lender (if telephonic, to be confirmed by telex or in writing on
or before the date of reduction or termination), which shall promptly notify the
Lenders, to terminate or reduce the Commitment, in whole or in part. Each
partial termination shall be in an aggregate amount which is at least $1,000,000
and which is an integral multiple of $100,000, and no voluntary reduction in the
Commitment shall cause any LIBOR Advance to be repaid prior to the last day of
its Interest Period.
- 29 -
<PAGE>
(b) MANDATORY REDUCTION. On the Maturity Date, the Commitment shall
automatically reduce to zero.
(c) GENERAL REQUIREMENTS. Upon any reduction of the Commitment
pursuant to this Section, the Borrower shall immediately make a repayment of
applicable Advances in accordance with Section 2.5(b) hereof. The Borrower
shall reimburse each Lender for any loss or out-of-pocket expense incurred by
each Lender in connection with any such payment, as set forth in Section 2.9
hereof to the extent applicable. The Borrower shall not have any right to
rescind any termination or reduction. Once reduced, the Commitment may not be
increased or reinstated.
Section 2.7 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE LENDER. Unless
the Administrative Lender shall have been notified by a Lender prior to the date
of any proposed Revolving Credit Advance (which notice shall be effective upon
receipt) that such Lender does not intend to make the proceeds of such Revolving
Credit Advance available to the Administrative Lender, the Administrative Lender
may assume that such Lender has made such proceeds available to the
Administrative Lender on such date, and the Administrative Lender may in
reliance upon such assumption (but shall not be required to) make available to
the Borrower a corresponding amount. If such corresponding amount is not in
fact made available to the Administrative Lender by such Lender, the
Administrative Lender shall, without prejudice to the Borrower's rights against
such Lender, be entitled to recover such amount on demand from such Lender (or,
if such Lender fails to pay such amount forthwith upon such demand, from the
Borrower) together with interest thereon in respect of each day during the
period commencing on the date such amount was available to the Borrower and
ending on (but excluding) the date the Administrative Lender receives such
amount from the Lender, at a per annum rate equal to the lesser of (i) the
Highest Lawful Rate or (ii)(a) in the case of such Lender, the Federal Funds
Rate or (b) in the case of the Borrower, the interest rate applicable to such
Revolving Credit Advance. No Lender shall be liable for any other Lender's
failure to fund a Revolving Credit Advance hereunder.
Section 2.8 PAYMENT OF PRINCIPAL OF ADVANCES. The Borrower agrees to
pay the principal amount of the Advances to the Administrative Lender for the
account of the Lenders as follows:
(a) END OF INTEREST PERIOD. The principal amount of each Advance
hereunder shall be due and payable on its Payment Date, which principal payment
(other than in respect of a Bid Rate Advance) may be made by means of a
Refinancing Advance.
(b) COMMITMENT REDUCTION. On the date of reduction of the Commitment
pursuant to Section 2.6 hereof, including the Maturity Date, the aggregate
amount of the Advances outstanding on such date of reduction in excess of the
Commitment as reduced shall be due and payable, which principal payment may not
be made by means of Refinancing Advances.
- 30 -
<PAGE>
(c) MATURITY DATE. To the extent not otherwise required to be paid
earlier as provided herein, the principal amount of the Advances, all accrued
interest and fees thereon, and all other Obligations related thereto, shall be
due and payable in full on the Maturity Date.
Section 2.9 REIMBURSEMENT. Whenever any Lender shall sustain or incur
any losses or reasonable out-of-pocket expenses in connection with (a) failure
by the Borrower to borrow any LIBOR Advance after having given notice of its
intention to borrow in accordance with Section 2.2 hereof (whether by reason of
the Borrower's election not to proceed or the non-fulfillment of any of the
conditions set forth in Article 3 hereof), or (b) any prepayment for any reason
of any LIBOR Advance in whole or in part, the Borrower agrees to pay to any such
Lender, upon its demand, an amount sufficient to compensate such Lender for all
such losses and out-of-pocket expenses, subject to Section 10.9 hereof. Such
Lender's good faith determination of the amount of such losses or out-of-pocket
expenses, calculated in its usual fashion, absent manifest error, shall be
binding and conclusive. Such losses shall include, without limiting the
generality of the foregoing, lost profits and reasonable expenses incurred by
such Lender in connection with the re-employment of funds prepaid, repaid,
converted or not borrowed, converted or paid, as the case may be. Upon request
of the Borrower, such Lender shall provide a certificate setting forth the
amount to be paid to it by the Borrower hereunder and calculations therefor.
Section 2.10 MANNER OF PAYMENT.
(a) Each payment (including prepayments) by the Borrower of the
principal of or interest on the Advances, fees, and any other amount owed under
this Agreement or any other Loan Paper shall be made not later than 12:00 noon
(Dallas, Texas time) on the date specified for payment under this Agreement to
the Administrative Lender at the Administrative Lender's office, in lawful money
of the United States of America constituting immediately available funds.
(b) If any payment under this Agreement or any other Loan Paper shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day, unless such Business Day falls
in another calendar month, in which case payment shall be made on the preceding
Business Day. Any extension of time shall in such case be included in computing
interest and fees, if any, in connection with such payment.
(c) The Borrower agrees to pay principal, interest, fees and all other
amounts due under the Loan Papers without deduction for set-off or counterclaim
or any deduction whatsoever.
(d) If some but less than all amounts due from the Borrower are received
by the Administrative Lender, the Administrative Lender shall apply such amounts
in the following order of priority: (i) to the payment of the Administrative
Lender's expenses incurred on behalf of the Lenders then due and payable, if
any; (ii) to the payment of all other fees and amounts then due and payable
under the Loan Papers; (iii) to the payment of interest then due and
- 31 -
<PAGE>
payable on the Advances; and (iv) to the payment of principal then due and
payable on the Advances.
(e) Each payment by the Borrower in respect of obligations relating to
the Revolving Credit Advance and the Letters of Credit (whether for principal,
interest, fees or otherwise) shall be made to the Administrative Lender for the
account of the Lenders pro rata in accordance with their respective Specified
Percentages. Each payment by the Borrower in respect of obligations relating to
Swing Line Advances (whether for principal, interest, fees or otherwise) shall
be made to the Administrative Lender for the account of the Swing Line Bank.
Each payment by the Borrower in respect of obligations related to Bid Rate
Advances (whether for principal, interest, fees or otherwise) shall be made to
the Administrative Lender for the account of each Lender holding such Bid Rate
Advance. Notwithstanding anything in this Section 2.10(e) or any other
provision of this Agreement or any other Loan Paper to the contrary, any payment
by the Borrower in respect of any Advances after acceleration of the Advances
pursuant to Section 7.2 or any monies received by the Administrative Lender as a
result of the exercise of remedies under any Loan Papers after acceleration of
the Advances pursuant to Section 7.2 shall be distributed pro rata to each
Lender based on the percentage that the outstanding Advances and Reimbursement
Obligations owed to such Lender bears to the aggregate Advances and
Reimbursement Obligations owed to all Lenders.
Section 2.11 LIBOR LENDING OFFICES. Each Lender's initial LIBOR Lending
Office is set forth opposite its name in SCHEDULE 1 attached hereto. Each
Lender shall have the right at any time and from time to time to designate a
different office of itself or of any Affiliate as such Lender's LIBOR Lending
Office, and to transfer any outstanding LIBOR Advance to such LIBOR Lending
Office. No such designation or transfer shall result in any liability on the
part of the Borrower for increased costs or expenses resulting solely from such
designation or transfer (except any such transfer which is made by a Lender
pursuant to Section 8.2 or 8.3 hereof, or otherwise for the purpose of complying
with Applicable Law). Increased costs for expenses resulting from a change in
law occurring subsequent to any such designation or transfer shall be deemed not
to result solely from such designation or transfer.
Section 2.12 SHARING OF PAYMENTS. Any Lender obtaining a payment
(whether voluntary or involuntary, due to the exercise of any right of set-off,
or otherwise) on account of its Revolving Credit Advances or its participation
in the Letters of Credit (other than pursuant to Sections 2.15, 2.16(d), 8.3 or
8.5), in excess of its Specified Percentage of all payments made by the Borrower
with respect to Revolving Credit Advances and the Letters of Credit shall
purchase from each other Lender such participation in the Revolving Credit
Advances made by such other Lender or its participation in the Letters of Credit
as shall be necessary to cause such purchasing Lender to share the excess
payment pro rata according to Specified Percentages with each other Lender;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section, to the fullest
extent permitted by law, may exercise all its rights of payment (including
- 32 -
<PAGE>
the right of set-off) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of such
participation.
Section 2.13 CALCULATION OF RATES. The provisions of this Agreement
relating to calculation of the LIBOR Rate are included only for the purpose of
determining the rate of interest or other amounts to be paid hereunder that are
based upon such rate, it being understood that each Lender shall be entitled to
fund and maintain its funding of all or any part of a LIBOR Advance as it sees
fit.
Section 2.14 BOOKING LOANS. Any Lender may make, carry or transfer
Advances at, to or for the account of any of its branch offices or the office of
any Affiliate.
Section 2.15 TAXES.
(a) Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 2.10, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges and
withholdings, and all liabilities with respect thereto, EXCLUDING, in the case
of each Lender and the Administrative Lender, taxes imposed on, based upon or
measured by its overall net income, net worth or capital, and franchise taxes,
doing business taxes or minimum taxes imposed on it, (i) by the jurisdiction
under the laws of which such Lender or the Administrative Lender (as the case
may be) is organized and in which it has its applicable lending office or any
political subdivision thereof; (ii) by any other jurisdiction, or any political
subdivision thereof, other than those imposed by reason of (a) an asserted
relation of such jurisdiction to the transactions contemplated by this
Agreement, (b) the activities of the Borrower in such jurisdiction, or (c) the
activities in connection with the transactions contemplated by this Agreement of
a Lender or the Administrative Lender; (iii) by reason of failure by the Lender
or the Administrative Lender to comply with the requirements of paragraph (e) of
this Section 2.15; and (iv) in the case of any Lender, any Taxes in the nature
of transfer, stamp, recording or documentary taxes resulting from a transfer
(other than as a result of foreclosure) by such Lender of all or any portion of
its interest in this Agreement, the Notes or any other Loan Papers (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Administrative Lender, (x) the sum payable shall
be increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.15) such Lender or the Administrative Lender (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(y) the Borrower shall make such deductions and (z) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges and
similar levies (other than (i) Taxes described in clause (iv) of the first
sentence of Section 2.15(a) and (ii) mortgage taxes payable
- 33 -
<PAGE>
in Oklahoma) that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Paper (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and the Administrative
Lender for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.15) paid by such Lender or the Administrative
Lender (as the case may be) and all liabilities (including penalties, additions
to tax, interest and reasonable expenses) arising therefrom or with respect
thereto whether or not such Taxes or Other Taxes were correctly or legally
asserted, other than penalties, additions to tax, interest and expenses arising
as a result of gross negligence on the part of such Lender or the Administrative
Lender, PROVIDED, HOWEVER, that the Borrower shall have no obligation to
indemnify such Lender or the Administrative Lender unless and until such Lender
or the Administrative Lender shall have delivered to the Borrower a certificate
setting forth in reasonable detail the basis of the Borrower's obligation to
indemnify such Lender or the Administrative Lender pursuant to this Section
2.15. This indemnification shall be made within 30 days from the date such
Lender or the Administrative Lender (as the case may be) makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Administrative Lender the original or a certified copy of a
receipt evidencing payment thereof. If no Taxes are payable in respect of any
payment hereunder, the Borrower will furnish to the Administrative Lender a
certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Administrative Lender, in either case stating that such
payment is exempt from or not subject to Taxes, PROVIDED, HOWEVER, that such
certificate or opinion need only be given if: (i) the Borrower makes any
payment from any account located outside the United States, or (ii) the payment
is made by a payor that is not a United States Person. For purposes of this
Section 2.15 the terms "United States" and "United States Person" shall have the
meanings set forth in Section 7701 of the Code.
(e) Each Lender which is not a United States Person hereby agrees that:
(i) it shall, no later than the Agreement Date (or, in the case of
a Lender which becomes a party hereto pursuant to Section 10.6 after the
Agreement Date, the date upon which such Lender becomes a party hereto)
deliver to the Borrower through the Administrative Lender, with a copy to
the Administrative Lender:
(A) if any lending office is located in the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 4224 or any successor thereto
("Form 4224"),
(B) if any lending office is located outside the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 1001 or any successor thereto
("Form 1001").
- 34 -
<PAGE>
in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees for
the account of such lending office or lending offices under this Agreement
free from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending office or
lending offices or selects an additional lending office it shall, at the
same time or reasonably promptly thereafter but only to the extent the
forms previously delivered by it hereunder are no longer effective,
deliver to the Borrower through the Administrative Lender, with a copy to
the Administrative Lender, in replacement for the forms previously
delivered by it hereunder:
(A) if such changed or additional lending office is located in the
United States of America, two (2) accurate and complete signed
originals of Form 4224; or
(B) otherwise, two (2) accurate and complete signed originals of
Form 1001,
in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees for
the account of such changed or additional lending office under this
Agreement free from withholding of United States Federal income tax;
(iii) it shall, before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in clause
(ii) above) requiring a change in the most recent Form 4224 or Form 1001
previously delivered by such Lender and if the delivery of the same be
lawful, deliver to the Borrower through the Administrative Lender with a
copy to the Administrative Lender, two (2) accurate and complete original
signed copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by such Lender;
(iv) it shall, promptly upon the request of the Borrower to that
effect, deliver to the Borrower such other forms or similar documentation
as may be required from time to time by any applicable law, treaty, rule
or regulation in order to establish such Lender's tax status for
withholding purposes; and
(v) it shall notify the Borrower within 30 days after any event
(including an amendment to, or a change in any applicable law or
regulation or in the written interpretation thereof by any regulatory
authority or any judicial authority, or by ruling applicable to such
Lender of any governmental authority charged with the interpretation or
administration of any law) shall occur that results in such Lender no
longer being capable of receiving payments without any deduction or
withholding of United States federal income tax.
- 35 -
<PAGE>
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.15 shall survive the payment in full of principal and interest
hereunder.
(g) Any Lender claiming any additional amounts payable pursuant to this
Section 2.15 shall use its reasonable best efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
lending office, if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the reasonable judgment of such Lender, be materially
disadvantageous to such Lender.
(h) Each Lender (and the Administrative Lender with respect to payments
to the Administrative Lender for its own account) agrees that (i) it will take
all reasonable actions by all usual means to maintain all exemptions, if any,
available to it from United States withholding taxes (whether available by
treaty, existing administrative waiver, by virtue of the location of any
Lender's lending office) and (ii) otherwise cooperate with the Borrower to
minimize amounts payable by the Borrower under this Section 2.15; PROVIDED,
HOWEVER, the Lenders and the Administrative Lender shall not be obligated by
reason of this Section 2.15(h) to contest the payment of any Taxes or Other
Taxes or to disclose any information regarding its tax affairs or tax
computations or reorder its tax or other affairs or tax or other planning.
Subject to the foregoing, to the extent the Borrower pays sums pursuant to this
Section 2.15 and the Lender or the Administrative Lender receives a refund of
any or all of such sums, such refund shall be applied to reduce any amounts then
due and owing under this Agreement or, to the extent that no amounts are due and
owing under this Agreement at the time such refunds are received, the party
receiving such refund shall promptly pay over all such refunded sums to the
Borrower, provided that no Default or Event of Default is in existence at such
time.
Section 2.16 LETTERS OF CREDIT.
(a) THE LETTER OF CREDIT FACILITY. The Borrower may request the
Issuing Bank, on the terms and conditions hereinafter set forth, to issue, and
the Issuing Bank shall, if so requested, issue, Financial Letters of Credit and
Non-Financial Letters of Credit (collectively, the "Letters of Credit") for the
account of the Borrower from time to time on any Business Day from the date of
the initial Advance until the Maturity Date in an aggregate maximum amount
(assuming compliance with all conditions to drawing) not to exceed at any time
outstanding the lesser of (i) $25,000,000 (the "Letter of Credit Facility") and
(ii) the remainder of (a) the Commitment MINUS (b) the aggregate principal
amount of Advances then outstanding. No Letter of Credit shall have an
expiration date (including all rights of renewal) later than the Maturity Date.
Immediately upon the issuance of each Letter of Credit (or upon the Agreement
Date, with respect to Existing Letters of Credit), the Issuing Bank shall be
deemed to have sold and transferred to each Lender, and each Lender shall be
deemed to have purchased and received from the Issuing Bank, in each case
irrevocably and without any further action by any party, an undivided interest
and participation in such Letter of Credit, each drawing thereunder and the
obligations of the Borrower under this Agreement in respect thereof in an amount
equal to the
- 36 -
<PAGE>
product of (x) such Lender's Specified Percentage times (y) the maximum amount
available to be drawn under such Letter of Credit (assuming compliance with all
conditions to drawing). Within the limits of the Letter of Credit Facility, and
subject to the limits referred to above, the Borrower may request the issuance
of Letters of Credit under this Section 2.16(a), repay any Advances resulting
from drawings thereunder pursuant to Section 2.16(c) and request the issuance of
additional Letters of Credit under this Section 2.16(a).
(b) REQUEST FOR ISSUANCE. Each Letter of Credit shall be issued upon
notice, given not later than 11:00 a.m. (Dallas time) on the third Business Day
prior to the date of the proposed issuance of such Letter of Credit, by the
Borrower to the Issuing Bank, which shall give to the Administrative Lender and
each Lender prompt notice thereof by telex, telecopier or cable. Each Letter of
Credit shall be issued upon notice given in accordance with the terms of any
separate agreement between the Borrower and the Issuing Bank in form and
substance reasonably satisfactory to the Borrower and the Issuing Bank providing
for the issuance of Letters of Credit pursuant to this Agreement and containing
terms and conditions not inconsistent with this Agreement (a "Letter of Credit
Agreement"), PROVIDED that if any such terms and conditions are inconsistent
with this Agreement, this Agreement shall control. Each such notice of issuance
of a Letter of Credit (a "Notice of Issuance") shall be by telex, telecopier or
cable, specifying therein, in the case of a Letter of Credit, the requested (a)
date of such issuance (which shall be a Business Day), (b) maximum amount of
such Letter of Credit, (c) expiration date of such Letter of Credit, (d) name
and address of the beneficiary of such Letter of Credit, (e) form of such Letter
of Credit and (f) such other information as shall be required pursuant to the
relevant Letter of Credit Agreement. If the requested terms of such Letter of
Credit are acceptable to the Issuing Bank in its reasonable discretion, the
Issuing Bank will, upon fulfillment of the applicable conditions set forth in
Article 3 hereof, make such Letter of Credit available to the Borrower at its
office referred to in Section 10.1 or as otherwise agreed with the Borrower in
connection with such issuance.
(c) DRAWING AND REIMBURSEMENT. The payment by the Issuing Bank of a
draft drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of a Revolving Credit Advance, which
shall bear interest at the applicable Base Rate Basis, in the amount of such
draft (but without any requirement for compliance with the conditions set forth
in Article 3 hereof). In the event that a drawing under any Letter of Credit is
not reimbursed by the Borrower by 11:00 a.m. (Dallas time) on the first Business
Day after such drawing, the Issuing Bank shall promptly notify Administrative
Lender and each other Lender. Each such Lender shall, on the first Business Day
following such notification, make a Revolving Credit Advance, which shall bear
interest at the applicable Base Rate Basis, and shall be used to repay the
applicable portion of the Issuing Bank's Revolving Credit Advance with respect
to such Letter of Credit, in an amount equal to the amount of its participation
in such drawing for application to reimburse the Issuing Bank (but without any
requirement for compliance with the applicable conditions set forth in Article 3
hereof) and shall make available to the Administrative Lender for the account of
the Issuing Bank, by deposit at the Administrative Lender's office, in same day
funds, the amount of such Revolving Credit Advance. In the event that any
Lender fails to make available to the Administrative Lender for
- 37 -
<PAGE>
the account of the Issuing Bank the amount of such Revolving Credit Advance, the
Issuing Bank shall be entitled to recover such amount on demand from such Lender
together with interest thereon at a rate per annum equal to the lesser of (i)
the Highest Lawful Rate or (ii) the Federal Funds Rate.
(d) INCREASED COSTS. If any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental authority
charged with the administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement against letters
of credit or guarantees issued by, or assets held by, or deposits in or for the
account of, the Issuing Bank or any Lender or (ii) impose on the Issuing Bank or
any Lender any other condition regarding this Agreement or such Lender or any
Letter of Credit, and the result of any event referred to in the preceding
clause (i) or (ii) shall be to increase the cost to the Issuing Bank of issuing
or maintaining any Letter of Credit or to any Lender of purchasing any
participation therein or making any Advance pursuant to Section 2.16(c)
("Increased Letter of Credit Costs"), then, upon demand by the Issuing Bank or
such Lender, the Borrower shall, subject to Section 10.9 hereof, pay to the
Issuing Bank or such Lender, from time to time as specified by the Issuing Bank
or such Lender, additional amounts that shall be sufficient to compensate the
Issuing Bank or such Lender for such Increased Letter of Credit Costs.
Notwithstanding the foregoing, any demand for Increased Letter of Credit Costs
shall not include any Letter of Credit Costs with respect to any period more
than 180 days prior to the date that the Issuing Bank or any Lender gives notice
to the Borrower of such Increased Letter of Credit Costs unless the effective
date of the condition which results in the right to receive Increased Letter of
Credit Costs is retroactive (the "Increased Letter of Credit Costs Retroactive
Effective Date"). If any Increased Letter of Credit Costs has an Increased
Costs Letter of Credit Retroactive Effective Date and the Issuing Bank or any
Lender demands compensation within 180 days after the date setting the Increased
Letter of Credit Costs Effective Date (the "Increased Letter of Credit Costs Set
Date"), the Issuing Bank or such Lender, as appropriate, shall have the right to
receive such Increased Letter of Credit Costs from the Increased Letter of
Credit Retroactive Effective Date. If the Issuing Bank or a Lender does not
demand such Increased Letter of Credit Costs within 180 days after the Increased
Letter of Credit Costs Set Date, the Issuing Bank or such Lender, as
appropriate, may not receive payment of Increased Letter of Credit Costs with
respect to any period more than 180 days prior to such demand. A certificate as
to the amount of such Increased Costs, submitted to the Borrower by the Issuing
Bank or such Lender, shall include in reasonable detail the basis for the demand
for additional compensation and shall be conclusive and binding for all
purposes, absent manifest error. The obligations of the Borrower under this
Section 2.16(d) shall survive termination of this Agreement. The Issuing Bank
or any Lender claiming any additional compensation under this Section 2.16(d)
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to reduce or eliminate any such additional compensation which may thereafter
accrue and which efforts would not, in the sole discretion of the Issuing Bank
or such Lender, be otherwise disadvantageous.
(e) OBLIGATIONS ABSOLUTE. The obligations of the Borrower under this
Agreement with respect to any Letter of Credit, any Letter of Credit Agreement
and any other agreement or
- 38 -
<PAGE>
instrument relating to any Letter of Credit or any Advance pursuant to Section
2.16(c) shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement, such Letter of Credit Agreement and
such other agreement or instrument under all circumstances, including, without
limitation, the following circumstances:
(i) any lack of validity or enforceability of this Agreement, any
other Loan Paper, any Letter of Credit Agreement, any Letter of Credit or
any other agreement or instrument relating thereto (collectively, the "L/C
Related Documents");
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations of the Borrower in
respect of the Letters of Credit or any Advance pursuant to Section
2.16(c) or any other amendment or waiver of or any consent to departure
from all or any of the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank, any
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C Related Documents or any
unrelated transaction;
(iv) any statement or any other document presented under a Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect, except to the extent that the failure of the Issuing Bank to
determine such insufficiency is a result of the Issuing Bank's gross
negligence or wilful misconduct;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not comply with the terms
of the Letter of Credit, except for any payment made upon the Issuing
Bank's gross negligence or willful misconduct;
(vi) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any
Subsidiary Guaranty or any other guarantee, for all or any of the
Obligations of the Borrower in respect of the Letters of Credit or any
Advance pursuant to Section 2.16(c); or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor, other than the Issuing's Bank
gross negligence or wilful misconduct.
- 39 -
<PAGE>
(f) COMPENSATION.
(i) FINANCIAL LETTERS OF CREDIT. Subject to Section 10.9
hereof, the Borrower shall pay to the Administrative Lender for the
account of each Lender a fee (which shall be payable quarterly in arrears
on each Quarterly Date and on the Maturity Date) on the average daily
amount available for drawing under all outstanding Financial Letters of
Credit at the following per annum percentages, applicable in the following
situations:
<TABLE>
<CAPTION>
APPLICABILITY PERCENTAGE
------------- ----------
<S> <C>
CATEGORY 1 - The Leverage Ratio is not less than 0.70
3.50 to 1 or the Index Debt Rating is any two of
the following: BB by S&P, BB by ARA or Ba2 by
Moody's
CATEGORY 2 - The Leverage Ratio is less than 3.50 0.55
to 1 but not less than 3.00 to 1 or the Index Debt
Rating is any two of the following: BB+ by S&P,
BB+ by ARA or Ba1 by Moody's
CATEGORY 3 - The Leverage Ratio is less than 3.00 0.45
to 1 but not less than 2.50 to 1 or the Index Debt
Rating is any two of the following: BBB- by S&P,
BBB- by ARA or Baa3 by Moody's
CATEGORY 4 - The Leverage Ratio is less than 2.50 0.35
to 1 but not less than 2.00 to 1 or the Index Debt
Rating is any two of the following: BBB by S&P,
BBB by ARA or Baa2 by Moody's
CATEGORY 5 - The Leverage Ratio is less than 2.00 0.30
to 1 or the Index Debt Rating is any two of the
following: BBB+ or better by S&P, BBB+ or better
by ARA or Baa1 or better by Moody's
</TABLE>
(ii) NON-FINANCIAL LETTERS OF CREDIT. Subject to Section 10.9
hereof, the Borrower shall pay to the Administrative Lender for the
account of each Lender a fee (which shall be payable quarterly in arrears
on each Quarterly Date and on the Maturity Date) on the average daily
amount available for drawing under all outstanding Non-Financial Letters
of Credit at the following per annum percentages, applicable in the
following situations:
<TABLE>
<CAPTION>
APPLICABILITY PERCENTAGE
------------- ----------
<S> <C>
CATEGORY 1 - The Leverage Ratio is not less than 0.35
3.50 to 1 or the Index Debt Rating is any two of
the following: BB by S&P, BB by ARA or Ba2 by
Moody's
- 40 -
<PAGE>
CATEGORY 2 - The Leverage Ratio is less than 3.50 0.275
to 1 but not less than 3.00 to 1 or the Index
Debt Rating is any two of the following: BB+
by S&P, BB+ by ARA or Ba1 by Moody's
CATEGORY 3 - The Leverage Ratio is less than 3.00 0.225
to 1 but not less than 2.50 to 1 or the Index
Debt Rating is any two of the following:
BBB- by S&P, BBB- by ARA or Baa3 by Moody's
CATEGORY 4 - The Leverage Ratio is less than 2.50 0.175
to 1 but not less than 2.00 to 1 or the Index Debt
Rating is any two of the following: BBB
by S&P, BBB by ARA or Baa2 by Moody's
CATEGORY 5 - The Leverage Ratio is less than 2.00 0.150
to 1 or the Index Debt Rating is any two of the
following: BBB+ or better by S&P, BBB+ or
better by ARA or Baa1 or better by Moody's
</TABLE>
(iii) ADJUSTMENT OF LETTER OF CREDIT FEE. The fee payable in
respect of the Letters of Credit shall be adjusted on each Adjustment Date
if determined based on the (i) Leverage Ratio, on a quarterly basis
according to the performance of the Borrower for the most recent fiscal
quarter or (ii) the Index Debt Rating, according to the most recent
determination of the Index Debt Rating. For purposes of the foregoing,
(a) if the Index Debt Rating and the Leverage Ratio are in different
categories, the commitment fee shall be determined on whichever of the
Index Debt Rating or the Leverage Ratio falls within the superior (or
numerically higher) category, (b) if the Letter of Credit fee is
determined based on the Leverage Ratio and the financial statements of the
Borrower setting forth the Leverage Ratio are not received by the
Administrative Lender by the date required pursuant to Section 6.1(a) or
6.1(b) hereof, the Letter of Credit fee shall be determined as if the
Leverage Ratio is not less than 3.50 to 1 until such time as such
financial statements are received, (c) if the Index Debt Rating
established by ARA shall fall within a different category than both
Moody's and S&P, the Letter of Credit fee shall be determined by reference
to Moody's or S&P, whichever shall be the superior (or numerically higher)
category, but not to exceed two rating levels higher than the other rating
agency. If the rating system of Moody's, S&P or ARA shall change prior to
the Maturity Date, the Borrower and the Lenders shall negotiate in good
faith to amend the references to specific ratings to reflect such changed
rating system.
(iv) OTHER FEES. In addition to the foregoing fees, subject to
Section 10.9 hereof, the Borrower shall also pay to the Issuing Bank for
its sole account (i) such customary fees, costs and expenses as may be
separately agreed to between the Borrower and the Issuing Bank and (ii) an
issuance and fronting fee in the amount of 0.075% of the average daily
amount available for drawing under all outstanding Letters of Credit,
which fronting fee shall be payable quarterly in arrears on each Quarterly
Date and on the Maturity Date.
- 41 -
<PAGE>
(g) L/C CASH COLLATERAL ACCOUNT.
(i) Upon the occurrence and continuance of an Event of Default and
demand by the Administrative Lender pursuant to Section 7.2(c), the
Borrower will promptly pay to the Administrative Lender in immediately
available funds (which payment may not be made by means of an Advance) an
amount equal to 102% of the maximum amount then available to be drawn
under the Letters of Credit then outstanding. Any amounts so received by
the Administrative Lender shall be deposited by the Administrative Lender
in a deposit account maintained by the Issuing Bank (the "L/C Cash
Collateral Account").
(ii) As security for the payment of all Reimbursement Obligations
and for any other Obligations, the Borrower hereby grants, conveys,
assigns, pledges, sets over and transfers to the Administrative Lender
(for the benefit of the Issuing Bank and Lenders), and creates in the
Administrative Lender's favor (for the benefit of the Issuing Bank and
Lenders) a Lien in, all money, instruments and securities at any time held
in or acquired in connection with the L/C Cash Collateral Account,
together with all proceeds thereof. The L/C Cash Collateral Account shall
be under the sole dominion and control of the Administrative Lender and
the Borrower shall have no right to withdraw or to cause the
Administrative Lender to withdraw any funds deposited in the L/C Cash
Collateral Account. At any time and from time to time, upon the
Administrative Lender's request, the Borrower promptly shall execute and
deliver any and all such further instruments and documents, including UCC
financing statements, as may be necessary, appropriate or desirable in the
Administrative Lender's judgment to obtain the full benefits (including
perfection and priority) of the security interest created or intended to
be created by this paragraph (ii) and of the rights and powers herein
granted. The Borrower shall not create or suffer to exist any Lien on any
amounts or investments held in the L/C Cash Collateral Account other than
(a) the Lien granted under this paragraph (ii) and (b) Permitted
Collateral Liens.
(iii) The Administrative Lender shall (a) apply any funds in the L/C
Cash Collateral Account on account of Reimbursement Obligations when the
same become due and payable if and to the extent that the Borrower shall
fail directly to pay such Reimbursement Obligations and (b) after the
Maturity Date and provided no Letters of Credit are outstanding, apply any
proceeds remaining in the L/C Cash Collateral Account FIRST to pay any
unpaid Obligations then outstanding hereunder and THEN to refund any
remaining amount to the Borrower.
(iv) The Borrower, no more than once in any calendar month, may
direct the Administrative Lender to invest the funds held in the L/C Cash
Collateral Account (so long as the aggregate amount of such funds exceeds
any relevant minimum investment requirement) in (a) direct obligations of
the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof and (b) one or more other types of
investments permitted by the Determining Lenders, in each case with such
- 42 -
<PAGE>
maturities as the Borrower, with the consent of the Determining Lenders,
may specify, pending application of such funds on account of Reimbursement
Obligations or on account of other Obligations, as the case may be. In
the absence of any such direction from the Borrower, the Administrative
Lender shall invest the funds held in the L/C Cash Collateral Account (so
long as the aggregate amount of such funds exceeds any relevant minimum
investment requirement) in one or more types of investments with the
consent of the Determining Lenders with such maturities as the
Administrative Lender, with the consent of the Determining Lenders, may
specify, pending application of such funds on account of Reimbursement
Obligations or on account of other Obligations, as the case may be. All
such investments shall be made in the Administrative Lender's name for the
account of the Lenders. The Borrower recognizes that any losses or taxes
with respect to such investments shall be borne solely by the Borrower,
and the Borrower agrees to hold the Administrative Lender and the Lenders
harmless from any and all such losses and taxes. Administrative Lender
may liquidate any investment held in the L/C Cash Collateral Account in
order to apply the proceeds of such investment on account of the
Reimbursement Obligations (or on account of any other Obligation then due
and payable, as the case may be) without regard to whether such investment
has matured and without liability for any penalty or other fee incurred
(with respect to which the Borrower hereby agrees to reimburse the
Administrative Lender) as a result of such application.
(v) At such time, if any, which the Commitment has been terminated
and the only unpaid amount of the Obligations outstanding is Reimbursement
Obligations, the Administrative Lender shall release to the Borrower, no
more than once in any calendar month, the amount by which funds held in
the L/C Cash Collateral Account exceed 110% of the aggregate outstanding
Reimbursement Obligations. At such time as any Event of Default is cured
or waived, the Administrative Lender shall, upon written instruction from
the Borrower, promptly distribute to the Borrower any funds held in the
L/C Cash Collateral Account.
(vi) The Borrower shall pay to the Administrative Lender the fees
customarily charged by the Issuing Bank with respect to the maintenance of
accounts similar to the L/C Cash Collateral Account.
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCES AND THE INITIAL
LETTERS OF CREDIT. The obligation of each Lender to sign this Agreement and to
make any Advance, and the obligation of the Issuing Bank to issue Letters of
Credit is subject to receipt by the Administrative Lender of the following, in
form and substance satisfactory to each Lender, with a copy (except for the
Notes) for each Lender, or satisfaction of the following:
- 43 -
<PAGE>
(a) a loan certificate of the Borrower certifying as to the accuracy of
its representations and warranties in the Loan Papers, certifying that no
Default has occurred, and including a certificate of incumbency with respect to
each Authorized Signatory, and including (i) a copy of the articles of
incorporation of the Borrower, certified to be true, complete and correct by the
secretary of state of its state of incorporation, (ii) a copy of the by-laws of
the Borrower, as in effect on the Agreement Date, (iii) a copy of the
resolutions of the Borrower authorizing it to execute, deliver and perform this
Agreement, the Notes and the other Loan Papers to which it is a party, and (iv)
a copy of a certificate of good standing and a certificate of existence for its
state of incorporation and each state in which it is qualified to do business;
(b) a certificate of an officer acceptable to the Lenders of each
Significant Subsidiary, certifying as to the incumbency of the officers signing
the Loan Papers to which it is a party, and including (i) a copy of its articles
of incorporation (or articles of partnership or other appropriate governing
documents), certified as true, complete and correct by the secretary of state of
its state of incorporation or organization, (ii) a copy of its by-laws (or
partnership agreement or other appropriate governing document), as in effect on
the Agreement Date, (iii) a copy of the resolutions authorizing it to execute,
deliver and perform the Loan Papers to which it is a party, and (iv) a copy of a
certificate of good standing and a certificate of existence for its state of
incorporation;
(c) duly executed Revolving Credit Notes, payable to the order of each
Lender and in an amount for each Lender equal to its Specified Percentage of the
Commitment;
(d) opinions of counsel to the Borrower and the Subsidiaries addressed
to the Lenders and in form and substance satisfactory to the Lenders, dated the
Agreement Date, and covering the matters set forth in Sections 4.1(a), (b), (c),
(g), (l), (m) and (o) and such other matters incident to the transactions
contemplated hereby as the Administrative Lender or Special Counsel may
reasonably request;
(e) reimbursement for the Administrative Lender for Special Counsel's
reasonable fees and expenses rendered through the Agreement Date;
(f) evidence that all corporate or other proceedings of the Borrower and
Subsidiaries taken in connection with the transactions contemplated by this
Agreement and the other Loan Papers shall be reasonably satisfactory in form and
substance to the Lenders and Special Counsel; and the Lenders shall have
received copies of all documents or other evidence which the Administrative
Lender, Special Counsel or any Lender may reasonably request in connection with
such transactions;
(g) the closing fee as required pursuant to Sections 2.4(b);
(h) the duly executed and completed Guaranty Agreements, dated as of the
Agreement Date;
- 44 -
<PAGE>
(i) any fees required to be paid pursuant to the Fee Letter;
(j) the duly executed Master Covenant Agreement;
(k) a certificate of an officer acceptable to the Lenders, in form and
substance satisfactory to the Lenders, certifying that the execution, delivery
and performance by the Obligors of the Loan Papers will not violate or result in
a default in respect of any of the terms of the Senior Subordinated Notes;
(l) payment in full of all accrued and outstanding obligations under the
Existing Credit Agreement (other than in respect of the Existing Letters of
Credit) whereupon all obligations of the Borrower (excluding those obligations
which expressly survive termination of the Existing Credit Agreement) and the
lenders party thereto (including but not limited to, the participations of the
Lenders in the Bond Letters of Credit) shall terminate;
(m) the duly executed Swing Line Note, payable to the order of the Swing
Line Bank in the principal amount of $10,000,000;
(n) closing and funding of the Senior Notes pursuant to terms acceptable
to the Lenders, and delivery of an executed final coy of the Indenture with
respect to the Senior Notes;
(o) the duly executed Facility B Credit Agreement and all documents
related thereto;
(p) payment in full of all accrued and outstanding obligations under the
Amended and Restated Credit Agreement, dated as of April 21, 1995, among La
Quinta Development Partners, L.P., a Delaware limited partnership, the lenders
party thereto, NationsBank of Texas, NA., as Administrative Lender, and
Citibank, N.A., as Co-Administrative Lender;
(q) duly executed Bid Rate Notes, payable to the order of each Lender in
the principal amount of $200,000,000; and
(r) in form and substance satisfactory to the Lenders and Special
Counsel, such other documents, instruments and certificates as the
Administrative Lender or any Lender may reasonably require in connection with
the transactions contemplated hereby, including without limitation the status,
organization or authority of the Borrower or any Subsidiary or any other Person
executing a Loan Paper, and the enforceability of the Obligation.
Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT.
The obligation of each Lender to make each Advance hereunder, and the obligation
of the Issuing Bank to issue each Letter of Credit hereunder is subject to
fulfillment of the following conditions immediately prior to or
contemporaneously with each such Advance or issuance:
(a) With respect to Advances other than Refinancing Advances and each
issuance of a Letter of Credit, all of the representations and warranties of the
Borrower under this
- 45 -
<PAGE>
Agreement, which, pursuant to Section 4.2 hereof, are made at and as of the time
of such Advance or issuance, shall be true and correct at such time in all
material respects, both before and after giving effect to the application of the
proceeds of the Advance or issuance;
(b) The incumbency of the Authorized Signatories shall be as stated in
the certificate of incumbency delivered in the Borrower's loan certificate
pursuant to Section 3.1(a) or as subsequently modified and reflected in a
certificate of incumbency delivered to the Administrative Lender. The Lenders
may, without waiving this condition, consider it fulfilled and a representation
by the Borrower made to such effect if no written notice to the contrary, dated
on or before the date of such Advance or issuance, is received by the
Administrative Lender from the Borrower prior to the making of such Advance or
issuance;
(c) There shall not exist a Default hereunder, with respect to Advances
other than Refinancing Advances, or with respect to the issuance of Letters of
Credit, or an Event of Default, with respect to any Refinancing Advance, and,
with respect to each Advance other than a Refinancing Advance, and with respect
to issuance of each Letter of Credit, the Administrative Lender shall have
received written or telephonic certification thereof by an Authorized Signatory
(which certification, if telephonic, shall be followed promptly by written
certification);
(d) The aggregate Advances and amounts available for draw under Letters
of Credit, after giving effect to such proposed Advance or Letter of Credit,
shall not exceed the maximum principal amount then permitted to be outstanding
hereunder; and
(e) The Administrative Lender shall have received all such other
certificates, reports, statements, opinions of counsel or other documents as the
Administrative Lender or any Lender may reasonably request; PROVIDED,
HOWEVER, that the obligation of each Lender to make a Revolving Credit Advance
pursuant to Sections 2.2(g) and 2.16(c) shall be absolute and unconditional and
shall not be affected by any circumstances, including, without limitation, (i)
the occurrence of any Default or Event of Default, (ii) the failure of the
Borrower to satisfy any condition set forth in this Section 3.2, or (iii) any
other circumstance, happening or event whatsoever, except that the conditions
precedent set forth in Sections 3.1 and 3.2 with respect to the Swing Line Loan
or the Letter of Credit for which such Revolving Credit Advance is made pursuant
to Section 2.2(g) or 2.16(c) shall have been satisfied in full at the time of
the making of such Swing Line Loan or the issuance of such Letter of Credit.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants to each Lender as follows:
- 46 -
<PAGE>
(a) ORGANIZATION; POWER; QUALIFICATION. As of the Agreement Date, the
respective jurisdiction of incorporation and percentage ownership by the
Borrower or another Subsidiary of the Subsidiaries and Unincorporated Ventures
listed on SCHEDULE 3 are true and correct. Each of the Borrower and its
Subsidiaries and Unincorporated Ventures is a corporation or partnership, as
designated on SCHEDULE 3, duly organized, validly existing and in good
standing under the laws of its state of organization. Each of the Borrower and
its Subsidiaries has the corporate or other power and authority to own its
properties and to carry on its business as now being and hereafter proposed to
be conducted. Each of the Borrower and its Subsidiaries and Unincorporated
Ventures is duly qualified, in good standing and authorized to do business in
each jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization except where the failure
to be so qualified or authorized would not have a Material Adverse Effect.
(b) AUTHORIZATION. The Borrower has corporate power and has taken all
necessary corporate action to authorize it to borrow hereunder. Each of the
Loan Parties has corporate or other power and has taken all necessary corporate
or other action to execute, deliver and perform the Loan Papers to which it is
party in accordance with the terms thereof, and to consummate the transactions
contemplated thereby. Each Loan Paper has been duly executed and delivered by
the Loan Party executing it. Each of the Loan Papers to which the Loan Parties
are party is a legal, valid and binding respective obligation of the Loan Party
executing it, enforceable in accordance with its terms, subject to the following
qualifications: (i) equitable principles generally, and (ii) Debtor Relief Laws
(insofar as any such law relates to the bankruptcy, insolvency or similar event
of any Loan Party).
(c) COMPLIANCE WITH OTHER LOAN PAPERS AND CONTEMPLATED TRANSACTIONS.
The execution, delivery and performance by the Loan Parties of the Loan Papers
to which they are respectively a party, and the consummation of the transactions
contemplated thereby, do not and will not (i) require any consent or approval
not already obtained, (ii) violate any Applicable Law, (iii) conflict with,
result in a breach of, or constitute a default under the articles of
incorporation, by-laws, articles of partnership, partnership agreements or
similar governing documents of any Loan Party, or under any Necessary
Authorization, indenture, agreement or other instrument, to which any Loan Party
is a party or by which they or their respective properties may be bound, or (iv)
result in or require the creation or imposition of any Lien upon or with respect
to any property now owned or hereafter acquired by any Loan Party, except
Permitted Liens.
(d) LICENSES, ETC. All Necessary Authorizations which are material
have been duly obtained, and are in full force and effect without any known
conflict with the rights of others and free from any unduly burdensome
restrictions which could reasonably be expected to have a Material Adverse
Effect. The Borrower and its Subsidiaries and Unincorporated Ventures are and
will continue to be in compliance in all material respects with all provisions
thereof. No circumstance exists which might impair the utility of the Necessary
Authorization or the right to renew such Necessary Authorization the effect of
which would have a Material Adverse Effect. No Necessary Authorization which
could reasonably be expected to have a Material
- 47 -
<PAGE>
Adverse Effect is the subject of any pending or, to the best of the Borrower's
knowledge, threatened challenge, suspension, cancellation or revocation.
(e) COMPLIANCE WITH LAW. The Borrower and its Subsidiaries and
Unincorporated Ventures are in compliance in all respects with all Applicable
Laws, except where the failure to so comply would not have a Material Adverse
Effect.
(f) TITLE TO PROPERTIES. The Borrower and its Subsidiaries and
Unincorporated Ventures have good and indefeasible title to, or a valid
leasehold interest in, all of their material assets. None of their assets are
subject to any Liens, except Permitted Liens. No effective financing statement
or other Lien filing (except relating to Permitted Liens) is on file in any
state or jurisdiction that names the Borrower or any of its Subsidiaries or
Unincorporated Ventures as debtor or covers (or purports to cover) any assets of
the Borrower or any of its Subsidiaries or Unincorporated Ventures. The
Borrower and its Subsidiaries and Unincorporated Ventures have not signed any
such financing statement or filing, nor any security agreement authorizing any
Person to file any such financing statement or filing.
(g) LITIGATION. Except as reflected on SCHEDULE 2 hereto, there is
no action, suit or proceeding pending against, or, to the best of the Borrower's
knowledge, threatened against the Borrower, or in any other manner relating
directly and adversely to the Borrower or any of its Subsidiaries or
Unincorporated Ventures, or any of their properties, in any court or before any
arbitrator of any kind or before or by any governmental body in which the amount
claimed (in excess of applicable insurance) exceeds a Material Amount.
(h) TAXES. All federal, state and other tax returns of the Borrower
and its Subsidiaries and Unincorporated Ventures required by law to be filed
have been duly filed and all federal, state and other taxes, assessments and
other governmental charges or levies upon the Borrower, its Subsidiaries or
Unincorporated Ventures or any of their respective properties, income, profits
and assets, which are due and payable, have been paid, unless the same are being
diligently contested in good faith by appropriate proceedings, with adequate
reserves established therefor, and no Lien (other than a Permitted Lien) has
attached and no foreclosure, distraint, sale or similar proceedings have been
commenced. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries and Unincorporated Ventures in respect of their respective
taxes are, in the judgment of the Borrower, adequate.
(i) FINANCIAL STATEMENTS; MATERIAL LIABILITIES. The Borrower has
furnished or caused to be furnished to the Lenders copies of its December 31,
1994 and June 30, 1995 financial statements, which present fairly in accordance
with GAAP the financial position of the Borrower and its Subsidiaries and
Unincorporated Ventures as at such dates and the results of operations for the
periods then ended. The Borrower and its Subsidiaries and Unincorporated
Ventures taken as a whole have no material liabilities, contingent or otherwise,
nor material losses, except (i) as set forth in the December 31, 1994 financial
statements, (ii) in respect of the Senior Notes and (iii) the "AEW Transaction"
as defined and described in the Borrower's Form S-3 dated August 11, 1995.
- 48 -
<PAGE>
(j) NO ADVERSE CHANGE. Since December 31, 1994, no event or
circumstances has occurred or arisen that could have a Material Adverse Effect.
(k) ERISA. None of the Borrower or its Controlled Group maintains or
contributes to any Plan other than those disclosed to the Administrative Lender
in writing. Each such Plan (other than any Multiemployer Plan) is in compliance
in all material respects with the applicable provisions of ERISA, the Code, and
any other applicable Federal or state law, rule or regulation. With respect to
each Plan (other than any Multiemployer Plan) of the Borrower and each member of
its Controlled Group, all reports required under ERISA or any other Applicable
Law to be filed with any governmental authority, the failure of which to file
could reasonably result in liability of the Borrower or any member of its
Controlled Group in excess of a Material Amount, have been duly filed. All such
reports are true and correct in all material respects as of the date given. No
Plan of the Borrower or any member of its Controlled Group has been terminated
under Section 4041(c) of ERISA nor has any accumulated funding deficiency (as
defined in Section 412(a) of the Code) been incurred (without regard to any
waiver granted under Section 412 of the Code), nor has any funding waiver from
the Internal Revenue Service been received or requested the result of which
could reasonably be expected to have Material Adverse Effect. None of the
Borrower or any member of its Controlled Group has failed to make any
contribution or pay any amount due or owing as required under the terms of any
such Plan, or by Section 412 of the Code or Section 302 of ERISA by the due date
under Section 412 of the Code and Section 302 of ERISA the result of which could
reasonably be expected to have Material Adverse Effect. There has been no ERISA
Event or any event requiring disclosure under Section 4041(c)(3)(c) or 4063(a)
of ERISA with respect to any Plan or its related trust of the Borrower or any
member of its Controlled Group since the effective date of ERISA. The present
value of the benefit liabilities, as defined in Title IV of ERISA, of each Plan
subject to Title IV of ERISA (other than a Multiemployer Plan) of the Borrower
and each member of its Controlled Group does not exceed by more than $10,000,000
the present value of the assets of each such Plan as of the most recent
valuation date using each such Plan's actuarial assumptions at such date. There
are no pending, or to the best of the Borrower's knowledge threatened, claims,
lawsuits or actions (other than routine claims for benefits in the ordinary
course) asserted or instituted against, and neither the Borrower nor any member
of its Controlled Group has knowledge of any threatened litigation or claims
against, the assets of any Plan or its related trust or against any fiduciary of
a Plan with respect to the operation of such Plan the result of which could
reasonably be expected to have Material Adverse Effect. None of the Borrower
or, to the best of the Borrower's knowledge, any member of its Controlled Group
has engaged in any prohibited transactions, within the meaning of Section 406 of
ERISA or Section 4975 of the Code, in connection with any Plan the result of
which could reasonably be expected to have Material Adverse Effect. None of the
Borrower or any member of its Controlled Group has withdrawn from any
Multiemployer Plan, nor has incurred or reasonably expects to incur (a) any
liability under Title IV of ERISA (other than premiums due under Section 4007 of
ERISA to the PBGC), (b) any withdrawal liability (and no event has occurred
which with the giving of notice under Section 4219 of ERISA would result in such
liability) under Section 4201 of ERISA as a result of a complete or partial
withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from a
Multiemployer Plan, or (c) any liability under Section 4062 of
- 49 -
<PAGE>
ERISA to the PBGC or to a trustee appointed under Section 4042 of ERISA. None
of the Borrower, any member of its Controlled Group, or any organization to
which the Borrower or any member of its Controlled Group is a successor or
parent corporation within the meaning of ERISA Section 4069(b), has engaged in a
transaction within the meaning of ERISA Section 4069 the result of which could
reasonably be expected to have Material Adverse Effect. None of the Borrower or
any member of its Controlled Group maintains or has established any Plan, which
is a material welfare benefit plan within the meaning of Section 3(1) of ERISA
and which provides for continuing benefits or coverage for any participant or
any beneficiary of any participant after such participant's termination of
employment, except as may be required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") and the regulations thereunder.
Each of Borrower and its Controlled Group which maintains a Plan which is a
welfare benefit plan within the meaning of Section 3(1) of ERISA has complied in
all material respects with any applicable notice and continuation requirements
of COBRA and the regulations thereunder, except to the extent that the failure
to so comply could not reasonably be expected to have a Material Adverse Effect.
None of the Borrower or any member of its Controlled Group maintains, has
established, or has ever participated in a multiemployer welfare benefit
arrangement within the meaning of Section 3(40)(a) of ERISA.
(l) COMPLIANCE WITH REGULATIONS G, T, U AND X. The Borrower is not
engaged principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any margin stock
within the meaning of Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System, and no part of the proceeds of the Advances or any
Letters of Credit will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock. No assets of the Borrower and its Subsidiaries and Unincorporated
Ventures are margin stock. None of the Borrower and its Subsidiaries nor any
agent acting on their behalf, have taken or will knowingly take any action which
might cause this Agreement or any other Loan Papers to violate any regulation of
the Board of Governors of the Federal Reserve System or to violate the
Securities Exchange Act of 1934, in each case as in effect now or as the same
may hereafter be in effect.
(m) GOVERNMENTAL REGULATION. The Borrower and its Subsidiaries and
Unincorporated Ventures are not required to obtain any Necessary Authorization
that has not already been obtained from, or effect any material filing or
registration that has not already been effected with, any federal, state or
local regulatory authority in connection with the execution and delivery of this
Agreement or any other Loan Paper, or the performance thereof (other than any
enforcement of remedies by the Administrative Lender on behalf of the Lenders,
in accordance with their respective terms, including any borrowings hereunder.
(n) ABSENCE OF DEFAULT. The Borrower and its Subsidiaries and
Unincorporated Ventures are in compliance in all respects with all of the
provisions of their articles of incorporation, by-laws, articles of partnership,
partnership agreement or other governing documents, and no event has occurred or
failed to occur, which has not been remedied or waived, the occurrence or
non-occurrence of which constitutes, or which with the passage of
- 50 -
<PAGE>
time or giving of notice or both would constitute, (i) an Event of Default or
(ii) a default by the Borrower or any of its Subsidiaries or Unincorporated
Ventures under any material indenture, agreement or other instrument, or any
judgment, decree or order to which the Borrower or any of its Subsidiaries or
Unincorporated Ventures or by which they or any of their material properties is
bound.
(o) INVESTMENT COMPANY ACT. The Borrower is not required to register
under the provisions of the Investment Company Act of 1940, as amended. Neither
the entering into or performance by the Borrower of this Agreement nor the
issuance of the Notes violates any provision of such act or requires any
consent, approval, or authorization of, or registration with, the Securities and
Exchange Commission or any other governmental or public body of authority
pursuant to any provisions of such act.
(p) ENVIRONMENTAL MATTERS. Neither the Borrower nor any Subsidiary or
Unincorporated Venture has any actual knowledge or reason to believe that any
substance deemed hazardous by any Applicable Environmental Law, has been
installed on any real property now owned by the Borrower or any of its
Subsidiaries or Unincorporated Ventures which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect. The Borrower
and its Subsidiaries and Unincorporated Ventures have complied in all respects
with all Applicable Environmental Laws except to the extent that the failure to
so comply, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect. The Borrower and its Subsidiaries and
Unincorporated Ventures are not in violation in any respects of or subject to
any existing, pending or, to the best of the Borrower's knowledge, threatened
investigation or inquiry by any governmental authority or to any material
remedial obligations under any Applicable Environmental Laws, except to the
extent that the results of such investigation, inquiry or remedial obligation
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect, and this representation and warranty would continue to
be true and correct following disclosure to the applicable governmental
authorities of all relevant facts, conditions and circumstances, if any,
pertaining to any real property of the Borrower and its Subsidiaries and
Unincorporated Ventures. The Borrower and its Subsidiaries and Unincorporated
Ventures have obtained all material permits, licenses or similar authorizations
necessary to construct, occupy, operate or use any buildings, improvements,
fixtures, and equipment forming a part of any real property of the Borrower or
any Subsidiary or Unincorporated Venture by reason of any Applicable
Environmental Laws, except where the failure to obtain such authorization would
not, individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect. The Borrower and its Subsidiaries and Unincorporated Ventures
undertook, at the time of acquisition of any real property, reasonable inquiry
into the previous ownership and uses of such real property consistent with good
commercial or customary practice as applied and used in the real estate industry
at the time of each such acquisition. The Borrower and its Subsidiaries and
Unincorporated Ventures have taken all reasonable steps to determine, and the
Borrower and its Subsidiaries and Unincorporated Ventures have no actual
knowledge or reason to believe, after reasonable investigation, that any
hazardous substances or solid wastes have been disposed of or otherwise released
on or to the real property of the Borrower or any of its Subsidiaries or
Unincorporated
- 51 -
<PAGE>
Ventures, within the meaning of the Applicable Environmental Laws, except to the
extent that the failure to so depose or release, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(q) CERTAIN FEES. No broker's, finder's or other fee or commission
will be payable by the Borrower (other than to the Lenders hereunder) with
respect to the making of the Commitments or the Advances or the issuance of the
Letters of Credit hereunder. The Borrower agrees to indemnify and hold harmless
the Administrative Lender and each Lender from and against any claims, demand,
liability, proceedings, costs or expenses asserted with respect to or arising in
connection with any such fees or commissions.
(r) NECESSARY AUTHORIZATIONS. No event has occurred which permits (or
with the passage of time would permit) the revocation or termination of any
Necessary Authorization, or which could result in the imposition of any
restriction thereon, of such a nature that could reasonably be expected to have
a Material Adverse Effect.
(s) PATENTS, ETC. The Borrower and its Subsidiaries and
Unincorporated Ventures have obtained all patents, trademarks, service-marks,
trade names, copyrights, licenses and other rights, free from burdensome
restrictions, that are necessary for the operation of their business as
presently conducted and as proposed to be conducted. Nothing has come to the
attention of the Borrower or any of its Subsidiaries or Unincorporated Ventures
to the effect that (i) any process, method, part or other material presently
contemplated to be employed by the Borrower or any Subsidiary or Unincorporated
Venture may infringe any patent, trademark, service-mark, trade name, copyright,
license or other right owned by any other Person, or (ii) there is pending or
overtly threatened any claim or litigation against or affecting the Borrower or
any Subsidiary or Unincorporated Venture contesting its right to sell or use any
such process, method, part or other material, provided with respect to clauses
(i) and (ii) that such events are limited to those which could reasonably be
expected to have a Material Adverse Effect.
(t) DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement which has been furnished to any Lender by or on behalf
of the Borrower or any Subsidiary or Unincorporated Venture in connection
herewith contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statement contained herein and
therein not misleading at the time it was furnished. There is no fact known to
the Borrower and not known to the public generally that could reasonably be
expected to materially adversely affect the assets or business of the Borrower
and its Subsidiaries and Unincorporated Ventures, or in the future could
reasonably be expected (so far as the Borrower can now foresee) to have a
Material Adverse Effect, which has not been set forth in this Agreement or in
the documents, certificates and statements furnished to the Lenders by or on
behalf of the Borrower prior to the date hereof in connection with the
transaction contemplated hereby.
(u) SOLVENCY. The Borrower is, and Borrower and its Subsidiaries and
Unincorporated Ventures on a consolidated basis are, Solvent.
- 52 -
<PAGE>
Section 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made under this Agreement and the other Loan
Papers shall be deemed to be made at and as of the Agreement Date and at and as
of the date of each Advance and issuance of each Letter of Credit, and each
shall be true and correct when made, except to the extent (a) previously
fulfilled in accordance with the terms hereof, (b) applicable to a specific date
or otherwise subsequently inapplicable or modified to give effect to the
transactions expressly permitted hereby, or (c) previously waived in writing by
the Determining Lenders with respect to any particular factual circumstance.
All such representations and warranties shall survive, and not be waived by, the
execution hereof by any Lender, any investigation or inquiry by any Lender, or
by the making of any Advance or the issuance of any Letter of Credit under this
Agreement.
ARTICLE 5
BUSINESS COVENANTS
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 5.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING PRACTICES,
CORPORATE EXISTENCE. The Borrower covenants and agrees to, and will cause each
Subsidiary and Unincorporated Venture to:
(a) Maintain its material property in good condition and make all
necessary renewals, replacements, additions, betterments and improvements
thereto, consistent with sound business practice and as is customary in the case
of corporations or other entities of established reputation engaged in the same
or a similar business and similarly situated;
(b) Maintain, with financially sound and reputable insurers, or through
its own program of self-insurance, insurance with respect to its material
properties and business against such casualties and contingencies, of such
types, and in such amounts as is customary in the case of corporations or other
entities of established reputation engaged in the same or a similar business and
similarly situated;
(c) Keep books of record and accounts in which entries will be made of
all of its business transactions, and will reflect in it financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP;
(d) Do or cause to be done all things necessary to preserve and keep in
full force and effect its material rights;
(e) Do or cause to be done all things necessary to preserve and keep in
full force and effect its existence (except as may be specifically permitted by
this Agreement); and
- 53 -
<PAGE>
(f) Cause to be paid and discharged (i) all lawful tax assessments and
governmental charges imposed from the income or profits of the Borrower, its
Subsidiaries and Unincorporated Ventures or upon any property belonging to the
Borrower, any Subsidiary or any Unincorporated Venture and (ii) all lawful
claims, whether for labor, materials, supplies, services or anything else, which
have become due and payable and which by law have or may become a Lien upon the
property of the Borrower or any of its Subsidiaries or Unincorporated Ventures;
PROVIDED, HOWEVER, that the Borrower, its Subsidiaries and Unincorporated
Ventures shall not be required to cause to be paid or discharged any such tax
assessment, charge or claim so long as the amount, applicability or validity
thereof shall be contested in good faith by appropriate proceedings, and
adequate book reserves shall have been established to the extent required by
GAAP with respect thereto.
Section 5.2 INSPECTION OF PROPERTIES AND BOOKS. The Borrower covenants
and agrees that it will permit, and will cause each Subsidiary and
Unincorporated Venture to permit, any Lender, upon (i) reasonable request, if
such request is prior to the occurrence of a Default or an Event of Default or
(ii) request, if such request is after the occurrence of a Default or an Event
of Default, to any Authorized Officer, to visit and inspect any of the
properties of, to examine the books of account and records of the Borrower, any
Subsidiary or Unincorporated Venture and to take extracts therefrom and to
discuss the affairs, finances or accounts of the Borrower, any Subsidiary or
Unincorporated Venture, and to be advised as to the same by the officers of the
Borrower, at all such times during normal business hours, in such detail and
through such agents and representatives as such Bank may reasonably desire.
Section 5.3 MERGER AND SALE OF ASSETS.
(a) The Borrower covenants and agrees that it will not, and will cause
each Subsidiary and Unincorporated Venture to not, directly or indirectly sell,
transfer or otherwise dispose of any of its assets (whether now owned or
hereafter acquired, and including any interest in a joint venture or
partnership) unless immediately prior to, and after giving effect to, such sale,
transfer or other disposition, the Borrower, its Subsidiaries and Unincorporated
Ventures are and will be in compliance with all covenants hereunder and there
shall otherwise be no Default or Event of Default hereunder; and
(b) The Borrower covenants and agrees that it will not, and will cause
each Subsidiary and Unincorporated Venture to not, merge into or consolidate
with any other Person; provided, however, if after giving effect to any such
merger or consolidation, (i) the business of the Borrower or any Subsidiary or
Unincorporated Venture, as appropriate, will not be materially changed and (ii)
the Borrower or any Subsidiary or Unincorporated Venture, as appropriate, will
not be in default in respect of any of the covenants contained in any material
agreement, including, without limitation, this Agreement, to which the Borrower
or any Subsidiary or Unincorporated Venture is a party or by which its property
may be bound,
- 54 -
<PAGE>
(1) any corporation, partnership or joint venture may merge or
consolidate with the Borrower, provided that the Borrower shall be the
continuing and surviving corporation,
(2) any Subsidiary may merge with or consolidate with any
corporation, partnership or joint venture, provided that, unless such
merger or consolidation shall be with the Borrower, such Subsidiary shall
be the continuing and surviving corporation, and
(3) any Unincorporated Venture may merge with or consolidate with
any corporation, partnership or joint venture, provided that, unless such
merger or consolidation shall be with the Borrower or a Subsidiary, such
Unincorporated Venture shall be the continuing and surviving person.
Section 5.4 NET WORTH. The Borrower covenants and agrees that it will
not allow its Net Worth at any time to be less than the sum of (i) $285,000,000
plus (ii) 50% of Consolidated Net Income (excluding Consolidated Net Income for
any fiscal quarter in which Consolidated Net Income was a negative number)
earned on or after the Agreement Date, plus (iii) 75% of the Net Cash Proceeds
of any equity issues of the Borrower's Capital Stock after the Agreement Date.
Section 5.5 CONTINGENT LIABILITIES. The Borrower covenants and agrees
that it will not, and will cause each Subsidiary and Unincorporated Venture to
not, guarantee, endorse, contingently agree to purchase, or otherwise become
liable, directly or indirectly, upon the obligation of or in connection with the
earnings, the assets, the stock, or the dividends of any other Person (other
than the Borrower or any Subsidiary), including obligations of the Borrower,
each Subsidiary and Unincorporated Venture arising solely by virtue of any of
them being a general partner or venturer of any Unincorporated Venture, except
(i) the obligations in respect of the written agreements in existence on the
Agreement Date in respect of any Significant Investments, (ii) the guarantees
and other contingent obligations set forth on SCHEDULE 11 hereto, (iii)
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection, (iv) guarantees of loans to any employee; PROVIDED,
THAT any such guaranty of an employee loan shall not exceed the amount of
$100,000 per employee, and the amount of such guaranties of employee loans,
together with the amount of Investments permitted pursuant to clause (vi) of the
definition of "Permitted Investments," shall not exceed, in the aggregate, more
than $2,000,000, and (v) guarantees and contingent obligations incurred after
the Agreement Date not to exceed $20,000,000 in aggregate principal amount.
Section 5.6 INCURRENCE AND RETENTION OF DEBT. The Borrower covenants
and agrees that it will not, and will cause each Subsidiary and Unincorporated
Venture to not, incur, create, assume, or suffer to exist any Debt (other than
Debt existing on the Agreement Date) unless, immediately prior to, and after the
incurrence of, such Debt, the Borrower, its Subsidiaries and Unincorporated
Ventures are and will be in compliance with all covenants hereunder and there
shall otherwise be no Default or Event of Default hereunder.
- 55 -
<PAGE>
Section 5.7 INVESTMENTS. The Borrower will not, and will cause each
Subsidiary and Unincorporated Venture to not, make or permit to remain any
Investment other than a Permitted Investment.
Section 5.8 NOTICE OF LITIGATION. The Borrower covenants and agrees
that it will, and will cause each Subsidiary and Unincorporated Venture to,
promptly give notice in writing to the Lenders (i) of any litigation to which
the Borrower, any Subsidiary or Unincorporated Venture becomes a party, if (a)
the amount in controversy exceeds $500,000 and (b) the Borrower's insurance
carrier does not acknowledge coverage with respect to such litigation, and (ii)
of all proceedings before any governmental or regulatory agencies (a) affecting
or potentially affecting the business or property of the Borrower, any
Subsidiary or Unincorporated Venture in an amount in excess of $500,000 or (b)
materially affecting the ability of the Borrower, any Subsidiary or
Unincorporated Venture to perform their respective covenants and obligations
hereunder or under any other obligations owed any Lender.
Section 5.9 TOTAL DEBT RATIO. The Borrower covenants and agrees that it
will not allow the ratio of (i) Total Debt to (ii) EBITDA, in each case for the
four consecutive fiscal quarters immediately preceding the date of
determination, to be greater than 4.00 to 1 at the end of any fiscal quarter.
For purposes of this Section 5.9, with respect to assets not owned at all times
during the four consecutive quarters immediately preceding the date of
determination of EBITDA, there shall be (i) included in EBITDA (without
duplication) the EBITDA of any assets acquired during any such four consecutive
fiscal quarters immediately preceding the date of determination and (ii)
excluded from EBITDA the EBITDA of any asset disposed of during any such four
consecutive fiscal quarters immediately preceding the date of determination.
Section 5.10 CASH FLOW RATIO. The Borrower covenants and agrees that it
will not allow the ratio of (i)(a) EBITDA, plus (b) lease expense pursuant to
Operating Leases, minus (c) Maintenance Capital Expenditures to (ii)(a) Net
Interest, plus (b) lease expense pursuant to Operating Leases, plus (c) Current
Maturities, in each case other than Current Maturities (which, with respect to
Current Maturities, shall be for the four consecutive fiscal quarters
immediately succeeding the date of determination) for the four consecutive
fiscal quarters immediately preceding the date of determination, to be less than
1.50 to 1 at the end of any fiscal quarter.
Section 5.11 SENIOR DEBT RATIO. The Borrower covenants and agrees that
it will not allow the ratio of (i) Senior Debt to (ii) EBITDA, in each case for
the four consecutive fiscal quarters immediately preceding the date of
determination, to be greater than 3.0 to 1 at the end of any fiscal quarter. For
purposes of this Section 5.11, with respect to assets not owned at all times
during the four consecutive quarters immediately preceding the date of
determination of EBITDA, there shall be (i) included in EBITDA (without
duplication) the EBITDA of any assets acquired during any such four consecutive
fiscal quarters immediately preceding the date of determination and (ii)
excluded from EBITDA the EBITDA of any asset disposed of during any such four
consecutive fiscal quarters immediately preceding the date of determination.
- 56 -
<PAGE>
Section 5.12 LIENS. The Borrower covenants and agrees that it will not
create, assume or suffer to exist, or permit any Subsidiary or Unincorporated
Venture to create, assume or suffer to exist, any Lien on any asset now owned or
hereafter acquired by it except Permitted Liens. Other than with respect to
Senior Notes, the Borrower shall not, and shall not permit any Subsidiary or
Unincorporated Venture to, agree with any Person that it shall not create,
assume, incur, permit or suffer to exist or to be created, assumed, incurred or
permitted to exist, directly or indirectly, any Lien on any of its assets.
Section 5.13 ACCOUNTING CHANGES. The Borrower covenants and agrees that
it will not, and will not permit an of its Subsidiaries or Unincorporated
Ventures to, make any change in its accounting treatment or financial reporting
practices, except as permitted or required by GAAP in effect from time to time.
The Borrower will not change its fiscal year or the calculation of its fiscal
quarter ends.
Section 5.14 AMENDMENT AND MODIFICATION OF SUBORDINATED DEBT DOCUMENTS.
The Borrower covenants and agrees that it will not, and it will not permit any
Subsidiary or Unincorporated Venture to, directly or indirectly, amend, modify,
supplement, waive compliance with, or assent to noncompliance with, any term,
provision or condition of any of the documents governing or evidencing the
Subordinated Debt, which (i) the Lenders deem material (including, without
limitation, relating to events of default, acceleration rights, interest rates,
tenor, maturity date, subordination, covenants, prohibition against amending any
documents related to this Agreement and definitions with respect thereto
(including, without limitation, the definition of "Senior Debt")) or (ii) places
any further restrictions on the Borrower, its Subsidiaries or Unincorporated
Ventures or increases the obligations of the Borrower, its Subsidiaries or
Unincorporated Ventures thereunder or confers on the holders thereof any
additional rights.
Section 5.15 LEASE-BACKS. The Borrower covenants and agrees that it will
not, and will not permit any Subsidiary or Unincorporated Venture to, enter into
any arrangements, directly or indirectly, with any Person, whereby the Borrower,
any Subsidiary or Unincorporated Venture shall sell or transfer any property,
whether now owned or hereafter acquired, used or useful in its business, and
thereafter rent or lease the property so sold or transferred in an aggregate
amount (determined at the greater of fair market value or net book value) in
excess of $20,000,000 during the term of this Agreement.
Section 5.16 ENVIRONMENTAL MATTERS.
(a) The Borrower covenants and agrees that it will not, and will not
permit any of its Subsidiaries or Unincorporated Ventures to, use, generate,
manufacture, produce, store, release, discharge or dispose of on, under or about
any real property owned or leased by the Borrower or any of its Subsidiaries or
Unincorporated Ventures (such owned or leased real property, the "Property"), or
transport to or from the Property, any Hazardous Substance (as defined below),
or (to the extent within the Borrower's or such Subsidiary's or Unincorporated
Venture's control) permit any other Person to do so, where such could reasonably
be expected to have a Material Adverse Effect.
- 57 -
<PAGE>
(b) The Borrower shall keep and maintain and shall cause each Subsidiary
and Unincorporated Venture to keep and maintain, the Property in compliance with
any Environmental Law (as defined below) where the failure to do so could
reasonably be expected to have a Material Adverse Effect.
(c) In the event that any investigation, site monitoring, containment,
cleanup, removal, restoration or other remedial work of any kind or nature (the
"Remedial Work") with respect to the Property is required to be performed by the
Borrower or any of its Subsidiaries or Unincorporated Ventures under any
applicable local, state or federal law or regulation, any judicial order, or by
any governmental entity because of, or in connection with, the current or future
presence, suspected presence, release or suspected release of a Hazardous
Substance in or into the air, soil, groundwater or surface water at, on, under
or within the Property (or any portion thereof), the Borrower or such Subsidiary
or Unincorporated Venture shall within thirty (30) days after written demand for
performance thereof by the Lenders (or such shorter period of time as may be
required under any applicable law, regulation, order or agreement), commence and
thereafter diligently prosecute to completion, all such Remedial Work.
(d) The Borrower will defend, indemnify and hold harmless the Lenders,
and their respective employees, agents, officers and directors, from and against
any claims, demands, penalties, fines, liabilities, settlements, damages, costs
and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under any Environmental Law applicable to the
operations of the Borrowers or any Subsidiary or Unincorporated Venture or the
Property, or any orders, requirements or demands of Tribunal related thereto,
including, without limitation, attorneys' and consultants' fees, investigation
and laboratory fees, response costs, court costs and litigation expenses, except
to the extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor. This
indemnity shall continue in full force and effect regardless of the termination
of this Agreement.
(e) As used herein, (i) "Environmental Law" means any federal, state
or local law, statute, ordinance, or regulation now or hereafter in effect
pertaining to health, industrial hygiene, or the environmental conditions on,
under or about the Property, and (ii) the term "Hazardous Substance" means
those substances included within the definitions of "hazardous substances",
"hazardous materials", "toxic substances", or "solid waste" under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. Sections 9601 ET SEQ., the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Sections 6901 ET SEQ. and the Hazardous
Materials Transportation Act, 49 U.S.C. Sections 1801 ET SEQ., and in the
regulations laws, and such other substances, materials and wastes which are
or become regulated under applicable local, state or federal law, or which
are classified as hazardous or toxic under federal, state, or local laws or
regulations.
Section 5.17 ERISA COMPLIANCE. The Borrower covenants and agrees that it
shall, and shall cause each Subsidiary and Unincorporated Venture to (i) at all
times, make prompt payment of all contributions required under all Plans and
required to meet the minimum funding
- 58 -
<PAGE>
standard set forth in ERISA with respect to its Plans, (ii) after the discovery
by an Authorized Officer, notify the Lenders immediately of any fact, including,
but not limited to, any Reportable Event arising in connection with any of its
Plans, which might constitute grounds for termination thereof by the PBGC or for
the appointment by the appropriate United States District Court of a trustee to
administer such Plan, together with a statement, if requested by any Lender, as
to the reason therefor and the action, if any, proposed to be taken with respect
thereto, and (iii) not permit any Plan to be subject to any involuntary
termination proceedings.
Section 5.18 BUSINESS. The Borrower covenants and agrees that it will
not, and will not permit any Subsidiary or Unincorporated Venture to, engage in,
directly or through other Persons, any business other than the businesses now
carried on and other businesses directly related thereto.
Section 5.19 DEBT. The Borrower covenants and agrees that it will not,
and will cause each Subsidiary and Unincorporated Venture to not, (i) default,
beyond any notice, grace or cure period, in any payment equal to or exceeding
the aggregate amount of $1,000,000 of principal of or interest on any Debt with
respect to which recourse may be made against the Borrower or any Subsidiary or
Unincorporated Venture beyond any period of grace provided with respect thereto,
or (ii) default, beyond any notice, grace or cure period, in the performance of
any other agreement, term, covenant or condition contained in any agreement or
instrument under or by which any such Debt, the unpaid principal amount of which
then equals or exceeds $1,000,000 is created, evidenced or secured if the effect
of such default is to cause such Debt to become due before its stated maturity.
Section 5.20 TRANSACTIONS WITH AFFILIATES. The Borrower covenants and
agrees that it will not, and will not permit any Subsidiary or Unincorporated
Venture to, directly or indirectly, enter into any transaction (including, but
not limited to, the sale or exchange of property or the rendering of service)
with any of its Affiliates, other than in the ordinary course of business and
upon fair and reasonable terms no less favorable than the Borrower or any
Subsidiary or Unincorporated Venture could obtain or could become entitled to in
an arm's-length transaction with a Person which was not an Affiliate.
Section 5.21 USE OF PROCEEDS. The Borrower shall use the proceeds of the
Commitment to refinance the debt outstanding under the Existing Credit Agreement
and for working capital and general corporate purposes, including repayment of
Debt.
Section 5.22 INDEMNITY.
(a) THE BORROWER AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS
THE ADMINISTRATIVE LENDER, EACH LENDER, EACH OF THEIR RESPECTIVE AFFILIATES, AND
EACH OF THEIR RESPECTIVE (INCLUDING SUCH AFFILIATES') OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS, SHAREHOLDERS AND CONSULTANTS (INCLUDING, WITHOUT
LIMITATION, THOSE RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED
- 59 -
<PAGE>
SATISFACTION OF ANY OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE FOREGOING
(COLLECTIVELY, "INDEMNITEES") FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS,
COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING,
WITHOUT LIMITATION, THE FEES AND DISBURSEMENTS OF COUNSEL FOR SUCH INDEMNITEES
IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING,
WHETHER OR NOT SUCH INDEMNITEES SHALL BE DESIGNATED A PARTY THERETO), IMPOSED
ON, INCURRED BY, OR ASSERTED AGAINST SUCH INDEMNITEES (WHETHER DIRECT, INDIRECT
OR CONSEQUENTIAL AND WHETHER BASED ON ANY FEDERAL, STATE, OR LOCAL LAWS AND
REGULATIONS, UNDER COMMON LAW OR AT EQUITABLE CAUSE, OR ON CONTRACT, TORT OR
OTHERWISE, ARISING FROM OR CONNECTED WITH THE PAST, PRESENT OR FUTURE OPERATIONS
OF THE BORROWER OR ITS PREDECESSORS IN INTEREST, OR THE PAST, PRESENT OR FUTURE
ENVIRONMENTAL CONDITION OF PROPERTY OF THE BORROWER), IN ANY MANNER RELATING TO
OR ARISING OUT OF THIS AGREEMENT, THE LOAN PAPERS, OR ANY ACT, EVENT OR
TRANSACTION OR ALLEGED ACT, EVENT OR TRANSACTION RELATING OR ATTENDANT THERETO,
THE MAKING OF ANY PARTICIPATIONS IN THE ADVANCES OR THE LETTERS OF CREDIT AND
THE MANAGEMENT OF THE ADVANCES OR THE LETTERS OF CREDIT, INCLUDING IN CONNECTION
WITH, OR AS A RESULT, IN WHOLE OR IN PART, OF ANY NEGLIGENCE OF ADMINISTRATIVE
LENDER OR ANY LENDER (OTHER THAN THOSE MATTERS RAISED EXCLUSIVELY BY A
PARTICIPANT AGAINST THE ADMINISTRATIVE LENDER OR ANY LENDER AND NOT THE
BORROWER), OR THE USE OR INTENDED USE OF THE PROCEEDS OF THE ADVANCES OR THE
LETTERS OF CREDIT HEREUNDER, OR IN CONNECTION WITH ANY INVESTIGATION OF ANY
POTENTIAL MATTER COVERED HEREBY, BUT EXCLUDING (i) ANY CLAIM OR LIABILITY THAT
ARISES AS THE RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY
INDEMNITEE, AS FINALLY JUDICIALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION, AND (ii) MATTERS RAISED BY ONE LENDER AGAINST ANOTHER LENDER OR BY
ANY SHAREHOLDERS OF A LENDER AGAINST A LENDER OR ITS MANAGEMENT (COLLECTIVELY,
"INDEMNIFIED MATTERS"). TO THE EXTENT THAT ANY INDEMNIFIED MATTER INVOLVES ONE
OR MORE INDEMNITEES, SUCH INDEMNITEES SHALL USE THE SAME LEGAL COUNSEL UNLESS
ANY INDEMNITEE IN ITS REASONABLE DISCRETION DETERMINES THAT CONFLICTS EXIST OR
MAY ARISE IN CONNECTION WITH SUCH REPRESENTATION.
(b) IN ADDITION, THE BORROWER SHALL PERIODICALLY, UPON REQUEST,
REIMBURSE EACH INDEMNITEE FOR ITS REASONABLE LEGAL AND OTHER ACTUAL EXPENSES
(INCLUDING THE COST OF ANY INVESTIGATION AND PREPARATION) INCURRED IN CONNECTION
WITH ANY INDEMNIFIED MATTER. IF FOR ANY REASON THE FOREGOING INDEMNIFICATION IS
UNAVAILABLE TO ANY INDEMNITEE OR INSUFFICIENT TO HOLD ANY INDEMNITEE HARMLESS
WITH
- 60 -
<PAGE>
RESPECT TO INDEMNIFIED MATTERS, THEN THE BORROWER SHALL CONTRIBUTE TO THE AMOUNT
PAID OR PAYABLE BY SUCH INDEMNITEE AS A RESULT OF SUCH LOSS, CLAIM, DAMAGE OR
LIABILITY IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT NOT ONLY THE RELATIVE
BENEFITS RECEIVED BY THE BORROWER AND THE BORROWER'S STOCKHOLDERS ON THE ONE
HAND AND SUCH INDEMNITEE ON THE OTHER HAND BUT ALSO THE RELATIVE FAULT OF THE
BORROWER AND SUCH INDEMNITEE, AS WELL AS ANY OTHER RELEVANT EQUITABLE
CONSIDERATIONS. THE REIMBURSEMENT, INDEMNITY AND CONTRIBUTION OBLIGATIONS UNDER
THIS SECTION SHALL BE IN ADDITION TO ANY LIABILITY WHICH THE BORROWER MAY
OTHERWISE HAVE, SHALL EXTEND UPON THE SAME TERMS AND CONDITIONS TO EACH
INDEMNITEE, AND SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF ANY
SUCCESSORS, ASSIGNS, HEIRS AND PERSONAL REPRESENTATIVES OF THE BORROWER, THE
ADMINISTRATIVE LENDER, THE LENDERS AND ALL OTHER INDEMNITEES. THIS SECTION
SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT AND PAYMENT OF THE OBLIGATIONS.
ARTICLE 6
INFORMATION
Section 6.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY THE BORROWER. The
Borrower will deliver to each Lender:
(a) As soon as practicable after the end of each of the first three
quarterly fiscal periods in each fiscal year of the Borrower, and in any event
within 45 days thereafter, duplicate copies of
(1) Combined balance sheets, statements of earnings, shareholders'
equity and cash flows for the portion of the fiscal year ending with such
quarter; all in reasonable detail and accompanied by an Officer's
Certificate certifying that the aforementioned financial statements
present fairly the financial position of the Borrower (Combined Basis) at
the end of such quarter and the results of operations and the changes in
financial position for the portion of the fiscal year ending with such
quarter, determined in accordance with GAAP; and
(2) An Officer's Certificate (with calculations and a new
SCHEDULE 11 attached thereto) certifying (i) as to any increases or
reductions in interest in the Significant Investments, and (ii) compliance
with Sections 5.4, 5.5, 5.9, 5.10 and 5.11.
(b) As soon as practicable after the end of each fiscal year of the
Borrower and in any event within 120 days thereafter, duplicate copies of:
- 61 -
<PAGE>
(1) Combined balance sheets, statements of earnings, shareholders'
equity and cash flows of the Borrower for such year; all in reasonable
detail, prepared on a basis consistent with the financial statements
delivered to all Lenders in prior periods and accompanied by an
unqualified opinion and report of KPMG Peat Marwick, or other independent
certified accountants of recognized standing selected by the Borrower and
reasonably consented to by Lenders, which report shall state that no
default under this Agreement and no condition or event which after notice
or lapse of time or both would constitute a default under this Agreement
has come to the knowledge of such accountants or, if such is not the case,
the details of such default or such condition or event; and
(2) An Officer's Certificate (with calculations and a new
SCHEDULE 11 attached thereto) certifying (i) as to any increases or
reductions in interest in the Significant Investments, and (ii) compliance
with Sections 5.4, 5.5, 5.9, 5.10 and 5.11.
(c) As soon as practicable after the Borrower or any Subsidiary files
with the S.E.C. any of the following documents and in any event within 10 days
thereafter, a copy of:
(1) Any final Registration Statement filed for the registration of
any securities under the Securities Act of 1933, as amended (except a
Registration Statement on Form S-8 for the registration of stock to be
issued in connection with any Stock Plan);
(2) Each Annual and Periodic Report filed under Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended;
(3) Each definitive Proxy Statement filed pursuant to the
Securities Exchange Act of 1934, as amended; and
together with any other document filed with the S.E.C. or the New York
Stock Exchange, Inc., as may be requested by any Lender.
(d) Upon request by any Lender, copies of the following:
(1) Each annual report/return, as well as all schedules and
attachments required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA and the regulations promulgated
thereunder, in connection with each of its Plans for each Plan year; and
(2) Such additional information concerning any of its Plans as may
be reasonably requested.
(e) On the date of receipt by the Borrower of any change in the Index
Debt Rating, a copy of such change.
- 62 -
<PAGE>
(f) Promptly upon the occurrence of a Default or Event of Default, a
written notice specifying the nature and period of existence thereof and what
action is being taken or is proposed to be taken with respect thereto.
(g) Promptly upon becoming aware thereof, notice of the commencement or
filing (or of a threat to commence or file) of any action, suit or proceeding
before any court or any federal, state, municipal or other governmental agency
or authority involving claims for damages, fines or penalties in excess of
$500,000 (after deducting any amount with respect to which the Borrower, any
Subsidiary or Unincorporated Venture is insured) against or in any other way
relating to the Borrower, any Subsidiary or any Unincorporated Venture or any of
their respective properties or businesses.
(h) With reasonable promptness, such other data and information as from
time to time may be reasonably requested by any Lender.
(i) Notwithstanding anything in this Section 6.1 to the contrary, (i) if
the terms of any Subordinated Debt of the Borrower requires delivery of Parent
Company financial statements and (ii) any Lender shall request delivery of
Parent Company financial statements, the Borrower shall also deliver to such
Lender the financial statements required to be delivered pursuant to (1) Section
6.1(a) on a Parent Company basis within 60 days after the end of the first three
quarterly fiscal periods of the Borrower and (2) Section 6.1(b) on a Parent
Company basis within 120 days after the end of each fiscal year of the Borrower.
Section 6.2 OFFICER'S CERTIFICATE. Each set of financial statements
delivered pursuant to Sections 6.1(a) and (b) shall be accompanied by an
Officer's Certificate stating whether there exists on the date of such
certificate any condition or event which then constitutes, or which after notice
or lapse of time or both, would constitute, a breach of any covenant herein, and
if any such condition or event then exists, specifying the nature and period of
existence thereof and the action the Borrower is taking or proposes to take with
respect thereto.
ARTICLE 7
DEFAULT
Section 7.1 EVENTS OF DEFAULT. Each of the following shall constitute
an Event of Default, whatever the reason for such event, and whether voluntary,
involuntary, or effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or
non-governmental body:
(a) The Borrower fails to make any payment of principal on any Note or
any Reimbursement Obligation on the date such payment is due;
- 63 -
<PAGE>
(b) The Borrower fails to make any payment of interest on any Note,
Reimbursement Obligation or any other costs, fees, expenses or other amounts
payable hereunder or under the other Loan Papers within one Business Day after
the date such payment is due;
(c) The Borrower or any Subsidiary or Unincorporated Venture fails to
perform or observe (i) any covenant contained in Sections 5.3, 5.4, 5.5, 5.6,
5.7, 5.9, 5.10, 5.11, 5.12, 5.13, 5.14, 5.15, 5.19, 5.20 or 5.21 of this
Agreement or (ii) any other covenant in this Agreement or any other Loan Paper
(other than the Master Covenant Agreement) to be performed or observed by it and
such failure with respect to such other covenants continues for a period of 30
days after any Lender has given written notice specifying such failure to the
Borrower;
(d) Any material warranty or representation by or on behalf of the
Borrower or any Subsidiary or Unincorporated Venture contained in this Agreement
or any other Loan Paper is false or misleading in any material respect;
(e) The Borrower or any Subsidiary or Unincorporated Venture fails to
make any payment due on any other Debt in an aggregate amount of at least
$1,000,000 beyond any applicable grace period, including any extension thereof,
or the Company, or any Subsidiary fails to perform or observe any other
provision contained in any such Debt or any agreement securing or relating to
such Debt if and only if the effect of such failure to make such payment or to
perform or observe such other provision is to cause or permit the holder of such
Debt or any Person acting on such holder's behalf to cause such Debt to become
due prior to its stated maturity;
(f) The Borrower or any Significant Subsidiary or Unincorporated Venture
(other than Insolvent Unincorporated Ventures) (i) shall become insolvent, (ii)
shall fail to pay its debts generally as they become due, (iii) shall make a
general assignment for the benefit of creditors, (iv) shall voluntarily seek,
consent to, or acquiesce in the benefit of any Debtor Relief Law, (v) shall
become a party to or is made the subject of any proceeding provided for by any
Debtor Relief Law, other than as a creditor or claimant (unless, in the event
such proceeding is involuntary, the petition instituting same is dismissed
within 60 days after its filing), or (vi) take any corporate or other action for
the purpose of effecting any of the foregoing;
(g) The Borrower or any Subsidiary or Unincorporated Venture fails to
have discharged, within a period of 45 days after the expiration of all rights
of appeal, any judgment, warrant of attachment, sequestration, or similar
proceeding against any of its respective assets with a value, individually or
collectively, in excess of a Material Amount;
(h) The Borrower or any Subsidiary or Unincorporated Venture shall fail
to perform or observe, beyond any grace period provided with respect thereto and
provided that the Borrower has been given a notice of default with respect to,
any covenant contained in that certain Master Covenant Agreement;
- 64 -
<PAGE>
(i) Any material provision of any Loan Paper after delivery thereof
hereunder shall for any reason cease to be valid and binding on the Person
(other than any Lender) executing such Loan Paper, or the Borrower or such
Person shall so state in writing;
(j) A final judgment or judgments for the payment of money shall be
entered by a court or courts against the Borrower or any Subsidiary or
Unincorporated Venture and such judgment or judgments remain unstayed or
undischarged for a period of 30 days from the date of entry thereof and the
aggregate amount of all such judgments exceeds a Material Amount (net of actual
insurance coverage if the Lenders receive evidence satisfactory to them that
coverage exists);
(k) With respect to any Plan of the Borrower or any member of its
Controlled Group: (i) the Borrower, any such member, or any other
party-in-interest or disqualified person shall engage in transactions which in
the aggregate would reasonably result in a direct or indirect liability to the
Borrower or any member of its Controlled Group in excess of $100,000 under
Section 409 or 502 of ERISA or Section 4975 of the Code; (ii) the Borrower or
any member of its Controlled Group shall incur any accumulated funding
deficiency, as defined in Section 412 of the Code, in the aggregate in excess of
$100,000, or request a funding waiver from the Internal Revenue Service for
contributions in the aggregate in excess of $100,000; (iii) the Borrower or any
member of its Controlled Group shall incur any withdrawal liability in the
aggregate in excess of $100,000 as a result of a complete or partial withdrawal
within the meaning of Section 4203 or 4205 of ERISA, or any other liability with
respect to a Plan in excess of $100,000, unless the amount of such liability has
been funded within the Plan or pursuant to one or more insurance contracts; (iv)
the Borrower or any member of its Controlled Group shall fail to make a required
contribution by the due date under Section 412 of the Code or Section 302 of
ERISA which would result in the imposition of a lien under Section 412 of the
Code or Section 302 of ERISA; (v) the Borrower, any member of its Controlled
Group or any Plan sponsor shall notify the PBGC of an intent to terminate, or
the PBGC shall institute proceedings to terminate, or the PBGC shall institute
proceedings to terminate, any Plan subject to Title IV of ERISA; (vi) a
Reportable Event shall occur with respect to a Plan subject to Title IV of
ERISA, and within 15 days after the reporting of such Reportable Event to the
Administrative Lender, the Administrative Lender shall have notified the
Borrower in writing that the Determining Lenders have made a determination that,
on the basis of such Reportable Event, there are reasonable grounds for the
termination of such Plan by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer such Plan and as a
result thereof an Event of Default shall have occurred hereunder; (vii) a
trustee shall be appointed by a court of competent jurisdiction to administer
any Plan or the assets thereof; (viii) the benefits of any Plan shall be
increased, or the Borrower or any member of its Controlled Group shall begin to
maintain, or begin to contribute to, any Plan, without the prior written consent
of the Determining Lenders; or (ix) any ERISA Event with respect to a Plan
subject to Title IV of ERISA shall have occurred, and 30 days thereafter (a)
such ERISA Event, other than such event described in clause (f) of the
definition of ERISA Event herein, (if correctable) shall not have been corrected
and (b) the then present value of such Plan's benefit liabilities, as defined in
Title IV of ERISA, shall exceed the then current value of assets
- 65 -
<PAGE>
accumulated in such Plan; provided, however, that the events listed in
subsections (v) through (ix) shall constitute Events of Default only if, as of
the date thereof or any subsequent date, the amount of liability that the
Borrower or any member of its Controlled Group reasonably is likely to incur in
the aggregate under Section 4062, 4063, 4064, 4219 or 4023 of ERISA or any other
provision of law with respect to all such Plans, computed by the actuary of the
Plan taking into account any applicable rules and regulations of the PBGC at
such time, and based on the actuarial assumptions used by the Plan, resulting
from or otherwise associated with such event exceeds $100,000; or
(l) A Change of Control shall have occurred.
Section 7.2 REMEDIES. If an Event of Default shall have occurred and
shall be continuing:
(a) With the exception of an Event of Default specified in Section
7.1(f) hereof, the Administrative Lender shall, upon the direction of the
Determining Lenders, terminate the Commitment and/or declare the principal of
and interest on the Advances and all Obligations and other amounts owed under
the Loan Papers to be forthwith due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything in the Loan Papers to the contrary notwithstanding.
(b) Upon the occurrence of an Event of Default specified in Section
7.1(f) hereof, such principal, interest and other amounts shall thereupon and
concurrently therewith become due and payable and the Commitment shall
automatically forthwith terminate, all without any action by the Administrative
Lender, any Lender or any holders of the Notes and without presentment, demand,
protest or other notice of any kind, all of which are expressly waived, anything
in the Loan Papers to the contrary notwithstanding.
(c) If any Letter of Credit shall be then outstanding, the
Administrative Lender may demand upon the Borrower to, and forthwith upon such
demand, the Borrower shall, pay to the Administrative Lender in same day funds
at the office of the Administrative Lender in such demand for deposit in the L/C
Cash Collateral Account, an amount equal to 102% of the maximum amount available
to be drawn under the Letters of Credit then outstanding.
(d) The Administrative Lender, and the Lenders may exercise all of the
post-default rights granted to them under the Loan Papers or under Applicable
Law.
(e) The rights and remedies of the Administrative Lender and the Lenders
hereunder shall be cumulative, and not exclusive.
- 66 -
<PAGE>
ARTICLE 8
CHANGES IN CIRCUMSTANCES
Section 8.1 LIBOR BASIS DETERMINATION INADEQUATE. If with respect to
any proposed LIBOR Advance for any Interest Period, any Lender determines that
(i) deposits in dollars (in the applicable amount) are not being offered to that
Lender in the relevant market for such Interest Period or (ii) the LIBOR Basis
for such proposed LIBOR Advance does not adequately cover the cost to such
Lender of making and maintaining such proposed LIBOR Advance for such Interest
Period, such Lender shall forthwith give notice thereof to the Borrower,
whereupon until such Lender notifies the Borrower that the circumstances giving
rise to such situation no longer exist, the obligation of such Lender to make
LIBOR Advances shall be suspended.
Section 8.2 ILLEGALITY. If any applicable law, rule or regulation, or
any change therein or adoption thereof, or interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its LIBOR Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, shall make it unlawful or impossible for such Lender (or its LIBOR
Lending Office) to make, maintain or fund its LIBOR Advances, such Lender shall
so notify the Borrower and the Administrative Lender. Before giving any notice
to the Borrower pursuant to this Section, the notifying Lender shall designate a
different LIBOR Lending Office or other lending office if such designation will
avoid the need for giving such notice and will not, in the sole judgment of the
Lender, be materially disadvantageous to the Lender. Upon receipt of such
notice, notwithstanding anything contained in Article 2 hereof, the Borrower
shall repay in full the then outstanding principal amount of each LIBOR Advance
owing to the notifying Lender, together with accrued interest thereon, on either
(a) the last day of the Interest Period applicable to such Advance, if the
Lender may lawfully continue to maintain and fund such Advance to such day, or
(b) immediately, if the Lender may not lawfully continue to fund and maintain
such Advance to such day. Concurrently with repaying each affected LIBOR
Advance owing to such Lender, notwithstanding anything contained in Article 2
hereof, the Borrower shall borrow a Base Rate Advance from such Lender, and such
Lender shall make such Base Rate Advance, in an amount such that the outstanding
principal amount of the Advances owing to such Lender shall equal the
outstanding principal amount of the Advances owing immediately prior to such
repayment.
Section 8.3 INCREASED COSTS.
(a) If any applicable law, rule or regulation, or any change in or
adoption of any law, rule or regulation, or any interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof or compliance by any Lender
(or its LIBOR Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or compatible
agency:
- 67 -
<PAGE>
(i) shall subject a Lender (or its LIBOR Lending Office) to any
Tax (net of any tax benefit engendered thereby) with respect to its LIBOR
Advances or its obligation to make such Advances, or shall change the
basis of taxation of payments to a Lender (or to its LIBOR Lending Office)
of the principal of or interest on its LIBOR Advances or in respect of any
other amounts due under this Agreement, as the case may be, or its
obligation to make such Advances (except for changes in the rate of tax on
the overall net income, net worth or capital of the Lender and franchise
taxes, doing business taxes or minimum taxes imposed upon such Lender); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of
the Federal Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, a Lender's LIBOR Lending Office or shall impose on the Lender (or its
LIBOR Lending Office) or on the United States market for certificates of
deposit or the London interbank market any other condition affecting its
LIBOR Advances or its obligation to make such Advances;
and the result of any of the foregoing is to increase the cost to a Lender (or
its LIBOR Lending Office) of making or maintaining any LIBOR Advances, or to
reduce the amount of any sum received or receivable by a Lender (or its LIBOR
Lending Office) with respect thereto, by an amount deemed by a Lender to be
material ("Increased Advance Costs"), then, within 15 days after demand by a
Lender, the Borrower agrees to pay to such Lender such additional amount as will
compensate such Lender for such increased costs or reduced amounts, subject to
Section 10.9 hereof. The affected Lender will as soon as practicable notify the
Borrower of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Lender to compensation pursuant to this Section
and will designate a different LIBOR Lending Office or other lending office if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole judgment of the affected Lender made in
good faith, be materially disadvantageous to such Lender. Notwithstanding the
foregoing, any Lender's demand for Increased Advance Costs shall not include any
Increased Advance Costs with respect to any period more than 180 days prior to
the date that such Lender gives notice to the Borrower of such Increased Advance
Costs unless the effective date of the condition which results in the right to
receive Increased Advance Costs is retroactive (the "Increased Advance Costs
Retroactive Effective Date"). If any Increased Advance Costs has an Increased
Advance Costs Retroactive Effective Date and any Lender demands compensation
within 180 days after the date setting the Increased Advance Costs Retroactive
Effective Date (the "Increased Advance Costs Set Date"), such Lender shall have
the right to receive such Increased Advance Costs from the Increased Advance
Costs Retroactive Effective Date. If a Lender does not demand such Increased
Advance Costs within 180 days after the Increased Advance Costs Set Date, such
Lender may not receive payment of Increased Advance Costs with respect to any
period more than 180 days prior to such demand.
(b) A certificate of any Lender claiming compensation under this Section
and setting forth the additional amounts to be paid to it hereunder and
calculations therefor shall be
- 68 -
<PAGE>
conclusive in the absence of manifest error. In determining such amount, a
Lender may use any reasonable averaging and attribution methods. If a Lender
demands compensation under this Section, the Borrower may at any time, upon at
least five Business Days' prior notice to the Lender, after reimbursement to the
Lender by the Borrower in accordance with this Section of all costs incurred,
prepay in full the then outstanding LIBOR Advances of the Lender, together with
accrued interest thereon to the date of prepayment, along with any reimbursement
required under Section 2.9 hereof. Concurrently with prepaying such LIBOR
Advances, the Borrower shall borrow a Base Rate Advance from the Lender, and the
Lender shall make such Base Rate Advance, in an amount such that the outstanding
principal amount of the Advances owing to such Lender shall equal the
outstanding principal amount of the Advances owing immediately prior to such
prepayment.
Section 8.4 EFFECT ON BASE RATE ADVANCES. If notice has been given
pursuant to Section 8.1, 8.2 or 8.3 hereof suspending the obligation of a Lender
to make LIBOR Advances, or requiring LIBOR Advances of a Lender to be repaid or
prepaid, then, unless and until the Lender notifies the Borrower that the
circumstances giving rise to such repayment no longer apply, all Advances which
would otherwise be made by such Lender as LIBOR Advances shall be made instead
as Base Rate Advances.
Section 8.5 CAPITAL ADEQUACY. If either (a) the introduction of or any
change in or in the interpretation of any law, rule or regulation or (b)
compliance by a Lender with any law, rule or regulation or any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital required
or expected to be maintained by a Lender or any corporation controlling such
Lender, and such Lender determines that the amount of such capital is increased
by or based upon the existence of such Lender's Commitment or Advances hereunder
and other commitments or advances of such Lender of this type, then, upon demand
by such Lender, subject to Section 10.9, the Borrower shall immediately pay to
such Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender with respect to such circumstances
(collectively, "Additional Costs"), to the extent that such Lender reasonably
determines in good faith such increase in capital to be allocable to the
existence of such Lender's Commitment hereunder. Notwithstanding the foregoing,
any Lender's demand for Additional Costs shall not include any Additional Costs
with respect to any period more than 180 days prior to the date that such Lender
gives notice to the Borrower of such Additional Costs unless the effective date
of the Regulatory Modification which results in the right to receive Additional
Costs is retroactive (the "Regulatory Modification Retroactive Effective Date").
If any Regulatory Modification has a Regulatory Modification Retroactive
Effective Date and any Lender demands compensation within 180 days after the
date setting the Regulatory Modification Retroactive Effective Date (the
"Regulatory Modification Set Date"), such Lender shall have the right to receive
such Additional Costs from the Regulatory Modification Retroactive Effective
Date. If a Lender does not demand such Additional Costs within 180 days after
the Regulatory Modification Set Date, such Lender may not receive payment of
Additional Costs with respect to any period more than 180 days prior to such
demand. A certificate as to such amounts
- 69 -
<PAGE>
submitted to the Borrower by a Lender hereunder, shall, in the absence of
manifest error, be conclusive and binding for all purposes.
ARTICLE 9
AGREEMENT AMONG LENDERS
Section 9.1 AGREEMENT AMONG LENDERS. The Lenders agree among themselves
that:
(a) ADMINISTRATIVE LENDER. Each Lender hereby appoints the
Administrative Lender as its nominee in its name and on its behalf, to receive
all documents and items to be furnished hereunder; to act as nominee for and on
behalf of all Lenders under the Loan Papers; to, except as otherwise expressly
set forth herein, take such action as may be requested by the Determining
Lenders, provided that, unless and until the Administrative Lender shall have
received such requests, the Administrative Lender may take such administrative
action, or refrain from taking such administrative action, as it may deem
advisable and in the best interests of the Lenders; to arrange the means whereby
the proceeds of the Advances of the Lenders are to be made available to the
Borrower; to distribute promptly to each Lender information, requests and
documents received from the Borrower, and each payment (in like funds received)
with respect to any of such Lender's Advances, fee or other amount; and to
deliver to the Borrower requests, demands, approvals and consents received from
the Lenders. Administrative Lender agrees to promptly distribute to each
Lender, at such Lender's address set forth below information, requests,
documents and payments received from the Borrower.
(b) REPLACEMENT OF ADMINISTRATIVE LENDER. Should the Administrative
Lender or any successor Administrative Lender ever cease to be a Lender
hereunder, or should the Administrative Lender or any successor Administrative
Lender ever resign as Administrative Lender, or should the Administrative Lender
or any successor Administrative Lender ever be removed with cause by the
Determining Lenders, then the Lender appointed by the other Lenders shall
forthwith become the Administrative Lender, and the Borrower and the Lenders
shall execute such documents as any Lender may reasonably request to reflect
such change. If the Administrative Lender also then serves in the capacity of
the Swing Line Bank or the Issuing Bank, such resignation or removal shall
constitute resignation or removal of the Swing Line Bank and the Issuing Bank.
Any resignation or removal of the Administrative Lender or any successor
Administrative Lender shall become effective upon the appointment by the Lenders
of a successor Administrative Lender; provided, however, that if the Lenders
fail for any reason to appoint a successor within 60 days after such removal or
resignation, the Administrative Lender or any successor Administrative Lender
(as the case may be) shall thereafter have no obligation to act as
Administrative Lender hereunder.
(c) EXPENSES. Each Lender shall pay its pro rata share, based on its
Specified Percentage, of any expenses paid by the Administrative Lender directly
and solely in connection with any of the Loan Papers if Administrative Lender
does not receive reimbursement therefor
- 70 -
<PAGE>
from other sources within 60 days after the date incurred, unless payment of
such fees is being diligently disputed by such Lender or the Borrower in good
faith. Any amount so paid by the Lenders to the Administrative Lender shall be
returned by the Administrative Lender pro rata to each paying Lender to the
extent later paid by the Borrower or any other Person on the Borrower's behalf
to the Administrative Lender.
(d) DELEGATION OF DUTIES. The Administrative Lender may execute any
of its duties hereunder by or through officers, directors, employees, attorneys
or agents, and shall be entitled to (and shall be protected in relying upon)
advice of counsel concerning all matters pertaining to its duties hereunder.
(e) RELIANCE BY ADMINISTRATIVE LENDER. The Administrative Lender and
its officers, directors, employees, attorneys and agents shall be entitled to
rely and shall be fully protected in relying on any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype
message, statement, order, or other document or conversation reasonably believed
by it or them in good faith to be genuine and correct and to have been signed or
made by the proper Person and, with respect to legal matters, upon opinions of
counsel selected the Administrative Lender. The Administrative Lender may, in
its reasonable judgment, deem and treat the payee of any Note as the owner
thereof for all purposes hereof.
(f) LIMITATION OF ADMINISTRATIVE LENDER'S LIABILITY. Neither the
Administrative Lender nor any of its officers, directors, employees, attorneys
or agents shall be liable for any action taken or omitted to be taken by it or
them hereunder in good faith and believed by it or them to be within the
discretion or power conferred to it or them by the Loan Papers or be responsible
for the consequences of any error of judgment, except for its or their own gross
negligence or wilful misconduct. Except as aforesaid, the Administrative Lender
shall be under no duty to enforce any rights with respect to any of the
Advances, or any security therefor. The Administrative Lender shall not be
compelled to do any act hereunder or to take any action towards the execution or
enforcement of the powers hereby created or to prosecute or defend any suit in
respect hereof, unless indemnified to its satisfaction against loss, cost,
liability and expense. The Administrative Lender shall not be responsible in
any manner to any Lender for the effectiveness, enforceability, genuineness,
validity or due execution of any of the Loan Papers, or for any representation,
warranty, document, certificate, report or statement made herein or furnished in
connection with any Loan Papers, or be under any obligation to any Lender to
ascertain or to inquire as to the performance or observation of any of the
terms, covenants or conditions of any Loan Papers on the part of the Borrower.
To the extent not reimbursed by the Borrower, each Lender hereby jointly and
severally indemnifies and holds harmless the Administrative Lender, pro rata
according to its Specified Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and/or disbursements of any kind or nature whatsoever which may be
imposed on, asserted against, or incurred by the Administrative Lender in any
way with respect to any Loan Papers or any action taken or omitted by the
Administrative Lender under the Loan Papers (including any negligent action of
the Administrative Lender), except to the extent the same result from gross
negligence or wilful misconduct by the Administrative Lender.
- 71 -
<PAGE>
(g) LIABILITY AMONG LENDERS. No Lender shall incur any liability
(other than the sharing of expenses and other matters specifically set forth
herein and in the other Loan Papers) to any other Lender, except for acts or
omissions in bad faith.
(h) RIGHTS AS LENDER. With respect to its commitment hereunder, the
Advances made by it and Note issued to it, the Administrative Lender shall have
the same rights as a Lender and may exercise the same as though it were not the
Administrative Lender, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Lender in its individual
capacity. The Administrative Lender or any Lender may accept deposits from, act
as trustee under indentures of, and generally engage in any kind of business
with, the Borrower and any of its Affiliates, and any Person who may do business
with or own securities of the Borrower or any of its Affiliates, all as if the
Administrative Lender were not the Administrative Lender hereunder and without
any duty to account therefor to the Lenders.
Section 9.2 LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Lender or any
other Lender and based upon the financial statements delivered to such Lender by
the Borrower, and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Lender or any other Lender and based
upon such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Papers.
Section 9.3 BENEFITS OF ARTICLE. None of the provisions of this Article
shall inure to the benefit of any Person other than Lenders; consequently, no
Person shall be entitled to rely upon, or to raise as a defense, in any manner
whatsoever, the failure of the Administrative Lender or any Lender to comply
with such provisions.
ARTICLE 10
MISCELLANEOUS
Section 10.1 NOTICES.
(a) All notices and other communications under this Agreement shall be
in writing and shall be deemed to have been given on the date personally
delivered or sent by telecopy (answerback received), or three days after deposit
in the mail, designated as certified mail, return receipt requested,
postage-prepaid, or one day after being entrusted to a reputable commercial
overnight delivery service, or one day after being delivered to the telegraph
office or sent out by telex addressed to the party to which such notice is
directed at its address determined as provided in this Section. All notices and
other communications under this Agreement shall be given to the parties hereto
at the following addresses:
- 72 -
<PAGE>
(i) If to the Borrower, at:
La Quinta Inns, Inc.
112 E. Pecan Street, Suite 1200
San Antonio, Texas 78205
Attn: Dewey Chambers, Treasurer
(ii) If to the Administrative Lender, at:
NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Douglas E. Hutt, Senior Vice President
(iii) If to a Lender, at its address shown below its name on the
signature pages hereof, or if applicable, set forth in its
Assignment Agreement.
(b) Any party hereto may change the address to which notices shall be
directed by giving 10 days' written notice of such change to the other parties.
Section 10.2 EXPENSES. The Borrower shall promptly pay:
(a) all reasonable out-of-pocket expenses of the Administrative Lender
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Papers, the transactions contemplated hereunder and
thereunder, and the making of Advances hereunder, including without limitation
the reasonable fees and disbursements of Special Counsel;
(b) all reasonable out-of-pocket expenses and attorneys' fees of the
Administrative Lender in connection with the administration of the transactions
contemplated in this Agreement and the other Loan Papers and the preparation,
negotiation, execution and delivery of any waiver, amendment or consent by the
Lenders relating to this Agreement or the other Loan Papers; and
(c) all costs, out-of-pocket expenses and attorneys' fees of the
Administrative Lender and each Lender incurred for enforcement, collection,
restructuring, refinancing and "work-out", or otherwise incurred in obtaining
performance under the Loan Papers, and all costs and out-of-pocket expenses of
collection if default is made in the payment of the Notes, which in each case
shall include without limitation fees and expenses of consultants, counsel for
the Administrative Lender and any Lender, and administrative fees for the
Administrative Lender.
Section 10.3 WAIVERS. The rights and remedies of the Lenders under this
Agreement and the other Loan Papers shall be cumulative and not exclusive of any
rights or remedies which they would otherwise have. No failure or delay by the
Administrative Lender or any Lender
- 73 -
<PAGE>
in exercising any right shall operate as a waiver of such right. The Lenders
expressly reserve the right to require strict compliance with the terms of this
Agreement in connection with any funding of a request for an Advance or the
issuance of any Letter of Credit. In the event that any Lender decides to fund
an Advance or the Issuing Bank decides to issue a Letter of Credit at a time
when the Borrower is not in strict compliance with the terms of this Agreement,
such decision by such Lender shall not be deemed to constitute an undertaking by
the Lender to fund any further requests for Advances or the Issuing Bank to
honor any further requests for Letters of Credit or preclude the Lenders from
exercising any rights available under the Loan Papers or at law or equity. Any
waiver or indulgence granted by the Lenders shall not constitute a modification
of this Agreement, except to the extent expressly provided in such waiver or
indulgence, or constitute a course of dealing by the Lenders at variance with
the terms of the Agreement such as to require further notice by the Lenders of
the Lenders' intent to require strict adherence to the terms of the Agreement in
the future. Any such actions shall not in any way affect the ability of the
Administrative Lender or the Lenders, in their discretion, to exercise any
rights available to them under this Agreement or under any other agreement,
whether or not the Administrative Lender or any of the Lenders are a party
thereto, relating to the Borrower.
Section 10.4 DETERMINATION BY THE LENDERS CONCLUSIVE AND BINDING. Any
material determination required or expressly permitted to be made by the
Administrative Lender or any Lender under this Agreement shall be made in its
reasonable judgment and in good faith, and shall when made, absent manifest
error, be conclusive and binding on all parties.
Section 10.5 SET-OFF. In addition to any rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender and any subsequent holder of any
Note, and any assignee or participant in any Note is hereby authorized by the
Borrower at any time or from time to time, without notice to the Borrower or any
other Person, any such notice being hereby expressly waived, to set-off,
appropriate and apply any deposits (general or special (except trust and escrow
accounts), time or demand, including without limitation Debt evidenced by
certificates of deposit, in each case whether matured or unmatured) and any
other Debt at any time held or owing by such Lender or holder to or for the
credit or the account of the Borrower, against and on account of the Obligations
and other liabilities of the Borrower to such Lender or holder, irrespective of
whether or not (a) the Lender or holder shall have made any demand hereunder, or
(b) the Lender or holder shall have declared the principal of and interest on
the Advances and other amounts due hereunder to be due and payable as permitted
by Section 7.2 and although such obligations and liabilities, or any of them,
shall be contingent or unmatured. Any sums obtained by any Lender or by any
assignee, participant or subsequent holder of any Note shall be subject to pro
rata treatment of all Obligations and other liabilities hereunder.
Section 10.6 ASSIGNMENT.
(a) The Borrower may not assign or transfer any of its rights or
obligations hereunder or under the other Loan Papers without the prior written
consent of the Lenders.
- 74 -
<PAGE>
(b) No Lender shall be entitled to assign its interest in this
Agreement, its Notes or its Advances, except as hereinafter set forth.
(c) With the prior written consent of the Borrower (which consent may be
withheld for any reason or for no reason), a Lender may at any time sell
participations in all or any part of its Advances, its portion of the
Commitment, and all other interests of such Lender under this Agreement and the
other Loan Papers, including but not limited to the Letters of Credit and the
Reimbursement Obligations (collectively, "Participations") to any banks or other
financial institutions ("Participants") provided that such Participation shall
not confer on any Person (other than the parties hereto) any right to vote on,
approve or sign amendments or waivers, or any other independent benefit or any
legal or equitable right, remedy or other claim under this Agreement or any
other Loan Papers, other than the right to vote on, approve, or sign amendments
or waivers or consents with respect to items that would result in (i) any
increase in the commitment of any Participant; or (ii)(A) the extension of the
date of maturity of, or (B) the extension of the due date for any payment of
principal, interest or fees respecting, or (C) the reduction of the amount of
any installment of principal or interest on or the change or reduction of any
mandatory reduction required hereunder, or (D) a reduction of the rate of
interest on, the Advances, the Letters of Credit or the Reimbursement
Obligations, or change in Applicable Margin; or (iii) the release of security
for the Obligations having a value in excess of a Material Amount, including
without limitation any guarantee; or (iv) the reduction of any fees payable
hereunder. Notwithstanding the foregoing, the Borrower agrees that the
Participants shall be entitled to the benefits of Article 8 and Section 10.5
hereof as though they were Lenders and the Lenders may provide copies of all
financial information received from the Borrower to such Participants. To the
fullest extent it may effectively do so under Applicable Law, the Borrower
agrees that any Participant may exercise any and all rights of banker's lien,
set-off and counterclaim with respect to this Participation as fully as if such
Participant were the holder of the Advances in the amount of its Participation.
Notwithstanding anything in this Section 9.6(c) to the contrary, a Lender may
sell Participations to its affiliates without the prior written consent of the
Borrower.
(d) Each Lender may assign to one or more financial institutions or
funds organized under the laws of the United States, or any state thereof, or
under the laws of any other country that is a member of the Organization for
Economic Cooperation and Development, or a political subdivision of any such
country, which is engaged in making, purchasing or otherwise investing in
commercial loans in the ordinary course of its business (each, an "Assignee")
its rights and obligations under this Agreement and the other Loan Papers;
PROVIDED, HOWEVER, that (i) except as otherwise provided herein, each such
assignment shall be subject to the prior written consent of the Administrative
Lender and the Borrower (which consent shall not be unreasonably withheld), (ii)
each such assignment shall be of a constant, and not a varying, percentage of
the Lender's rights and obligations under this Agreement and the Facility B
Credit Agreement, (iii) the amount of the Commitment and Advances being assigned
pursuant to each such assignment (determined as of the date of the assignment
with respect to such assignment), together with the amount of the commitment and
advances being assigned pursuant to the Facility B Credit Agreement, shall in no
event be less than $10,000,000, (iv) the applicable
- 75 -
<PAGE>
Lender, Administrative Lender and applicable Assignee shall execute and deliver
to the Administrative Lender an Assignment and Acceptance Agreement (an
"Assignment Agreement") in substantially the form of EXHIBIT E hereto,
together with the Notes subject to such assignment, (v) the Assignee or the
Lender executing the Assignment as the case may be, shall deliver to the
Administrative Lender a processing fee of $3,500 (for both this Agreement and
the Facility B Credit Agreement), and (vi) the Administrative Lender shall give
the Borrower notice of any proposed assignment no later than 5 days prior to any
assignment by any Lender. Upon such execution, delivery and acceptance from and
after the effective date specified in each Assignment, which effective date
shall be at least three Business Days after the execution thereof, (a) the
Assignee thereunder shall be party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment, have
the rights and obligations of a Lender hereunder and (b) the assigning Lender
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment, relinquish such rights and be released from such
obligations under this Agreement. Notwithstanding anything in this clause (d)
to the contrary, any Lender may assign its rights and obligations under this
Agreement to an affiliate of such Lender without the prior written consent of
the Administrative Lender and the Borrower, but otherwise subject to the
restrictions set forth herein.
(e) Notwithstanding anything in clause (d) above to the contrary, any
Lender may assign and pledge all or any portion of its Advances and Notes to any
Federal Reserve Bank as collateral security pursuant to Regulation A of F.R.S.
Board and any Operating Circular issued by such Federal Reserve Bank; provided,
however, that no such assignment under this clause (e) shall release the
assignor Lender from its obligations hereunder.
(f) Upon its receipt of an Assignment Agreement executed by a Lender and
an Assignee, and any Note subject to such assignment, the Borrower shall, within
three Business Days after its receipt of such Assignment Agreement, at its own
expense, execute and deliver to the Administrative Lender in exchange for the
surrendered Note a new Note to the order of such Assignee in an amount equal to
the portion of the Advances and Commitment assigned to it pursuant to such
Assignment Agreement and a new Note to the order of the assigning Lender in an
amount equal to the portion of the Advances and Commitment retained by it
hereunder. Such new Notes shall be in an aggregate principal amount equal to
the aggregate principal amount of such surrendered Note, shall be dated the
effective date of such Assignment Agreement and shall otherwise be in
substantially the form of EXHIBIT A hereto.
(g) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 10.6, disclose
to the assignee or Participant or proposed assignee or participant, any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower.
(h) Except as specifically set forth in this Section 10.6, nothing in
this Agreement or any other Loan Papers, expressed or implied, is intended to or
shall confer on any Person other than the respective parties hereto and thereto
and their successors and assignees permitted
- 76 -
<PAGE>
hereunder and thereunder any benefit or any legal or equitable right, remedy or
other claim under this Agreement or any other Loan Papers.
(i) Notwithstanding anything in this Section 10.6 to the contrary, no
Assignee or Participant shall be entitled to receive any greater payment under
Section 2.15 or Section 8.3 than such assigning or participating Lender would
have been entitled to receive with respect to the interest assigned or
participated to such Assignee or Participant.
Section 10.7 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Section 10.8 SEVERABILITY. Any provision of this Agreement which is for
any reason prohibited or found or held invalid or unenforceable by any court or
governmental agency shall be ineffective to the extent of such prohibition or
invalidity or unenforceability without invalidating the remaining provisions
hereof in such jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 10.9 INTEREST AND CHARGES. It is not the intention of any
parties to this Agreement to make an agreement in violation of the laws of any
applicable jurisdiction relating to usury. Regardless of any provision in any
Loan Papers, no Lender shall ever be entitled to receive, collect or apply, as
interest on the Obligations, any amount in excess of the Maximum Amount. If any
Lender or participant ever receives, collects or applies, as interest, any such
excess, such amount which would be excessive interest shall be deemed a partial
repayment of principal and treated hereunder as such; and if principal is paid
in full, any remaining excess shall be paid to the Borrower. In determining
whether or not the interest paid or payable, under any specific contingency,
exceeds the Maximum Amount, the Borrower and the Lenders shall, to the maximum
extent permitted under Applicable Law, (a) characterize any nonprincipal payment
as an expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effect thereof, and (c) amortize, prorate, allocate and
spread in equal parts, the total amount of interest throughout the entire
contemplated term of the Obligations so that the interest rate is uniform
throughout the entire term of the Obligations; provided, however, that if the
Obligations are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period of
existence thereof exceeds the Maximum Amount, the Lenders shall refund to the
Borrower the amount of such excess or credit the amount of such excess against
the total principal amount of the Obligations owing, and, in such event, the
Lenders shall not be subject to any penalties provided by any laws for
contracting for, charging or receiving interest in excess of the Maximum Amount.
This Section shall control every other provision of all agreements pertaining to
the transactions contemplated by or contained in the Loan Papers.
Section 10.10 CONFIDENTIALITY. Each Lender and the Administrative Lender
agrees (on behalf of itself and each of its affiliates, directors, officers,
employees and representatives) to use reasonable precautions to keep
confidential, in accordance with customary procedures for
- 77 -
<PAGE>
confidential information of this nature and in accordance with safe and sound
banking practices, any non-public information supplied to it by the Borrower
pursuant to this Agreement which is identified by the Borrower as being
confidential at the time the same is delivered to the Lenders or the
Administrative Lender, provided that nothing herein shall limit the disclosure
of any such information (a) to the extent required by statute, rule, regulation
or judicial process, (b) to counsel for any Lender or the Administrative Lender,
(c) to bank examiners, auditors or accountants of any Lender, (d) to the
Administrative Lender or any other Lender, (e) in connection with any litigation
to which any one or more of Lenders is a party, provided, further, that, unless
specifically prohibited by Applicable Law or court order, each Lender shall,
prior to disclosure thereof, notify the Borrower of any request for disclosure
of any such non-public information (i) by any governmental agency or
representative thereof (other than any such request in connection with an
examination of such Lender's financial condition by such governmental agency) or
(ii) pursuant to legal process, or (f) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) first executes and delivers to the
respective Lender an agreement (a "Confidentiality Agreement") in substantially
the form of EXHIBIT F hereto; and provided finally that in no event shall any
Lender or the Administrative Lender by obligated or required to return any
materials furnished by the Borrower.
Section 10.11 HEADINGS. Headings used in this Agreement are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof.
Section 10.12 AMENDMENT AND WAIVER. The provisions of this Agreement may
not be amended, modified or waived except by the written agreement of the
Borrower and the Determining Lenders; provided, however, that no such amendment,
modification or waiver shall be made (a) without the consent of all Lenders, if
it would (i) increase the Specified Percentage or commitment of any Lender, or
(ii) extend the date of maturity of, extend the due date for any payment of
principal or interest on, reduce the amount of any installment of principal or
interest on, or reduce the rate of interest on, any Advance, the Reimbursement
Obligations or other amount owing under any Loan Papers, or (iii) release any
security for or guaranty of the Obligations (except pursuant to this Agreement),
or (iv) reduce the fees payable hereunder, or (v) revise this Section 10.12, or
(vi) waive the date for payment of any of the Obligations, or (vii) amend the
definition of Determining Lenders; or (b) without the consent of the
Administrative Lender, if it would alter the rights, duties or obligations of
the Administrative Lender. Neither this Agreement nor any term hereof may be
amended orally, nor may any provision hereof be waived orally but only by an
instrument in writing signed by the Administrative Lender and, in the case of an
amendment, by the Borrower.
Section 10.13 EXCEPTION TO COVENANTS. Neither the Borrower nor any
Subsidiary shall be deemed to be permitted to take any action or fail to take
any action which is permitted as an exception to any of the covenants contained
herein or which is within the permissible limits of any of the covenants
contained herein if such action or omission would result in the breach of any
other covenant contained herein.
- 78 -
<PAGE>
Section 10.14 NO LIABILITY OF ISSUING BANK. The Borrower assumes all
risks of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuing
Bank nor any Lender nor any of their respective officers or directors shall be
liable or responsible for: (a) the use that may be made of any Letter of Credit
or any acts or omissions of any beneficiary or transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing
Bank against presentation of documents that do not comply with the terms of a
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to the Letter of Credit, except for any payment made upon the
Issuing Bank's gross negligence or willful misconduct; or (d) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit, EXCEPT that the Borrower shall have a claim against the Issuing
Bank, and the Issuing Bank shall be liable to the Borrower, to the extent of any
direct, but not consequential, damages suffered by the Borrower that the
Borrower proves were caused by (i) the Issuing Bank's willful misconduct or
gross negligence in determining whether documents presented under any Letter of
Credit comply with the terms of the Letter of Credit or (ii) the Issuing Bank's
willful failure to make lawful payment under a Letter of Credit after the
presentation to it of a draft and certificates strictly complying with the terms
and conditions of the Letter of Credit. In furtherance and not in limitation of
the foregoing, the Issuing Bank may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary.
Section 10.15 TERMINATION OF PARTICIPATIONS IN BOND LETTERS OF CREDIT.
Upon satisfaction of all conditions set forth in Section 3.1 hereof, any
obligation of any Lender to participate in the Bond Letters of Credit shall
automatically terminate without any further action being taken with respect
thereto.
Section 10.16 TERMINATION OF COMMITMENT. The Commitment shall terminate
on December 31, 1995 if the conditions precedent set forth in Sections 3.1 and
3.2 have not been satisfied by such date.
SECTION 10.17 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN PAPERS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF TEXAS; PROVIDED, HOWEVER, THAT PURSUANT TO ARTICLE 5069-15.10(b), TITLE
79, REVISED CIVIL STATUTES OF TEXAS, 1925, AS AMENDED, IT IS AGREED THAT THE
PROVISIONS OF CHAPTER 15, TITLE 79, REVISED CIVIL STATUTES OF TEXAS, 1925, AS
AMENDED, SHALL NOT APPLY TO THE ADVANCES, THIS AGREEMENT AND THE OTHER LOAN
PAPERS. WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BORROWER AGREES THAT
THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE
JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE OTHER
LOAN PAPERS.
- 79 -
<PAGE>
SECTION 10.18 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE LENDER AND THE LENDERS HEREBY KNOWINGLY VOLUNTARILY,
IRREVOCABLY AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW,
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN PAPERS OR THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. THIS PROVISION IS A MATERIAL
INDUCEMENT TO EACH LENDER ENTERING INTO THIS AGREEMENT AND MAKING ANY
ADVANCES HEREUNDER.
SECTION 10.19 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH
THE OTHER LOAN PAPERS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
===============================================================================
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
===============================================================================
- 80 -
<PAGE>
IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first
set forth above.
BORROWER: LA QUINTA INNS, INC.
By:_______________________________
Name:_________________________
Title:________________________
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
By:_______________________________
Douglas E. Hutt
Senior Vice President
LENDERS: NATIONSBANK OF TEXAS, N.A.,
as a Lender
Specified Percentage:
16.0%
By:_______________________________
Douglas E. Hutt
Senior Vice President
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Douglas E. Hutt
Senior Vice President
- 81 -
<PAGE>
CITIBANK, N.A.
Specified Percentage:
14.0%
By:_______________________________
Name:_________________________
Title:________________________
399 Park Avenue
9th Floor, Zone 6
New York, New York 10043
Attn: Heidi McKibben
- 82 -
<PAGE>
THE FROST NATIONAL BANK
Specified Percentage:
8.0%
By:_______________________________
Name:_________________________
Title:________________________
100 West Houston Street
San Antonio, Texas 78205
Attn: Suzanne Houser
- 83 -
<PAGE>
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
Specified Percentage:
10.0%
By:_______________________________
Name:_________________________
Title:________________________
1020 N.E. Loop 410
San Antonio, Texas 78209
Attn: Mark Harris
Vice President
- 84 -
<PAGE>
BANK OF AMERICA ILLINOIS
Specified Percentage:
14.0%
By:_______________________________
Name:_________________________
Title:________________________
333 Clay Street, Suite 4550
Houston, Texas 77002
Attn: W. Thomas Barnett
Vice President
- 85 -
<PAGE>
FIRST INTERSTATE BANK OF TEXAS,
N.A.
Specified Percentage:
14.0%
By:_______________________________
Name:_________________________
Title:________________________
700 N. St. Mary's Street, Suite 300
San Antonio, Texas 78205
Attn: Charles T. Bridgeman
- 86 -
<PAGE>
UNITED STATES NATIONAL BANK OF
OREGON
Specified Percentage:
8.0%
By:_______________________________
Name:_________________________
Title:________________________
555 Southwest Oak Street, Suite 400
Portland, Oregon 97204
Attn: Blake R. Howells
Vice President
- 87 -
<PAGE>
WELLS FARGO BANK, N.A.
Specified Percentage:
8.0%
By:_______________________________
Name:_________________________
Title:________________________
420 Montgomery Street, 9th Floor
San Francisco, California 94104
Attn: Veronica Christian
with a copy to:
3535 Lincoln Plaza
500 North Akard
Dallas, Texas 75201
Attn: Dana D. Cagle
Vice President
- 88 -
<PAGE>
SOCIETE GENERALE, SOUTHWEST
AGENCY
Specified Percentage:
8.0%
By:_______________________________
Name:_________________________
Title:________________________
1111 Bagby, Suite 2020
Houston, Texas 77002
Attn: Richard A. Gould
Vice President
- 89 -
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
Dallas, Texas $__________ September 12, 1995
LA QUINTA INNS, INC., a Texas corporation (the "Borrower"), for value
received, promises to pay to the order of _______________________ ("Lender"),
at the principal office of _________________________________, in lawful money
of the United States of America, the principal sum of _______________________
DOLLARS ($________), or such lesser sum as shall be due and payable from time
to time hereunder, as hereinafter provided. All terms used but not defined
herein shall have the meanings set forth in the Credit Agreement described
below.
The Borrower promises to pay principal of and interest on the unpaid
principal balance of Revolving Credit Advances under this Revolving Credit
Note from time to time outstanding as set forth in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to NationsBank of Texas, N.A., as Administrative Lender for
the Lenders, at 901 Main Street, Dallas, Texas 75202, in immediately
available funds.
This Revolving Credit Note is issued pursuant to and evidences Revolving
Credit Advances under an Amended and Restated Credit Agreement (Facility A),
dated as of September 12, 1995, among the Borrower, NationsBank of Texas,
N.A., as Administrative Lender, and the lenders parties thereto (as amended,
restated, supplemented, renewed, extended or otherwise modified from time to
time, "Credit Agreement"), to which reference is made for a statement of the
rights and obligations of the Lender and the duties and obligations of the
Borrower in relation thereto; but neither this reference to the Credit
Agreement nor any provision thereof shall affect or impair the absolute and
unconditional obligation of the Borrower to pay the principal sum of and
interest on this Revolving Credit Note when due.
The Borrower and all endorsers, sureties and guarantors of this Revolving
Credit Note hereby severally waive demand, presentment for payment, protest,
notice of protest, notice of acceleration, notice of intention to accelerate
the maturity of this Revolving Credit Note, and all other notices of any
kind, diligence in collecting, the bringing of any suit against any party and
any notice of or defense on account of any extensions, renewals, partial
payments or changes in any manner of or in this Revolving Credit Note or in
any of its terms, provisions and covenants, or any release or substitutions
of any security, or any delay, indulgence or other act of any trustee or any
holder hereof, whether before or after maturity.
THIS REVOLVING CREDIT NOTE, TOGETHER WITH THE OTHER LOAN PAPERS,
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
<PAGE>
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
LA QUINTA INNS, INC.
By:
-----------------------------------
Title:
-----------------------------
-2-
<PAGE>
EXHIBIT B
BID RATE NOTE
U.S. $200,000,000 Dated: September 12, 1995
FOR VALUE RECEIVED, the undersigned, LA QUINTA INNS, INC., a Texas
corporation, (the "Borrower"), HEREBY PROMISES TO PAY to the order of
____________________ (the "Lender") the lesser of TWO HUNDRED MILLION AND
NO/100 Dollars ($200,000,000) and the unpaid principal amount of the Bid Rate
Advances (as defined in the Credit Agreement referred to below) made by the
Lender to the Borrower pursuant to the Credit Agreement, payable at such
times, and in such amounts, as are agreed to by the Lender and the Borrower
pursuant to Section 2.2(i) of the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
the Bid Rate Advances from the date made until such principal amount is paid
in full, at such interest rates, and payable at such times, as are agreed to
by the Lender and the Borrower pursuant to Section 2.2(i) of the Credit
Agreement.
Both principal and interest are payable in lawful money of the United
States of America to NationsBank of Texas, N.A., as Administrative Lender for
the Lender, at 901 Main Street, Dallas, Texas 75202 in immediately available
funds.
This Bid Rate Note is one of the Bid Rate Notes referred to in, and is
entitled to the benefits of, the Amended and Restated Credit Agreement
(Facility A), dated as of September 12, 1995, among the Borrower, the Lender
and certain other banks parties thereto, and NationsBank of Texas, N.A., as
Administrative Lender for the Lender and such other banks (as from time to
time amended, modified or supplemented, the "Credit Agreement"). The Credit
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified; but neither this reference to the
Credit Agreement nor any provision thereof shall affect or impair the
absolute and unconditional obligation of the Borrower to pay the principal
sum of and interest on this Bid Rate Note when due.
The Borrower and all endorsers, sureties and guarantors of this Bid Rate
Note hereby severally waive demand, presentment for payment, protest, notice
of protest, notice of acceleration, notice of intention to accelerate the
maturity of this Bid Rate Note, and all other notices of any kind, diligence
in collecting, the bringing of any suit against any party and any notice of
or defense on account of any extensions, renewals, partial payments or
changes in any manner of or in this Bid Rate Note or in any of its terms,
provisions and covenants, or any releases or substitutions of any security,
or any delay, indulgence or other act of any trustee or any holder hereof,
whether before or after maturity.
<PAGE>
THIS BID RATE NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES
HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
LA QUINTA INNS, INC.
By:
-----------------------------------
Title:
-----------------------------
-2-
<PAGE>
EXHIBIT C
SWING LINE NOTE
U.S. $10,000,000.00 Dated: September 12, 1995
FOR VALUE RECEIVED, the undersigned, LA QUINTA INNS, INC., a Texas
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
NATIONSBANK OF TEXAS, N.A. (the "Swing Line Bank") for the account of its
Lending Office (as defined in the Credit Agreement referred to below) the
lesser of TEN MILLION AND NO/100 Dollars ($10,000,000) and the unpaid
principal amount of the Swing Line Advances (as defined in the Credit
Agreement referred to below) made by the Swing Line Bank to the Borrower
pursuant to the Credit Agreement, payable at such times, and in such amounts,
as are specified in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
the Swing Line Advances from the date made until such principal amount is
paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to NationsBank of Texas, N.A., as Administrative Lender for
the Swing Line Bank, at NationsBank Plaza, 901 Main Street, Dallas, Texas
75202 in immediately available funds.
This Swing Line Note is the Swing Line Note referred to in, and is
entitled to the benefits of, the Amended and Restated Credit Agreement
(Facility A), dated as of September 12, 1995, among La Quinta Inns, Inc., the
Swing Line Bank and certain other banks parties thereto, and NationsBank of
Texas, N.A., as Administrative Lender for the Swing Line Bank and such other
banks (as from time to time amended, modified or supplemented, the "Credit
Agreement"). The Credit Agreement, among other things, contains provisions
for acceleration of the maturity hereof upon the happening of certain stated
events and also for prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified; but neither
this reference to the Credit Agreement nor any provision thereof shall affect
or impair the absolute and unconditional obligation of the Borrower to pay
the principal sum of and interest on their Swing Line Note when due.
The Borrower and all endorsers, sureties and guarantors of this Swing
Line Note hereby severally waive demand, presentment for payment, protest,
notice of protest, notice of acceleration, notice of intention to accelerate
the maturity of this Swing Line Note, and all other notices of any kind,
diligence in collecting, the bringing of any suit against any party and any
notice of or defense on account of any extensions, renewals, partial payments
or changes in any manner of or in this Swing Line Note or in any of its
terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgences or other act of any trustee or any holder
hereof, whether before or after maturity.
<PAGE>
THIS SWING LINE NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
LA QUINTA INNS, INC.
By:
---------------------------------
Title:
---------------------------
<PAGE>
EXHIBIT D
GUARANTY
This Guaranty, dated as of September 12, 1995 (this "GUARANTY"), is made
by the entities listed on the signature pages hereof (all such entities being
collectively called the "GUARANTORS").
BACKGROUND.
1. La Quinta Inns, Inc., a Texas corporation ("COMPANY"), NationsBank
of Texas, N.A., as Administrative Lender ("ADMINISTRATIVE LENDER") on behalf
of NationsBank of Texas, N.A. and each other lender, and each other lender
(singly, a "LENDER" and collectively, the "LENDERS") have entered into the
Amended and Restated Credit Agreement (FACILITY A), dated as of September 12,
1995 (as hereafter amended or otherwise modified from time to time, the "CREDIT
AGREEMENT"). The capitalized terms not otherwise defined herein have the
meanings specified in the Credit Agreement.
2. Pursuant to the Credit Agreement, Company may, subject to the terms
of the Credit Agreement and the other Loan Papers, request that Lenders make
Advances and issue, or participate in the issuance of, Letters of Credit.
3. It is a condition precedent to the obligation of Lenders to make
such Advances and issue, or participate in the issuance of, Letters of Credit
that Guarantors guarantee repayment thereof upon the terms and conditions set
forth herein.
4. In the case of each Guarantor which is a corporation, the Board of
Directors of each such Guarantor, and in the case of each Guarantor which is
a partnership or joint venture, the Board of Directors of each corporation
which is a partner or a joint venture of such Guarantor, have determined that
the execution, delivery, and performance of this Guaranty is necessary and
convenient to the conduct, promotion, and attainment of such Guarantor's
business and that such Guaranty may reasonably be expected to benefit,
directly or indirectly, such Guarantor.
5. Guarantors desire to induce Lender to make such Advances and issue,
or participate in the issuance of, Letters of Credit.
AGREEMENT.
Now, therefore, in consideration of the premises and in order to induce
Lenders to make Advances and issue, or participate in the issuance of,
Letters of Credit under the Credit Agreement, Guarantors agree as follows:
<PAGE>
1. GUARANTY.
(a) Each Guarantor, jointly and severally, hereby unconditionally
and irrevocably guarantees the punctual payment of, and promises to pay,
when due, whether at stated maturity, by mandatory prepayment, by
acceleration or otherwise, all obligations, indebtedness and liabilities,
and all rearrangements, renewals and extensions of all or any part thereof,
of Company or any other Obligor now or hereafter arising from, by virtue of
or pursuant to the Credit Agreement, the Notes, any other Loan Paper, and
any and all renewals and extensions thereof, or any part thereof, or future
amendments thereto, whether for principal, interest (including, without
limitation, interest, fees and other charges that would accrue or become
owing both prior to and subsequent to and but for the commencement of any
proceeding against or with respect to Company or any other Obligor under
any chapter of the Bankruptcy Code of 1978, 11 U.S.C. Section 101 ET SEQ.
whether or not a claim is allowed for the same in any such proceeding),
premium, fees, commissions, expenses or otherwise (such obligations being
the "OBLIGATION"), and agrees to pay any and all reasonable expenses
(including reasonable counsel fees and expenses) incurred in enforcement
or collection of all or any part thereof, whether such obligations,
indebtedness and liabilities are direct, indirect, fixed, contingent,
joint, several or joint and several, and any rights under this Guaranty.
(b) Anything contained in this Guaranty to the contrary
notwithstanding, the obligations of each Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that
would not render its obligations hereunder subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of Title 11 of the
United States Code or any applicable provisions of comparable state law
(collectively, the "FRAUDULENT TRANSFER LAWS"), in each case after giving
effect to all other liabilities of Guarantor, contingent or otherwise, that
are relevant under the Fraudulent Transfer Laws (specifically excluding,
however, any liabilities of such Guarantor in respect of intercompany
indebtedness to Company, other Affiliates of Company or other Obligors to
the extent that such indebtedness would be discharged in an amount equal to
the amount paid by such Guarantor hereunder) and after giving effect as
assets, subject to PARAGRAPH 4(a) hereof, to the value (as determined under
the applicable provisions of Fraudulent Transfer Laws) of any rights to
subrogation or contribution of such Guarantor pursuant to (i) Applicable
Law or (ii) any agreement providing for an equitable allocation among such
Guarantor and other Obligors of obligations arising under guaranties by
such parties.
2. GUARANTY ABSOLUTE. Each Guarantor guarantees that Obligation will
be paid strictly in accordance with the terms of the Credit Agreement, the
Notes, and the other Loan Papers, regardless of any Applicable Law,
regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of Administrative Lender or any Lender with
respect thereto; PROVIDED, HOWEVER, nothing contained in this Guaranty shall
require any Guarantor to make any payment under this Guaranty in violation of
any Applicable Law, regulation or order now or hereafter in effect. The
obligations and liabilities of each Guarantor
-2-
<PAGE>
hereunder are independent of the obligations of Company under the Credit
Agreement and of the obligations of each other Obligor under each other Loan
Paper and any Applicable Law. The liability of each Guarantor under this
Guaranty shall be absolute and unconditional irrespective of:
(a) the taking or accepting of any other security or guaranty for any
or all of the Obligation;
(b) any increase, reduction or payment in full at any time or from
time to time of any part of the Obligation, including any increase,
reduction or termination of the Commitment;
(c) any lack of validity or enforceability of the Credit Agreement,
the Notes, or any other Loan Paper or other agreement or instrument
relating thereto, including but not limited by the unenforceability of
all or any part of the Obligation by reason of the fact that (i) the
Obligation, and/or the interest paid or payable with respect thereto,
exceeds the amount permitted by Applicable Law, (ii) the act of creating
the Obligation, or any part thereof, is ULTRA VIRES, (iii) the officers
creating same acted in excess of their authority, or (iv) for any other
reason;
(d) any lack of corporate, partnership or other power of Company, any
Obligor or any other Person;
(e) any Debtor Relief Law involving Company, any Guarantor, any
Obligor or any other Person;
(f) any renewal, compromise, extension, acceleration or other change
in the time, manner or place of payment of, or in any other term of, all
or any of the Obligation; any adjustment, indulgence, forbearance, or
compromise that may be granted or given by any Lender or Administrative
Lender to Company, any Guarantor or any other Obligor; or any other
modification, amendment, or waiver of or any consent to departure from
the Credit Agreement, the Notes, or any other Loan Paper or other agreement
or instrument relating thereto without notification of any Guarantor (the
right to such notification being herein specifically waived by each
Guarantor);
(g) any exchange, release, sale, subordination, or non-perfection of
any collateral or Lien thereon or any lack of validity or enforceability or
change in priority, destruction, reduction, or loss or impairment of value
of any collateral or Lien thereon;
(h) any release or amendment or waiver of or consent to departure from
any other guaranty for all or any of the Obligation;
(i) the failure by any Lender or Administrative Lender to make any
demand upon or to bring any legal, equitable, or other action against the
Company or any other
-3-
<PAGE>
Person (including without limitation any Guarantor or any other Obligor),
or the failure or delay by any Lender or Administrative Lender to, or the
manner in which any Lender or Administrative Lender shall, proceed to
exhaust rights against any direct or indirect security for the Obligation;
(j) the existence of any claim, defense, set-off, or other rights
which Company or Guarantor may have at any time against Company, any
Lender, Administrative Lender, any Guarantor or any other Obligor, or any
other Person, whether in connection with this Guaranty, the Loan Papers,
the transactions contemplated thereby, or any other transaction;
(k) any failure of any Lender or Administrative Lender to notify any
Guarantor of any renewal, extension, or assignment of the Obligation or
any part thereof, or the release of any security, or of any other action
taken or refrained from being taken by any Lender or Administrative Lender,
it being understood that Lenders and Administrative Lender shall not be
required to give any Guarantor any notice of any kind under any
circumstances whatsoever with respect to or in connection with the
Obligation;
(l) any payment by Company to any Lender or Administrative Lender is
held to constitute a preference under any Debtor Relief Law or if for any
other reason any Lender or Administrative Lender is required to refund
such payment or pay the amount thereof to another Person; or
(m) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, Company, any Guarantor or any
other Obligor, including without limitation any defense by reason of any
disability or other defense of Company, or the cessation from any cause
whatsoever of the liability of Company, or any claim that Guarantor's
obligations hereunder exceed or are more burdensome than those of Company
or any other Obligor.
This Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Obligation is rescinded or
must otherwise be returned by any Lender or any other Person upon the
insolvency, bankruptcy or reorganization of Company, any Guarantor, any other
Obligor or otherwise, all as though such payment had not been made.
3. WAIVER. To the extent not prohibited by Applicable Law, each
Guarantor hereby waives: (a) promptness, protest, diligence, presentments,
acceptance, performance, demands for performance, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this
Guaranty and notices of the existence, creation or incurrence of new or
additional indebtedness, and any of the events described in SECTION 2 and of
any other occurrence or matter with respect to any of the Obligation, this
Guaranty or any of the other Loan Papers; (b) any requirement that
Administrative Lender or any Lender protect, secure, perfect, or insure any
Lien or security interest or any property subject thereto or exhaust any
right or take any action against Company, any Guarantor, any other Obligor or
any other Person or any collateral
-4-
<PAGE>
or pursue any other remedy in Administrative Lender's or any Lender's power
whatsoever; (c) any right to assert against Administrative Lender or any
Lender as a counterclaim, set-off or cross-claim, any counterclaim, set-off
or claim which it may now or hereafter have against Administrative Lender,
any Lender, Company, any Guarantor or any other Obligor, (d) any right to
seek or enforce any remedy or right that Administrative Lender or any Lender
now has or may hereafter have against Company, any Guarantor, any other
Obligor or any other Person (to the extent permitted by Applicable Law);
(e) any right to participate in any collateral or any right benefiting
Administrative Lender or Lenders in respect of the Obligation; and (f) any
right by which it might be entitled to require suit on an accrued right of
action in respect of any of the Obligation or require suit against Company,
any Guarantor, any other Obligor or any other Person, whether arising
pursuant to Section 34.02 of the Texas Business and Commerce Code, as
amended, Section 17.001 of the Texas Civil Practice and Remedies Code, as
amended, Rule 31 of the Texas Rules of Civil Procedure, as amended, or
otherwise.
4. SUBROGATION AND SUBORDINATION.
(a) Notwithstanding any reference to subrogation contained herein to
the contrary, each Guarantor hereby irrevocably waives any claim or other
rights which it may have or hereafter acquire against Company or any other
Obligor that arise from the existence, payment, performance or enforcement
of such Guarantor's obligations under this Guaranty, including, without
limitation, any right of subrogation, reimbursement, exoneration,
contribution, indemnification, any right to participate in any claim or
remedy of any Lender or Administrative Lender against Company, any Guarantor
or any other Obligor or any collateral which any Lender or Administrative
Lender now has or hereafter acquires, whether or not such claim, remedy or
right arises in equity, or under contract, statutes or common law, including
without limitation, the right to take or receive from Company, any Guarantor
or any other Obligor, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security on account of such claim
or other rights. If any amount shall be paid to any Guarantor in violation
of the preceding sentence and the Obligation shall not have been paid in
full, such amount shall be deemed to have been paid to such Guarantor for the
benefit of, and held in trust for the benefit of, Lenders, and shall
forthwith be paid to Administrative Lender to be credited and applied upon
the Obligation, whether matured or unmatured, in accordance with the terms of
the Credit Agreement. Each Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by
the Credit Agreement and that the waiver set forth in this PARAGRAPH 4(a) is
knowingly made in contemplation of such benefit.
(b) If any Guarantor becomes the holder of any indebtedness payable by
Company, any Guarantor or any other Obligor, such Guarantor hereby
subordinates all indebtedness owing to it from Company, any Guarantor and
each other Obligor to all indebtedness of Company, any Guarantor and each
other Obligor to Lenders and Administrative Lender, and agrees that upon the
occurrence and continuance of a Default or an Event of Default, it shall not
accept any payment on the same until final payment in full of the obligations
of Company under the Credit Agreement, the Notes and all other Loan Papers,
and shall in no circumstance whatsoever
-5-
<PAGE>
attempt to set-off or reduce any obligations hereunder because of such
indebtedness. If any amount shall nevertheless be paid to such Guarantor by
Company, any Guarantor or any other Obligor prior to payment in full of the
Obligation, such amount shall be held in trust for the benefit of Lenders and
Administrative Lender and shall forthwith be paid to Administrative Lender to
be credited and applied to the Obligation, whether matured or unmatured.
5. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby represents
and warrants that all representations and warranties as they apply to such
Guarantor only set forth in ARTICLE 4 of the Credit Agreement (each of which
is hereby incorporated by reference) are true and correct. Furthermore, each
Guarantor represents that it is Solvent.
6. COVENANTS. Each Guarantor hereby expressly assumes, confirms, and
agrees to perform, observe, and be bound by all conditions and covenants set
forth in the Credit Agreement, to the extent applicable to it, as if it were a
signatory thereto. Each Guarantor further covenants and agrees (a) punctually
and properly to perform all of such Guarantor's covenants and duties under
all other Loan Papers; (b) from time to time promptly to furnish
Administrative Lender with any information or writings which Administrative
Lender may request concerning this Guaranty; and (c) promptly to notify
Administrative Lender of may claim, action, or proceeding affecting this
Guaranty.
7. AMENDMENTS, ETC. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by any Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by such
Guarantor, Administrative Lender, and, either all Lenders or Determining
Lenders, as appropriate, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
8. ADDRESSES FOR NOTICES. Unless otherwise provided herein, all
notices, requests, consents and demands shall be in writing and shall be
delivered by hand or overnight courier service, mailed or sent by telecopy to
the respective addresses specified herein, or, as to any party, to such other
addresses as may be designated by it in written notice to all other parties.
All notices, requests, consents and demands hereunder shall be deemed to have
been given on the date of receipt if delivered by hand or overnight courier
service or sent by telecopy, or if mailed, effective on the earlier of actual
receipt or three days after being mailed by certified mail, return receipt
requested, postage prepaid, addressed as aforesaid.
9. NO WAIVER, REMEDIES. No failure on the part of Administrative
Lender or any Lender to exercise, and no delay in exercising, any right
hereunder or under any of the Loan Papers shall operate as a waiver thereof;
nor shall any single or partial exercise of any right hereunder or under any
of the Loan Papers preclude any other or further exercise thereof or the
exercise of any other right. Neither Administrative Lender nor any Lender
shall be required to (a) prosecute collection or seek to enforce or resort to
any remedies against Company, any Guarantor, any other Obligor or any other
Person, (b) join Company, any Guarantor, any other Obligor or any other
Person in any action in which Administrative Lender or any Lender prosecutes
collection or seeks to enforce or resort to any remedies against Company, any
-6-
<PAGE>
Guarantor, any other Obligor or any other Person liable on any of the
Obligation, or (c) seek to enforce or resort to any remedies with respect to
any Liens granted to (or benefiting, directly or indirectly) Administrative
Lender or any Lender by Company, any Guarantor, any other Obligor or any
other Person. Neither Administrative Lender nor any Lender shall have any
obligation to protect, secure or insure any of the Liens or the properties or
interests in properties subject thereto. The remedies herein provided are
cumulative and not exclusive of any remedies provided by Applicable Law.
10. RIGHT OF SET-OFF. Upon the occurrence and during the continuance of
any Event of Default, each Lender and Administrative Lender is hereby
authorized at any time and from time to time, to the fullest extent permitted
by Law, to set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender or Administrative Lender to or for the credit
or the account of any Guarantor against any and all of the obligations of
such Guarantor now or hereafter existing under this Guaranty, irrespective of
whether or not such Lender or Administrative Lender shall have made any
demand under this Guaranty. Each Lender and Administrative Lender agrees
promptly to notify such Guarantor after any such set-off and application,
provided that the failure to give such notice shall not affect the validity
of such set-off and application or provide a defense to such Guarantor's
obligations under this Guaranty. The rights of each Lender and Administrative
Lender under this SECTION 10 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which such Lender
and Administrative Lender may have.
11. LIENS. To the extent not prohibited by Applicable Law, each
Guarantor agrees that Administrative Lender or any Lender, in its discretion,
without notice or demand and without affecting either the liability of such
Guarantor, Company, any other Guarantor or any other Obligor, or any security
interest or other Lien, may foreclose any deed of trust or mortgage or
similar Lien covering interests in real or personal property, and the
interests in real or personal property secured thereby, by nonjudicial sale.
Each Guarantor waives any defense to the recovery by Administrative Lender or
any Lender hereunder against Company, such Guarantor or any collateral of any
deficiency after a nonjudicial sale and each Guarantor expressly waives any
defense or benefits that may be derived from Chapter 34 of the Texas Business
and Commerce Code, Section 51.003 of the Texas Property Code, or any similar
statute in effect in any other jurisdiction. Without limiting the foregoing,
each Guarantor waives, to the extent not prohibited by Applicable Law, any
defense arising out of any such nonjudicial sale even though such sale
operates to impair or extinguish any right of reimbursement or subrogation or
any other right or remedy of such Guarantor against Company, any other
Guarantor or any other Person or any Collateral or any other collateral. Each
Guarantor agrees that such Guarantor is liable, subject to the limitations of
SECTION 1 hereof, for any part of the Obligation remaining unpaid after any
foreclosure.
12. CONTINUING GUARANTY; TRANSFER OF NOTES. This Guaranty is an
irrevocable continuing guaranty of payment and shall (a) remain in full force
and effect until final payment in full (after the Maturity Date) of the
Obligation and all other amounts payable under this
-7-
<PAGE>
Guaranty, (b) be binding upon each Guarantor, its successors and assigns, and
(c) inure to the benefit of and be enforceable by Lender and Administrative
Lender and their successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), to the extent permitted by the Credit
Agreement, each Lender may assign or otherwise transfer its rights under the
Credit Agreement, the Notes or any of the Loan Papers or any interest therein
to any other Person, and such other Person shall thereupon become vested with
all the rights or any interest therein, as appropriate, in respect thereof
granted to such Lender herein or otherwise.
13. INFORMATION. Each Guarantor acknowledges and agrees that it shall
have the sole responsibility for obtaining from Company and each other Obligor
such information concerning Company's and each Obligor's financial condition
or business operations as such Guarantor may require, and that neither
Administrative Lender nor any Lender has any duty at any time to disclose to
Guarantor any information relating to the business operations or financial
conditions of Company or any Obligor.
14. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. WITHOUT EXCLUDING ANY OTHER
JURISDICTION, EACH GUARANTOR AGREES THAT THE STATE AND FEDERAL COURTS OF
TEXAS LOCATED IN DALLAS, TEXAS, SHALL HAVE JURISDICTION OVER PROCEEDINGS IN
CONNECTION HEREWITH. THIS GUARANTY IS PERFORMABLE IN DALLAS COUNTY, TEXAS.
15. WAIVER OF JURY TRIAL. EACH GUARANTOR, ADMINISTRATIVE LENDER, AND
LENDERS HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY WAIVE,
TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO THIS GUARANTY OR ANY
OF THE LOAN PAPERS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION
IS A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THE CREDIT AGREEMENT.
16. RATABLE BENEFIT. This Guaranty is for the ratable benefit of
Lenders and Administrative Lender, each of which shall share any proceeds of
this Guaranty pursuant to the terms of the Credit Agreement.
17. GUARANTOR INSOLVENCY. Should any Guarantor become insolvent, fail
to pay its debts generally as they become due, voluntarily seek, consent to,
or acquiesce in the benefits of any Debtor Relief Law or become a party to or
be made the subject of any proceeding provided for by any Debtor Relief Law
(other than as a creditor or claimant) that could suspend or otherwise
adversely affect the rights of any Lender or Administrative Lender granted
hereunder, then, the obligations of such Guarantor under this Guaranty shall
be, as between such Guarantor and such Lender and Administrative Lender, a
fully-matured, due, and payable obligation of such Guarantor to such Lender
and Administrative Lender (without regard to whether Company or any other
Obligor is then in default under the Credit Agreement or any
-8-
<PAGE>
other Loan Paper or whether any part of the Obligation is then due and owing
by Company or any other Obligor to such Lender or Administrative Lender),
payable in full by such Guarantor to such Lender or Administrative Lender
upon demand, which shall be the estimated amount owing in respect of the
contingent claim created hereunder.
18. ENTIRE AGREEMENT. THIS GUARANTY, TOGETHER WITH THE OTHER LOAN
PAPERS, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES.
------------------------------------------------------------------------------
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
------------------------------------------------------------------------------
-9-
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the
date first above written.
LA QUINTA REALTY CORP.
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
LA QUINTA PLAZA, INC.
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
Address for all Guarantors:
112 East Pecan Street LA QUINTA FINANCIAL CORPORATION
San Antonio, Texas 78205
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
LA QUINTA INVESTMENTS, INC.
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
-10-
<PAGE>
LA QUINTA ACQUISITION CORPORATION
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
LA QUINTA MOTOR INNS LIMITED
PARTNERSHIP
By: La Quinta Realty Corp.,
its General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
LA QUINTA ROUGE JOINT VENTURE
By: La Quinta Inns, Inc., its
Managing General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
-11-
<PAGE>
LA QUINTA DENVER - PEORIA ST., LTD
By: La Quinta Inns, Inc., its
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
LQM OPERATING PARTNERS, L.P.
By: La Quinta Realty Corp., its
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
LQ-BIG APPLE JOINT VENTURE
By: La Quinta Inns, Inc., its Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
By: La Quinta Investments, Inc., its
Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
-12-
<PAGE>
LQ-LNL LIMITED PARTNERSHIP
By: La Quinta Inns, Inc., its Managing
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
LQ-EAST IRVINE JOINT VENTURE
By: La Quinta Inns, Inc., its Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
By: La Quinta Investments, Inc., its
Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
-13-
<PAGE>
LQ-INVESTMENTS I
By: La Quinta Inns, Inc., its Managing
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
By: La Quinta Investments, Inc., a
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
LQ-INVESTMENTS II
By: La Quinta Inns, Inc., its Managing
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
By: La Quinta Investments, Inc., a
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
-14-
<PAGE>
LA QUINTA INNS OF LUBBOCK, INC.
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
LA QUINTA INNS OF PUERTO RICO,
INC.
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
LA QUINTA DEVELOPMENT PARTNERS,
L.P.
By: La Quinta Inns, Inc., its
Sole General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
-15-
<PAGE>
EXHIBIT E
ASSIGNMENT AND ACCEPTANCE
DATED _____________, 199__
Reference is made to the Amended and Restated Credit Agreement (Facility
A), dated as of September 12, 1995 (the "Credit Agreement") among La Quinta
Inns, Inc., a Texas corporation ("Borrower"), NationsBank of Texas, N.A. as
Administrative Lender ("Administrative Lender"), and the lenders parties
thereto. Terms defined in the Credit Agreement are used herein with the same
meaning.
______________________ ("Assignor") and _____________________
("Assignee") agree as follows:
1. Assignor hereby sells and assigns to Assignee, and Assignee hereby
purchases and assumes from Assignor, a __% interest in and to all of
Assignor's rights and obligations under the Credit Agreement as of the
Effective Date (as defined below), with respect to such percentage interest
in Assignor's Commitment as in effect on the Effective Date, the principal
amount of Revolving Credit Advances owing to Assignor on the Effective Date,
and the Revolving Credit Note held by Assignor, and Assignor's participation
in any Letters of Credit and Reimbursement Obligations outstanding on the
Effective Date, subject to the terms and conditions of this Assignment and
Acceptance.
2. Assignor (a) represents and warrants that (i) as of the date hereof
its Commitment (without giving effect to assignments thereof which have not
yet become effective) is $______ and, as of the date hereof, the outstanding
principal amount of the Revolving Credit Advances owing to it (without giving
effect to assignments thereof which have not yet become effective) is $____,
(ii) it is the legal and beneficial owner of the interest being assigned by
it hereunder and that such interest is free and clear of any adverse claim;
(b) makes no representation or warranty and assumes no responsibility with
respect to (i) any statements, warranties, or representations made in or in
connection with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency, or value of the Credit Agreement or
any other instrument or document furnished pursuant thereto or (ii) the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (c) attaches the
Revolving Credit Note referred to in Paragraph 1 above to exchange such
Revolving Credit Note for new Revolving Credit Notes as follows: a Revolving
Credit Note dated ____________, 199__, in the principal amount of $____
payable to the order of Assignee, and a Revolving Credit Note dated
____________, 199__, in the principal amount of $____ payable to the order of
Assignor.
3. Assignee (a) confirms that it has received a copy of the Credit
Agreement and the other Loan Papers, together with copies of the financial
statements referred to in Sections 6.1(a) and 6.1(b) of the Credit Agreement
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
<PAGE>
Acceptance; (b) agrees that it will, independently and without reliance upon
the Administrative Lender, Assignor, or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under the
Credit Agreement and the other Loan Papers; (c) appoints and authorizes the
Administrative Lender to take such action as agent on its behalf and to
exercise such powers under the Credit Agreement, the other Loan Papers; and
this Assignment and Acceptance as are delegated to the Administrative Lender
by the terms thereof and hereof, together with such powers as are reasonably
incidental thereto and hereto; (d) agrees that it will perform in accordance
with its terms all of the obligations which by the terms of the Credit
Agreement, the other Loan Papers, and this Assignment and Acceptance are
required to be performed by it as a Lender, [and] (e) specifies the addresses
set forth in Schedule I attached hereto as its address for the receipt of
notices and as its initial LIBOR Lender Office, respectively[; and (f)
attaches the forms prescribed by the IRS certifying as to Assignee's status
for purposes of determining exception from United States withholding taxes
with respect to all payments to be made to Assignee under the Credit
Agreement, the other Loan Papers, and this Assignment and Acceptance or such
other documents as are necessary to indicate that all such payments are
subject to such taxes at a rate reduced by an applicable tax treaty].
4. The effective date for this Assignment and Acceptance shall be
____________, 199__ (the "Effective Date").
5. Upon such acceptance as of the Effective Date and upon the
remittance of a $3,500 processing fee to the Administrative Lender, (a)
Assignee shall be a party to the Credit Agreement and, to the extent provided
in this Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and (b) Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.
6. Upon such acceptance from and after the Effective Date, whenever the
Administrative Lender shall receive a payment, or whenever the Administrative
Lender shall make an application of funds, in respect of any aggregate
outstanding principal amount of the Revolving Credit Advances or in respect
of any aggregate amount of interest accrued on the Revolving Credit Advances,
or in respect of the commitment fee (other than a payment or an application
of funds in respect of any amount due and owing to any Lender or the
Administrative Lender under Sections 2.9, 5.22, 8.3, 8.5, or 10.2 of the
Credit Agreement), the Administrative Lender shall pay over to each of the
Lenders an amount equal to (i) such Lender's Pro Rata Share (as defined
below) of such aggregate amount of principal, (ii) such Lender's Pro Rata
Share of such aggregate amount of interest, and (iii) such Lender's Pro Rata
Share of such aggregate amount of the commitment fee.
The "Pro Rata Share" of any aggregate amount means, with respect to such
Lender, the amount equal to the product obtained by multiplying (i) such
aggregate amount and (ii) a fraction, the numerator of which is such Lender
Commitment, or after the Revolving Credit Advances have been made, the
principal amount of the Revolving Credit Advances owing
-2-
<PAGE>
to such Lender and the denominator of which is the sum of the Commitments of
all of the Lenders, or after the Revolving Credit Advances have been made,
the aggregate principal amount of the Revolving Credit Advances owing to all
of the Lenders.
7. In the event that, after the Administrative Lender has paid to any
Lender its Pro Rata Share of any such payment received by the Administrative
Lender or any such application made by the Administrative Lender; such
payment or application is rescinded or must otherwise be returned or must be
paid over by the Administrative Lender for any reason, such Lender shall,
upon notice by the Administrative Lender, forthwith pay back to the
Administrative Lender such Lender's Pro Rata Share of the amount so rescinded
or so returned or paid over.
8. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of Texas and the United States of
America. Without excluding any other jurisdiction, Assignee agrees that the
courts of Texas will have jurisdiction over proceedings in connection
herewith.
9. Assignee's Specified Percentage shall be __%.
10. This Assignment and Acceptance may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same
instrument.
[NAME OF ASSIGNOR]
By:
-----------------------------------
-----------------, ----------------
(Print Name) (Print Title)
[NAME OF ASSIGNEE]
By:
-----------------------------------
-----------------, ----------------
(Print Name) (Print Title)
-3-
<PAGE>
Accepted this __ day of ____________, 199__
NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
By:
----------------------------------
-----------------, ---------------
(Print Name) (Print Title)
LA QUINTA INNS, INC.
By:
----------------------------------
-----------------, ---------------
(Print Name) (Print Title)
-4-
<PAGE>
SCHEDULE I
ASSIGNEE'S ADDRESS
1. ADDRESS FOR THE ADVANCES AND RECEIPT OF NOTICES
2. INITIAL LIBOR LENDING OFFICE
-5-
<PAGE>
EXHIBIT F
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and Address
of Prospective Participant
or Assignee]
Re: Amended and Restated Credit Agreement (Facility A), dated as of
September 12, 1995, among La Quinta Inns, Inc. (the "Borrower"),
the Lenders a party thereto, and NationsBank of Texas, N.A., as
Administrative Lender.
Dear ___________:
As a Lender party to the above-referenced Credit Agreement (the "CREDIT
AGREEMENT"); capitalized terms used herein shall have the same meaning given
to them in the Credit Agreement), we have agreed with the Borrower pursuant
to Section 10.10 of the Credit Agreement to use reasonable precautions to
keep confidential, except as otherwise provided therein, all non-public
information identified by the Borrower as being confidential at the time the
same is delivered to us pursuant to the Credit Agreement.
As provided in said Section 10.10, we are permitted to provide you, as a
prospective [PARTICIPANT] [ASSIGNEE], with certain of such non-public
information subject to the execution and delivery by you, prior to receiving
such non-public information, of a Confidentiality Agreement in this form.
Such information will not be made available to you until your execution and
return to us of this Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf of
yourself and each of your affiliates, directors, officers, employees and
representatives) that (A) such information will not be used by you except in
connection with the proposed [PARTICIPATION] [ASSIGNMENT] mentioned above and
(B) you shall use reasonable precautions, in accordance with your customary
procedures for handling confidential information and in accordance with safe
and sound banking practices, to keep such information confidential, provided
that nothing herein shall limit the disclosure of any such information (i) to
the extent required by statute, rule, regulation or judicial process, (ii) to
your counsel or to counsel for any of the Lenders or the Administrative
Lender, (iii) to bank examiners, auditors or accountants of any of the
Lenders, (iv) to the Administrative Lender, or any other Lender, (v) in
connection with any litigation to which you or any one or more of the Lenders
are a party; provided, further, that, unless specifically prohibited by
Applicable Law or court order, you agree, prior to disclosure thereof, to
notify the Borrower of any request for disclosure of any such non-public
information (x) by
<PAGE>
____________, 199_
Page 2
any governmental agency or representative thereof (other than any such request
in connection with an examination of your financial condition by such
governmental agency) or (y) pursuant to legal process; and provided, finally,
that in no event shall you be obligated to return any materials furnished to
you pursuant to this Confidentiality Agreement.
Would you please indicate your agreement to the foregoing by signing at
the place provided below the enclosed copy of this Confidentiality Agreement.
Very truly yours,
----------------------------------
By:
-------------------------------
Title:
----------------------------
THE FOREGOING IS AGREED TO AS OF THE
DATE OF THIS LETTER.
----------------------------------
By:
-------------------------------
Title:
----------------------------
<PAGE>
EXHIBIT 10(b)
==============================================================================
$50,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
(Facility B)
AMONG
LA QUINTA INNS, INC.
CERTAIN LENDERS
AND
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE LENDER
September 12, 1995
==============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINED TERMS.......................................... 1
Section 1.2 AMENDMENTS AND RENEWALS................................ 19
Section 1.3 CONSTRUCTION........................................... 19
ARTICLE 2
ADVANCES
Section 2.1 THE ADVANCES........................................... 19
Section 2.2 MANNER OF BORROWING AND DISBURSEMENT................... 20
Section 2.3 INTEREST............................................... 21
(a) ON BASE RATE ADVANCES.................................. 21
(b) ON LIBOR ADVANCES...................................... 22
(c) INTEREST IF NO NOTICE OF SELECTION OF INTEREST RATE
BASIS.................................................. 22
(d) INTEREST AFTER AN EVENT OF DEFAULT..................... 22
Section 2.4 FEES................................................... 23
(a) FACILITY FEE........................................... 23
(b) CLOSING FEE............................................ 24
(c) OTHER FEES............................................. 24
Section 2.5 PREPAYMENT............................................. 24
(a) VOLUNTARY PREPAYMENTS.................................. 24
(b) MANDATORY PREPAYMENT................................... 24
(c) PREPAYMENTS, GENERALLY................................. 24
Section 2.6 REDUCTION OF COMMITMENT................................ 25
(a) VOLUNTARY REDUCTION.................................... 25
(b) MANDATORY REDUCTION.................................... 25
(c) GENERAL REQUIREMENTS................................... 25
Section 2.7 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE LENDER...... 25
Section 2.8 PAYMENT OF PRINCIPAL OF ADVANCES....................... 25
(a) END OF INTEREST PERIOD................................. 26
(b) COMMITMENT REDUCTION................................... 26
(c) MATURITY DATE.......................................... 26
Section 2.9 REIMBURSEMENT.......................................... 26
Section 2.10 MANNER OF PAYMENT...................................... 26
Section 2.11 LIBOR LENDING OFFICES.................................. 27
Section 2.12 SHARING OF PAYMENTS.................................... 27
Section 2.13 CALCULATION OF RATES................................... 27
Section 2.14 BOOKING LOANS.......................................... 28
<PAGE>
Section 2.15 TAXES.................................................. 28
Section 2.16 EXTENSION OF MATURITY DATE............................. 31
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCES........... 31
Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES................... 33
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES......................... 34
(a) ORGANIZATION; POWER; QUALIFICATION..................... 34
(b) AUTHORIZATION.......................................... 34
(c) COMPLIANCE WITH OTHER LOAN PAPERS AND CONTEMPLATED
TRANSACTIONS........................................... 35
(d) LICENSES, ETC.......................................... 35
(e) COMPLIANCE WITH LAW.................................... 35
(f) TITLE TO PROPERTIES.................................... 35
(g) LITIGATION............................................. 36
(h) TAXES.................................................. 36
(i) FINANCIAL STATEMENTS; MATERIAL LIABILITIES............. 36
(j) NO ADVERSE CHANGE...................................... 36
(k) ERISA.................................................. 36
(l) COMPLIANCE WITH REGULATIONS G, T, U AND X.............. 38
(m) GOVERNMENTAL REGULATION................................ 38
(n) ABSENCE OF DEFAULT..................................... 38
(o) INVESTMENT COMPANY ACT................................. 38
(p) ENVIRONMENTAL MATTERS.................................. 39
(q) CERTAIN FEES........................................... 39
(r) NECESSARY AUTHORIZATIONS............................... 39
(s) PATENTS, ETC........................................... 40
(t) DISCLOSURE............................................. 40
(u) SOLVENCY............................................... 40
Section 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC........ 40
- ii -
<PAGE>
ARTICLE 5
BUSINESS COVENANTS
Section 5.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING
PRACTICES, CORPORATE EXISTENCE......................... 41
Section 5.2 INSPECTION OF PROPERTIES AND BOOKS..................... 42
Section 5.3 MERGER AND SALE OF ASSETS.............................. 42
Section 5.4 NET WORTH.............................................. 43
Section 5.5 CONTINGENT LIABILITIES................................. 43
Section 5.6 INCURRENCE AND RETENTION OF DEBT....................... 43
Section 5.7 INVESTMENTS............................................ 43
Section 5.8 NOTICE OF LITIGATION................................... 43
Section 5.9 TOTAL DEBT RATIO....................................... 44
Section 5.10 CASH FLOW RATIO........................................ 44
Section 5.11 SENIOR DEBT RATIO...................................... 44
Section 5.12 LIENS.................................................. 44
Section 5.13 ACCOUNTING CHANGES..................................... 44
Section 5.14 AMENDMENT AND MODIFICATION OF SUBORDINATED DEBT
DOCUMENTS............................................. 45
Section 5.15 LEASE-BACKS............................................ 45
Section 5.16 ENVIRONMENTAL MATTERS.................................. 45
Section 5.17 ERISA COMPLIANCE....................................... 46
Section 5.18 BUSINESS............................................... 46
Section 5.19 DEBT................................................... 47
Section 5.20 TRANSACTIONS WITH AFFILIATES........................... 47
Section 5.21 USE OF PROCEEDS........................................ 47
Section 5.22 INDEMNITY.............................................. 47
ARTICLE 6
INFORMATION
Section 6.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY THE
BORROWER.............................................. 49
Section 6.2 OFFICER'S CERTIFICATE.................................. 51
ARTICLE 7
DEFAULT
Section 7.1 EVENTS OF DEFAULT...................................... 51
Section 7.2 REMEDIES............................................... 53
- iii -
<PAGE>
ARTICLE 8
CHANGES IN CIRCUMSTANCES
Section 8.1 LIBOR BASIS DETERMINATION INADEQUATE.................. 54
Section 8.2 ILLEGALITY............................................ 54
Section 8.3 INCREASED COSTS....................................... 55
Section 8.4 EFFECT ON BASE RATE ADVANCES.......................... 56
Section 8.5 CAPITAL ADEQUACY...................................... 56
ARTICLE 9
AGREEMENT AMONG LENDERS
Section 9.1 AGREEMENT AMONG LENDERS............................... 57
(a) ADMINISTRATIVE LENDER................................. 57
(b) REPLACEMENT OF ADMINISTRATIVE LENDER.................. 57
(c) EXPENSES.............................................. 58
(d) DELEGATION OF DUTIES.................................. 58
(e) RELIANCE BY ADMINISTRATIVE LENDER..................... 58
(f) LIMITATION OF ADMINISTRATIVE LENDER'S LIABILITY....... 58
(g) LIABILITY AMONG LENDERS............................... 59
(h) RIGHTS AS LENDER...................................... 59
Section 9.2 LENDER CREDIT DECISION................................ 59
Section 9.3 BENEFITS OF ARTICLE................................... 60
ARTICLE 10
MISCELLANEOUS
Section 10.1 NOTICES............................................... 60
Section 10.2 EXPENSES.............................................. 60
Section 10.3 WAIVERS............................................... 61
Section 10.4 DETERMINATION BY THE LENDERS CONCLUSIVE AND BINDING... 61
Section 10.5 SET-OFF............................................... 62
Section 10.6 ASSIGNMENT............................................ 62
Section 10.7 COUNTERPARTS.......................................... 64
Section 10.8 SEVERABILITY.......................................... 64
Section 10.9 INTEREST AND CHARGES.................................. 64
Section 10.10 CONFIDENTIALITY....................................... 65
Section 10.11 HEADINGS.............................................. 65
Section 10.12 AMENDMENT AND WAIVER.................................. 65
Section 10.13 EXCEPTION TO COVENANTS................................ 66
Section 10.14 TERMINATION OF PARTICIPATIONS IN BOND LETTERS OF
CREDIT................................................ 66
- iv -
<PAGE>
Section 10.15 TERMINATION OF COMMITMENT............................. 66
Section 10.16 GOVERNING LAW........................................ 66
Section 10.17 WAIVER OF JURY TRIAL................................. 66
Section 10.18 ENTIRE AGREEMENT..................................... 67
- v -
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1: LIBOR Lending Offices
Schedule 2: Existing Litigation
Schedule 3: Subsidiaries and Unincorporated Ventures
Schedule 4: Existing Investments
Schedule 5: Investment Policy
Schedule 6: Unincorporated Ventures to be Purchased
Schedule 7: Benefit Agreements With Former Employees
Schedule 8: Insolvent Unincorporated Ventures
Schedule 9: Existing Letters of Credit
Schedule 10: Significant Investments
Schedule 11: Guaranteed Contingent Obligations
Schedule 12: Existing Liens
Exhibit A: Promissory Note
Exhibit B: Subsidiary Guaranty
Exhibit C: Assignment Agreement
Exhibit D: Confidentiality Agreement
- vi -
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
(Facility B)
THIS AMENDED AND RESTATED CREDIT AGREEMENT (Facility B) is dated as of
September 12, 1995, among LA QUINTA INNS, INC., a Texas corporation
("Borrower"), the Lenders from time to time party hereto, and NATIONSBANK OF
TEXAS, N.A., a national banking association, as administrative agent for the
Lenders.
BACKGROUND
The Borrower, certain of the Lenders and the Administrative Lender are
parties to that Credit Agreement dated as of January 25, 1994 (said Credit
Agreement, as amended, the "Existing Credit Agreement"). The Borrower has
requested that the Lenders amend and restate the Existing Credit Agreement by
making a credit facility available to the Borrower in the maximum principal
amount of (i) $200,000,000 pursuant to the Facility A Credit Agreement (as
herein defined) and (ii) $50,000,000 pursuant to this Agreement. The Lenders
have agreed to provide the $50,000,000 credit facility, subject to the terms
and conditions set forth below.
In consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration hereby acknowledged, the
parties hereto agree that the Existing Credit Agreement is amended and
restated in its entirety, together with the Facility A Credit Agreement, as
follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINED TERMS. For purposes of this Agreement:
"ADDITIONAL COSTS" has the meaning set forth in Section 8.5 hereof.
"ADJUSTMENT DATE" means, for purposes of the Applicable Margin and the
facility fees payable pursuant to Section 2.4(a) hereof, (i) when the
Applicable Margin and such fees are based on the Leverage Ratio, the date of
receipt by the Administrative Lender of the financial statements required to
be delivered pursuant to Section 6.1(a) or 6.1(b) hereof which results in a
change in the Applicable Margin and (ii) when the Applicable Margin and the
facility fees are based on the Index Debt Rating, the effective date of any
issuance of, or change in, the Index Debt Rating which results in a change in
the Applicable Margin.
"ADMINISTRATIVE LENDER" means NationsBank of Texas, N.A., a national
banking association, as administrative agent for Lenders, or such successor
administrative agent appointed pursuant to Section 9.1(b) hereof.
<PAGE>
"ADVANCE" means an Advance made pursuant to Section 2.1(a) hereof.
"AFFILIATE" means any Person that directly or indirectly through one or
more Subsidiaries Controls, or is Controlled By or Under Common Control with,
the Borrower.
"AGREEMENT" means this Credit Agreement, as amended, modified,
supplemented and restated from time to time.
"AGREEMENT DATE" means the date of this Agreement.
"APPLICABLE ENVIRONMENTAL LAWS" means applicable laws pertaining to
health or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, "CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act
amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as
amended from time to time, "RCRA"), the Texas Water Code, and the Texas Solid
Waste Disposal Act.
"APPLICABLE LAW" means (a) in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies
or regulatory agencies applicable to such Person and its properties,
including, without limiting the foregoing, all orders and decrees of all
courts and arbitrators in proceedings or actions to which the Person in
question is a party, and (b) in respect of contracts relating to interest or
finance charges that are made or performed in the State of Texas, "APPLICABLE
LAW" shall mean the laws of the United States of America, including without
limitation 12 USC 85 and 86, as amended from time to time, and any other
statute of the United States of America now or at any time hereafter
prescribing the maximum rates of interest on loans and extensions of credit,
and the laws of the State of Texas, including, without limitation, Article
5069-1.04, Title 79, Revised Civil Statutes of Texas, 1925, as amended ("Art.
1.04"), and any other statute of the State of Texas now or at any time
hereafter prescribing maximum rates of interest on loans and extensions of
credit; provided that the parties hereto agree that the provisions of Chapter
15, Title 79, Revised Civil Statutes of Texas, 1925, as amended, shall not
apply to Advances, this Agreement, the Notes or any other Loan Papers.
"APPLICABLE MARGIN" means the following per annum percentages,
applicable in the following situations:
<TABLE>
<CAPTION>
BASE RATE LIBOR
APPLICABILITY BASIS BASIS
------------- --------- -----
<S> <C> <C>
CATEGORY 1 - The Leverage Ratio is not less than 3.50 to 1 0.00 0.75
or the Index Debt Rating is any two of the following: BB
by S&P, BB by ARA or Ba2 by Moody's
</TABLE>
- 2 -
<PAGE>
<TABLE>
<CAPTION>
BASE RATE LIBOR
APPLICABILITY BASIS BASIS
------------- --------- -----
<S> <C> <C>
CATEGORY 2 - The Leverage Ratio is less than 3.50 to 1 but 0.00 0.60
not less than 3.00 to 1 or the Index Debt Rating is any two
of the following: BB+ by S&P, BB+ by ARA or Ba1 by Moody's
CATEGORY 3 - The Leverage Ratio is less than 3.00 to 1 but 0.00 0.50
not less than 2.50 to 1 or the Index Debt Rating is any two
of the following: BBB- by S&P, BBB- by ARA or Baa3 by Moody's
CATEGORY 4 - The Leverage Ratio is less than 2.50 to 1 but 0.00 0.40
not less than 2.0 to 1 or the Index Debt Rating is any two of
the following: BBB by S&P, BBB by ARA or Baa2 by Moody's
CATEGORY 5 - The Leverage Ratio is less than 2.00 to 1 or the 0.00 0.325
Index Debt Rating is any two of the following: BBB+ or better
by S&P, BBB+ or better by ARA or Baa1 or better by Moody's
</TABLE>
The Applicable Margin payable by the Borrower on the Advances outstanding
hereunder shall be adjusted on each Adjustment Date if determined based on
the (i) Leverage Ratio, according to the performance of the Borrower for the
most recent fiscal quarter or (ii) the Index Debt Rating, according to the
most recent determination of the Index Debt Rating. For purposes of the
foregoing, (a) if the Index Debt Rating and the Leverage Ratio are in
different categories, the Applicable Margin shall be determined on whichever
of the Index Debt Rating or the Leverage Ratio falls within the superior (or
numerically higher) category, (b) if the Applicable Margin is determined
based on the Leverage Ratio and the financial statements of the Borrower
setting forth the Leverage Ratio are not received by the Administrative
Lender by the date required pursuant to Section 6.1(a) or 6.1(b), the
Applicable Margin shall be determined as if the Leverage Ratio is not less
than 3.50 to 1 until such time as the financial statements are received, (c)
if the Index Debt Rating established by ARA shall fall within a different
category than both Moody's and S&P, the Applicable Margin shall be determined
by reference to Moody's or S&P, whichever is the superior (or numerically
higher) category, but not to exceed two rating levels higher than the other
rating agency. If the rating system of Moody's, S&P or ARA shall change
prior to the Maturity Date, the Borrower and the Lenders shall negotiate in
good faith to amend the references to specific ratings in this definition to
reflect such changed rating system.
"ARA" means Duff & Phelps Credit Ratings Company or Fitch Investor
Services or any other nationally recognized rating agency approved in writing
by the Determining Lenders which shall have a rating system identical to S&P.
"ART. 1.04" has the meaning specified in the definition of "Applicable
Law."
"ASSIGNEES" means any assignee of a Lender pursuant to an Assignment
Agreement and has the meaning specified in Section 10.6 hereof.
- 3 -
<PAGE>
"ASSIGNMENT AGREEMENT" has the meaning specified in Section 10.6 hereof.
"AUTHORIZED OFFICER" means any of the following officers of the
Borrower: President, Senior Vice President-Accounting & Administration, Senior
Vice President-Finance, Vice President & General Counsel or Vice
President-Treasurer.
"AUTHORIZED SIGNATORY" means such senior personnel of the Borrower as
may be duly authorized and designated in writing by the Borrower to execute
documents, agreements and instruments on behalf of the Borrower, and to
request Advances hereunder.
"BASE RATE ADVANCE" means an Advance which the Borrower requests to be
made as a Base Rate Advance or which is reborrowed as a Base Rate Advance, in
accordance with the provisions of Section 2.2 hereof.
"BASE RATE BASIS" means, for any day, a per annum interest rate equal
to the higher of (a) the sum of (i) 0.50% plus (ii) the Federal Funds Rate on
such day, plus (iii) the Applicable Margin, or (b) the sum of (i) the Prime
Rate on such day plus (ii) the Applicable Margin. The Base Rate Basis shall
be adjusted automatically as of the opening of business on the effective date
of each change in the Prime Rate to account for such change.
"BOND LETTERS OF CREDIT" has the meaning specified in the Existing
Credit Agreement.
"BORROWER" means La Quinta Inns, Inc., a Texas corporation.
"BUSINESS DAY" means a day on which banks are open for the transaction
of business in Dallas, Texas and New York, New York, and, with respect to any
LIBOR Advance, in London, England.
"CAPITAL LEASES" mean all capital leases and subleases, as defined in
the Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 13, dated November 1976, as amended.
"CAPITAL STOCK" means, with respect to any Person, any capital stock,
partnership or joint venture interests of such Person and shares, interests,
participations or other ownership interests (however designated) of any Person
and any rights (other than debt securities convertible into corporate stock),
warrants or options to purchase any of the foregoing.
"CAPITALIZED LEASE OBLIGATIONS" means that portion of any obligation of
the Borrower or any Subsidiary as lessee under a lease which at the time would
be required to be capitalized on a balance sheet prepared in accordance with
GAAP.
"CHANGE OF CONTROL" means (a) any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable), is or becomes the "beneficial owner" (as that term is used in
Rules 13d-3 and 13d-5 under the
- 4 -
<PAGE>
Exchange Act, whether or not applicable, except that a person shall be deemed
to have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time, directly or indirectly, of more than 50% of the total
voting power in the aggregate of all classes of Capital Stock then
outstanding of the Borrower normally entitled to vote in elections of
directors, PROVIDED, that for the purposes of this clause (a), neither Thomas
M. Taylor & Co., Trust for the benefit of Mr. Taylor's son, Sid R. Bass,
Inc., Lee M. Bass, Inc., The Bass Management Trust, Annie R. Bass Trust for
Lee M. Bass, Ann R. Bass Trust for Sid R. Bass, Peter Sterling Trusts nor
Peter Sterling, each of which is a principal shareholder of the Borrower as
of the Agreement Date, nor any person who on the Agreement Date is, or at any
time thereafter becomes, a member of any group which includes any of such
entities and persons, shall be deemed to be a "person" or "group" for
purposes of this definition, or (b) during any period of 24 consecutive
months after September 12, 1995, individuals who at the beginning of such
period constituted the Board of Directors of the Borrower (together with any
new directors whose election by such Board or whose nomination for election
by the shareholders of the Borrower was approved by a vote of a majority of
the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved), cease for any reason to constitute a majority of the Board of
Directors of the Borrower then in office.
"CODE" means the Internal Revenue Code of 1986, as amended, together
with all regulations thereunder.
"COMBINED" means, with respect to financial statements, the combined
accounts of the Borrower, its Subsidiaries and Unincorporated Ventures which
are included in the Borrower's Annual Report to Shareholders and in the
Borrower's Form 10-K filed with the Securities and Exchange Commission (the
"Combined Financial Statements").
"COMMITMENT" means $50,000,000, as reduced pursuant to Section 2.6
hereof.
"CONFIDENTIALITY AGREEMENT" has the meaning specified in Section 10.10
hereof.
"CONSOLIDATED NET INCOME" means, for any period, determined in
accordance with GAAP on a Combined basis, consolidated net income for such
period.
"CONTROL" or "CONTROLLED BY" or "UNDER COMMON CONTROL" means
possession, directly or indirectly, of power to direct or cause the direction
of management or policies (whether through ownership of voting securities, by
contract or otherwise); provided, however, that in any event any Person which
beneficially owns, directly or indirectly, 10% or more (in number of votes)
of the securities having ordinary voting power for the election of directors
of a corporation shall be conclusively presumed to control such corporation.
"CONTROLLED GROUP" shall mean as of the applicable date, as to any
Person, all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) which are under common control with
such Person and which, together with such Person, are
- 5 -
<PAGE>
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code;
provided, however, that the Subsidiaries and Unincorporated Ventures of the
Borrower shall be deemed to be members of the Borrower's Controlled Group.
"CURRENT MATURITIES" means, with respect to any Person, the principal
portion payable by such Person on Long Term Debt during the twelve-month period
immediately succeeding the date of determination.
"DEBT" of any Person means, at any date, without duplication, all
obligations, contingent or otherwise, (a) of such Person for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof), (b) of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) representing the
balance deferred and unpaid of the purchase price of any property or services
(other than accounts payable or other obligations arising in the ordinary
course of business), if and to the extent any of the foregoing described in
clauses (a), (b) and (c) would appear as a liability on the balance sheet of
such Person, (d) of such Person in respect of bankers' acceptances, letters
of credit or other similar instruments (or reimbursement obligations with
respect thereto), (e) of such Person under Capitalized Lease Obligations, (f)
all liabilities secured by a Lien on any asset of such Person to the extent
of the value of such asset, whether or not such liability is an obligation of
such Person, (g) all liability of others guaranteed by such Person (but only
to the extent of such guarantees), (h) to the extent not otherwise included,
obligations of such Person under currency risk-hedging agreements and
Interest Rate Protection Agreements, (i) the liquidation preference and any
mandatory redemption payment obligations (without duplication) of such
Person's Subsidiaries in respect of preferred stock issued by any such
Subsidiary, (j) in the case of such Person, the liquidation preference and
any mandatory redemption payment obligations (without duplication) in respect
of Disqualified Capital Stock, and (k) in the case of such Person, unfunded
vested benefits under any Plan.
"DEBTOR RELIEF LAWS" means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
debtor relief Laws affecting the rights of creditors generally from time to
time in effect.
"DEFAULT" means an Event of Default and/or any of the events specified
in Section 7.1, regardless of whether there shall have occurred any passage of
time or giving of notice that would be necessary in order to constitute such
event an Event of Default.
"DEFAULT RATE" means a simple per annum interest rate equal to the
lesser of (a) the Highest Lawful Rate, or (b) the sum of the Prime Rate plus
three percent.
"DETERMINING LENDERS" means, on any date of determination, any
combination of the Lenders having at least 51% of the aggregate amount of the
Advances hereunder and Revolving Credit Advances (as defined in the Facility A
Credit Agreement) under the Facility A Credit Agreement (which for purpose of
the calculation shall include for each Lender an amount equal to the product of
such Lender's Specified Percentage multiplied by the aggregate principal
- 6 -
<PAGE>
amount of Swing Line Loans (as defined in the Facility A Credit Agreement)
outstanding) then outstanding; provided, however, that if there are no
Advances outstanding hereunder and no Revolving Credit Advances (as defined
in the Facility A Credit Agreement) outstanding under the Facility A Credit
Agreement, "DETERMINING LENDERS" shall mean any combination of Lenders whose
Specified Percentages hereunder and under the Facility A Credit Agreement
aggregate at least 51%.
"DISQUALIFIED CAPITAL STOCK" means, with respect to any Person any
series or class of Capital Stock of such Person which is or may be required to
be redeemed, in whole or in part, or may be put to such Person or any of its
Subsidiaries, in whole or in part, at the option of the Holder thereof, on or
prior to the final maturity of the Senior Subordinated Notes, or is or may be
convertible or exchangeable into or exercisable for such Capital Stock on or
prior to the final maturity of the Notes; PROVIDED, that Capital Stock will
not be deemed to be Disqualified Capital Stock if it may only be so redeemed or
put solely in consideration of Qualified Capital Stock.
"DOMESTIC SUBSIDIARY" means any Subsidiary of the Borrower organized
under the laws of any state within the United States.
"EBITDA" means, for any period, determined in accordance with GAAP on a
Combined basis, the sum of (a) Operating Income, plus (b) nonrecurring,
non-cash charges which decrease Operating Income, plus (c) depreciation,
amortization and non-cash fixed asset retirements, minus (d) nonrecurring
credits which are included in Operating Income.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.
"ERISA EVENT" means, with respect to the Borrower and its Subsidiaries,
(a) a Reportable Event (other than a Reportable Event not subject to the
provision for 30-day notice to the PBGC under regulations issued under
Section 4043 of ERISA), (b) the withdrawal of any such Person or any member
of its Controlled Group from a Plan subject to Title IV of ERISA during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate under
Section 4041(c) of ERISA, (d) the institution of proceedings to terminate a
Plan by the PBGC, (e) the failure to make required contributions which could
result in the imposition of a lien under Section 412 of the Code or Section
302 of ERISA, or (f) any other event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
the imposition of any liability under Title IV of ERISA other than PBGC
premiums due but not delinquent under Section 4007 of ERISA.
"EVENT OF DEFAULT" means any of the events specified in Section 7.1,
provided that any requirement for notice or lapse of time has been satisfied.
"EXISTING CREDIT AGREEMENT" means that certain Amended and Restated
Credit Agreement, dated as of January 25, 1994, among the Borrower, the lenders
party thereto, and
- 7 -
<PAGE>
NationsBank of Texas, N.A., as Administrative Lender, as amended, modified,
supplemented or restated from time to time.
"EXISTING INVESTMENTS" means those Investments described on SCHEDULE 4
hereto.
"EXISTING LETTERS OF CREDIT" means those Letters of Credit outstanding
on the Agreement Date, as described on SCHEDULE 9 hereto.
"FACILITY A CREDIT AGREEMENT" means that certain Amended and Restated
Credit Agreement (Facility A), dated as of the Agreement Date, among the
Borrower, the lenders party thereto, and NationsBank of Texas, N.A., as
administrative lender, as amended, restated, supplemented or otherwise modified
from time to time.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of Dallas on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding
Business Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to the Administrative Lender on such day on such transactions as
determined by Administrative Lender.
"FEE LETTER" has the meaning specified in Section 2.4(c) hereof.
"FOREIGN SUBSIDIARY" means any Subsidiary that is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles, set forth in the
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants, or their successors which are applicable in the
circumstances as of the date in question (except as stated in the last
sentence of this definition). The requisite that such principles be applied
on a consistent basis shall mean that the accounting principles observed in a
current period are comparable in all material respects to those applied in a
preceding period, except as otherwise required by the adoption of Statements
by the Financial Accounting Standards Board. Notwithstanding the foregoing,
each determination and computation with respect to financial covenants and
ratios in this Agreement shall be made in accordance with GAAP as in effect
on the Agreement Date.
"GUARANTY" or "GUARANTEED", as applied to an obligation of another
Person, means and includes (a) a guaranty, direct or indirect, in any manner,
of any part or all of such obligation, and (b) an agreement, direct or
indirect, contingent or otherwise, the practical effect of which is to assure
in any way the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation, including, without
limiting the foregoing,
- 8 -
<PAGE>
any reimbursement obligations with respect to amounts which may be drawn by
beneficiaries of outstanding letters of credit.
"GUARANTY AGREEMENTS" means the Subsidiary Guaranty and any other
Guaranty executed by a Guarantor.
"GUARANTOR" means each Significant Subsidiary.
"HIGHEST LAWFUL RATE" means at the particular time in question the
maximum rate of interest which, under Applicable Law, the Lenders are then
permitted to charge on the Obligations. If the maximum rate of interest which,
under Applicable Law, the Lenders are permitted to charge on the Obligations
shall change after the date hereof, the Highest Lawful Rate shall be
automatically increased or decreased, as the case may be, from time to time as
of the effective time of each change in the Highest Lawful Rate without notice
to the Borrower. For purposes of determining the Highest Lawful Rate under the
Applicable Law of the State of Texas, the applicable rate ceiling shall be (a)
the indicated rate ceiling described in and computed in accordance with the
provisions of Section (a)(1) of Art. 1.04, or (b) if the parties subsequently
contract as allowed by Applicable Law, the quarterly ceiling or the annualized
ceiling computed pursuant to Section (d) of Art. 1.04; provided, however, that
at any time the indicated rate ceiling, the quarterly ceiling or the annualized
ceiling shall be less than 18% per annum or more than 24% per annum, the
provisions of Sections (b)(1) and (2) of said Art. 1.04 shall control for
purposes of such determination, as applicable.
"INCREASED ADVANCE COSTS" has the meaning specified in Section 8.3
hereof.
"INCREASED ADVANCE COSTS RETROACTIVE EFFECTIVE DATE" has the meaning
specified in Section 8.3 hereof.
"INCREASED ADVANCE COSTS SET DATE" has the meaning specified in Section
8.3 hereof.
"INDEMNIFIED MATTERS" has the meaning specified in Section 5.22 hereof.
"INDEMNITEES" has the meaning specified in Section 5.22 hereof.
"INDEX DEBT RATING" means the rating applicable to the Borrower's
senior, unsecured, non-credit-enhanced long term indebtedness for borrowed
money ("Index Debt") or the implied rating established by Moody's, S&P or ARA
as if the Borrower had outstanding Index Debt.
"INSOLVENT UNINCORPORATED VENTURES" means those Unincorporated Ventures
specified on SCHEDULE 8 hereto.
"INTEREST EXPENSE" of any Person means, for any period, the aggregate
interest expense in respect of Debt (including amortization of original issue
discount and non-cash interest payments or accruals, and dividends on
Disqualified Capital Stock, but excluding amortization
- 9 -
<PAGE>
of Debt issuance costs) of such Person and all commissions, discounts, other
fees and charges owed with respect to letters of credit and bankers'
acceptance financing and costs associated with currency and Interest Rate
Protection Agreements, all in accordance with GAAP; PROVIDED, that interest
expense attributable to that portion of the Debt of another Person that is a
direct or indirect, contingent or primary, recourse obligation of such Person
subsequent to the Agreement Date shall be added thereto.
"INTEREST PERIOD" means (a) for any Base Rate Advance, the period
beginning on the day the Advance was made and ending on the Maturity Date, and
(b) for any LIBOR Advance, the period beginning on the day such Advance is made
and ending one, two, three, six months or twelve months thereafter (as the
Borrower shall select).
"INTEREST RATE PROTECTION AGREEMENT" means an interest rate swap, cap,
collar or similar interest rate protection agreement between the Borrower or
any Subsidiary and other Person.
"INVESTMENT" means, in one or a series of related transactions, any
direct or indirect acquisition of all or substantially all assets of any
Person, or any direct or indirect purchase or other acquisition of, or
beneficial interest in, capital stock or other securities of any other
Person, or any direct or indirect loan, advance (other than advances to
employees for moving and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution or
transfer of property, assets or value to, or investment, in any other Person,
including without limitation the incurrence or sufferance of Debt or the
purchase of accounts receivable of any other Person that are not current
assets or do not arise in the ordinary course of business.
"INVESTMENT POLICY" means that certain Amended and Restated La Quinta
Inns, Inc. Statement of Investment Policy as of October 1989 in effect on the
Agreement Date as specified on SCHEDULE 5 hereto.
"ISSUING BANK" means NationsBank of Texas, N.A. in its capacity as
issuer of the Letters of Credit.
"LENDER" means each financial institution shown on the signature pages
hereof so long as such financial institution maintains a Commitment or is owed
any part of the Obligations (including the Administrative Lender in its
individual capacity), and each Assignee that hereafter becomes party hereto
pursuant to Section 10.6 hereof.
"LEVERAGE RATIO" means, for any date of determination, the ratio of (i)
Total Debt as of the fiscal quarter immediately preceding the date of
determination to (ii) EBITDA, for the four consecutive fiscal quarters
preceding the date of determination. For purposes of calculation of EBITDA,
there shall be (i) included in EBITDA (without duplication) the EBITDA of any
assets acquired during any such four fiscal quarters and (ii) excluded from
EBITDA the EBITDA of any asset disposed during any such four fiscal quarters.
- 10 -
<PAGE>
"LIBOR ADVANCE" means an Advance which the Borrower requests to be made
as a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance
with the provisions of Section 2.2 hereof.
"LIBOR BASIS" means, with respect to each LIBOR Advance for each
Interest Period, a rate per annum equal to the lesser of (a) the Highest
Lawful Rate or (b) the sum of the LIBOR Rate plus the Applicable Margin.
"LIBOR LENDING OFFICE" means, with respect to a Lender, the office
designated as its LIBOR Lending Office on SCHEDULE 1 attached hereto, and such
other office of the Lender or any of its affiliates hereafter designated by
notice to the Borrower and the Administrative Lender.
"LIBOR RATE" means, for any Interest Period, the interest rate per annum
(rounded upward to the nearest one-sixteenth (1/16th) of one percent) at which
deposits in United States Dollars are offered to the Administrative Lender by
leading banks reasonably selected by the Administrative Lender in the London
interbank market at approximately 11:00 a.m. (London time), two Business Days
before the first day of such Interest Period, in an amount approximately equal
to the principal amount of, and for a length of time approximately equal to the
Interest Period for, the LIBOR Advance sought by the Borrower.
"LIEN" means, with respect to any property, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"LOAN PAPERS" means this Agreement, the Notes, the Guaranty Agreements,
the Fee Letter, and any other document or agreement executed or delivered from
time to time by the Borrower, any Subsidiary or any other Person in connection
herewith or as security for all or any part of the Obligations.
"LOAN PARTY" means the Borrower and each Guarantor.
"LONG TERM DEBT" means any obligation which is due one year or more from
the date of creation thereof which under GAAP is shown as a liability, plus
(without duplication) amounts equal to the aggregate net rentals (after making
allowances for any interest, taxes or other expenses included therein) payable
more than one year from the date of creation thereof under Capital Leases.
"MAINTENANCE CAPITAL EXPENDITURES" means, for any date of determination,
an amount equal to the product of (a) 5% multiplied by (b) room revenues (as
disclosed in the Borrower's Form 10-K and 10-Q) of the Borrower, its
Subsidiaries and Unincorporated Ventures, for the four consecutive fiscal
quarters preceding the date of determination.
- 11 -
<PAGE>
"MASTER COVENANT AGREEMENT" means the Fifth Amended and Restated Master
Covenant Agreement dated as of the Agreement Date, by and between the Borrower
and NationsBank of Texas, N.A., as such agreement may be amended, restated,
supplemented or otherwise modified from time to time.
"MATERIAL ADVERSE CHANGE OR EFFECT" means any act or circumstance or
event which (a) is material and adverse to the combined or consolidated
financial condition of the Borrower, its Subsidiaries and Unincorporated
Ventures as represented in the Combined Financial Statements most recently
delivered to the Lenders at the time of any determination thereof or be
material and adverse to the combined or consolidated business operations or
properties of the Borrower, its Subsidiaries and Unincorporated Ventures or
(b) impairs the ability of the Borrower, any Subsidiary or any other Person
to perform in any material respect their respective obligations under the
Loan Papers.
"MATERIAL AMOUNT" means, as of the determination thereof, an amount
equal to the greater of (a) $1,000,000 or (b) the lesser of (i) $4,000,000 or
(ii) 1% of the consolidated revenues of the Borrower and its Subsidiaries
computed on a Combined basis for the fiscal year preceding the date of
determination.
"MATURITY DATE" means September 9, 1996, or the earlier date of
termination in whole of the Commitment pursuant to Section 2.6 or 7.2 hereof,
or such later date as agreed to by the Borrower and the Lenders pursuant to
Section 2.17 hereof.
"MAXIMUM AMOUNT" means the maximum amount of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means, as to any Person, at any time, a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which such Person or any member of its Controlled Group is making, or is
obligated to make contributions or has made, or been obligated to make,
contributions.
"NECESSARY AUTHORIZATION" means any right, franchise, license, permit,
consent, approval or authorization from, or any filing or registration with,
any governmental or other regulatory authority necessary or appropriate to
enable the Borrower or any Subsidiary or Unincorporated Venture to maintain
and operate its business and properties.
"NET CASH PROCEEDS" means the aggregate amount of cash received by the
Borrower in respect of the sale of Capital Stock of the Borrower, less the sum
of all fees, commissions and other expenses incurred in connection with such
sale.
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, as determined in accordance with
GAAP.
- 12 -
<PAGE>
"NET INTEREST EXPENSE" means, with respect to any Person for any period,
the sum of (i) Interest Expense of such Persons for such period minus (ii)
interest income of such Person for such period as reflected on an income
statement of such Person prepared in accordance with GAAP.
"NET WORTH" means an amount equal to the sum of the Capital Stock and
additional paid-in-capital plus retained earnings (or minus accumulated
deficit) of the Borrower and its Subsidiaries, less (i) treasury stock and
(ii) amounts attributable to the extent included, (1) to any write-up in book
value of assets resulting from a revaluation thereof subsequent to June 30,
1995, and (2) to Disqualified Capital Stock, all in accordance with GAAP.
"NOTE" means any Promissory Note of the Borrower evidencing Advances
hereunder, substantially in the form of EXHIBIT A hereto, together with any
extension, renewal or amendment thereof or substitution therefor.
"OBLIGATIONS" means (a) all obligations of any nature (whether matured
or unmatured, fixed or contingent) of the Borrower, any Subsidiary or any
other Person to the Lenders under the Loan Papers as they may be amended from
time to time, and (b) all obligations of the Borrower, any Subsidiary or any
other Person for losses, damages, expenses or any other liabilities of any
kind that any Lender may suffer by reason of a breach by the Borrower, any
Subsidiary or any other Person of any obligation, covenant or undertaking
with respect to any Loan Paper.
"OBLIGOR" means Borrower or each other Person liable for performance of
any of the Obligations or the property of which secures any of the Obligations.
"OPERATING INCOME" means, with respect to any Person for any period, the
operating income (loss) of such Person, as determined in accordance with GAAP.
"OPERATING LEASE" means any operating lease, as defined in the Financial
Accounting Standard Board Statement of Financial Accounting Standards No. 13,
dated November, 1976 or otherwise in accordance with GAAP.
"OTHER TAXES" has the meaning specified in Section 2.15 hereof.
"PARENT COMPANY" means, with respect to financial statements, the
uncombined, consolidated financial statements of the Borrower and its
Subsidiaries, including equity method investments, as defined by GAAP, in
Unincorporated Ventures and designated "La Quinta Inns, Inc. (Parent Company
and Wholly-Owned Subsidiaries)" on the Borrower's audit report.
"PARTICIPANT" has the meaning specified in Section 10.6(c) hereof.
"PARTICIPATION" has the meaning specified in Section 10.6(c) hereof.
- 13 -
<PAGE>
"PARTNERS' CAPITAL" means the equity in the net assets of Unincorporated
Ventures of all the partners or venturers (other than the Borrower or a
Subsidiary) of such Unincorporated Ventures, or minority interest holders, as
determined in accordance with GAAP.
"PAYMENT DATE" means the last day of the Interest Period for any
Advance.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED INVESTMENT" means Investments in (i) wholly-owned Domestic
Subsidiaries (a) that are subject to the provisions of this Agreement, (b)
that concurrently therewith unconditionally guarantee the performance of the
Borrower's obligations under this Agreement and (c) that concurrently deliver
to the Lenders (1) an opinion acceptable to the Lenders with respect to the
validity and enforceability of such guarantee and (2) such other documents,
such as corporate resolutions, certificates of incumbency, by-laws and
articles of incorporation, as the Lenders shall reasonably require, (ii)
Investments in any Person other than a wholly-owned Subsidiary in any one or
a series of related transactions with a fair market value not in excess of
$25,000,000 in the aggregate for all Investments in all such Persons, (iii)
Investments for the purpose of satisfying the Borrower's or any Subsidiary's
guarantee obligations with respect to the Debt of any Person in which the
Borrower or any Subsidiary owned any interest and which obligation was in
existence as of the Agreement Date; (iv) Investments in Subsidiaries and
Unincorporated Ventures which do not guarantee the performance of the
Borrower's obligations under this Agreement made in the ordinary course of
business, consistent with past practices for the purpose of providing for the
day to day operating requirements of such Subsidiary or Unincorporated
Venture, PROVIDED, that such Investments shall (a) not be used for
acquisition or conversion of any inns and (b) be evidenced by a note or other
evidence of indebtedness and (c) not at any time exceed $10,000,000 in
aggregate principal amount, (v) Investments permitted by Sections II.B.,
II.C. (provided that, notwithstanding Section II.C.3. of the Investment
Policy, banks shall be required to have at least $150,000,000 in capital and
surplus), II.E. and II.H. of the Investment Policy, (vi) loans or advances to
employees as compensation for services in the ordinary course of business not
in excess of $2,000,000 aggregate principal amount, (vii) Investments in the
ordinary course of business, consistent with past practice, in the Borrower's
National Advertising Fund, (viii) Existing Investments, (ix) Investments in
Capital Stock of Subsidiaries and Unincorporated Ventures listed on SCHEDULE
3 hereto for the purpose of acquiring no less than 100% of the capital stock
or partnership interests, as appropriate, of such Subsidiaries and
Unincorporated Ventures, (x) Investments in notes payable to the Borrower as
a result of the sale of inns in an aggregate principal amount not in excess
of $10,000,000, provided that the Borrower shall obtain and continue to hold
a perfected first Lien (subject to Permitted Liens) in such inns, and (xi)
Investments in wholly-owned Foreign Subsidiaries (a) that are subject to the
provisions of this Agreement and (b) not to exceed in aggregate amount
$1,000,000 for all Investments in all Foreign Subsidiaries. For purposes of
the calculation of the amount of any Investments permitted hereunder,
Investments will be calculated at all times at the amount of the original
Investment with no reduction for write-offs or write-downs. No Investment
which is a Permitted Investment other than pursuant to clause (ii) of the
- 14 -
<PAGE>
definition of "PERMITTED INVESTMENTS" shall reduce the amount of Investments
permitted pursuant to such clause (ii).
"PERMITTED LIENS" means, as applied to any Person:
(i) any Lien in favor of the Administrative Lender or a trustee on its
behalf to secure the Obligations;
(ii) (a) Liens on real estate for real estate taxes not yet
delinquent, (b) Liens created by lease agreements to secure the payments of
rental amounts and other sums not yet due thereunder, (c) Liens on leasehold
interests created by the lessor in favor of any mortgagee of the leased
premises, and (d) Liens for taxes, assessments, governmental charges, levies
or claims that are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on such
Person's books, but only so long as no foreclosure, restraint, sale or
similar proceedings have been commenced with respect thereto;
(iii) Liens of carriers, warehousemen, mechanics, laborers and
materialmen and other similar Liens incurred in the ordinary course of
business for sums not yet due or being contested in good faith, if such
reserve or appropriate provision, if any, as shall be required by GAAP shall
have been made therefor;
(iv) Liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or similar legislation;
(v) Easements, rights-of-way, restrictions and other similar
encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person;
(vi) Liens created to secure the purchase price of fixed assets
acquired by such Person, which is incurred solely for the purpose of
financing the acquisition of such assets and incurred at the time of
acquisition, so long as (a) each such Lien shall at all times be confined
solely to the asset or assets so acquired (and proceeds thereof), (b) the
Liens were placed on such assets at the time such assets were acquired and
(c) the aggregate principal amount of Debt secured by such Liens does not
exceed, together with the principal amount of Debt secured by Liens permitted
pursuant to clause (vii) below, $25,000,000, and refinancings thereof so long
as any such Lien remains solely on the asset or assets acquired and the
amount of Debt related thereto is not increased;
(vii) Liens existing on any property acquired by such Person prior to
the acquisition of such property by such Person, provided (a) such Lien shall
at all times be confined solely to the property so acquired (and proceeds
thereof) and (b) the aggregate principal amount of Debt secured by such Liens
does not exceed, together with the principal amount of Debt secured by Liens
permitted pursuant to clause (vi) above, $25,000,000 and refinancings thereof
so long as any such Lien remains solely on the asset or assets acquired and
the amount of Debt related thereto is not increased;
- 15 -
<PAGE>
(viii) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (a) such Person shall have established adequate reserves for such
judgments or awards, (b) such judgments or awards shall be fully insured and the
insurer shall not have denied coverage, or (c) such judgments or awards shall
have been bonded to the satisfaction of the Lenders;
(ix) Any Liens existing on the Agreement Date which are described on
SCHEDULE 12 hereto, and Liens resulting from the refinancing of the related
Debt, provided that the Debt secured thereby shall not be increased and the
Liens shall not cover additional assets of the Borrower;
(x) any obligations or duties, affecting any property, to any
municipality or public authority with respect to any franchise, grant, license
or permit which do not materially impair the use of any material property for
the purposes for which such property is held by such Person;
(xi) zoning laws or ordinances and municipal regulations which do not
materially impair the use of any material property for the purposes for which
such property is held by such Person;
(xii) Liens, minor irregularities in or deficiencies of title on any
property which do not materially impair the use of any material property for the
purposes for which such property is held by such Person; and
(xiii)Liens otherwise permitted or contemplated by the Loan Papers.
"PERSON" means and includes an individual, corporation, partnership,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
"PLAN" means an employee benefit plan as defined in Section 3(3) of
ERISA (including a Multiemployer Plan that is covered by Title IV of ERISA)
pursuant to which any employees of the Borrower, its Subsidiaries,
Unincorporated Ventures or any member of their Controlled Group participate;
PROVIDED, HOWEVER, "Plan" shall not include those agreements with former
employees of any of such Persons described on SCHEDULE 7 hereto, the
obligations pursuant to which do not exceed $450,000 in aggregate amount.
"PRIME RATE" means, at any time, the prime interest rate announced or
published by the Administrative Lender from time to time as its reference rate
for the determination of interest rates for loans of varying maturities in
United States dollars to United States residents of varying degrees of
creditworthiness and being quoted at such time by the Administrative Lender as
its "prime rate;" it being understood that such rate may not be the lowest rate
of interest charged by the Administrative Lender.
- 16 -
<PAGE>
"QUALIFIED CAPITAL STOCK" means any Capital Stock of the Borrower that
is not Disqualified Capital Stock.
"QUARTERLY DATE" means the last Business Day of each February, May,
August and November, beginning November 30, 1995.
"REFINANCING ADVANCE" means any Advance which is used to pay the
principal amount (or any portion thereof) of an Advance at the end of its
Interest Period and which, after giving effect to such application, does not
result in an increase in the aggregate amount of outstanding Advances.
"REGULATORY MODIFICATION RETROACTIVE EFFECTIVE DATE" has the meaning
specified in Section 8.5 hereof.
"REGULATORY MODIFICATION SET DATE" has the meaning specified in Section
8.5 hereof.
"RELEASE DATE" means the date on which the Notes have been paid, all
other Obligations due and owing have been paid and performed in full, and the
Commitment has been terminated.
"REPORTABLE EVENT" has the meaning specified in Section 4043(b) of
ERISA.
"RIGHTS" means rights, remedies, powers and privileges.
"S&P" means Standard & Poor's Ratings Group, a Division of McGraw-Hill,
Inc., a New York corporation.
"S.E.C." means the United States Securities and Exchange Commission.
"SENIOR DEBT" means Total Debt of the Borrower, its Subsidiaries and
Unincorporated Ventures, as appropriate, other than Subordinated Debt.
"SENIOR NOTES" means the Borrower's $100,000,000 senior unsecured notes
due 2005.
"SENIOR SUBORDINATED NOTES" means the Borrower's $120,000,000 9-1/4%
Senior Subordinated Notes due May 15, 2003 issued pursuant to the Senior
Subordinated Note Indenture.
"SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture pursuant to
which the Senior Subordinated Notes may be issued, as the same may be amended,
supplemented or otherwise modified.
"SIGNIFICANT INVESTMENTS" means those investments of the Borrower in the
joint ventures or partnerships set forth on SCHEDULE 10 hereto.
- 17 -
<PAGE>
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Borrower (a) the
revenues attributable to which for the then most recently completed four fiscal
quarters constituted (or, with respect to Subsidiaries acquired during such four
fiscal quarters, would have constituted had the revenues of such Subsidiary been
included for such period) 2.5% or more of the consolidated revenues of the
Borrower and its Subsidiaries for such period, or (b) the assets of which as of
the end of such period constituted 2.5% or more of the consolidated assets of
the Borrower and its Subsidiaries as of the end of such period.
"SOLVENT" means, with respect to any Person, that the fair value of the
assets of such Person (both at fair valuation and at present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and such Person does not
have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability discounted to present value
at rates believed to be reasonable by such Person.
"SPECIAL COUNSEL" means the law firm of Donohoe, Jameson & Carroll,
P.C., or such other legal counsel as the Administrative Lender may select.
"SPECIFIED PERCENTAGE" means, as to any Lender, the percentage indicated
beside its name on the signature pages hereof, or if applicable, specified in
its most recent Assignment Agreement.
"SUBSIDIARY" with respect to any Persons, means (a) a corporation at
least a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person or (b) a partnership, joint venture or
similar entity in which 100% of the ownership, capital, interest or profits is
at the time, directly or indirectly, owned by such Person, by such Person and
one or more Subsidiaries of such Person or by one or more Subsidiaries of such
Person.
"SUBSIDIARY GUARANTY" means the Guaranty executed by each Significant
Subsidiary guaranteeing payment and performance of the Obligations,
substantially in the form of EXHIBIT B hereto, as such agreement may be
amended, modified, supplemented or restated from time to time.
"SUBORDINATED DEBT" means any debt, obligation or liability (whether
primary, contingent or otherwise) of the Borrower, a Subsidiary or an
Unincorporated Venture which by its terms is subordinate in right of payment to
the Obligations, provided that the Banks approve the terms thereof prior to or
at the time of the issuance thereof.
- 18 -
<PAGE>
"TAXES" has the meaning specified in Section 2.15 hereof.
"TOTAL DEBT" means, as of any date of determination, the sum (without
duplication) of (a) all Debt of the Borrower and its Subsidiaries, minus (b)(i)
the aggregate face amount of Bond Letters of Credit outstanding and (ii) all
Debt of the Borrower and its Subsidiaries of the type described in (A) clauses
(f) and (g) of the definition of "DEBT" herein which are set forth on
SCHEDULE 11 hereto and (B) clauses (h) and (k) of the definition of "DEBT"
herein.
"TRIBUNAL" means any state, commonwealth, federal, foreign territorial,
or other court or governmental department, commission, board, bureau, agency or
instrumentality.
"UCC" means the Uniform Commercial Code of Texas, as amended from time
to time.
"UNINCORPORATED VENTURES" means those Persons designated as
"Unincorporated Ventures" on SCHEDULE 3 hereto.
Section 1.2 AMENDMENTS AND RENEWALS. Each definition of an agreement in
this Article 1 shall include such agreement as amended to date, and as amended
or renewed from time to time in accordance with its terms, but only with the
prior written consent of the Determining Lenders.
Section 1.3 CONSTRUCTION. The terms defined in this Article 1 (except
as otherwise expressly provided in this Agreement) for all purposes shall have
the meanings set forth in Section 1.1 hereof, and the singular shall include the
plural, and vice versa, unless otherwise specifically required by the context.
All accounting terms used in this Agreement which are not otherwise defined
herein shall be construed in accordance with GAAP on a consolidated basis for
the Borrower and its Subsidiaries, unless otherwise expressly stated herein.
ARTICLE 2
ADVANCES
Section 2.1 THE ADVANCES. Each Lender severally agrees, upon the terms
and subject to the conditions of this Agreement, to make Advances to the
Borrower from time to time up to and including the Maturity Date in an aggregate
amount not to exceed an amount equal to its Specified Percentage of the
Commitment for the purposes set forth in Section 5.21 hereof. Notwithstanding
the immediately preceding sentence, at no time shall the aggregate principal
amount of Advances outstanding, exceed the Commitment. Subject to Section 2.9
hereof, Advances may be repaid and then reborrowed. Any Advance shall, at the
option of the Borrower as provided in Section 2.2 hereof (and, in the case of
LIBOR Advances, subject to availability and to the provisions of Article 8
hereof), be made as a Base Rate Advance or a LIBOR Advance; provided that there
shall not be outstanding to any Lender, at any one time,
- 19 -
<PAGE>
more than six LIBOR Advances. On the Maturity Date unless sooner paid as
provided herein, the outstanding Advances shall be repaid in full.
Section 2.2 MANNER OF BORROWING AND DISBURSEMENT.
(a) In the case of Base Rate Advances other than a Refinancing Advance,
the Borrower, through an Authorized Signatory, shall give the Administrative
Lender prior to 10:30 a.m., Dallas, Texas time, on the date of any proposed Base
Rate Advance irrevocable written notice, or irrevocable telephonic notice
followed immediately by written notice (provided, however, that the Borrower's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given), of its intention to borrow or reborrow a Base Rate Advance
hereunder. Such notice of borrowing shall specify the requested funding date,
which shall be a Business Day, and the amount of the proposed aggregate Base
Rate Advances to be made by Lenders. Each Base Rate Advance shall have an
Interest Period beginning on the date such Advance is made and ending on the
Quarterly Date next following the date the Advance is made; provided that no
such Interest Period shall extend past the Maturity Date.
(b) In the case of LIBOR Advances, the Borrower, through an Authorized
Signatory, shall give the Administrative Lender at least three Business Days'
irrevocable written notice for LIBOR Advances, or irrevocable telephonic notice
followed immediately by written notice (provided, however, that the Borrower's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given), of its intention to borrow or reborrow a LIBOR Advance
hereunder. Notice shall be given to the Administrative Lender prior to 11:00
a.m., Dallas, Texas time, in order for such Business Day to count toward the
minimum number of Business Days required. LIBOR Advances shall in all cases be
subject to availability and to Article 8 hereof. For LIBOR Advances, the notice
of borrowing shall specify the requested funding date, which shall be a Business
Day, the amount of the proposed aggregate LIBOR Advances, to be made by Lenders
and the Interest Period selected by the Borrower, provided that no such Interest
Period shall extend past the Maturity Date.
(c) Subject to Sections 2.1 and 2.9 hereof, at least three Business Days
prior to each Payment Date for a LIBOR Advance, the Borrower, through an
Authorized Signatory, shall give the Administrative Lender irrevocable written
notice, or irrevocable telephonic notice followed immediately by written notice
(provided, however, that the Borrower's failure to confirm any telephonic notice
in writing shall not invalidate any notice so given), specifying whether all or
a portion of such LIBOR Advance outstanding on the Payment Date (i) is to be
repaid and then reborrowed in whole or in part as a Base Rate Advance or a LIBOR
Advance, or (ii) is to be repaid and not reborrowed; provided, however,
notwithstanding anything in this Agreement to the contrary, if on any Payment
Date a Default shall exist, such LIBOR Advance may only be reborrowed as a Base
Rate Advance. Upon such Payment Date, such LIBOR Advance shall, subject to the
provisions hereof, be so repaid and, as applicable, reborrowed.
(d) Subject to Sections 2.1 and 2.9 hereof, upon irrevocable written
notice to the Administrative Lender prior to 11:00 a.m., Dallas, Texas, time on
each Payment Date (or three
- 20 -
<PAGE>
Business Days if the Borrower wishes to reborrow a LIBOR Advance, through an
Authorized Signatory, or irrevocable telephonic notice followed immediately by
written notice (provided, however, that the Borrower's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given), the
Borrower may repay a Base Rate Advance on its Payment Date, and (i) reborrow all
or a portion of the principal amount thereof as a Base Rate Advance, (ii)
reborrow all or a portion of the principal amount thereof as one or more LIBOR
Advances, or (iii) not reborrow all or any portion of such Base Rate Advance.
Upon such Payment Date or date of repayment, such Base Rate Advance shall,
subject to the provisions hereof, be so repaid and, as applicable, reborrowed.
(e) The aggregate amount of Base Rate Advances to be made by the Lenders
on any day shall be in a principal amount which is at least $1,000,000 and which
is an integral multiple of $100,000; provided, however, that such amount may
equal the unused amount of the Commitment. The aggregate amount of LIBOR
Advances having the same Interest Period and to be made by the Lenders on any
day shall be in a principal amount which is at least $3,000,000 and which is an
integral multiple of $500,000.
(f) The Administrative Lender shall promptly notify the Lenders of each
notice received from the Borrower pursuant to this Section. Failure of the
Borrower to give any notice in accordance with Sections 2.2(c) and (d) hereof
shall result in a repayment of any such existing Advance on the applicable
Payment Date by a Refinancing Advance which is a Base Rate Advance. Each Lender
shall, not later than 1:00 p.m., Dallas, Texas time, on the date of any Advance
that is not a Refinancing Advance, deliver to the Administrative Lender, at its
address set forth herein, such Lender's Specified Percentage of such Advance in
immediately available funds in accordance with the Administrative Lender's
instructions. Prior to 2:00 p.m., Dallas, Texas time, on the date of any
Advance hereunder that is not a Refinancing Advance, the Administrative Lender
shall, subject to satisfaction of the conditions set forth in Article 3,
disburse the amounts made available to the Administrative Lender by the Lenders
by (i) transferring such amounts by wire transfer pursuant to the Borrower's
instructions, or (ii) in the absence of such instructions, crediting such
amounts to the account of the Borrower maintained with the Administrative
Lender. All Advances shall be made by each Lender according to its Specified
Percentage.
Section 2.3 INTEREST.
(a) ON BASE RATE ADVANCES.
(i) The Borrower shall pay interest on the outstanding unpaid
principal amount of each Base Rate Advance, from the date such Advance is
made until it is due (whether at maturity, by reason of acceleration, by
scheduled reduction, or otherwise) or repaid, which shall be payable as
set forth in Section 2.3(a)(ii) hereof, at a simple interest rate per
annum equal to the Base Rate Basis for such Base Rate Advance as in effect
from time to time, provided that interest on such Base Rate Advance shall
not exceed the Maximum Amount. If at any time the Base Rate Basis would
exceed the Highest Lawful
- 21 -
<PAGE>
Rate, interest payable on such Base Rate Advance shall be limited to the
Highest Lawful Rate, but the Base Rate Basis shall not thereafter be
reduced below the Highest Lawful Rate until the total amount of interest
accrued on such Advance equals the amount of interest that would have
accrued if the Base Rate Basis had been in effect at all times.
(ii) Interest on each Base Rate Advance shall be computed on the
basis of a year of 365 or 366 days, as applicable, for the number of days
actually elapsed, and shall be payable in arrears on each Quarterly Date
and on the Maturity Date.
(b) ON LIBOR ADVANCES.
(i) The Borrower shall pay interest on the unpaid principal amount
of each LIBOR Advance, from the date such Advance is made until it is due
(whether at maturity, by reason of acceleration, by scheduled reduction,
or otherwise) or repaid, at a rate per annum equal to the LIBOR Basis for
such Advance. The Administrative Lender, whose determination shall be
conclusive, shall determine the LIBOR Basis on the second Business Day
prior to the applicable funding date and shall notify the Borrower and the
Lenders of such LIBOR Basis.
(ii) Subject to Section 10.9 hereof, interest on each LIBOR Advance
shall be computed on the basis of a 360-day year for the actual number of
days elapsed, and shall be payable in arrears on the applicable Payment
Date and on the Maturity Date; provided, however, that if the Interest
Period for such Advance exceeds three months, interest shall also be due
and payable in arrears on each Quarterly Date during such Interest Period.
(c) INTEREST IF NO NOTICE OF SELECTION OF INTEREST RATE BASIS. If the
Borrower fails to give the Administrative Lender timely notice of its selection
of a LIBOR Basis or an Interest Period for a LIBOR Advance, or if for any reason
a determination of a LIBOR Basis for any Advance is not timely concluded due to
the fault of the Borrower, the appropriate Base Rate Basis shall apply to such
Advance.
(d) INTEREST AFTER AN EVENT OF DEFAULT. (i) After an Event of Default
(other than an Event of Default specified in Section 7.1(f) hereof) and during
any continuance thereof, at the option of Determining Lenders, and (ii) after an
Event of Default specified in Section 7.1(f) hereof and during any continuance
thereof, automatically and without any action by the Administrative Lender or
any Lender, the Obligations shall bear interest at a rate per annum equal to the
Default Rate. Such interest shall be payable on the earlier of demand or the
Maturity Date, and shall accrue until the earlier of (i) waiver or cure (to the
satisfaction of the Determining Lenders) of the applicable Event of Default,
(ii) agreement by the Lenders to rescind the charging of interest at the Default
Rate, or (iii) payment in full of the Obligations. The Lenders shall not be
required to accelerate the maturity of the Advances, to exercise any other
rights or remedies under the Loan Papers, or to give notice to the Borrower of
the decision
- 22 -
<PAGE>
to charge interest at the Default Rate. The Lenders will undertake to notify
the Borrower, after the effective date, of the decision to charge interest at
the Default Rate.
Section 2.4 FEES.
(a) FACILITY FEE. Subject to Section 10.9 hereof, the Borrower agrees
to pay to the Administrative Lender, for the ratable account of the Lenders, a
facility fee on the daily average amount of the Commitment at the following per
annum percentages, applicable in the following situations:
<TABLE>
<CAPTION>
APPLICABILITY PERCENTAGE
------------- ----------
<S> <C>
CATEGORY 1 - The Leverage Ratio is not less than
3.50 to 1 or the Index Debt Rating is any two of
the following: BB by S&P, BB by ARA or Ba2 by Moody's 0.25
CATEGORY 2 - The Leverage Ratio is less than 3.50
to 1 but not less than 3.0 to 1 or the Index Debt
Rating is any two of the following: BB+ by S&P, BB+
by ARA or Ba1 by Moody's 0.20
CATEGORY 3 - The Leverage Ratio is less than 3.00
to 1 but not less than 2.0 to 1 or the Index Debt
Rating is any two of the following: BBB- or
better by S&P, BBB- or better by ARA or Baa3 or
better by Moody's 0.15
CATEGORY 4 - The Leverage Ratio is less than 2.00
to 1 or the Index Debt Rating is any two of the
following: BBB+ or better by S&P, BBB+ or better by
ARA or Baa1 or better by Moody's 0.125
</TABLE>
Such fee shall accrue on the date of the initial advance under the Facility A
Credit Agreement and shall be payable (i) in arrears on each Quarterly Date and
on the Maturity Date, fully earned when due and, subject to Section 10.9 hereof,
nonrefundable when paid and (ii) computed on the basis of a year of 365 or 366
days, as applicable, for the actual number of days elapsed. (a) If the Index
Debt Rating and the Leverage Ratio are in different categories, the facility fee
shall be determined on whichever of the Index Debt Rating or the Leverage Ratio
falls within the superior (or numerically higher) category, (b) if the facility
fee is determined based on the Leverage Ratio and the financial statements of
the Borrower setting the Leverage Ratio are not received by the Administrative
Lender by the date required pursuant to Section 6.1(a) or 6.1(b) hereof, the
facility fee shall be determined as if the Leverage Ratio is not less than 3.50
to 1 until such time as the financial statements are received, (c) if the Index
Debt Rating established by ARA shall fall within a different category than both
Moody's and S&P, the facility fee shall be determined by reference to Moody's or
S&P, whichever is the superior (or numerically higher) category, but not to
exceed two rating levels higher than the other rating agency and (e) such fee
shall be adjusted on each Adjustment Date if determined based on the (i)
Leverage Ratio, according to the performance of the Borrower for the most recent
fiscal quarter or (ii) the
- 23 -
<PAGE>
Index Debt Rating, according to the most recent determination of the Index Debt
Rating. If the rating system of Moody's, S&P or ARA shall change prior to the
Maturity Date, the Borrower and the Lenders shall negotiate in good faith to
amend the references to specific ratings to reflect such changed rating system.
(b) CLOSING FEE. Subject to Section 10.9 hereof, the Borrower agrees
to pay to the Administrative Lender, for the account of the Lenders a closing
fee equal to 0.10% of each Lender's portion of the Commitment. Such fee shall
be payable on the date of the initial Advance under the Facility A Agreement,
fully earned when due and, subject to Section 10.9 hereof, nonrefundable when
paid.
(c) OTHER FEES. Subject to Section 10.9 hereof, the Borrower agrees
to pay to the Administrative Lender, for its account and not the account of the
Lenders, the fees provided for in the letter agreement ("Fee Letter"), dated as
of the Agreement Date, between the Borrower and the Administrative Lender on the
date and in the amounts specified therein.
Section 2.5 PREPAYMENT.
(a) VOLUNTARY PREPAYMENTS. The principal amount of any Base Rate
Advance may be prepaid in full or in part at any time, without penalty and
without regard to the Payment Date for such Advance, upon notice as required for
a repayment of a Base Rate Advance as provided in Section 2.2(d) hereof. LIBOR
Advances may be voluntarily prepaid upon notice as required for repayments of
LIBOR Advances as provided in Section 2.2(c) hereof, but only so long as the
Borrower concurrently reimburses the Lenders in accordance with Section 2.9
hereof. Any notice of prepayment shall be irrevocable.
(b) MANDATORY PREPAYMENT. On or before the date of any reduction of
the Commitment, the Borrower shall prepay outstanding Advances in an amount
necessary to reduce the same to an amount less than or equal to the Commitment
as so reduced. The Borrower shall first prepay all Base Rate Advances and shall
thereafter prepay LIBOR Advances. To the extent that any prepayment requires
that a LIBOR Advance be repaid on a date other than the last day of its Interest
Period, the Borrower shall reimburse each Lender in accordance with Section 2.9
hereof. To the extent that outstanding Advances exceed the Commitment after any
reduction thereof, the Borrower shall repay any such excess amount and all
accrued interest thereon on the date of such reduction.
(c) PREPAYMENTS, GENERALLY. Any prepayment of an Advance shall be
accompanied by interest accrued on the principal amount being prepaid. Any
voluntary partial prepayment of a Base Rate Advance shall be in a principal
amount of $100,000 or an integral multiple thereof. All voluntary prepayments
shall be applied in the order directed in writing by the Borrower to the
Administrative Lender. If the Borrower fails to so direct the Administrative
Lender or if the prepayment occurs during the occurrence and continuance of an
Event of Default, such prepayment shall be applied in the inverse order of
maturity.
- 24 -
<PAGE>
Section 2.6 REDUCTION OF COMMITMENT.
(a) VOLUNTARY REDUCTION. The Borrower shall have the right, upon not
less than 10 Business Days' notice (provided no notice shall be required for a
termination in whole of the Commitment) by an Authorized Signatory to the
Administrative Lender (if telephonic, to be confirmed by telex or in writing on
or before the date of reduction or termination), which shall promptly notify the
Lenders, to terminate or reduce the Commitment, in whole or in part. Each
partial termination shall be in an aggregate amount which is at least $1,000,000
and which is an integral multiple of $100,000, and no voluntary reduction in the
Commitment shall cause any LIBOR Advance to be repaid prior to the last day of
its Interest Period.
(b) MANDATORY REDUCTION. On the Maturity Date, the Commitment shall
automatically reduce to zero.
(c) GENERAL REQUIREMENTS. Upon any reduction of the Commitment
pursuant to this Section, the Borrower shall immediately make a repayment of
applicable Advances in accordance with Section 2.5(b) hereof. The Borrower
shall reimburse each Lender for any loss or out-of-pocket expense incurred by
each Lender in connection with any such payment, as set forth in Section 2.9
hereof to the extent applicable. The Borrower shall not have any right to
rescind any termination or reduction. Once reduced, the Commitment may not be
increased or reinstated.
Section 2.7 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE LENDER. Unless
the Administrative Lender shall have been notified by a Lender prior to the date
of any proposed Advance (which notice shall be effective upon receipt) that such
Lender does not intend to make the proceeds of such Advance available to the
Administrative Lender, the Administrative Lender may assume that such Lender has
made such proceeds available to the Administrative Lender on such date, and the
Administrative Lender may in reliance upon such assumption (but shall not be
required to) make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Administrative Lender
by such Lender, the Administrative Lender shall, without prejudice to the
Borrower's rights against such Lender, be entitled to recover such amount on
demand from such Lender (or, if such Lender fails to pay such amount forthwith
upon such demand, from the Borrower) together with interest thereon in respect
of each day during the period commencing on the date such amount was available
to the Borrower and ending on (but excluding) the date the Administrative Lender
receives such amount from the Lender, at a per annum rate equal to the lesser of
(i) the Highest Lawful Rate or (ii)(a) in the case of such Lender, the Federal
Funds Rate or (b) in the case of the Borrower, the interest rate applicable to
such Advance. No Lender shall be liable for any other Lender's failure to fund
an Advance hereunder.
Section 2.8 PAYMENT OF PRINCIPAL OF ADVANCES. The Borrower agrees to
pay the principal amount of the Advances to the Administrative Lender for the
account of the Lenders as follows:
- 25 -
<PAGE>
(a) END OF INTEREST PERIOD. The principal amount of each Advance
hereunder shall be due and payable on its Payment Date, which principal payment
(other than in respect of a Bid Rate Advance) may be made by means of a
Refinancing Advance.
(b) COMMITMENT REDUCTION. On the date of reduction of the Commitment
pursuant to Section 2.6 hereof, including the Maturity Date, the aggregate
amount of the Advances outstanding on such date of reduction in excess of the
Commitment as reduced shall be due and payable, which principal payment may not
be made by means of Refinancing Advances.
(c) MATURITY DATE. To the extent not otherwise required to be paid
earlier as provided herein, the principal amount of the Advances, all accrued
interest and fees thereon, and all other Obligations related thereto, shall be
due and payable in full on the Maturity Date.
Section 2.9 REIMBURSEMENT. Whenever any Lender shall sustain or incur
any losses or reasonable out-of-pocket expenses in connection with (a) failure
by the Borrower to borrow any LIBOR Advance after having given notice of its
intention to borrow in accordance with Section 2.2 hereof (whether by reason of
the Borrower's election not to proceed or the non-fulfillment of any of the
conditions set forth in Article 3 hereof), or (b) any prepayment for any reason
of any LIBOR Advance in whole or in part, the Borrower agrees to pay to any such
Lender, upon its demand, an amount sufficient to compensate such Lender for all
such losses and out-of-pocket expenses, subject to Section 10.9 hereof. Such
Lender's good faith determination of the amount of such losses or out-of-pocket
expenses, calculated in its usual fashion, absent manifest error, shall be
binding and conclusive. Such losses shall include, without limiting the
generality of the foregoing, lost profits and reasonable expenses incurred by
such Lender in connection with the re-employment of funds prepaid, repaid,
converted or not borrowed, converted or paid, as the case may be. Upon request
of the Borrower, such Lender shall provide a certificate setting forth the
amount to be paid to it by the Borrower hereunder and calculations therefor.
Section 2.10 MANNER OF PAYMENT.
(a) Each payment (including prepayments) by the Borrower of the
principal of or interest on the Advances, fees, and any other amount owed under
this Agreement or any other Loan Paper shall be made not later than 12:00 noon
(Dallas, Texas time) on the date specified for payment under this Agreement to
the Administrative Lender at the Administrative Lender's office, in lawful money
of the United States of America constituting immediately available funds.
(b) If any payment under this Agreement or any other Loan Paper shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day, unless such Business Day falls
in another calendar month, in which case payment shall be made on the preceding
Business Day. Any extension of time shall in such case be included in computing
interest and fees, if any, in connection with such payment.
- 26 -
<PAGE>
(c) The Borrower agrees to pay principal, interest, fees and all other
amounts due under the Loan Papers without deduction for set-off or counterclaim
or any deduction whatsoever.
(d) If some but less than all amounts due from the Borrower are received
by the Administrative Lender, the Administrative Lender shall apply such amounts
in the following order of priority: (i) to the payment of the Administrative
Lender's expenses incurred on behalf of the Lenders then due and payable, if
any; (ii) to the payment of all other fees and amounts then due and payable
under the Loan Papers; (iii) to the payment of interest then due and payable on
the Advances; and (iv) to the payment of principal then due and payable on the
Advances.
(e) Each payment by the Borrower in respect of obligations relating to
an Advance (whether for principal, interest, fees or otherwise) shall be made to
the Administrative Lender for the account of the Lenders pro rata in accordance
with their respective Specified Percentages.
Section 2.11 LIBOR LENDING OFFICES. Each Lender's initial LIBOR Lending
Office is set forth opposite its name in SCHEDULE 1 attached hereto. Each
Lender shall have the right at any time and from time to time to designate a
different office of itself or of any Affiliate as such Lender's LIBOR Lending
Office, and to transfer any outstanding LIBOR Advance to such LIBOR Lending
Office. No such designation or transfer shall result in any liability on the
part of the Borrower for increased costs or expenses resulting solely from such
designation or transfer (except any such transfer which is made by a Lender
pursuant to Section 8.2 or 8.3 hereof, or otherwise for the purpose of complying
with Applicable Law). Increased costs for expenses resulting from a change in
law occurring subsequent to any such designation or transfer shall be deemed not
to result solely from such designation or transfer.
Section 2.12 SHARING OF PAYMENTS. Any Lender obtaining a payment
(whether voluntary or involuntary, due to the exercise of any right of set-off,
or otherwise) on account of its Advances (other than pursuant to Sections 2.15,
2.16(d), 8.3 or 8.5), in excess of its Specified Percentage of all payments made
by the Borrower with respect to Advances, shall purchase from each other Lender
such participation in the Advances made by such other Lender as shall be
necessary to cause such purchasing Lender to share the excess payment pro rata
according to Specified Percentages with each other Lender; provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section, to the fullest extent permitted by law, may exercise
all its rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
Section 2.13 CALCULATION OF RATES. The provisions of this Agreement
relating to calculation of the LIBOR Rate are included only for the purpose of
determining the rate of interest or other amounts to be paid hereunder that are
based upon such rate, it being understood
- 27 -
<PAGE>
that each Lender shall be entitled to fund and maintain its funding of all or
any part of a LIBOR Advance as it sees fit.
Section 2.14BOOKING LOANS. Any Lender may make, carry or transfer
Advances at, to or for the account of any of its branch offices or the office of
any Affiliate.
Section 2.15TAXES.
(a) Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 2.10, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges and
withholdings, and all liabilities with respect thereto, EXCLUDING, in the case
of each Lender and the Administrative Lender, taxes imposed on, based upon or
measured by its overall net income, net worth or capital, and franchise taxes,
doing business taxes or minimum taxes imposed on it, (i) by the jurisdiction
under the laws of which such Lender or the Administrative Lender (as the case
may be) is organized and in which it has its applicable lending office or any
political subdivision thereof; (ii) by any other jurisdiction, or any political
subdivision thereof, other than those imposed by reason of (A) an asserted
relation of such jurisdiction to the transactions contemplated by this
Agreement, (B) the activities of the Borrower in such jurisdiction, or (C) the
activities in connection with the transactions contemplated by this Agreement of
a Lender or the Administrative Lender; (iii) by reason of failure by the Lender
or the Administrative Lender to comply with the requirements of paragraph (e) of
this Section 2.15; and (iv) in the case of any Lender, any Taxes in the nature
of transfer, stamp, recording or documentary taxes resulting from a transfer
(other than as a result of foreclosure) by such Lender of all or any portion of
its interest in this Agreement, the Notes or any other Loan Papers (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Administrative Lender, (x) the sum payable shall
be increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.15) such Lender or the Administrative Lender (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(y) the Borrower shall make such deductions and (z) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges and
similar levies (other than (i) Taxes described in clause (iv) of the first
sentence of Section 2.15(a) and (ii) mortgage taxes payable in Oklahoma) that
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any other Loan
Paper (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and the Administrative
Lender for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes
- 28 -
<PAGE>
imposed by any jurisdiction on amounts payable under this Section 2.15) paid by
such Lender or the Administrative Lender (as the case may be) and all
liabilities (including penalties, additions to tax, interest and reasonable
expenses) arising therefrom or with respect thereto whether or not such Taxes or
Other Taxes were correctly or legally asserted, other than penalties, additions
to tax, interest and expenses arising as a result of gross negligence on the
part of such Lender or the Administrative Lender, PROVIDED, HOWEVER, that
the Borrower shall have no obligation to indemnify such Lender or the
Administrative Lender unless and until such Lender or the Administrative Lender
shall have delivered to the Borrower a certificate setting forth in reasonable
detail the basis of the Borrower's obligation to indemnify such Lender or the
Administrative Lender pursuant to this Section 2.15. This indemnification shall
be made within 30 days from the date such Lender or the Administrative Lender
(as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Administrative Lender the original or a certified copy of a
receipt evidencing payment thereof. If no Taxes are payable in respect of any
payment hereunder, the Borrower will furnish to the Administrative Lender a
certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Administrative Lender, in either case stating that such
payment is exempt from or not subject to Taxes, PROVIDED, HOWEVER, that such
certificate or opinion need only be given if: (i) the Borrower makes any
payment from any account located outside the United States, or (ii) the payment
is made by a payor that is not a United States Person. For purposes of this
Section 2.15 the terms "United States" and "United States Person" shall have the
meanings set forth in Section 7701 of the Code.
(e) Each Lender which is not a United States Person hereby agrees that:
(i) it shall, no later than the Agreement Date (or, in the case of
a Lender which becomes a party hereto pursuant to Section 10.6 after the
Agreement Date, the date upon which such Lender becomes a party hereto)
deliver to the Borrower through the Administrative Lender, with a copy to
the Administrative Lender:
(A) if any lending office is located in the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 4224 or any successor thereto
("Form 4224"),
(B) if any lending office is located outside the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 1001 or any successor thereto
("Form 1001").
in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees for
the account of such lending office or lending offices under this Agreement
free from withholding of United States Federal income tax;
- 29 -
<PAGE>
(ii) if at any time such Lender changes its lending office or
lending offices or selects an additional lending office it shall, at the
same time or reasonably promptly thereafter but only to the extent the
forms previously delivered by it hereunder are no longer effective,
deliver to the Borrower through the Administrative Lender, with a copy to
the Administrative Lender, in replacement for the forms previously
delivered by it hereunder:
(A) if such changed or additional lending office is located in the
United States of America, two (2) accurate and complete signed
originals of Form 4224; or
(B) otherwise, two (2) accurate and complete signed originals of
Form 1001,
in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees for
the account of such changed or additional lending office under this
Agreement free from withholding of United States Federal income tax;
(iii) it shall, before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in clause
(ii) above) requiring a change in the most recent Form 4224 or Form 1001
previously delivered by such Lender and if the delivery of the same be
lawful, deliver to the Borrower through the Administrative Lender with a
copy to the Administrative Lender, two (2) accurate and complete original
signed copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by such Lender;
(iv) it shall, promptly upon the request of the Borrower to that
effect, deliver to the Borrower such other forms or similar documentation
as may be required from time to time by any applicable law, treaty, rule
or regulation in order to establish such Lender's tax status for
withholding purposes; and
(v) it shall notify the Borrower within 30 days after any event
(including an amendment to, or a change in any applicable law or
regulation or in the written interpretation thereof by any regulatory
authority or any judicial authority, or by ruling applicable to such
Lender of any governmental authority charged with the interpretation or
administration of any law) shall occur that results in such Lender no
longer being capable of receiving payments without any deduction or
withholding of United States federal income tax.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.15 shall survive the payment in full of principal and interest
hereunder.
- 30 -
<PAGE>
(g) Any Lender claiming any additional amounts payable pursuant to this
Section 2.15 shall use its reasonable best efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
lending office, if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the reasonable judgment of such Lender, be materially
disadvantageous to such Lender.
(h) Each Lender (and the Administrative Lender with respect to payments
to the Administrative Lender for its own account) agrees that (i) it will take
all reasonable actions by all usual means to maintain all exemptions, if any,
available to it from United States withholding taxes (whether available by
treaty, existing administrative waiver, by virtue of the location of any
Lender's lending office) and (ii) otherwise cooperate with the Borrower to
minimize amounts payable by the Borrower under this Section 2.15; PROVIDED,
HOWEVER, the Lenders and the Administrative Lender shall not be obligated by
reason of this Section 2.15(h) to contest the payment of any Taxes or Other
Taxes or to disclose any information regarding its tax affairs or tax
computations or reorder its tax or other affairs or tax or other planning.
Subject to the foregoing, to the extent the Borrower pays sums pursuant to this
Section 2.15 and the Lender or the Administrative Lender receives a refund of
any or all of such sums, such refund shall be applied to reduce any amounts then
due and owing under this Agreement or, to the extent that no amounts are due and
owing under this Agreement at the time such refunds are received, the party
receiving such refund shall promptly pay over all such refunded sums to the
Borrower, provided that no Default or Event of Default is in existence at such
time.
Section 2.16 EXTENSION OF MATURITY DATE. The Borrower may notify the
Administrative Lender in writing 30 days prior to each Maturity Date, commencing
August 9, 1996, of its desire to extend the Maturity Date for an additional 364
days beyond the present Maturity Date. If such notice is given by the Borrower,
the Administrative Lender, no later than 10 days after such notice is given by
the Borrower may notify the Borrower in writing of the Lenders' decision whether
to extend the Maturity Date for a period of 364 days after the date that such
notice, if any, is given by the Administrative Lender. Extension of the
Maturity Date shall be at the sole option and discretion of the Lenders, and the
decision to extend the Maturity Date shall require the consent of all Lenders.
If either the Borrower or the Administrative Lender fail to give notice within
the time prescribed above, the Maturity Date shall be the then present Maturity
Date. Any extension of the Maturity Date pursuant to this SECTION 2.16 shall
not require any renewal Note or amendment or supplement to this Agreement or any
other Loan Papers unless otherwise determined or requested by the Administrative
Lender.
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCES. The obligation
of each Lender to make any Advance is subject to receipt by the Administrative
Lender of the following,
- 31 -
<PAGE>
in form and substance satisfactory to each Lender, with a copy (except for the
Notes) for each Lender, or satisfaction of the following:
(a) a loan certificate of the Borrower certifying as to the accuracy of
its representations and warranties in the Loan Papers, certifying that no
Default has occurred, and including a certificate of incumbency with respect to
each Authorized Signatory, and including (i) a copy of the articles of
incorporation of the Borrower, certified to be true, complete and correct by the
secretary of state of its state of incorporation, (ii) a copy of the by-laws of
the Borrower, as in effect on the Agreement Date, (iii) a copy of the
resolutions of the Borrower authorizing it to execute, deliver and perform this
Agreement, the Notes and the other Loan Papers to which it is a party, and (iv)
a copy of a certificate of good standing and a certificate of existence for its
state of incorporation and each state in which it is qualified to do business;
(b) a certificate of an officer acceptable to the Lenders of each
Significant Subsidiary, certifying as to the incumbency of the officers signing
the Loan Papers to which it is a party, and including (i) a copy of its articles
of incorporation (or articles of partnership or other appropriate governing
documents), certified as true, complete and correct by the secretary of state of
its state of incorporation or organization, (ii) a copy of its by-laws (or
partnership agreement or other appropriate governing document), as in effect on
the Agreement Date, (iii) a copy of the resolutions authorizing it to execute,
deliver and perform the Loan Papers to which it is a party, and (iv) a copy of a
certificate of good standing and a certificate of existence for its state of
incorporation;
(c) duly executed Notes, payable to the order of each Lender and in an
amount for each Lender equal to its Specified Percentage of the Commitment;
(d) opinions of counsel to the Borrower and the Subsidiaries addressed
to the Lenders and in form and substance satisfactory to the Lenders, dated the
Agreement Date, and covering the matters set forth in Sections 4.1(a), (b), (c),
(g), (l), (m) and (o) and such other matters incident to the transactions
contemplated hereby as the Administrative Lender or Special Counsel may
reasonably request;
(e) reimbursement for the Administrative Lender for Special Counsel's
reasonable fees and expenses rendered through the Agreement Date;
(f) evidence that all corporate or other proceedings of the Borrower and
Subsidiaries taken in connection with the transactions contemplated by this
Agreement and the other Loan Papers shall be reasonably satisfactory in form and
substance to the Lenders and Special Counsel; and the Lenders shall have
received copies of all documents or other evidence which the Administrative
Lender, Special Counsel or any Lender may reasonably request in connection with
such transactions;
(g) the closing fee as required pursuant to Sections 2.4(b);
- 32 -
<PAGE>
(h) the duly executed and completed Guaranty Agreements, dated as of the
Agreement Date;
(i) any fees required to be paid pursuant to the Fee Letter;
(j) the duly executed Master Covenant Agreement;
(k) a certificate of an officer acceptable to the Lenders, in form and
substance satisfactory to the Lenders, certifying that the execution, delivery
and performance by the Obligors of the Loan Papers will not violate or result in
a default in respect of any of the terms of the Senior Subordinated Notes;
(l) payment in full of all accrued and outstanding obligations under the
Existing Credit Agreement (other than in respect of the Existing Letters of
Credit) whereupon all obligations of the Borrower (excluding those obligations
which expressly survive termination of the Existing Credit Agreement) and the
lenders (including but not limited to, the participations of the Lenders in the
Bond Letters of Credit) shall terminate;
(m) closing and funding of the Senior Notes pursuant to terms acceptable
to the Lenders, and delivery of an executed final copy of the Indenture with
respect to the Senior Notes;
(n) the duly executed Facility A Credit Agreement and all documents
related thereto;
(o) payment in full of all accrued and outstanding obligations under the
Amended and Restated Credit Agreement, dated as of April 21, 1995, among La
Quinta Development Partners, L.P., a Delaware limited partnership, the lenders
party thereto, NationsBank of Texas, NA., as Administrative Lender, and
Citibank, N.A., as Co-Administrative Lender; and
(p) in form and substance satisfactory to the Lenders and Special
Counsel, such other documents, instruments and certificates as the
Administrative Lender or any Lender may reasonably require in connection with
the transactions contemplated hereby, including without limitation the status,
organization or authority of the Borrower or any Subsidiary or any other Person
executing a Loan Paper, and the enforceability of the Obligation.
Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of
each Lender to make each Advance hereunder is subject to fulfillment of the
following conditions immediately prior to or contemporaneously with each such
Advance or issuance:
(a) With respect to Advances other than Refinancing Advances, all of the
representations and warranties of the Borrower under this Agreement, which,
pursuant to Section 4.2 hereof, are made at and as of the time of such Advance
or issuance, shall be true and correct at such time in all material respects,
both before and after giving effect to the application of the proceeds of the
Advance;
- 33 -
<PAGE>
(b) The incumbency of the Authorized Signatories shall be as stated in
the certificate of incumbency delivered in the Borrower's loan certificate
pursuant to Section 3.1(a) or as subsequently modified and reflected in a
certificate of incumbency delivered to the Administrative Lender. The Lenders
may, without waiving this condition, consider it fulfilled and a representation
by the Borrower made to such effect if no written notice to the contrary, dated
on or before the date of such Advance, is received by the Administrative Lender
from the Borrower prior to the making of such Advance;
(c) There shall not exist a Default hereunder, with respect to Advances
other than Refinancing Advances, or an Event of Default, with respect to any
Refinancing Advance, and, with respect to each Advance other than a Refinancing
Advance, the Administrative Lender shall have received written or telephonic
certification thereof by an Authorized Signatory (which certification, if
telephonic, shall be followed promptly by written certification);
(d) The aggregate Advances, after giving effect to such proposed
Advance, shall not exceed the maximum principal amount then permitted to be
outstanding hereunder; and
(e) The Administrative Lender shall have received all such other
certificates, reports, statements, opinions of counsel or other documents as the
Administrative Lender or any Lender may reasonably request.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants to each Lender as follows:
(a) ORGANIZATION; POWER; QUALIFICATION. As of the Agreement Date, the
respective jurisdiction of incorporation and percentage ownership by the
Borrower or another Subsidiary of the Subsidiaries and Unincorporated Ventures
listed on SCHEDULE 3 are true and correct. Each of the Borrower and its
Subsidiaries and Unincorporated Ventures is a corporation or partnership, as
designated on SCHEDULE 3, duly organized, validly existing and in good
standing under the laws of its state of organization. Each of the Borrower and
its Subsidiaries has the corporate or other power and authority to own its
properties and to carry on its business as now being and hereafter proposed to
be conducted. Each of the Borrower and its Subsidiaries and Unincorporated
Ventures is duly qualified, in good standing and authorized to do business in
each jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization except where the failure
to be so qualified or authorized would not have a Material Adverse Effect.
(b) AUTHORIZATION. The Borrower has corporate power and has taken all
necessary corporate action to authorize it to borrow hereunder. Each of the
Loan Parties has corporate
- 34 -
<PAGE>
or other power and has taken all necessary corporate or other action to execute,
deliver and perform the Loan Papers to which it is party in accordance with the
terms thereof, and to consummate the transactions contemplated thereby. Each
Loan Paper has been duly executed and delivered by the Loan Party executing it.
Each of the Loan Papers to which the Loan Parties are party is a legal, valid
and binding respective obligation of the Loan Party executing it, enforceable in
accordance with its terms, subject to the following qualifications: (i)
equitable principles generally, and (ii) Debtor Relief Laws (insofar as any such
law relates to the bankruptcy, insolvency or similar event of any Loan Party).
(c) COMPLIANCE WITH OTHER LOAN PAPERS AND CONTEMPLATED TRANSACTIONS.
The execution, delivery and performance by the Loan Parties of the Loan Papers
to which they are respectively a party, and the consummation of the transactions
contemplated thereby, do not and will not (i) require any consent or approval
not already obtained, (ii) violate any Applicable Law, (iii) conflict with,
result in a breach of, or constitute a default under the articles of
incorporation, by-laws, articles of partnership, partnership agreements or
similar governing documents of any Loan Party, or under any Necessary
Authorization, indenture, agreement or other instrument, to which any Loan Party
is a party or by which they or their respective properties may be bound, or (iv)
result in or require the creation or imposition of any Lien upon or with respect
to any property now owned or hereafter acquired by any Loan Party, except
Permitted Liens.
(d) LICENSES, ETC. All Necessary Authorizations which are material
have been duly obtained, and are in full force and effect without any known
conflict with the rights of others and free from any unduly burdensome
restrictions which could reasonably be expected to have a Material Adverse
Effect. The Borrower and its Subsidiaries and Unincorporated Ventures are and
will continue to be in compliance in all material respects with all provisions
thereof. No circumstance exists which might impair the utility of the Necessary
Authorization or the right to renew such Necessary Authorization the effect of
which would have a Material Adverse Effect. No Necessary Authorization which
could reasonably be expected to have a Material Adverse Effect is the subject of
any pending or, to the best of the Borrower's knowledge, threatened challenge,
suspension, cancellation or revocation.
(e) COMPLIANCE WITH LAW. The Borrower and its Subsidiaries and
Unincorporated Ventures are in compliance in all respects with all Applicable
Laws, except where the failure to so comply would not have a Material Adverse
Effect.
(f) TITLE TO PROPERTIES. The Borrower and its Subsidiaries and
Unincorporated Ventures have good and indefeasible title to, or a valid
leasehold interest in, all of their material assets. None of their assets are
subject to any Liens, except Permitted Liens. No effective financing statement
or other Lien filing (except relating to Permitted Liens) is on file in any
state or jurisdiction that names the Borrower or any of its Subsidiaries or
Unincorporated Ventures as debtor or covers (or purports to cover) any assets of
the Borrower or any of its Subsidiaries or Unincorporated Ventures. The
Borrower and its Subsidiaries and Unincorporated Ventures
- 35 -
<PAGE>
have not signed any such financing statement or filing, nor any security
agreement authorizing any Person to file any such financing statement or filing.
(g) LITIGATION. Except as reflected on SCHEDULE 2 hereto, there is
no action, suit or proceeding pending against, or, to the best of the Borrower's
knowledge, threatened against the Borrower, or in any other manner relating
directly and adversely to the Borrower or any of its Subsidiaries or
Unincorporated Ventures, or any of their properties, in any court or before any
arbitrator of any kind or before or by any governmental body in which the amount
claimed (in excess of applicable insurance) exceeds a Material Amount.
(h) TAXES. All federal, state and other tax returns of the Borrower
and its Subsidiaries and Unincorporated Ventures required by law to be filed
have been duly filed and all federal, state and other taxes, assessments and
other governmental charges or levies upon the Borrower, its Subsidiaries or
Unincorporated Ventures or any of their respective properties, income, profits
and assets, which are due and payable, have been paid, unless the same are being
diligently contested in good faith by appropriate proceedings, with adequate
reserves established therefor, and no Lien (other than a Permitted Lien) has
attached and no foreclosure, distraint, sale or similar proceedings have been
commenced. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries and Unincorporated Ventures in respect of their respective
taxes are, in the judgment of the Borrower, adequate.
(i) FINANCIAL STATEMENTS; MATERIAL LIABILITIES. The Borrower has
furnished or caused to be furnished to the Lenders copies of its December 31,
1994 and June 30, 1995 financial statements, which present fairly in accordance
with GAAP the financial position of the Borrower and its Subsidiaries and
Unincorporated Ventures as at such dates and the results of operations for the
periods then ended. The Borrower and its Subsidiaries and Unincorporated
Ventures taken as a whole have no material liabilities, contingent or otherwise,
nor material losses, except (i) as set forth in the December 31, 1994 financial
statements, (ii) in respect of the Senior Notes and (iii) the "AEW Transaction"
as defined and described in the Borrower's Form S-3 dated August 11, 1995.
(j) NO ADVERSE CHANGE. Since December 31, 1994, no event or
circumstances has occurred or arisen that could have a Material Adverse Effect.
(k) ERISA. None of the Borrower or its Controlled Group maintains or
contributes to any Plan other than those disclosed to the Administrative Lender
in writing. Each such Plan (other than any Multiemployer Plan) is in compliance
in all material respects with the applicable provisions of ERISA, the Code, and
any other applicable Federal or state law, rule or regulation. With respect to
each Plan (other than any Multiemployer Plan) of the Borrower and each member of
its Controlled Group, all reports required under ERISA or any other Applicable
Law to be filed with any governmental authority, the failure of which to file
could reasonably result in liability of the Borrower or any member of its
Controlled Group in excess of a Material Amount, have been duly filed. All such
reports are true and correct in all material respects as of the date given. No
Plan of the Borrower or any member of its Controlled Group has been
- 36 -
<PAGE>
terminated under Section 4041(c) of ERISA nor has any accumulated funding
deficiency (as defined in Section 412(a) of the Code) been incurred (without
regard to any waiver granted under Section 412 of the Code), nor has any funding
waiver from the Internal Revenue Service been received or requested the result
of which could reasonably be expected to have Material Adverse Effect. None of
the Borrower or any member of its Controlled Group has failed to make any
contribution or pay any amount due or owing as required under the terms of any
such Plan, or by Section 412 of the Code or Section 302 of ERISA by the due date
under Section 412 of the Code and Section 302 of ERISA the result of which could
reasonably be expected to have Material Adverse Effect. There has been no ERISA
Event or any event requiring disclosure under Section 4041(c)(3)(C) or 4063(a)
of ERISA with respect to any Plan or its related trust of the Borrower or any
member of its Controlled Group since the effective date of ERISA. The present
value of the benefit liabilities, as defined in Title IV of ERISA, of each Plan
subject to Title IV of ERISA (other than a Multiemployer Plan) of the Borrower
and each member of its Controlled Group does not exceed by more than $10,000,000
the present value of the assets of each such Plan as of the most recent
valuation date using each such Plan's actuarial assumptions at such date. There
are no pending, or to the best of the Borrower's knowledge threatened, claims,
lawsuits or actions (other than routine claims for benefits in the ordinary
course) asserted or instituted against, and neither the Borrower nor any member
of its Controlled Group has knowledge of any threatened litigation or claims
against, the assets of any Plan or its related trust or against any fiduciary of
a Plan with respect to the operation of such Plan the result of which could
reasonably be expected to have Material Adverse Effect. None of the Borrower
or, to the best of the Borrower's knowledge, any member of its Controlled Group
has engaged in any prohibited transactions, within the meaning of Section 406 of
ERISA or Section 4975 of the Code, in connection with any Plan the result of
which could reasonably be expected to have Material Adverse Effect. None of the
Borrower or any member of its Controlled Group has withdrawn from any
Multiemployer Plan, nor has incurred or reasonably expects to incur (A) any
liability under Title IV of ERISA (other than premiums due under Section 4007 of
ERISA to the PBGC), (B) any withdrawal liability (and no event has occurred
which with the giving of notice under Section 4219 of ERISA would result in such
liability) under Section 4201 of ERISA as a result of a complete or partial
withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from a
Multiemployer Plan, or (C) any liability under Section 4062 of ERISA to the PBGC
or to a trustee appointed under Section 4042 of ERISA. None of the Borrower,
any member of its Controlled Group, or any organization to which the Borrower or
any member of its Controlled Group is a successor or parent corporation within
the meaning of ERISA Section 4069(b), has engaged in a transaction within the
meaning of ERISA Section 4069 the result of which could reasonably be expected
to have Material Adverse Effect. None of the Borrower or any member of its
Controlled Group maintains or has established any Plan, which is a material
welfare benefit plan within the meaning of Section 3(1) of ERISA and which
provides for continuing benefits or coverage for any participant or any
beneficiary of any participant after such participant's termination of
employment, except as may be required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") and the regulations thereunder.
Each of Borrower and its Controlled Group which maintains a Plan which is a
welfare benefit plan within the meaning of Section 3(1) of ERISA has complied in
all material respects with any applicable notice and continuation requirements
of COBRA and
- 37 -
<PAGE>
the regulations thereunder, except to the extent that the failure to so comply
could not reasonably be expected to have a Material Adverse Effect. None of the
Borrower or any member of its Controlled Group maintains, has established, or
has ever participated in a multiemployer welfare benefit arrangement within the
meaning of Section 3(40)(a) of ERISA.
(l) COMPLIANCE WITH REGULATIONS G, T, U AND X. The Borrower is not
engaged principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any margin stock
within the meaning of Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System, and no part of the proceeds of the Advances will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock. No assets of the Borrower
and its Subsidiaries and Unincorporated Ventures are margin stock. None of the
Borrower and its Subsidiaries nor any agent acting on their behalf, have taken
or will knowingly take any action which might cause this Agreement or any other
Loan Papers to violate any regulation of the Board of Governors of the Federal
Reserve System or to violate the Securities Exchange Act of 1934, in each case
as in effect now or as the same may hereafter be in effect.
(m) GOVERNMENTAL REGULATION. The Borrower and its Subsidiaries and
Unincorporated Ventures are not required to obtain any Necessary Authorization
that has not already been obtained from, or effect any material filing or
registration that has not already been effected with, any federal, state or
local regulatory authority in connection with the execution and delivery of this
Agreement or any other Loan Paper, or the performance thereof (other than any
enforcement of remedies by the Administrative Lender on behalf of the Lenders,
in accordance with their respective terms, including any borrowings hereunder.
(n) ABSENCE OF DEFAULT. The Borrower and its Subsidiaries and
Unincorporated Ventures are in compliance in all respects with all of the
provisions of their articles of incorporation, by-laws, articles of partnership,
partnership agreement or other governing documents, and no event has occurred or
failed to occur, which has not been remedied or waived, the occurrence or
non-occurrence of which constitutes, or which with the passage of time or giving
of notice or both would constitute, (i) an Event of Default or (ii) a default by
the Borrower or any of its Subsidiaries or Unincorporated Ventures under any
material indenture, agreement or other instrument, or any judgment, decree or
order to which the Borrower or any of its Subsidiaries or Unincorporated
Ventures or by which they or any of their material properties is bound.
(o) INVESTMENT COMPANY ACT. The Borrower is not required to register
under the provisions of the Investment Company Act of 1940, as amended. Neither
the entering into or performance by the Borrower of this Agreement nor the
issuance of the Notes violates any provision of such act or requires any
consent, approval, or authorization of, or registration with, the Securities and
Exchange Commission or any other governmental or public body of authority
pursuant to any provisions of such act.
- 38 -
<PAGE>
(p) ENVIRONMENTAL MATTERS. Neither the Borrower nor any Subsidiary or
Unincorporated Venture has any actual knowledge or reason to believe that any
substance deemed hazardous by any Applicable Environmental Law, has been
installed on any real property now owned by the Borrower or any of its
Subsidiaries or Unincorporated Ventures which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect. The Borrower
and its Subsidiaries and Unincorporated Ventures have complied in all respects
with all Applicable Environmental Laws except to the extent that the failure to
so comply, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect. The Borrower and its Subsidiaries and
Unincorporated Ventures are not in violation in any respects of or subject to
any existing, pending or, to the best of the Borrower's knowledge, threatened
investigation or inquiry by any governmental authority or to any material
remedial obligations under any Applicable Environmental Laws, except to the
extent that the results of such investigation, inquiry or remedial obligation
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect, and this representation and warranty would continue to
be true and correct following disclosure to the applicable governmental
authorities of all relevant facts, conditions and circumstances, if any,
pertaining to any real property of the Borrower and its Subsidiaries and
Unincorporated Ventures. The Borrower and its Subsidiaries and Unincorporated
Ventures have obtained all material permits, licenses or similar authorizations
necessary to construct, occupy, operate or use any buildings, improvements,
fixtures, and equipment forming a part of any real property of the Borrower or
any Subsidiary or Unincorporated Venture by reason of any Applicable
Environmental Laws, except where the failure to obtain such authorization would
not, individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect. The Borrower and its Subsidiaries and Unincorporated Ventures
undertook, at the time of acquisition of any real property, reasonable inquiry
into the previous ownership and uses of such real property consistent with good
commercial or customary practice as applied and used in the real estate industry
at the time of each such acquisition. The Borrower and its Subsidiaries and
Unincorporated Ventures have taken all reasonable steps to determine, and the
Borrower and its Subsidiaries and Unincorporated Ventures have no actual
knowledge or reason to believe, after reasonable investigation, that any
hazardous substances or solid wastes have been disposed of or otherwise released
on or to the real property of the Borrower or any of its Subsidiaries or
Unincorporated Ventures, within the meaning of the Applicable Environmental
Laws, except to the extent that the failure to so depose or release,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(q) CERTAIN FEES. No broker's, finder's or other fee or commission
will be payable by the Borrower (other than to the Lenders hereunder) with
respect to the making of the Commitments or the Advances hereunder. The
Borrower agrees to indemnify and hold harmless the Administrative Lender and
each Lender from and against any claims, demand, liability, proceedings, costs
or expenses asserted with respect to or arising in connection with any such fees
or commissions.
(r) NECESSARY AUTHORIZATIONS. No event has occurred which permits (or
with the passage of time would permit) the revocation or termination of any
Necessary Authorization, or
- 39 -
<PAGE>
which could result in the imposition of any restriction thereon, of such a
nature that could reasonably be expected to have a Material Adverse Effect.
(s) PATENTS, ETC. The Borrower and its Subsidiaries and
Unincorporated Ventures have obtained all patents, trademarks, service-marks,
trade names, copyrights, licenses and other rights, free from burdensome
restrictions, that are necessary for the operation of their business as
presently conducted and as proposed to be conducted. Nothing has come to the
attention of the Borrower or any of its Subsidiaries or Unincorporated Ventures
to the effect that (i) any process, method, part or other material presently
contemplated to be employed by the Borrower or any Subsidiary or Unincorporated
Venture may infringe any patent, trademark, service-mark, trade name, copyright,
license or other right owned by any other Person, or (ii) there is pending or
overtly threatened any claim or litigation against or affecting the Borrower or
any Subsidiary or Unincorporated Venture contesting its right to sell or use any
such process, method, part or other material, provided with respect to clauses
(i) and (ii) that such events are limited to those which could reasonably be
expected to have a Material Adverse Effect.
(t) DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement which has been furnished to any Lender by or on behalf
of the Borrower or any Subsidiary or Unincorporated Venture in connection
herewith contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statement contained herein and
therein not misleading at the time it was furnished. There is no fact known to
the Borrower and not known to the public generally that could reasonably be
expected to materially adversely affect the assets or business of the Borrower
and its Subsidiaries and Unincorporated Ventures, or in the future could
reasonably be expected (so far as the Borrower can now foresee) to have a
Material Adverse Effect, which has not been set forth in this Agreement or in
the documents, certificates and statements furnished to the Lenders by or on
behalf of the Borrower prior to the date hereof in connection with the
transaction contemplated hereby.
(u) SOLVENCY. The Borrower is, and Borrower and its Subsidiaries and
Unincorporated Ventures on a consolidated basis are, Solvent.
Section 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made under this Agreement and the other Loan
Papers shall be deemed to be made at and as of the Agreement Date and at and as
of the date of each Advance, and each shall be true and correct when made,
except to the extent (a) previously fulfilled in accordance with the terms
hereof, (b) applicable to a specific date or otherwise subsequently inapplicable
or modified to give effect to the transactions expressly permitted hereby, or
(c) previously waived in writing by the Determining Lenders with respect to any
particular factual circumstance. All such representations and warranties shall
survive, and not be waived by, the execution hereof by any Lender, any
investigation or inquiry by any Lender, or by the making of any Advance under
this Agreement.
- 40 -
<PAGE>
ARTICLE 5
BUSINESS COVENANTS
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 5.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING PRACTICES,
Corporate Existence. The Borrower covenants and agrees to, and will cause each
Subsidiary and Unincorporated Venture to:
(a) Maintain its material property in good condition and make all
necessary renewals, replacements, additions, betterments and improvements
thereto, consistent with sound business practice and as is customary in the case
of corporations or other entities of established reputation engaged in the same
or a similar business and similarly situated;
(b) Maintain, with financially sound and reputable insurers, or through
its own program of self-insurance, insurance with respect to its material
properties and business against such casualties and contingencies, of such
types, and in such amounts as is customary in the case of corporations or other
entities of established reputation engaged in the same or a similar business and
similarly situated;
(c) Keep books of record and accounts in which entries will be made of
all of its business transactions, and will reflect in it financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP;
(d) Do or cause to be done all things necessary to preserve and keep in
full force and effect its material rights;
(e) Do or cause to be done all things necessary to preserve and keep in
full force and effect its existence (except as may be specifically permitted by
this Agreement); and
(f) Cause to be paid and discharged (i) all lawful tax assessments and
governmental charges imposed from the income or profits of the Borrower, its
Subsidiaries and Unincorporated Ventures or upon any property belonging to the
Borrower, any Subsidiary or any Unincorporated Venture and (ii) all lawful
claims, whether for labor, materials, supplies, services or anything else, which
have become due and payable and which by law have or may become a Lien upon the
property of the Borrower or any of its Subsidiaries or Unincorporated Ventures;
PROVIDED, HOWEVER, that the Borrower, its Subsidiaries and Unincorporated
Ventures shall not be required to cause to be paid or discharged any such tax
assessment, charge or claim so long as the amount, applicability or validity
thereof shall be contested in good faith by appropriate proceedings, and
adequate book reserves shall have been established to the extent required by
GAAP with respect thereto.
- 41 -
<PAGE>
Section 5.2 INSPECTION OF PROPERTIES AND BOOKS. The Borrower covenants
and agrees that it will permit, and will cause each Subsidiary and
Unincorporated Venture to permit, any Lender, upon (i) reasonable request, if
such request is prior to the occurrence of a Default or an Event of Default or
(ii) request, if such request is after the occurrence of a Default or an Event
of Default, to any Authorized Officer, to visit and inspect any of the
properties of, to examine the books of account and records of the Borrower, any
Subsidiary or Unincorporated Venture and to take extracts therefrom and to
discuss the affairs, finances or accounts of the Borrower, any Subsidiary or
Unincorporated Venture, and to be advised as to the same by the officers of the
Borrower, at all such times during normal business hours, in such detail and
through such agents and representatives as such Bank may reasonably desire.
Section 5.3 MERGER AND SALE OF ASSETS.
(a) The Borrower covenants and agrees that it will not, and will cause
each Subsidiary and Unincorporated Venture to not, directly or indirectly sell,
transfer or otherwise dispose of any of its assets (whether now owned or
hereafter acquired, and including any interest in a joint venture or
partnership) unless immediately prior to, and after giving effect to, such sale,
transfer or other disposition, the Borrower, its Subsidiaries and Unincorporated
Ventures are and will be in compliance with all covenants hereunder and there
shall otherwise be no Default or Event of Default hereunder; and
(b) The Borrower covenants and agrees that it will not, and will cause
each Subsidiary and Unincorporated Venture to not, merge into or consolidate
with any other Person; provided, however, if after giving effect to any such
merger or consolidation, (i) the business of the Borrower or any Subsidiary or
Unincorporated Venture, as appropriate, will not be materially changed and (ii)
the Borrower or any Subsidiary or Unincorporated Venture, as appropriate, will
not be in default in respect of any of the covenants contained in any material
agreement, including, without limitation, this Agreement, to which the Borrower
or any Subsidiary or Unincorporated Venture is a party or by which its property
may be bound,
(1) any corporation, partnership or joint venture may merge or
consolidate with the Borrower, provided that the Borrower shall be the
continuing and surviving corporation,
(2) any Subsidiary may merge with or consolidate with any
corporation, partnership or joint venture, provided that, unless such
merger or consolidation shall be with the Borrower, such Subsidiary shall
be the continuing and surviving corporation, and
(3) any Unincorporated Venture may merge with or consolidate with
any corporation, partnership or joint venture, provided that, unless such
merger or consolidation shall be with the Borrower or a Subsidiary, such
Unincorporated Venture shall be the continuing and surviving person.
- 42 -
<PAGE>
Section 5.4 NET WORTH. The Borrower covenants and agrees that it will
not allow its Net Worth at any time to be less than the sum of (i) $285,000,000
plus (ii) 50% of Consolidated Net Income (excluding Consolidated Net Income for
any fiscal quarter in which Consolidated Net Income was a negative number)
earned on or after the Agreement Date, plus (iii) 75% of the Net Cash Proceeds
of any equity issues of the Borrower's Capital Stock after the Agreement Date.
Section 5.5 CONTINGENT LIABILITIES. The Borrower covenants and agrees
that it will not, and will cause each Subsidiary and Unincorporated Venture to
not, guarantee, endorse, contingently agree to purchase, or otherwise become
liable, directly or indirectly, upon the obligation of or in connection with the
earnings, the assets, the stock, or the dividends of any other Person (other
than the Borrower or any Subsidiary), including obligations of the Borrower,
each Subsidiary and Unincorporated Venture arising solely by virtue of any of
them being a general partner or venturer of any Unincorporated Venture, except
(i) the obligations in respect of the written agreements in existence on the
Agreement Date in respect of any Significant Investments, (ii) the guarantees
and other contingent obligations set forth on SCHEDULE 11 hereto, (iii)
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection, (iv) guarantees of loans to any employee; PROVIDED,
THAT any such guaranty of an employee loan shall not exceed the amount of
$100,000 per employee, and the amount of such guaranties of employee loans,
together with the amount of Investments permitted pursuant to clause (vi) of the
definition of "Permitted Investments," shall not exceed, in the aggregate, more
than $2,000,000, and (v) guarantees and contingent obligations incurred after
the Agreement Date not to exceed $20,000,000 in aggregate principal amount.
Section 5.6 INCURRENCE AND RETENTION OF DEBT. The Borrower covenants
and agrees that it will not, and will cause each Subsidiary and Unincorporated
Venture to not, incur, create, assume, or suffer to exist any Debt (other than
Debt existing on the Agreement Date) unless, immediately prior to, and after the
incurrence of, such Debt, the Borrower, its Subsidiaries and Unincorporated
Ventures are and will be in compliance with all covenants hereunder and there
shall otherwise be no Default or Event of Default hereunder.
Section 5.7 INVESTMENTS. The Borrower will not, and will cause each
Subsidiary and Unincorporated Venture to not, make or permit to remain any
Investment other than a Permitted Investment.
Section 5.8 NOTICE OF LITIGATION. The Borrower covenants and agrees
that it will, and will cause each Subsidiary and Unincorporated Venture to,
promptly give notice in writing to the Lenders (i) of any litigation to which
the Borrower, any Subsidiary or Unincorporated Venture becomes a party, if (A)
the amount in controversy exceeds $500,000 and (B) the Borrower's insurance
carrier does not acknowledge coverage with respect to such litigation, and (ii)
of all proceedings before any governmental or regulatory agencies (A) affecting
or potentially affecting the business or property of the Borrower, any
Subsidiary or Unincorporated Venture in an amount in excess of $500,000 or (B)
materially affecting the ability of the Borrower, any
- 43 -
<PAGE>
Subsidiary or Unincorporated Venture to perform their respective covenants and
obligations hereunder or under any other obligations owed any Lender.
Section 5.9 TOTAL DEBT RATIO. The Borrower covenants and agrees that it
will not allow the ratio of (i) Total Debt to (ii) EBITDA, in each case for the
four consecutive fiscal quarters immediately preceding the date of
determination, to be greater than 4.00 to 1 at the end of any fiscal quarter.
For purposes of this Section 5.9, with respect to assets not owned at all times
during the four consecutive quarters immediately preceding the date of
determination of EBITDA, there shall be (i) included in EBITDA (without
duplication) the EBITDA of any assets acquired during any such four consecutive
fiscal quarters immediately preceding the date of determination and (ii)
excluded from EBITDA the EBITDA of any asset disposed of during any such four
consecutive fiscal quarters immediately preceding the date of determination.
Section 5.10 CASH FLOW RATIO. The Borrower covenants and agrees that it
will not allow the ratio of (i)(a) EBITDA, plus (b) lease expense pursuant to
Operating Leases, minus (c) Maintenance Capital Expenditures to (ii)(a) Net
Interest, plus (b) lease expense pursuant to Operating Leases, plus (c) Current
Maturities, in each case other than Current Maturities (which, with respect to
Current Maturities, shall be for the four consecutive fiscal quarters
immediately succeeding the date of determination) for the four consecutive
fiscal quarters immediately preceding the date of determination, to be less than
1.50 to 1 at the end of any fiscal quarter.
Section 5.11 SENIOR DEBT RATIO. The Borrower covenants and agrees that
it will not allow the ratio of (i) Senior Debt to (ii) EBITDA, in each case for
the four consecutive fiscal quarters immediately preceding the date of
determination, to be greater than 3.0 to 1 at the end of any fiscal quarter. For
purposes of this Section 5.11, with respect to assets not owned at all times
during the four consecutive quarters immediately preceding the date of
determination of EBITDA, there shall be (i) included in EBITDA (without
duplication) the EBITDA of any assets acquired during any such four consecutive
fiscal quarters immediately preceding the date of determination and (ii)
excluded from EBITDA the EBITDA of any asset disposed of during any such four
consecutive fiscal quarters immediately preceding the date of determination.
Section 5.12 LIENS. The Borrower covenants and agrees that it will not
create, assume or suffer to exist, or permit any Subsidiary or Unincorporated
Venture to create, assume or suffer to exist, any Lien on any asset now owned or
hereafter acquired by it except Permitted Liens. Other than with respect to
Senior Notes, the Borrower shall not, and shall not permit any Subsidiary or
Unincorporated Venture to, agree with any Person that it shall not create,
assume, incur, permit or suffer to exist or to be created, assumed, incurred or
permitted to exist, directly or indirectly, any Lien on any of its assets.
Section 5.13 ACCOUNTING CHANGES. The Borrower covenants and agrees that
it will not, and will not permit an of its Subsidiaries or Unincorporated
Ventures to, make any change in its accounting treatment or financial reporting
practices, except as permitted or required by GAAP in effect from time to time.
The Borrower will not change its fiscal year or the calculation of its fiscal
quarter ends.
- 44 -
<PAGE>
Section 5.14 AMENDMENT AND MODIFICATION OF SUBORDINATED DEBT DOCUMENTS.
The Borrower covenants and agrees that it will not, and it will not permit any
Subsidiary or Unincorporated Venture to, directly or indirectly, amend, modify,
supplement, waive compliance with, or assent to noncompliance with, any term,
provision or condition of any of the documents governing or evidencing the
Subordinated Debt, which (i) the Lenders deem material (including, without
limitation, relating to events of default, acceleration rights, interest rates,
tenor, maturity date, subordination, covenants, prohibition against amending any
documents related to this Agreement and definitions with respect thereto
(including, without limitation, the definition of "Senior Debt")) or (ii) places
any further restrictions on the Borrower, its Subsidiaries or Unincorporated
Ventures or increases the obligations of the Borrower, its Subsidiaries or
Unincorporated Ventures thereunder or confers on the holders thereof any
additional rights.
Section 5.15 LEASE-BACKS. The Borrower covenants and agrees that it will
not, and will not permit any Subsidiary or Unincorporated Venture to, enter into
any arrangements, directly or indirectly, with any Person, whereby the Borrower,
any Subsidiary or Unincorporated Venture shall sell or transfer any property,
whether now owned or hereafter acquired, used or useful in its business, and
thereafter rent or lease the property so sold or transferred in an aggregate
amount (determined at the greater of fair market value or net book value) in
excess of $20,000,000 during the term of this Agreement.
Section 5.16 ENVIRONMENTAL MATTERS.
(a) The Borrower covenants and agrees that it will not, and will not
permit any of its Subsidiaries or Unincorporated Ventures to, use, generate,
manufacture, produce, store, release, discharge or dispose of on, under or about
any real property owned or leased by the Borrower or any of its Subsidiaries or
Unincorporated Ventures (such owned or leased real property, the "Property"), or
transport to or from the Property, any Hazardous Substance (as defined below),
or (to the extent within the Borrower's or such Subsidiary's or Unincorporated
Venture's control) permit any other Person to do so, where such could reasonably
be expected to have a Material Adverse Effect.
(b) The Borrower shall keep and maintain and shall cause each Subsidiary
and Unincorporated Venture to keep and maintain, the Property in compliance with
any Environmental Law (as defined below) where the failure to do so could
reasonably be expected to have a Material Adverse Effect.
(c) In the event that any investigation, site monitoring, containment,
cleanup, removal, restoration or other remedial work of any kind or nature (the
"Remedial Work") with respect to the Property is required to be performed by the
Borrower or any of its Subsidiaries or Unincorporated Ventures under any
applicable local, state or federal law or regulation, any judicial order, or by
any governmental entity because of, or in connection with, the current or future
presence, suspected presence, release or suspected release of a Hazardous
Substance in or into the air, soil, groundwater or surface water at, on, under
or within the Property (or any portion thereof), the Borrower or such Subsidiary
or Unincorporated Venture shall within thirty
- 45 -
<PAGE>
(30) days after written demand for performance thereof by the Lenders (or such
shorter period of time as may be required under any applicable law, regulation,
order or agreement), commence and thereafter diligently prosecute to completion,
all such Remedial Work.
(d) The Borrower will defend, indemnify and hold harmless the Lenders,
and their respective employees, agents, officers and directors, from and against
any claims, demands, penalties, fines, liabilities, settlements, damages, costs
and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under any Environmental Law applicable to the
operations of the Borrowers or any Subsidiary or Unincorporated Venture or the
Property, or any orders, requirements or demands of Tribunal related thereto,
including, without limitation, attorneys' and consultants' fees, investigation
and laboratory fees, response costs, court costs and litigation expenses, except
to the extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor. This
indemnity shall continue in full force and effect regardless of the termination
of this Agreement.
(e) As used herein, (i) "Environmental Law" means any federal, state
or local law, statute, ordinance, or regulation now or hereafter in effect
pertaining to health, industrial hygiene, or the environmental conditions on,
under or about the Property, and (ii) the term "Hazardous Substance" means
those substances included within the definitions of "hazardous substances",
"hazardous materials", "toxic substances", or "solid waste" under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. Sections 9601 ET SEQ., the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Sections 6901 ET SEQ. and the Hazardous
Materials Transportation Act, 49 U.S.C. Sections 1801 ET SEQ., and in the
regulations laws, and such other substances, materials and wastes which are
or become regulated under applicable local, state or federal law, or which
are classified as hazardous or toxic under federal, state, or local laws or
regulations.
Section 5.17 ERISA COMPLIANCE. The Borrower covenants and agrees that it
shall, and shall cause each Subsidiary and Unincorporated Venture to (i) at all
times, make prompt payment of all contributions required under all Plans and
required to meet the minimum funding standard set forth in ERISA with respect to
its Plans, (ii) after the discovery by an Authorized Officer, notify the Lenders
immediately of any fact, including, but not limited to, any Reportable Event
arising in connection with any of its Plans, which might constitute grounds for
termination thereof by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such Plan, together with a
statement, if requested by any Lender, as to the reason therefor and the action,
if any, proposed to be taken with respect thereto, and (iii) not permit any Plan
to be subject to any involuntary termination proceedings.
Section 5.18 BUSINESS. The Borrower covenants and agrees that it will
not, and will not permit any Subsidiary or Unincorporated Venture to, engage in,
directly or through other Persons, any business other than the businesses now
carried on and other businesses directly related thereto.
- 46 -
<PAGE>
Section 5.19 DEBT. The Borrower covenants and agrees that it will not,
and will cause each Subsidiary and Unincorporated Venture to not, (i) default,
beyond any notice, grace or cure period, in any payment equal to or exceeding
the aggregate amount of $1,000,000 of principal of or interest on any Debt with
respect to which recourse may be made against the Borrower or any Subsidiary or
Unincorporated Venture beyond any period of grace provided with respect thereto,
or (ii) default, beyond any notice, grace or cure period, in the performance of
any other agreement, term, covenant or condition contained in any agreement or
instrument under or by which any such Debt, the unpaid principal amount of which
then equals or exceeds $1,000,000 is created, evidenced or secured if the effect
of such default is to cause such Debt to become due before its stated maturity.
Section 5.20 TRANSACTIONS WITH AFFILIATES. The Borrower covenants and
agrees that it will not, and will not permit any Subsidiary or Unincorporated
Venture to, directly or indirectly, enter into any transaction (including, but
not limited to, the sale or exchange of property or the rendering of service)
with any of its Affiliates, other than in the ordinary course of business and
upon fair and reasonable terms no less favorable than the Borrower or any
Subsidiary or Unincorporated Venture could obtain or could become entitled to in
an arm's-length transaction with a Person which was not an Affiliate.
Section 5.21 USE OF PROCEEDS. The Borrower shall use the proceeds of the
Commitment to refinance the debt outstanding under the Existing Credit Agreement
and for working capital and general corporate purposes, including repayment of
Debt.
Section 5.22 INDEMNITY.
(a) THE BORROWER AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS
THE ADMINISTRATIVE LENDER, EACH LENDER, EACH OF THEIR RESPECTIVE AFFILIATES, AND
EACH OF THEIR RESPECTIVE (INCLUDING SUCH AFFILIATES') OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS, SHAREHOLDERS AND CONSULTANTS (INCLUDING, WITHOUT
LIMITATION, THOSE RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED
SATISFACTION OF ANY OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE FOREGOING
(COLLECTIVELY, "INDEMNITEES") FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS,
COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING,
WITHOUT LIMITATION, THE FEES AND DISBURSEMENTS OF COUNSEL FOR SUCH INDEMNITEES
IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING,
WHETHER OR NOT SUCH INDEMNITEES SHALL BE DESIGNATED A PARTY THERETO), IMPOSED
ON, INCURRED BY, OR ASSERTED AGAINST SUCH INDEMNITEES (WHETHER DIRECT, INDIRECT
OR CONSEQUENTIAL AND WHETHER BASED ON ANY FEDERAL, STATE, OR LOCAL LAWS AND
REGULATIONS, UNDER COMMON LAW OR AT EQUITABLE CAUSE, OR ON CONTRACT, TORT OR
OTHERWISE, ARISING FROM OR CONNECTED WITH THE PAST, PRESENT OR
- 47 -
<PAGE>
FUTURE OPERATIONS OF THE BORROWER OR ITS PREDECESSORS IN INTEREST, OR THE PAST,
PRESENT OR FUTURE ENVIRONMENTAL CONDITION OF PROPERTY OF THE BORROWER), IN ANY
MANNER RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE LOAN PAPERS, OR ANY
ACT, EVENT OR TRANSACTION OR ALLEGED ACT, EVENT OR TRANSACTION RELATING OR
ATTENDANT THERETO, THE MAKING OF ANY PARTICIPATIONS IN THE ADVANCES AND THE
MANAGEMENT OF THE ADVANCES, INCLUDING IN CONNECTION WITH, OR AS A RESULT, IN
WHOLE OR IN PART, OF ANY NEGLIGENCE OF ADMINISTRATIVE LENDER OR ANY LENDER
(OTHER THAN THOSE MATTERS RAISED EXCLUSIVELY BY A PARTICIPANT AGAINST THE
ADMINISTRATIVE LENDER OR ANY LENDER AND NOT THE BORROWER), OR THE USE OR
INTENDED USE OF THE PROCEEDS OF THE ADVANCES HEREUNDER, OR IN CONNECTION WITH
ANY INVESTIGATION OF ANY POTENTIAL MATTER COVERED HEREBY, BUT EXCLUDING (i) ANY
CLAIM OR LIABILITY THAT ARISES AS THE RESULT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY INDEMNITEE, AS FINALLY JUDICIALLY DETERMINED BY A COURT OF
COMPETENT JURISDICTION, AND (ii) MATTERS RAISED BY ONE LENDER AGAINST ANOTHER
LENDER OR BY ANY SHAREHOLDERS OF A LENDER AGAINST A LENDER OR ITS MANAGEMENT
(COLLECTIVELY, "INDEMNIFIED MATTERS"). TO THE EXTENT THAT ANY INDEMNIFIED
MATTER INVOLVES ONE OR MORE INDEMNITEES, SUCH INDEMNITEES SHALL USE THE SAME
LEGAL COUNSEL UNLESS ANY INDEMNITEE IN ITS REASONABLE DISCRETION DETERMINES THAT
CONFLICTS EXIST OR MAY ARISE IN CONNECTION WITH SUCH REPRESENTATION.
(b) IN ADDITION, THE BORROWER SHALL PERIODICALLY, UPON REQUEST,
REIMBURSE EACH INDEMNITEE FOR ITS REASONABLE LEGAL AND OTHER ACTUAL EXPENSES
(INCLUDING THE COST OF ANY INVESTIGATION AND PREPARATION) INCURRED IN CONNECTION
WITH ANY INDEMNIFIED MATTER. IF FOR ANY REASON THE FOREGOING INDEMNIFICATION IS
UNAVAILABLE TO ANY INDEMNITEE OR INSUFFICIENT TO HOLD ANY INDEMNITEE HARMLESS
WITH RESPECT TO INDEMNIFIED MATTERS, THEN THE BORROWER SHALL CONTRIBUTE TO THE
AMOUNT PAID OR PAYABLE BY SUCH INDEMNITEE AS A RESULT OF SUCH LOSS, CLAIM,
DAMAGE OR LIABILITY IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT NOT ONLY THE
RELATIVE BENEFITS RECEIVED BY THE BORROWER AND THE BORROWER'S STOCKHOLDERS ON
THE ONE HAND AND SUCH INDEMNITEE ON THE OTHER HAND BUT ALSO THE RELATIVE FAULT
OF THE BORROWER AND SUCH INDEMNITEE, AS WELL AS ANY OTHER RELEVANT EQUITABLE
CONSIDERATIONS. THE REIMBURSEMENT, INDEMNITY AND CONTRIBUTION OBLIGATIONS UNDER
THIS SECTION SHALL BE IN ADDITION TO ANY LIABILITY WHICH THE BORROWER MAY
OTHERWISE HAVE, SHALL EXTEND UPON THE SAME TERMS AND CONDITIONS TO EACH
INDEMNITEE, AND SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF ANY
SUCCESSORS, ASSIGNS, HEIRS AND PERSONAL REPRESENTATIVES OF THE BORROWER, THE
ADMINISTRATIVE LENDER, THE LENDERS AND ALL OTHER INDEMNITEES. THIS
- 48 -
<PAGE>
SECTION SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT AND PAYMENT OF THE
OBLIGATIONS.
ARTICLE 6
INFORMATION
Section 6.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY THE BORROWER. The
Borrower will deliver to each Lender:
(a) As soon as practicable after the end of each of the first three
quarterly fiscal periods in each fiscal year of the Borrower, and in any event
within 45 days thereafter, duplicate copies of
(1) Combined balance sheets, statements of earnings, shareholders'
equity and cash flows for the portion of the fiscal year ending with such
quarter; all in reasonable detail and accompanied by an Officer's
Certificate certifying that the aforementioned financial statements
present fairly the financial position of the Borrower (Combined Basis) at
the end of such quarter and the results of operations and the changes in
financial position for the portion of the fiscal year ending with such
quarter, determined in accordance with GAAP; and
(2) An Officer's Certificate (with calculations and a new
SCHEDULE 11 attached thereto) certifying (i) as to any increases or
reductions in interest in the Significant Investments, and (ii) compliance
with Sections 5.4, 5.5, 5.9, 5.10 and 5.11.
(b) As soon as practicable after the end of each fiscal year of the
Borrower and in any event within 120 days thereafter, duplicate copies of:
(1) Combined balance sheets, statements of earnings, shareholders'
equity and cash flows of the Borrower for such year; all in reasonable
detail, prepared on a basis consistent with the financial statements
delivered to all Lenders in prior periods and accompanied by an
unqualified opinion and report of KPMG Peat Marwick, or other independent
certified accountants of recognized standing selected by the Borrower and
reasonably consented to by Lenders, which report shall state that no
default under this Agreement and no condition or event which after notice
or lapse of time or both would constitute a default under this Agreement
has come to the knowledge of such accountants or, if such is not the case,
the details of such default or such condition or event; and
(2) An Officer's Certificate (with calculations and a new
SCHEDULE 11 attached thereto) certifying (i) as to any increases or
reductions in interest in the Significant Investments, and (ii) compliance
with Sections 5.4, 5.5, 5.9, 5.10 and 5.11.
- 49 -
<PAGE>
(c) As soon as practicable after the Borrower or any Subsidiary files
with the S.E.C. any of the following documents and in any event within 10 days
thereafter, a copy of:
(1) Any final Registration Statement filed for the registration of
any securities under the Securities Act of 1933, as amended (except a
Registration Statement on Form S-8 for the registration of stock to be
issued in connection with any Stock Plan);
(2) Each Annual and Periodic Report filed under Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended;
(3) Each definitive Proxy Statement filed pursuant to the
Securities Exchange Act of 1934, as amended; and
together with any other document filed with the S.E.C. or the New York
Stock Exchange, Inc., as may be requested by any Lender.
(d) Upon request by any Lender, copies of the following:
(1) Each annual report/return, as well as all schedules and
attachments required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA and the regulations promulgated
thereunder, in connection with each of its Plans for each Plan year; and
(2) Such additional information concerning any of its Plans as may
be reasonably requested.
(e) On the date of receipt by the Borrower of any change in the Index
Debt Rating, a copy of such change.
(f) Promptly upon the occurrence of a Default or Event of Default, a
written notice specifying the nature and period of existence thereof and what
action is being taken or is proposed to be taken with respect thereto.
(g) Promptly upon becoming aware thereof, notice of the commencement or
filing (or of a threat to commence or file) of any action, suit or proceeding
before any court or any federal, state, municipal or other governmental agency
or authority involving claims for damages, fines or penalties in excess of
$500,000 (after deducting any amount with respect to which the Borrower, any
Subsidiary or Unincorporated Venture is insured) against or in any other way
relating to the Borrower, any Subsidiary or any Unincorporated Venture or any of
their respective properties or businesses.
(h) With reasonable promptness, such other data and information as from
time to time may be reasonably requested by any Lender.
- 50 -
<PAGE>
(i) Notwithstanding anything in this Section 6.1 to the contrary, (i) if
the terms of any Subordinated Debt of the Borrower requires delivery of Parent
Company financial statements and (ii) any Lender shall request delivery of
Parent Company financial statements, the Borrower shall also deliver to such
Lender the financial statements required to be delivered pursuant to (1) Section
6.1(a) on a Parent Company basis within 60 days after the end of the first three
quarterly fiscal periods of the Borrower and (2) Section 6.1(b) on a Parent
Company basis within 120 days after the end of each fiscal year of the Borrower.
Section 6.2 OFFICER'S CERTIFICATE. Each set of financial statements
delivered pursuant to Sections 6.1(a) and (b) shall be accompanied by an
Officer's Certificate stating whether there exists on the date of such
certificate any condition or event which then constitutes, or which after notice
or lapse of time or both, would constitute, a breach of any covenant herein, and
if any such condition or event then exists, specifying the nature and period of
existence thereof and the action the Borrower is taking or proposes to take with
respect thereto.
ARTICLE 7
DEFAULT
Section 7.1 EVENTS OF DEFAULT. Each of the following shall constitute
an Event of Default, whatever the reason for such event, and whether voluntary,
involuntary, or effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or
non-governmental body:
(a) The Borrower fails to make any payment of principal on any Note on
the date such payment is due;
(b) The Borrower fails to make any payment of interest on any Note or
any other costs, fees, expenses or other amounts payable hereunder or under the
other Loan Papers within one Business Day after the date such payment is due;
(c) The Borrower or any Subsidiary or Unincorporated Venture fails to
perform or observe (i) any covenant contained in Sections 5.3, 5.4, 5.5, 5.6,
5.7, 5.9, 5.10, 5.11, 5.12, 5.13, 5.14, 5.15, 5.19, 5.20 or 5.21 of this
Agreement or (ii) any other covenant in this Agreement or any other Loan Paper
(other than the Master Covenant Agreement) to be performed or observed by it and
such failure with respect to such other covenants continues for a period of 30
days after any Lender has given written notice specifying such failure to the
Borrower;
(d) Any material warranty or representation by or on behalf of the
Borrower or any Subsidiary or Unincorporated Venture contained in this Agreement
or any other Loan Paper is false or misleading in any material respect;
- 51 -
<PAGE>
(e) The Borrower or any Subsidiary or Unincorporated Venture fails to
make any payment due on any other Debt in an aggregate amount of at least
$1,000,000 beyond any applicable grace period, including any extension thereof,
or the Company, or any Subsidiary fails to perform or observe any other
provision contained in any such Debt or any agreement securing or relating to
such Debt if and only if the effect of such failure to make such payment or to
perform or observe such other provision is to cause or permit the holder of such
Debt or any Person acting on such holder's behalf to cause such Debt to become
due prior to its stated maturity;
(f) The Borrower or any Significant Subsidiary or Unincorporated Venture
(other than Insolvent Unincorporated Ventures) (i) shall become insolvent, (ii)
shall fail to pay its debts generally as they become due, (iii) shall make a
general assignment for the benefit of creditors, (iv) shall voluntarily seek,
consent to, or acquiesce in the benefit of any Debtor Relief Law, (v) shall
become a party to or is made the subject of any proceeding provided for by any
Debtor Relief Law, other than as a creditor or claimant (unless, in the event
such proceeding is involuntary, the petition instituting same is dismissed
within 60 days after its filing), or (vi) take any corporate or other action for
the purpose of effecting any of the foregoing;
(g) The Borrower or any Subsidiary or Unincorporated Venture fails to
have discharged, within a period of 45 days after the expiration of all rights
of appeal, any judgment, warrant of attachment, sequestration, or similar
proceeding against any of its respective assets with a value, individually or
collectively, in excess of a Material Amount;
(h) The Borrower or any Subsidiary or Unincorporated Venture shall fail
to perform or observe, beyond any grace period provided with respect thereto and
provided that the Borrower has been given a notice of default with respect to,
any covenant contained in that certain Master Covenant Agreement;
(i) Any material provision of any Loan Paper after delivery thereof
hereunder shall for any reason cease to be valid and binding on the Person
(other than any Lender) executing such Loan Paper, or the Borrower or such
Person shall so state in writing;
(j) A final judgment or judgments for the payment of money shall be
entered by a court or courts against the Borrower or any Subsidiary or
Unincorporated Venture and such judgment or judgments remain unstayed or
undischarged for a period of 30 days from the date of entry thereof and the
aggregate amount of all such judgments exceeds a Material Amount (net of actual
insurance coverage if the Lenders receive evidence satisfactory to them that
coverage exists);
(k) With respect to any Plan of the Borrower or any member of its
Controlled Group: (i) the Borrower, any such member, or any other
party-in-interest or disqualified person shall engage in transactions which in
the aggregate would reasonably result in a direct or indirect liability to the
Borrower or any member of its Controlled Group in excess of $100,000 under
Section 409 or 502 of ERISA or Section 4975 of the Code; (ii) the Borrower or
any member of
- 52 -
<PAGE>
its Controlled Group shall incur any accumulated funding deficiency, as defined
in Section 412 of the Code, in the aggregate in excess of $100,000, or request a
funding waiver from the Internal Revenue Service for contributions in the
aggregate in excess of $100,000; (iii) the Borrower or any member of its
Controlled Group shall incur any withdrawal liability in the aggregate in excess
of $100,000 as a result of a complete or partial withdrawal within the meaning
of Section 4203 or 4205 of ERISA, or any other liability with respect to a Plan
in excess of $100,000, unless the amount of such liability has been funded
within the Plan or pursuant to one or more insurance contracts; (iv) the
Borrower or any member of its Controlled Group shall fail to make a required
contribution by the due date under Section 412 of the Code or Section 302 of
ERISA which would result in the imposition of a lien under Section 412 of the
Code or Section 302 of ERISA; (v) the Borrower, any member of its Controlled
Group or any Plan sponsor shall notify the PBGC of an intent to terminate, or
the PBGC shall institute proceedings to terminate, or the PBGC shall institute
proceedings to terminate, any Plan subject to Title IV of ERISA; (vi) a
Reportable Event shall occur with respect to a Plan subject to Title IV of
ERISA, and within 15 days after the reporting of such Reportable Event to the
Administrative Lender, the Administrative Lender shall have notified the
Borrower in writing that the Determining Lenders have made a determination that,
on the basis of such Reportable Event, there are reasonable grounds for the
termination of such Plan by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer such Plan and as a
result thereof an Event of Default shall have occurred hereunder; (vii) a
trustee shall be appointed by a court of competent jurisdiction to administer
any Plan or the assets thereof; (viii) the benefits of any Plan shall be
increased, or the Borrower or any member of its Controlled Group shall begin to
maintain, or begin to contribute to, any Plan, without the prior written consent
of the Determining Lenders; or (ix) any ERISA Event with respect to a Plan
subject to Title IV of ERISA shall have occurred, and 30 days thereafter (a)
such ERISA Event, other than such event described in clause (f) of the
definition of ERISA Event herein, (if correctable) shall not have been corrected
and (b) the then present value of such Plan's benefit liabilities, as defined in
Title IV of ERISA, shall exceed the then current value of assets accumulated in
such Plan; provided, however, that the events listed in subsections (v) through
(ix) shall constitute Events of Default only if, as of the date thereof or any
subsequent date, the amount of liability that the Borrower or any member of its
Controlled Group reasonably is likely to incur in the aggregate under Section
4062, 4063, 4064, 4219 or 4023 of ERISA or any other provision of law with
respect to all such Plans, computed by the actuary of the Plan taking into
account any applicable rules and regulations of the PBGC at such time, and based
on the actuarial assumptions used by the Plan, resulting from or otherwise
associated with such event exceeds $100,000; or
(l) A Change of Control shall have occurred.
Section 7.2 REMEDIES. If an Event of Default shall have occurred and
shall be continuing:
(a) With the exception of an Event of Default specified in Section
7.1(f) hereof, the Administrative Lender shall, upon the direction of the
Determining Lenders, terminate the
- 53 -
<PAGE>
Commitment and/or declare the principal of and interest on the Advances and all
Obligations and other amounts owed under the Loan Papers to be forthwith due and
payable without presentment, demand, protest or notice of any kind, all of which
are hereby expressly waived, anything in the Loan Papers to the contrary
notwithstanding.
(b) Upon the occurrence of an Event of Default specified in Section
7.1(f) hereof, such principal, interest and other amounts shall thereupon and
concurrently therewith become due and payable and the Commitment shall
automatically forthwith terminate, all without any action by the Administrative
Lender, any Lender or any holders of the Notes and without presentment, demand,
protest or other notice of any kind, all of which are expressly waived, anything
in the Loan Papers to the contrary notwithstanding.
(c) The Administrative Lender, and the Lenders may exercise all of the
post-default rights granted to them under the Loan Papers or under Applicable
Law.
(d) The rights and remedies of the Administrative Lender and the Lenders
hereunder shall be cumulative, and not exclusive.
ARTICLE 8
CHANGES IN CIRCUMSTANCES
Section 8.1 LIBOR BASIS DETERMINATION INADEQUATE. If with respect to
any proposed LIBOR Advance for any Interest Period, any Lender determines that
(i) deposits in dollars (in the applicable amount) are not being offered to that
Lender in the relevant market for such Interest Period or (ii) the LIBOR Basis
for such proposed LIBOR Advance does not adequately cover the cost to such
Lender of making and maintaining such proposed LIBOR Advance for such Interest
Period, such Lender shall forthwith give notice thereof to the Borrower,
whereupon until such Lender notifies the Borrower that the circumstances giving
rise to such situation no longer exist, the obligation of such Lender to make
LIBOR Advances shall be suspended.
Section 8.2 ILLEGALITY. If any applicable law, rule or regulation, or
any change therein or adoption thereof, or interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its LIBOR Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, shall make it unlawful or impossible for such Lender (or its LIBOR
Lending Office) to make, maintain or fund its LIBOR Advances, such Lender shall
so notify the Borrower and the Administrative Lender. Before giving any notice
to the Borrower pursuant to this Section, the notifying Lender shall designate a
different LIBOR Lending Office or other lending office if such designation will
avoid the need for giving such notice and will not, in the sole judgment of the
Lender, be materially disadvantageous to the Lender. Upon receipt of such
notice, notwithstanding anything contained in Article 2 hereof, the Borrower
shall repay in full the then
- 54 -
<PAGE>
outstanding principal amount of each LIBOR Advance owing to the notifying
Lender, together with accrued interest thereon, on either (a) the last day of
the Interest Period applicable to such Advance, if the Lender may lawfully
continue to maintain and fund such Advance to such day, or (b) immediately, if
the Lender may not lawfully continue to fund and maintain such Advance to such
day. Concurrently with repaying each affected LIBOR Advance owing to such
Lender, notwithstanding anything contained in Article 2 hereof, the Borrower
shall borrow a Base Rate Advance from such Lender, and such Lender shall make
such Base Rate Advance, in an amount such that the outstanding principal amount
of the Advances owing to such Lender shall equal the outstanding principal
amount of the Advances owing immediately prior to such repayment.
Section 8.3 INCREASED COSTS.
(a) If any applicable law, rule or regulation, or any change in or
adoption of any law, rule or regulation, or any interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof or compliance by any Lender
(or its LIBOR Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or compatible
agency:
(i) shall subject a Lender (or its LIBOR Lending Office) to any
Tax (net of any tax benefit engendered thereby) with respect to its LIBOR
Advances or its obligation to make such Advances, or shall change the
basis of taxation of payments to a Lender (or to its LIBOR Lending Office)
of the principal of or interest on its LIBOR Advances or in respect of any
other amounts due under this Agreement, as the case may be, or its
obligation to make such Advances (except for changes in the rate of tax on
the overall net income, net worth or capital of the Lender and franchise
taxes, doing business taxes or minimum taxes imposed upon such Lender); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of
the Federal Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, a Lender's LIBOR Lending Office or shall impose on the Lender (or its
LIBOR Lending Office) or on the United States market for certificates of
deposit or the London interbank market any other condition affecting its
LIBOR Advances or its obligation to make such Advances;
and the result of any of the foregoing is to increase the cost to a Lender (or
its LIBOR Lending Office) of making or maintaining any LIBOR Advances, or to
reduce the amount of any sum received or receivable by a Lender (or its LIBOR
Lending Office) with respect thereto, by an amount deemed by a Lender to be
material ("Increased Advance Costs"), then, within 15 days after demand by a
Lender, the Borrower agrees to pay to such Lender such additional amount as will
compensate such Lender for such increased costs or reduced amounts, subject to
Section 10.9 hereof. The affected Lender will as soon as practicable notify the
Borrower of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Lender to compensation pursuant to this Section
and will designate a different LIBOR Lending Office
- 55 -
<PAGE>
or other lending office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the sole judgment of the
affected Lender made in good faith, be materially disadvantageous to such
Lender. Notwithstanding the foregoing, any Lender's demand for Increased
Advance Costs shall not include any Increased Advance Costs with respect to any
period more than 180 days prior to the date that such Lender gives notice to the
Borrower of such Increased Advance Costs unless the effective date of the
condition which results in the right to receive Increased Advance Costs is
retroactive (the "Increased Advance Costs Retroactive Effective Date"). If any
Increased Advance Costs has an Increased Advance Costs Retroactive Effective
Date and any Lender demands compensation within 180 days after the date setting
the Increased Advance Costs Retroactive Effective Date (the "Increased Advance
Costs Set Date"), such Lender shall have the right to receive such Increased
Advance Costs from the Increased Advance Costs Retroactive Effective Date. If
a Lender does not demand such Increased Advance Costs within 180 days after the
Increased Advance Costs Set Date, such Lender may not receive payment of
Increased Advance Costs with respect to any period more than 180 days prior to
such demand.
(b) A certificate of any Lender claiming compensation under this Section
and setting forth the additional amounts to be paid to it hereunder and
calculations therefor shall be conclusive in the absence of manifest error. In
determining such amount, a Lender may use any reasonable averaging and
attribution methods. If a Lender demands compensation under this Section, the
Borrower may at any time, upon at least five Business Days' prior notice to the
Lender, after reimbursement to the Lender by the Borrower in accordance with
this Section of all costs incurred, prepay in full the then outstanding LIBOR
Advances of the Lender, together with accrued interest thereon to the date of
prepayment, along with any reimbursement required under Section 2.9 hereof.
Concurrently with prepaying such LIBOR Advances, the Borrower shall borrow a
Base Rate Advance from the Lender, and the Lender shall make such Base Rate
Advance, in an amount such that the outstanding principal amount of the Advances
owing to such Lender shall equal the outstanding principal amount of the
Advances owing immediately prior to such prepayment.
Section 8.4 EFFECT ON BASE RATE ADVANCES. If notice has been given
pursuant to Section 8.1, 8.2 or 8.3 hereof suspending the obligation of a Lender
to make LIBOR Advances, or requiring LIBOR Advances of a Lender to be repaid or
prepaid, then, unless and until the Lender notifies the Borrower that the
circumstances giving rise to such repayment no longer apply, all Advances which
would otherwise be made by such Lender as LIBOR Advances shall be made instead
as Base Rate Advances.
Section 8.5 CAPITAL ADEQUACY. If either (a) the introduction of or any
change in or in the interpretation of any law, rule or regulation or (b)
compliance by a Lender with any law, rule or regulation or any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital required
or expected to be maintained by a Lender or any corporation controlling such
Lender, and such Lender determines that the amount of such capital is increased
by or based upon the existence of such Lender's Commitment or Advances hereunder
and other commitments or
- 56 -
<PAGE>
advances of such Lender of this type, then, upon demand by such Lender, subject
to Section 10.9, the Borrower shall immediately pay to such Lender, from time to
time as specified by such Lender, additional amounts sufficient to compensate
such Lender with respect to such circumstances (collectively, "Additional
Costs"), to the extent that such Lender reasonably determines in good faith such
increase in capital to be allocable to the existence of such Lender's Commitment
hereunder. Notwithstanding the foregoing, any Lender's demand for Additional
Costs shall not include any Additional Costs with respect to any period more
than 180 days prior to the date that such Lender gives notice to the Borrower of
such Additional Costs unless the effective date of the Regulatory Modification
which results in the right to receive Additional Costs is retroactive (the
"Regulatory Modification Retroactive Effective Date"). If any Regulatory
Modification has a Regulatory Modification Retroactive Effective Date and any
Lender demands compensation within 180 days after the date setting the
Regulatory Modification Retroactive Effective Date (the "Regulatory Modification
Set Date"), such Lender shall have the right to receive such Additional Costs
from the Regulatory Modification Retroactive Effective Date. If a Lender does
not demand such Additional Costs within 180 days after the Regulatory
Modification Set Date, such Lender may not receive payment of Additional Costs
with respect to any period more than 180 days prior to such demand. A
certificate as to such amounts submitted to the Borrower by a Lender hereunder,
shall, in the absence of manifest error, be conclusive and binding for all
purposes.
ARTICLE 9
AGREEMENT AMONG LENDERS
Section 9.1 AGREEMENT AMONG LENDERS. The Lenders agree among themselves
that:
(a) ADMINISTRATIVE LENDER. Each Lender hereby appoints the
Administrative Lender as its nominee in its name and on its behalf, to receive
all documents and items to be furnished hereunder; to act as nominee for and on
behalf of all Lenders under the Loan Papers; to, except as otherwise expressly
set forth herein, take such action as may be requested by the Determining
Lenders, provided that, unless and until the Administrative Lender shall have
received such requests, the Administrative Lender may take such administrative
action, or refrain from taking such administrative action, as it may deem
advisable and in the best interests of the Lenders; to arrange the means whereby
the proceeds of the Advances of the Lenders are to be made available to the
Borrower; to distribute promptly to each Lender information, requests and
documents received from the Borrower, and each payment (in like funds received)
with respect to any of such Lender's Advances, fee or other amount; and to
deliver to the Borrower requests, demands, approvals and consents received from
the Lenders. Administrative Lender agrees to promptly distribute to each
Lender, at such Lender's address set forth below information, requests,
documents and payments received from the Borrower.
(b) REPLACEMENT OF ADMINISTRATIVE LENDER. Should the Administrative
Lender or any successor Administrative Lender ever cease to be a Lender
hereunder, or should the
- 57 -
<PAGE>
Administrative Lender or any successor Administrative Lender ever resign as
Administrative Lender, or should the Administrative Lender or any successor
Administrative Lender ever be removed with cause by the Determining Lenders,
then the Lender appointed by the other Lenders shall forthwith become the
Administrative Lender, and the Borrower and the Lenders shall execute such
documents as any Lender may reasonably request to reflect such change. Any
resignation or removal of the Administrative Lender or any successor
Administrative Lender shall become effective upon the appointment by the Lenders
of a successor Administrative Lender; provided, however, that if the Lenders
fail for any reason to appoint a successor within 60 days after such removal or
resignation, the Administrative Lender or any successor Administrative Lender
(as the case may be) shall thereafter have no obligation to act as
Administrative Lender hereunder.
(c) EXPENSES. Each Lender shall pay its pro rata share, based on its
Specified Percentage, of any expenses paid by the Administrative Lender directly
and solely in connection with any of the Loan Papers if Administrative Lender
does not receive reimbursement therefor from other sources within 60 days after
the date incurred, unless payment of such fees is being diligently disputed by
such Lender or the Borrower in good faith. Any amount so paid by the Lenders to
the Administrative Lender shall be returned by the Administrative Lender pro
rata to each paying Lender to the extent later paid by the Borrower or any other
Person on the Borrower's behalf to the Administrative Lender.
(d) DELEGATION OF DUTIES. The Administrative Lender may execute any
of its duties hereunder by or through officers, directors, employees, attorneys
or agents, and shall be entitled to (and shall be protected in relying upon)
advice of counsel concerning all matters pertaining to its duties hereunder.
(e) RELIANCE BY ADMINISTRATIVE LENDER. The Administrative Lender and
its officers, directors, employees, attorneys and agents shall be entitled to
rely and shall be fully protected in relying on any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype
message, statement, order, or other document or conversation reasonably believed
by it or them in good faith to be genuine and correct and to have been signed or
made by the proper Person and, with respect to legal matters, upon opinions of
counsel selected the Administrative Lender. The Administrative Lender may, in
its reasonable judgment, deem and treat the payee of any Note as the owner
thereof for all purposes hereof.
(f) LIMITATION OF ADMINISTRATIVE LENDER'S LIABILITY. Neither the
Administrative Lender nor any of its officers, directors, employees, attorneys
or agents shall be liable for any action taken or omitted to be taken by it or
them hereunder in good faith and believed by it or them to be within the
discretion or power conferred to it or them by the Loan Papers or be responsible
for the consequences of any error of judgment, except for its or their own gross
negligence or wilful misconduct. Except as aforesaid, the Administrative Lender
shall be under no duty to enforce any rights with respect to any of the
Advances, or any security therefor. The Administrative Lender shall not be
compelled to do any act hereunder or to take any action towards the execution or
enforcement of the powers hereby created or to prosecute or defend
- 58 -
<PAGE>
any suit in respect hereof, unless indemnified to its satisfaction against loss,
cost, liability and expense. The Administrative Lender shall not be responsible
in any manner to any Lender for the effectiveness, enforceability, genuineness,
validity or due execution of any of the Loan Papers, or for any representation,
warranty, document, certificate, report or statement made herein or furnished in
connection with any Loan Papers, or be under any obligation to any Lender to
ascertain or to inquire as to the performance or observation of any of the
terms, covenants or conditions of any Loan Papers on the part of the Borrower.
To the extent not reimbursed by the Borrower, each Lender hereby jointly and
severally indemnifies and holds harmless the Administrative Lender, pro rata
according to its Specified Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and/or disbursements of any kind or nature whatsoever which may be
imposed on, asserted against, or incurred by the Administrative Lender in any
way with respect to any Loan Papers or any action taken or omitted by the
Administrative Lender under the Loan Papers (including any negligent action of
the Administrative Lender), except to the extent the same result from gross
negligence or wilful misconduct by the Administrative Lender.
(g) LIABILITY AMONG LENDERS. No Lender shall incur any liability
(other than the sharing of expenses and other matters specifically set forth
herein and in the other Loan Papers) to any other Lender, except for acts or
omissions in bad faith.
(h) RIGHTS AS LENDER. With respect to its commitment hereunder, the
Advances made by it and Note issued to it, the Administrative Lender shall have
the same rights as a Lender and may exercise the same as though it were not the
Administrative Lender, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Lender in its individual
capacity. The Administrative Lender or any Lender may accept deposits from, act
as trustee under indentures of, and generally engage in any kind of business
with, the Borrower and any of its Affiliates, and any Person who may do business
with or own securities of the Borrower or any of its Affiliates, all as if the
Administrative Lender were not the Administrative Lender hereunder and without
any duty to account therefor to the Lenders.
Section 9.2 LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Lender or any
other Lender and based upon the financial statements delivered to such Lender by
the Borrower, and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Lender or any other Lender and based
upon such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Papers.
- 59 -
<PAGE>
Section 9.3 BENEFITS OF ARTICLE. None of the provisions of this Article
shall inure to the benefit of any Person other than Lenders; consequently, no
Person shall be entitled to rely upon, or to raise as a defense, in any manner
whatsoever, the failure of the Administrative Lender or any Lender to comply
with such provisions.
ARTICLE 10
MISCELLANEOUS
Section 10.1 NOTICES.
(a) All notices and other communications under this Agreement shall be
in writing and shall be deemed to have been given on the date personally
delivered or sent by telecopy (answerback received), or three days after deposit
in the mail, designated as certified mail, return receipt requested,
postage-prepaid, or one day after being entrusted to a reputable commercial
overnight delivery service, or one day after being delivered to the telegraph
office or sent out by telex addressed to the party to which such notice is
directed at its address determined as provided in this Section. All notices and
other communications under this Agreement shall be given to the parties hereto
at the following addresses:
(i) If to the Borrower, at:
La Quinta Inns, Inc.
112 E. Pecan Street, Suite 1200
San Antonio, Texas 78205
Attn: Dewey Chambers, Treasurer
(ii) If to the Administrative Lender, at:
NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Douglas E. Hutt, Senior Vice President
(iii) If to a Lender, at its address shown below its name on the
signature pages hereof, or if applicable, set forth in its
Assignment Agreement.
(b) Any party hereto may change the address to which notices shall be
directed by giving 10 days' written notice of such change to the other parties.
Section 10.2 EXPENSES. The Borrower shall promptly pay:
- 60 -
<PAGE>
(a) all reasonable out-of-pocket expenses of the Administrative Lender
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Papers, the transactions contemplated hereunder and
thereunder, and the making of Advances hereunder, including without limitation
the reasonable fees and disbursements of Special Counsel;
(b) all reasonable out-of-pocket expenses and attorneys' fees of the
Administrative Lender in connection with the administration of the transactions
contemplated in this Agreement and the other Loan Papers and the preparation,
negotiation, execution and delivery of any waiver, amendment or consent by the
Lenders relating to this Agreement or the other Loan Papers; and
(c) all costs, out-of-pocket expenses and attorneys' fees of the
Administrative Lender and each Lender incurred for enforcement, collection,
restructuring, refinancing and "work-out", or otherwise incurred in obtaining
performance under the Loan Papers, and all costs and out-of-pocket expenses of
collection if default is made in the payment of the Notes, which in each case
shall include without limitation fees and expenses of consultants, counsel for
the Administrative Lender and any Lender, and administrative fees for the
Administrative Lender.
Section 10.3 WAIVERS. The rights and remedies of the Lenders under this
Agreement and the other Loan Papers shall be cumulative and not exclusive of any
rights or remedies which they would otherwise have. No failure or delay by the
Administrative Lender or any Lender in exercising any right shall operate as a
waiver of such right. The Lenders expressly reserve the right to require strict
compliance with the terms of this Agreement in connection with any funding of a
request for an Advance. In the event that any Lender decides to fund an Advance
at a time when the Borrower is not in strict compliance with the terms of this
Agreement, such decision by such Lender shall not be deemed to constitute an
undertaking by the Lender to fund any further requests for Advances or preclude
the Lenders from exercising any rights available under the Loan Papers or at law
or equity. Any waiver or indulgence granted by the Lenders shall not constitute
a modification of this Agreement, except to the extent expressly provided in
such waiver or indulgence, or constitute a course of dealing by the Lenders at
variance with the terms of the Agreement such as to require further notice by
the Lenders of the Lenders' intent to require strict adherence to the terms of
the Agreement in the future. Any such actions shall not in any way affect the
ability of the Administrative Lender or the Lenders, in their discretion, to
exercise any rights available to them under this Agreement or under any other
agreement, whether or not the Administrative Lender or any of the Lenders are a
party thereto, relating to the Borrower.
Section 10.4 DETERMINATION BY THE LENDERS CONCLUSIVE AND BINDING. Any
material determination required or expressly permitted to be made by the
Administrative Lender or any Lender under this Agreement shall be made in its
reasonable judgment and in good faith, and shall when made, absent manifest
error, be conclusive and binding on all parties.
- 61 -
<PAGE>
Section 10.5 SET-OFF. In addition to any rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender and any subsequent holder of any
Note, and any assignee or participant in any Note is hereby authorized by the
Borrower at any time or from time to time, without notice to the Borrower or any
other Person, any such notice being hereby expressly waived, to set-off,
appropriate and apply any deposits (general or special (except trust and escrow
accounts), time or demand, including without limitation Debt evidenced by
certificates of deposit, in each case whether matured or unmatured) and any
other Debt at any time held or owing by such Lender or holder to or for the
credit or the account of the Borrower, against and on account of the Obligations
and other liabilities of the Borrower to such Lender or holder, irrespective of
whether or not (a) the Lender or holder shall have made any demand hereunder, or
(b) the Lender or holder shall have declared the principal of and interest on
the Advances and other amounts due hereunder to be due and payable as permitted
by Section 7.2 and although such obligations and liabilities, or any of them,
shall be contingent or unmatured. Any sums obtained by any Lender or by any
assignee, participant or subsequent holder of any Note shall be subject to pro
rata treatment of all Obligations and other liabilities hereunder.
Section 10.6 ASSIGNMENT.
(a) The Borrower may not assign or transfer any of its rights or
obligations hereunder or under the other Loan Papers without the prior written
consent of the Lenders.
(b) No Lender shall be entitled to assign its interest in this
Agreement, its Notes or its Advances, except as hereinafter set forth.
(c) With the prior written consent of the Borrower (which consent may be
withheld for any reason or for no reason), a Lender may at any time sell
participations in all or any part of its Advances, its portion of the
Commitment, and all other interests of such Lender under this Agreement and the
other Loan Papers (collectively, "Participations") to any banks or other
financial institutions ("Participants") provided that such Participation shall
not confer on any Person (other than the parties hereto) any right to vote on,
approve or sign amendments or waivers, or any other independent benefit or any
legal or equitable right, remedy or other claim under this Agreement or any
other Loan Papers, other than the right to vote on, approve, or sign amendments
or waivers or consents with respect to items that would result in (i) any
increase in the commitment of any Participant; or (ii)(A) the extension of the
date of maturity of, or (B) the extension of the due date for any payment of
principal, interest or fees respecting, or (C) the reduction of the amount of
any installment of principal or interest on or the change or reduction of any
mandatory reduction required hereunder, or (D) a reduction of the rate of
interest on, the Advances, or change in Applicable Margin; or (iii) the release
of security for the Obligations having a value in excess of a Material Amount,
including without limitation any guarantee; or (iv) the reduction of any fees
payable hereunder. Notwithstanding the foregoing, the Borrower agrees that the
Participants shall be entitled to the benefits of Article 8 and Section 10.5
hereof as though they were Lenders and the Lenders may provide copies of all
financial information received from the Borrower to such Participants. To the
fullest extent it
- 62 -
<PAGE>
may effectively do so under Applicable Law, the Borrower agrees that any
Participant may exercise any and all rights of banker's lien, set-off and
counterclaim with respect to this Participation as fully as if such Participant
were the holder of the Advances in the amount of its Participation.
Notwithstanding anything in this Section 9.6(c) to the contrary, a Lender may
sell Participations to its affiliates without the prior written consent of the
Borrower.
(d) Each Lender may assign to one or more financial institutions or
funds organized under the laws of the United States, or any state thereof, or
under the laws of any other country that is a member of the Organization for
Economic Cooperation and Development, or a political subdivision of any such
country, which is engaged in making, purchasing or otherwise investing in
commercial loans in the ordinary course of its business (each, an "Assignee")
its rights and obligations under this Agreement and the other Loan Papers;
PROVIDED, HOWEVER, that (i) except as otherwise provided herein, each such
assignment shall be subject to the prior written consent of the Administrative
Lender and the Borrower (which consent shall not be unreasonably withheld), (ii)
each such assignment shall be of a constant, and not a varying, percentage of
the Lender's rights and obligations under this Agreement and the Facility A
Credit Agreement, (iii) the amount of the Commitment and Advances being assigned
pursuant to each such assignment (determined as of the date of the assignment
with respect to such assignment), together with the amount of the commitment and
advances being assigned pursuant to the Facility A Credit Agreement, shall in no
event be less than $10,000,000, (iv) the applicable Lender, Administrative
Lender and applicable Assignee shall execute and deliver to the Administrative
Lender an Assignment and Acceptance Agreement (an "Assignment Agreement") in
substantially the form of EXHIBIT C hereto, together with the Notes subject to
such assignment, (v) the Assignee or the Lender executing the Assignment as the
case may be, shall deliver to the Administrative Lender a processing fee of
$3,500 (for both this Agreement and the Facility A Credit Agreement), and (vi)
the Administrative Lender shall give the Borrower notice of any proposed
assignment no later than 5 days prior to any assignment by any Lender. Upon
such execution, delivery and acceptance from and after the effective date
specified in each Assignment, which effective date shall be at least three
Business Days after the execution thereof, (A) the Assignee thereunder shall be
party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment, have the rights and obligations of a
Lender hereunder and (B) the assigning Lender shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such Assignment,
relinquish such rights and be released from such obligations under this
Agreement. Notwithstanding anything in this clause (d) to the contrary, any
Lender may assign its rights and obligations under this Agreement to an
affiliate of such Lender without the prior written consent of the Administrative
Lender and the Borrower, but otherwise subject to the restrictions set forth
herein.
(e) Notwithstanding anything in clause (d) above to the contrary, any
Lender may assign and pledge all or any portion of its Advances and Notes to any
Federal Reserve Bank as collateral security pursuant to Regulation A of F.R.S.
Board and any Operating Circular issued by such Federal Reserve Bank; provided,
however, that no such assignment under this clause (e) shall release the
assignor Lender from its obligations hereunder.
- 63 -
<PAGE>
(f) Upon its receipt of an Assignment Agreement executed by a Lender and
an Assignee, and any Note subject to such assignment, the Borrower shall, within
three Business Days after its receipt of such Assignment Agreement, at its own
expense, execute and deliver to the Administrative Lender in exchange for the
surrendered Note a new Note to the order of such Assignee in an amount equal to
the portion of the Advances and Commitment assigned to it pursuant to such
Assignment Agreement and a new Note to the order of the assigning Lender in an
amount equal to the portion of the Advances and Commitment retained by it
hereunder. Such new Notes shall be in an aggregate principal amount equal to
the aggregate principal amount of such surrendered Note, shall be dated the
effective date of such Assignment Agreement and shall otherwise be in
substantially the form of EXHIBIT A hereto.
(g) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 10.6, disclose
to the assignee or Participant or proposed assignee or participant, any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower.
(h) Except as specifically set forth in this Section 10.6, nothing in
this Agreement or any other Loan Papers, expressed or implied, is intended to or
shall confer on any Person other than the respective parties hereto and thereto
and their successors and assignees permitted hereunder and thereunder any
benefit or any legal or equitable right, remedy or other claim under this
Agreement or any other Loan Papers.
(i) Notwithstanding anything in this Section 10.6 to the contrary, no
Assignee or Participant shall be entitled to receive any greater payment under
Section 2.15 or Section 8.3 than such assigning or participating Lender would
have been entitled to receive with respect to the interest assigned or
participated to such Assignee or Participant.
Section 10.7 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Section 10.8 SEVERABILITY. Any provision of this Agreement which is for
any reason prohibited or found or held invalid or unenforceable by any court or
governmental agency shall be ineffective to the extent of such prohibition or
invalidity or unenforceability without invalidating the remaining provisions
hereof in such jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 10.9 INTEREST AND CHARGES. It is not the intention of any
parties to this Agreement to make an agreement in violation of the laws of any
applicable jurisdiction relating to usury. Regardless of any provision in any
Loan Papers, no Lender shall ever be entitled to receive, collect or apply, as
interest on the Obligations, any amount in excess of the Maximum Amount. If any
Lender or participant ever receives, collects or applies, as interest, any such
excess, such amount which would be excessive interest shall be deemed a partial
repayment of principal and treated hereunder as such; and if principal is paid
in full, any remaining excess
- 64 -
<PAGE>
shall be paid to the Borrower. In determining whether or not the interest paid
or payable, under any specific contingency, exceeds the Maximum Amount, the
Borrower and the Lenders shall, to the maximum extent permitted under Applicable
Law, (a) characterize any nonprincipal payment as an expense, fee or premium
rather than as interest, (b) exclude voluntary prepayments and the effect
thereof, and (c) amortize, prorate, allocate and spread in equal parts, the
total amount of interest throughout the entire contemplated term of the
Obligations so that the interest rate is uniform throughout the entire term of
the Obligations; provided, however, that if the Obligations are paid and
performed in full prior to the end of the full contemplated term thereof, and if
the interest received for the actual period of existence thereof exceeds the
Maximum Amount, the Lenders shall refund to the Borrower the amount of such
excess or credit the amount of such excess against the total principal amount of
the Obligations owing, and, in such event, the Lenders shall not be subject to
any penalties provided by any laws for contracting for, charging or receiving
interest in excess of the Maximum Amount. This Section shall control every
other provision of all agreements pertaining to the transactions contemplated by
or contained in the Loan Papers.
Section 10.10 CONFIDENTIALITY. Each Lender and the Administrative Lender
agrees (on behalf of itself and each of its affiliates, directors, officers,
employees and representatives) to use reasonable precautions to keep
confidential, in accordance with customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices, any non-public information supplied to it by the Borrower pursuant to
this Agreement which is identified by the Borrower as being confidential at the
time the same is delivered to the Lenders or the Administrative Lender, provided
that nothing herein shall limit the disclosure of any such information (a) to
the extent required by statute, rule, regulation or judicial process, (b) to
counsel for any Lender or the Administrative Lender, (c) to bank examiners,
auditors or accountants of any Lender, (d) to the Administrative Lender or any
other Lender, (e) in connection with any litigation to which any one or more of
Lenders is a party, provided, further, that, unless specifically prohibited by
Applicable Law or court order, each Lender shall, prior to disclosure thereof,
notify the Borrower of any request for disclosure of any such non-public
information (i) by any governmental agency or representative thereof (other than
any such request in connection with an examination of such Lender's financial
condition by such governmental agency) or (ii) pursuant to legal process, or (f)
to any assignee or participant (or prospective assignee or participant) so long
as such assignee or participant (or prospective assignee or participant) first
executes and delivers to the respective Lender an agreement (a "Confidentiality
Agreement") in substantially the form of EXHIBIT D hereto; and provided
finally that in no event shall any Lender or the Administrative Lender by
obligated or required to return any materials furnished by the Borrower.
Section 10.11 HEADINGS. Headings used in this Agreement are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof.
Section 10.12 AMENDMENT AND WAIVER. The provisions of this Agreement may
not be amended, modified or waived except by the written agreement of the
Borrower and the Determining Lenders; provided, however, that no such amendment,
modification or waiver shall
- 65 -
<PAGE>
be made (a) without the consent of all Lenders, if it would (i) increase the
Specified Percentage or commitment of any Lender, or (ii) extend the date of
maturity of, extend the due date for any payment of principal or interest on,
reduce the amount of any installment of principal or interest on, or reduce the
rate of interest on, any Advance or other amount owing under any Loan Papers, or
(iii) release any security for or guaranty of the Obligations (except pursuant
to this Agreement), or (iv) reduce the fees payable hereunder, or (v) revise
this Section 10.12, or (vi) waive the date for payment of any of the
Obligations, or (vii) amend the definition of Determining Lenders; or (b)
without the consent of the Administrative Lender, if it would alter the rights,
duties or obligations of the Administrative Lender. Neither this Agreement nor
any term hereof may be amended orally, nor may any provision hereof be waived
orally but only by an instrument in writing signed by the Administrative Lender
and, in the case of an amendment, by the Borrower.
Section 10.13 EXCEPTION TO COVENANTS. Neither the Borrower nor any
Subsidiary shall be deemed to be permitted to take any action or fail to take
any action which is permitted as an exception to any of the covenants contained
herein or which is within the permissible limits of any of the covenants
contained herein if such action or omission would result in the breach of any
other covenant contained herein.
Section 10.14 TERMINATION OF PARTICIPATIONS IN BOND LETTERS OF CREDIT.
Upon satisfaction of all conditions set forth in Section 3.1 hereof, any
obligation of any Lender to participate in the Bond Letters of Credit shall
automatically terminate without any further action being taken with respect
thereto.
Section 10.15 TERMINATION OF COMMITMENT. The Commitment shall terminate
on December 31, 1995 if the conditions precedent set forth in Sections 3.1 and
3.2 have not been satisfied by such date.
SECTION 10.16 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN PAPERS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF TEXAS; PROVIDED, HOWEVER, THAT PURSUANT TO ARTICLE 5069-15.10(b), TITLE
79, REVISED CIVIL STATUTES OF TEXAS, 1925, AS AMENDED, IT IS AGREED THAT THE
PROVISIONS OF CHAPTER 15, TITLE 79, REVISED CIVIL STATUTES OF TEXAS, 1925, AS
AMENDED, SHALL NOT APPLY TO THE ADVANCES, THIS AGREEMENT AND THE OTHER LOAN
PAPERS. WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BORROWER AGREES THAT
THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE
JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE OTHER
LOAN PAPERS.
SECTION 10.17 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE LENDER AND THE LENDERS HEREBY KNOWINGLY VOLUNTARILY,
IRREVOCABLY AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW,
ALL RIGHT TO TRIAL BY JURY IN
- 66 -
<PAGE>
ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR ANY OF THE OTHER LOAN PAPERS OR THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING
INTO THIS AGREEMENT AND MAKING ANY ADVANCES HEREUNDER.
SECTION 10.18 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH
THE OTHER LOAN PAPERS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
=============================================================================
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
=============================================================================
- 67 -
<PAGE>
IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first
set forth above.
BORROWER: LA QUINTA INNS, INC.
By:_________________________________
Name:___________________________
Title:__________________________
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
By: /s/ Douglas E. Hutt
---------------------------------
Douglas E. Hutt
Senior Vice President
LENDERS: NATIONSBANK OF TEXAS, N.A.,
as a Lender
Specified Percentage:
16.0%
By: /s/ Douglas E. Hutt
---------------------------------
Douglas E. Hutt
Senior Vice President
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Douglas E. Hutt
Senior Vice President
- 68 -
<PAGE>
CITIBANK, N.A.
Specified Percentage:
14.0%
By:_________________________________
Name:___________________________
Title:__________________________
399 Park Avenue
9th Floor, Zone 6
New York, New York 10043
Attn: Heidi McKibben
- 69 -
<PAGE>
THE FROST NATIONAL BANK
Specified Percentage:
8.0%
By:_________________________________
Name:___________________________
Title:__________________________
100 West Houston Street
San Antonio, Texas 78205
Attn: Suzanne Houser
- 70 -
<PAGE>
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
Specified Percentage:
10.0%
By:_________________________________
Name:___________________________
Title:__________________________
1020 N.E. Loop 410
San Antonio, Texas 78209
Attn: Mark Harris
Vice President
- 71 -
<PAGE>
BANK OF AMERICA ILLINOIS
Specified Percentage:
14.0%
By:_________________________________
Name:___________________________
Title:__________________________
333 Clay Street, Suite 4550
Houston, Texas 77002
Attn: W. Thomas Barnett
Vice President
- 72 -
<PAGE>
FIRST INTERSTATE BANK OF TEXAS,
N.A.
Specified Percentage:
14.0%
By:_________________________________
Name:___________________________
Title:__________________________
700 N. St. Mary's Street, Suite 300
San Antonio, Texas 78205
Attn: Charles T. Bridgeman
- 73 -
<PAGE>
UNITED STATES NATIONAL BANK OF
OREGON
Specified Percentage:
8.0%
By:_________________________________
Name:___________________________
Title:__________________________
555 Southwest Oak Street, Suite 400
Portland, Oregon 97204
Attn: Blake R. Howells
Vice President
- 74 -
<PAGE>
WELLS FARGO BANK, N.A.
Specified Percentage:
8.0%
By:_________________________________
Name:___________________________
Title:__________________________
420 Montgomery Street, 9th Floor
San Francisco, California 94104
Attn: Veronica Christian
with a copy to:
3535 Lincoln Plaza
500 North Akard
Dallas, Texas 75201
Attn: Dana D. Cagle
Vice President
- 75 -
<PAGE>
SOCIETE GENERALE, SOUTHWEST
AGENCY
Specified Percentage:
8.0%
By:_________________________________
Name:___________________________
Title:__________________________
1111 Bagby, Suite 2020
Houston, Texas 77002
Attn: Richard A. Gould
Vice President
- 76 -
<PAGE>
EXHIBIT A
PROMISSORY NOTE
Dallas, Texas $_____________ September 12, 1995
LA QUINTA INNS, INC., a Texas corporation (the "Borrower"), for value
received, promises to pay to the order of ____________________ ("Lender"), at
the principal office of ____________________________________, in lawful money
of the United States of America, the principal sum of ______________________
DOLLARS ($__________), or such lesser sum as shall be due and payable from
time to time hereunder, as hereinafter provided. All terms used by not
defined herein shall have the meaning set forth in the Credit Agreement
described below.
The Borrower promises to pay principal of and interest on the unpaid
principal balance of Advances under this Note from time to time outstanding
as set forth in the Credit Agreement.
This Note is issued pursuant to and evidences Advances under an Amended
and Restated Credit Agreement (Facility B), dated as of September 12, 1995,
among the Borrower, NationsBank of Texas, N.A., as Administrative Lender, and
the lenders parties thereto (as amended, restated, supplemented, renewed,
extended or otherwise modified from time to time, "Credit Agreement"), to
which reference is made for a statement of the rights and obligations of the
Lender and duties and obligations of the Borrower in relation thereto; but
neither this reference to the Credit Agreement nor may provision thereof
shall affect or impair the absolute and unconditional obligation of the
Borrower to pay the principal sum of and interest on this Note when due.
The Borrower and all endorsers, sureties and guarantors of this Note
hereby severally waive demand, presentment for payment, protest, notice of
protests, notice of acceleration, notice of intention to accelerate the
maturity of this Note, and all other notices of any kind, diligence in
collecting, the bringing of any suit against any party and any notice of or
defense on account of any extensions, renewals, partial payments or changes
in any manner of or in this Note or in any of its terms, provisions and
covenants, or any releases or substitutions of any security, or any delay,
indulgence or other act of any trustee or any holder hereof, whether before or
after maturity.
THIS NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND
<PAGE>
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
LA QUINTA INNS, INC.
By:
----------------------------------
Title:
----------------------------
-2-
<PAGE>
EXHIBIT B
GUARANTY
This Guaranty, dated as of September 12, 1995 (this "GUARANTY"), is made
by the entities listed on the signature pages hereof (all such entities being
collectively called the "GUARANTORS").
BACKGROUND.
1. La Quinta Inns, Inc., a Texas corporation ("COMPANY"), NationsBank
of Texas, N.A., as Administrative Lender ("ADMINISTRATIVE LENDER") on behalf
of NationsBank of Texas, N.A. and each other lender, and each other lender
(singly, a "LENDER" and collectively, the "LENDERS") have entered into the
Amended and Restated Credit Agreement (FACILITY B), dated as of September 12,
1995 (as hereafter amended or otherwise modified from time to time, the "CREDIT
AGREEMENT"). The capitalized terms not otherwise defined herein have the
meanings specified in the Credit Agreement.
2. Pursuant to the Credit Agreement, Company may, subject to the terms
of the Credit Agreement and the other Loan Papers, request that Lenders make
Advances.
3. It is a condition precedent to the obligation of Lenders to make
such Advances that Guarantors guarantee repayment thereof upon the terms and
conditions set forth herein.
4. In the case of each Guarantor which is a corporation, the Board of
Directors of each such Guarantor, and in the case of each Guarantor which is
a partnership or joint venture, the Board of Directors of each corporation
which is a partner or a joint venture of such Guarantor, have determined that
the execution, delivery, and performance of this Guaranty is necessary and
convenient to the conduct, promotion, and attainment of such Guarantor's
business and that such Guaranty may reasonably be expected to benefit,
directly or indirectly, such Guarantor.
5. Guarantors desire to induce Lender to make such Advances.
AGREEMENT.
Now, therefore, in consideration of the premises and in order to induce
Lenders to make Advances, Guarantors agree as follows:
<PAGE>
1. GUARANTY.
(a) Each Guarantor, jointly and severally, hereby unconditionally
and irrevocably guarantees the punctual payment of, and promises to pay,
when due, whether at stated maturity, by mandatory prepayment, by
acceleration or otherwise, all obligations, indebtedness and liabilities,
and all rearrangements, renewals and extensions of all or any part thereof,
of Company or any other Obligor now or hereafter arising from, by virtue of
or pursuant to the Credit Agreement, the Notes, any other Loan Paper, and
any and all renewals and extensions thereof, or any part thereof, or future
amendments thereto, whether for principal, interest (including, without
limitation, interest, fees and other charges that would accrue or become
owing both prior to and subsequent to and but for the commencement of any
proceeding against or with respect to Company or any other Obligor under
any chapter of the Bankruptcy Code of 1978, 11 U.S.C. Section 101 ET SEQ.
whether or not a claim is allowed for the same in any such proceeding),
premium, fees, commissions, expenses or otherwise (such obligations being
the "OBLIGATION"), and agrees to pay any and all reasonable expenses
(including reasonable counsel fees and expenses) incurred in enforcement
or collection of all or any part thereof, whether such obligations,
indebtedness and liabilities are direct, indirect, fixed, contingent,
joint, several or joint and several, and any rights under this Guaranty.
(b) Anything contained in this Guaranty to the contrary
notwithstanding, the obligations of each Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that
would not render its obligations hereunder subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of Title 11 of the
United States Code or any applicable provisions of comparable state law
(collectively, the "FRAUDULENT TRANSFER LAWS"), in each case after giving
effect to all other liabilities of Guarantor, contingent or otherwise, that
are relevant under the Fraudulent Transfer Laws (specifically excluding,
however, any liabilities of such Guarantor in respect of intercompany
indebtedness to Company, other Affiliates of Company or other Obligors to
the extent that such indebtedness would be discharged in an amount equal to
the amount paid by such Guarantor hereunder) and after giving effect as
assets, subject to PARAGRAPH 4(a) hereof, to the value (as determined under
the applicable provisions of Fraudulent Transfer Laws) of any rights to
subrogation or contribution of such Guarantor pursuant to (i) Applicable
Law or (ii) any agreement providing for an equitable allocation among such
Guarantor and other Obligors of obligations arising under guaranties by
such parties.
2. GUARANTY ABSOLUTE. Each Guarantor guarantees that Obligation will
be paid strictly in accordance with the terms of the Credit Agreement, the
Notes, and the other Loan Papers, regardless of any Applicable Law,
regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of Administrative Lender or any Lender with
respect thereto; PROVIDED, HOWEVER, nothing contained in this Guaranty shall
require any Guarantor to make any payment under this Guaranty in violation of
any Applicable Law, regulation or order now or hereafter in effect. The
obligations and liabilities of each Guarantor
-2-
<PAGE>
hereunder are independent of the obligations of Company under the Credit
Agreement and of the obligations of each other Obligor under each other Loan
Paper and any Applicable Law. The liability of each Guarantor under this
Guaranty shall be absolute and unconditional irrespective of:
(a) the taking or accepting of any other security or guaranty for any
or all of the Obligation;
(b) any increase, reduction or payment in full at any time or from
time to time of any part of the Obligation, including any increase,
reduction or termination of the Commitment;
(c) any lack of validity or enforceability of the Credit Agreement,
the Notes, or any other Loan Paper or other agreement or instrument
relating thereto, including but not limited by the unenforceability of
all or any part of the Obligation by reason of the fact that (i) the
Obligation, and/or the interest paid or payable with respect thereto,
exceeds the amount permitted by Applicable Law, (ii) the act of creating
the Obligation, or any part thereof, is ULTRA VIRES, (iii) the officers
creating same acted in excess of their authority, or (iv) for any other
reason;
(d) any lack of corporate, partnership or other power of Company, any
Obligor or any other Person;
(e) any Debtor Relief Law involving Company, any Guarantor, any
Obligor or any other Person;
(f) any renewal, compromise, extension, acceleration or other change
in the time, manner or place of payment of, or in any other term of, all
or any of the Obligation; any adjustment, indulgence, forbearance, or
compromise that may be granted or given by any Lender or Administrative
Lender to Company, any Guarantor or any other Obligor; or any other
modification, amendment, or waiver of or any consent to departure from
the Credit Agreement, the Notes, or any other Loan Paper or other agreement
or instrument relating thereto without notification of any Guarantor (the
right to such notification being herein specifically waived by each
Guarantor);
(g) any exchange, release, sale, subordination, or non-perfection of
any collateral or Lien thereon or any lack of validity or enforceability or
change in priority, destruction, reduction, or loss or impairment of value
of any collateral or Lien thereon;
(h) any release or amendment or waiver of or consent to departure from
any other guaranty for all or any of the Obligation;
(i) the failure by any Lender or Administrative Lender to make any
demand upon or to bring any legal, equitable, or other action against the
Company or any other
-3-
<PAGE>
Person (including without limitation any Guarantor or any other Obligor),
or the failure or delay by any Lender or Administrative Lender to, or the
manner in which any Lender or Administrative Lender shall, proceed to
exhaust rights against any direct or indirect security for the Obligation;
(j) the existence of any claim, defense, set-off, or other rights
which Company or Guarantor may have at any time against Company, any
Lender, Administrative Lender, any Guarantor or any other Obligor, or any
other Person, whether in connection with this Guaranty, the Loan Papers,
the transactions contemplated thereby, or any other transaction;
(k) any failure of any Lender or Administrative Lender to notify any
Guarantor of any renewal, extension, or assignment of the Obligation or
any part thereof, or the release of any security, or of any other action
taken or refrained from being taken by any Lender or Administrative Lender,
it being understood that Lenders and Administrative Lender shall not be
required to give any Guarantor any notice of any kind under any
circumstances whatsoever with respect to or in connection with the
Obligation;
(l) any payment by Company to any Lender or Administrative Lender is
held to constitute a preference under any Debtor Relief Law or if for any
other reason any Lender or Administrative Lender is required to refund
such payment or pay the amount thereof to another Person; or
(m) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, Company, any Guarantor or any
other Obligor, including without limitation any defense by reason of any
disability or other defense of Company, or the cessation from any cause
whatsoever of the liability of Company, or any claim that Guarantor's
obligations hereunder exceed or are more burdensome than those of Company
or any other Obligor.
This Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Obligation is rescinded or
must otherwise be returned by any Lender or any other Person upon the
insolvency, bankruptcy or reorganization of Company, any Guarantor, any other
Obligor or otherwise, all as though such payment had not been made.
3. WAIVER. To the extent not prohibited by Applicable Law, each
Guarantor hereby waives: (a) promptness, protest, diligence, presentments,
acceptance, performance, demands for performance, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this
Guaranty and notices of the existence, creation or incurrence of new or
additional indebtedness, and any of the events described in SECTION 2 and of
any other occurrence or matter with respect to any of the Obligation, this
Guaranty or any of the other Loan Papers; (b) any requirement that
Administrative Lender or any Lender protect, secure, perfect, or insure any
Lien or security interest or any property subject thereto or exhaust any
right or take any action against Company, any Guarantor, any other Obligor or
any other Person or any collateral
-4-
<PAGE>
or pursue any other remedy in Administrative Lender's or any Lender's power
whatsoever, (c) any right to assert against Administrative Lender or any
Lender as a counterclaim, set-off or cross-claim, any counterclaim, set-off
or claim which it may now or hereafter have against Administrative Lender,
any Lender, Company, any Guarantor or any other Obligor, (d) any right to
seek or enforce any remedy or right that Administrative Lender or any Lender
now has or may hereafter have against Company, any Guarantor, any other
Obligor or any other Person (to the extent permitted by Applicable Law);
(e) any right to participate in any collateral or any right benefiting
Administrative Lender or Lenders in respect of the Obligation; and (f) any
right by which it might be entitled to require suit on an accrued right of
action in respect of any of the Obligation or require suit against Company,
any Guarantor, any other Obligor or any other Person, whether arising
pursuant to Section 34.02 of the Texas Business and Commerce Code, as
amended, Section 17.001 of the Texas Civil Practice and Remedies Code, as
amended, Rule 31 of the Texas Rules of Civil Procedure, as amended, or
otherwise.
4. SUBROGATION AND SUBORDINATION.
(a) Notwithstanding any reference to subrogation contained herein to
the contrary, each Guarantor hereby irrevocably waives any claim or other
rights which it may have or hereafter acquires against Company or any other
Obligor that arise from the existence, payment, performance or enforcement
of such Guarantor's obligations under this Guaranty, including, without
limitation, any right of subrogation, reimbursement, exoneration,
contribution, indemnification, any right to participate in any claim or
remedy of any Lender or Administrative Lender against Company, any Guarantor
or any other Obligor or any collateral which any Lender or Administrative
Lender now has or hereafter acquires, whether or not such claim, remedy or
right arises in equity, or under contract, statutes or common law, including
without limitation, the right to take or receive from Company, any Guarantor
or any other Obligor, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security on account of such claim
or other rights. If any amount shall be paid to any Guarantor in violation
of the preceding sentence and the Obligation shall not have been paid in
full, such amount shall be deemed to have been paid to such Guarantor for the
benefit of, and held in trust for the benefit of, Lenders, and shall
forthwith be paid to Administrative Lender to be credited and applied upon
the Obligation, whether matured or unmatured, in accordance with the terms of
the Credit Agreement. Each Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by
the Credit Agreement and that the waiver set forth in the PARAGRAPH 4(a) is
knowingly made in contemplation of such benefit.
(b) If any Guarantor becomes the holder of any indebtedness payable by
Company, any Guarantor or any other Obligor, such Guarantor hereby
subordinates all indebtedness owing to it from Company, any Guarantor and
each other Obligor to all indebtedness of Company, any Guarantor and each
other Obligor to Lenders and Administrative Lender, and agrees that upon the
occurrence and continuance of a Default or an Event of Default, it shall not
accept any payment on the same until final payment in full of the obligations
of Company under the Credit Agreement, the Notes and all other Loan Papers,
and shall in no circumstance whatsoever
-5-
<PAGE>
attempt to set-off or reduce any obligations hereunder because of such
indebtedness. If any amount shall nevertheless be paid to such Guarantor by
Company, any Guarantor or any other Obligor prior to payment in full of the
Obligation, such amount shall be held in trust for the benefit of Lenders and
Administrative Lender and shall forthwith be paid to Administrative Lender to
be credited and applied to the Obligation, whether matured or unmatured.
5. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby represents
and warrants that all representations and warranties as they apply to such
Guarantor only set forth in ARTICLE 4 of the Credit Agreement (each of which
is hereby incorporated by reference) are true and correct. Furthermore, each
Guarantor represents that it is Solvent.
6. COVENANTS. Each Guarantor hereby expressly assumes, confirms, and
agrees to perform, observe, and be bound by all conditions and covenants set
forth in the Credit Agreement, to the extent applicable to it, as if it were a
signatory thereto. Each Guarantor further covenants and agrees (a) punctually
and properly to perform all of such Guarantor's covenants and duties under
all other Loan Papers; (b) from time to time promptly to furnish
Administrative Lender with any information or writings which Administrative
Lender may request concerning this Guaranty; and (c) promptly to notify
Administrative Lender of may claim, action, or proceeding affecting this
Guaranty.
7. AMENDMENTS, ETC. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by any Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by such
Guarantor, Administrative Lender, and, either all Lenders or Determining
Lenders, as appropriate, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
8. ADDRESSES FOR NOTICES. Unless otherwise provided herein, all
notices, requests, consents and demands shall be in writing and shall be
delivered by hand or overnight courier service, mailed or sent by telecopy to
the respective addresses specified herein, or, as to any party, to such other
addresses as may be designated by it in written notice to all other parties.
All notices, requests, consents and demands hereunder shall be deemed to have
been given on the date of receipt if delivered by hand or overnight courier
service or sent by telecopy, or if mailed, effective on the earlier of actual
receipt or three days after being mailed by certified mail, return receipt
requested, postage prepaid, addressed as aforesaid.
9. NO WAIVER, REMEDIES. No failure on the part of Administrative
Lender or any Lender to exercise, and no delay in exercising, any right
hereunder or under any of the Loan Papers shall operate as a waiver thereof;
nor shall any single or partial exercise of any right hereunder or under any
of the Loan Papers preclude any other or further exercise thereof or the
exercise of any other right. Neither Administrative Lender nor any Lender
shall be required to (a) prosecute collection or seek to enforce or resort to
any remedies against Company, any Guarantor, any other Obligor or any other
Person, (b) join Company, any Guarantor, any other Obligor or any other
Person in any action in which Administrative Lender or any Lender prosecutes
collection or seeks to enforce or resort to any remedies against Company, any
-6-
<PAGE>
Guarantor, any other Obligor or any other Person liable on any of the
Obligation, or (c) seek to enforce or resort to any remedies with respect to
any Liens granted to (or benefiting, directly or indirectly) Administrative
Lender or any Lender by Company, any Guarantor, any other Obligor or any
other Person. Neither Administrative Lender nor any Lender shall have any
obligation to protect, secure or insure any of the Liens or the properties or
interests in properties subject thereto. The remedies herein provided are
cumulative and not exclusive of any remedies provided by Applicable Law.
10. RIGHT OF SET-OFF. Upon the occurrence and during the continuance of
any Event of Default, each Lender and Administrative Lender is hereby
authorized at any time and from time to time, to the fullest extent permitted
by Law, to set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender or Administrative Lender to or for the credit
or the account of any Guarantor against any and all of the obligations of
such Guarantor now or hereafter existing under this Guaranty, irrespective of
whether or not such Lender or Administrative Lender shall have made any
demand under this Guaranty. Each Lender and Administrative Lender agrees
promptly to notify such Guarantor after any such set-off and application,
provided that the failure to give such notice shall not affect the validity
of such set-off and application or provide a defense to such Guarantor's
obligations under this Guaranty. The rights of each Lender and Administrative
Lender under this SECTION 10 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which such Lender
and Administrative Lender may have.
11. LIENS. To the extent not prohibited by Applicable Law, each
Guarantor agrees that Administrative Lender or any Lender, in its discretion,
without notice or demand and without affecting either the liability of such
Guarantor, Company, any other Guarantor or any other Obligor, or any security
interest or other Lien, may foreclose any deed of trust or mortgage or
similar Lien covering interests in real or personal property, and the
interests in real or personal property secured thereby, by nonjudicial sale.
Each Guarantor waives any defense to the recovery by Administrative Lender or
any Lender hereunder against Company, such Guarantor or any collateral of any
deficiency after a nonjudicial sale and each Guarantor expressly waives any
defense or benefits that may be derived from Chapter 34 of the Texas Business
and Commerce Code, Section 51.003 of the Texas Property Code, or any similar
statute in effect in any other jurisdiction. Without limiting the foregoing,
each Guarantor waives, to the extent not prohibited by Applicable Law, any
defense arising out of any such nonjudicial sale even though such sale
operates to impair or extinguish any right of reimbursement or subrogation or
any other right or remedy of such Guarantor against Company, any other
Guarantor or any other Person or any Collateral or any other collateral. Each
Guarantor agrees that such Guarantor is liable, subject to the limitations of
SECTION 1 hereof, for any part of the Obligation remaining unpaid after any
foreclosure.
12. CONTINUING GUARANTY; TRANSFER OF NOTES. This Guaranty is an
irrevocable continuing guaranty of payment and shall (a) remain in full force
and effect until final payment in full (after the Maturity Date) of the
Obligation and all other amounts payable under this
-7-
<PAGE>
Guaranty, (b) be binding upon each Guarantor, its successors and assigns, and
(c) inure to the benefit of and be enforceable by Lender and Administrative
Lender and their successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), to the extent permitted by the Credit
Agreement, each Lender may assign or otherwise transfer its rights under the
Credit Agreement, the Notes or any of the Loan Papers or any interest therein
to any other Person, and such other Person shall thereupon become vested with
all the rights or any interest therein, as appropriate, in respect thereof
granted to such Lender herein or otherwise.
13. INFORMATION. Each Guarantor acknowledges and agrees that it shall
have the sole responsibility for obtaining from Company and each other Obligor
such information concerning Company's and each Obligor's financial condition
or business operations as such Guarantor may require, and that neither
Administrative Lender nor any Lender has any duty at any time to disclose to
Guarantor any information relating to the business operations or financial
conditions of Company or any Obligor.
14. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. WITHOUT EXCLUDING ANY OTHER
JURISDICTION, EACH GUARANTOR AGREES THAT THE STATE AND FEDERAL COURTS OF
TEXAS LOCATED IN DALLAS, TEXAS, SHALL HAVE JURISDICTION OVER PROCEEDINGS IN
CONNECTION HEREWITH. THIS GUARANTY IS PERFORMABLE IN DALLAS COUNTY, TEXAS.
15. WAIVER OF JURY TRIAL. EACH GUARANTOR, ADMINISTRATIVE LENDER, AND
LENDERS HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY WAIVE,
TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO THIS GUARANTY OR ANY
OF THE LOAN PAPERS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION
IS A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THE CREDIT AGREEMENT.
16. RATABLE BENEFIT. This Guaranty is for the ratable benefit of
Lenders and Administrative Lender, each of which shall share any proceeds of
this Guaranty pursuant to the terms of the Credit Agreement.
17. GUARANTOR INSOLVENCY. Should any Guarantor become insolvent, fail
to pay its debts generally as they become due, voluntarily seek, consent to,
or acquiesce in the benefits of any Debtor Relief Law or become a party to or
be made the subject of any proceeding provided for by any Debtor Relief Law
(other than as a creditor or claimant) that could suspend or otherwise
adversely affect the rights of any Lender or Administrative Lender granted
hereunder, then, the obligations of such Guarantor under this Guaranty shall
be, as between such Guarantor and such Lender and Administrative Lender, a
fully-matured, due, and payable obligation of such Guarantor to such Lender
and Administrative Lender (without regard to whether Company or any other
Obligor is then in default under the Credit Agreement or any
-8-
<PAGE>
other Loan Paper or whether any part of the Obligation is then due and owing
by Company or any other Obligor to such Lender or Administrative Lender),
payable in full by such Guarantor to such Lender or Administrative Lender
upon demand, which shall be the estimated amount owing in respect of the
contingent claim created hereunder.
18. ENTIRE AGREEMENT. THIS GUARANTY, TOGETHER WITH THE OTHER LOAN
PAPERS, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES.
------------------------------------------------------------------------------
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
------------------------------------------------------------------------------
-9-
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the
date first above written.
LA QUINTA REALTY CORP.
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
LA QUINTA PLAZA, INC.
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
Address for all Guarantors:
112 East Pecan Street LA QUINTA FINANCIAL CORPORATION
San Antonio, Texas 78205
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
LA QUINTA INVESTMENTS, INC.
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
-10-
<PAGE>
LQI ACQUISITION CORPORATION
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
LA QUINTA MOTOR INNS LIMITED
PARTNERSHIP
By: La Quinta Realty Corp.,
its General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
LA QUINTA ROUGE JOINT VENTURE
By: La Quinta Inns, Inc., its
Managing General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
-11-
<PAGE>
LA QUINTA DENVER - PEORIA STREET, LTD.
By: La Quinta Inns, Inc., its
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
LQM OPERATING PARTNERS, L.P.
By: La Quinta Realty Corp., its
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
LQ-BIG APPLE JOINT VENTURE
By: La Quinta Inns, Inc., its Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
By: La Quinta Investments, Inc., its
Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
-12-
<PAGE>
LQ-LNL LIMITED PARTNERSHIP
By: La Quinta Inns, Inc., its Managing
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
LQ-EAST IRVINE JOINT VENTURE
By: La Quinta Inns, Inc., its Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
By: La Quinta Investments, Inc., its
Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
-13-
<PAGE>
LQ-INVESTMENTS I
By: La Quinta Inns, Inc., its Managing
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
By: La Quinta Investments, Inc., a
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
LQ-INVESTMENTS II
By: La Quinta Inns, Inc., its Managing
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
By: La Quinta Investments, Inc., a
General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
-14-
<PAGE>
LA QUINTA INNS OF LUBBOCK, INC.
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
LA QUINTA INNS OF PUERTO RICO,
INC.
By:
----------------------------------
Name:
--------------------------
Title:
-------------------------
LA QUINTA DEVELOPMENT PARTNERS,
L.P.
By: La Quinta Inns, Inc., its
Sole General Partner
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
-15-
<PAGE>
EXHIBIT C
ASSIGNMENT AND ACCEPTANCE
DATED _____________, 199__
Reference is made to the Amended and Restated Credit Agreement (Facility
B), dated as of September 12, 1995 (the "Credit Agreement") among La Quinta
Inns, Inc., a Texas corporation ("Borrower"), NationsBank of Texas, N.A. as
Administrative Lender ("Administrative Lender"), and the lenders parties
thereto. Terms defined in the Credit Agreement are used herein with the same
meaning.
______________________ ("Assignor") and _____________________
("Assignee") agree as follows:
1. Assignor hereby sells and assigns to Assignee, and Assignee hereby
purchases and assumes from Assignor, a __% interest in and to all of
Assignor's rights and obligations under the Credit Agreement as of the
Effective Date (as defined below), with respect to such percentage interest
in Assignor's Commitment as in effect on the Effective Date, the principal
amount of Advances owing to Assignor on the Effective Date, and the Note held
by Assignor, and Reimbursement Obligations outstanding on the Effective Date,
subject to the terms and conditions of this Assignment and Acceptance.
2. Assignor (a) represents and warrants that (i) as of the date hereof
its Commitment (without giving effect to assignments thereof which have not
yet become effective) is $______ and, as of the date hereof, the outstanding
principal amount of Advances owing to it (without giving effect to
assignments thereof which have not yet become effective) is $____, (ii) it is
the legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to (i)
any statements, warranties, or representations made in or in connection with
the Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency, or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto or (ii) the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under the Credit Agreement or any other instrument or
document furnished pursuant thereto; and (c) attaches the Note referred to in
Paragraph 1 above to exchange such Note for new Notes as follows: a Note
dated ____________, 199__, in the principal amount of $____ payable to the
order of Assignee, and a Note dated ____________, 199__, in the principal
amount of $____ payable to the order of Assignor.
3. Assignee (a) confirms that it has received a copy of the Credit
Agreement and the other Loan Papers, together with copies of the financial
statements referred to in Section 6.1(a) and 6.1(b) of the Credit Agreement
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
<PAGE>
Acceptance; (b) agrees that it will, independently and without reliance upon
the Administrative Lender, Assignor, or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action upon the
Credit Agreement and the other Loan Papers; (c) appoints and authorizes the
Administrative Lender to take such action as agent on its behalf and to
exercise such powers under the Credit Agreement, the other Loan Papers, and
this Assignment and Acceptance as are delegated to the Administrative Lender
by the terms thereof and hereof, together with such powers as are reasonably
incidental thereto and hereto; (d) agrees that it will perform in accordance
with its terms all of the obligations which by the terms of the Credit
Agreement, the other Loan Papers, and this Assignment and Acceptance are
required to be performed by it as a Lender, [and] (e) specifies the addresses
set forth in Schedule I attached hereto as its address for the receipt of
notices and as its initial LIBOR Lender Office, respectively[; and (f)
attaches the forms prescribed by the IRS certifying as to Assignee's status
for purposes of determining exception from United States withholding taxes
with respect to all payments to be made to Assignee under the Credit
Agreement, the other Loan Papers, and this Assignment and Acceptance or such
other documents as are necessary to indicate that all such payments are
subject to such taxes at a rate reduced by an applicable tax treaty].
4. The effective date for this Assignment and Acceptance shall be
____________, 199__ (the "Effective Date").
5. Upon such acceptance as of the Effective Date and upon the
remittance of a $3,500 processing fee to the Administrative Lender, (a)
Assignee shall be a party to the Credit Agreement and, to the extent provided
in this Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and (b) Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.
6. Upon such acceptance from and after the Effective Date, whenever the
Administrative Lender shall receive a payment, or whenever the Administrative
Lender shall make an application of funds, in respect of any aggregate
outstanding principal amount of Advances or in respect of any aggregate
amount of interest accrued on Advances, or in respect of the commitment fee
(other than a payment or an application of funds in respect of any amount due
and owing to any Lender or the Administrative Lender under Sections 2.9,
5.22, 8.3, 8.5, or 10.2 of the Credit Agreement), the Administrative Lender
shall pay over to each of the Lenders an amount equal to (i) such Lender's
Pro Rata Share (as defined below) of such aggregate amount of principal, (ii)
such Lender's Pro Rata Share of such aggregate amount of interest, and (iii)
such Lender's Pro Rata Share of such aggregate amount of the commitment fee.
The "Pro Rata Share" of any aggregate amount means, with respect to such
Lender, the amount equal to the product obtained by multiplying (i) such
aggregate amount and (ii) a fraction, the numerator of which is such Lender
Total Commitment, or after the Advances have been made, the principal amount
of the Advances owing
-2-
<PAGE>
to such Lender and the denominator of which is the sum of the Commitments of
all of the Lenders, or after the Advances have been made, the aggregate
principal amount of the Advances owing to all of the Lenders.
7. In the event that, after the Administrative Lender has paid to any
Lender its Pro Rata Share of any such payment received by the Administrative
Lender or any such application made by the Administrative Lender; such
payment or application is rescinded or must otherwise be returned or must be
paid over by the Administrative Lender for the reason, such Lender shall,
upon notice by the Administrative Lender, forthwith pay back to the
Administrative Lender such Lender's Pro Rata Share of the amount so rescinded
or so returned or paid over.
8. This Assignment and Acceptance shall be governed by and constructed
in accordance with the laws of the state of Texas and the United States of
America. Without excluding any other jurisdiction, Assignee agrees that the
courts of Texas will have jurisdiction over proceedings in connection
herewith.
9. Assignee's Specified Percentage shall be __%.
10. This Assignment and Acceptance may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same
instrument.
[NAME OF ASSIGNOR]
By:
-----------------------------------
-----------------, ----------------
(Print Name) (Print Title)
[NAME OF ASSIGNEE]
By:
-----------------------------------
-----------------, ----------------
(Print Name) (Print Title)
-3-
<PAGE>
Accepted this __ day of ____________, 199__
NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
By:
----------------------------------
-----------------, ---------------
(Print Name) (Print Title)
LA QUINTA INNS, INC.
By:
----------------------------------
-----------------, ---------------
(Print Name) (Print Title)
-4-
<PAGE>
SCHEDULE I
ASSIGNEE'S ADDRESS
1. ADDRESS FOR THE ADVANCES AND RECEIPT OF NOTICES
2. INITIAL LIBOR LENDING OFFICE
-5-
<PAGE>
EXHIBIT D
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and Address
of Prospective Participant
or Assignee]
Re: Amended and Restated Credit Agreement (Facility B), dated as of
September 12, 1995, among La Quinta Inns, Inc. (the "Borrower"),
the Lenders a party thereto, and NationsBank of Texas, N.A., as
Administrative Lender.
Dear ___________:
As a Lender party to the above-referenced Credit Agreement (the "CREDIT
AGREEMENT"); capitalized terms used herein shall have the same meaning given
to them in the Credit Agreement), we have agreed with the Borrower pursuant
to Section 10.10 of the Credit Agreement to use reasonable precautions to
keep confidential, except as otherwise provided therein, all non-public
information identified by the Borrower as being confidential at the time the
same is delivered to us pursuant to the Credit Agreement.
As provided in said Section 10.10, we are permitted to provide you, as a
prospective [PARTICIPANT] [ASSIGNEE], with certain of such non-public
information subject to the execution and delivery by you, prior to receiving
such non-public information, of a Confidentiality Agreement in this form.
Such information will not be made available to you until your execution and
return to us of this Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf of
yourself and each of your affiliates, directors, officers, employees and
representatives) that (A) such information will not be used by you except in
connection with the proposed [PARTICIPATION] [ASSIGNMENT] mentioned above and
(B) you shall use reasonable precautions, in accordance with your customary
procedures for handling confidential information and in accordance with safe
and sound banking practices, to keep such information confidential, provided
that nothing herein shall limit the disclosure of any such information (i) to
the extent required by statute, rule, regulation or judicial process, (ii) to
your counsel or to counsel for any of the Lenders or the Administrative
Lender, (iii) to bank examiners, auditors or accountants of any of the
Lenders, (iv) to the Administrative Lender, or any other Lender, (v) in
connection with any litigation to which you or any one or more of the Lenders
are a party; provided, further, that, unless specifically prohibited by
Applicable Law or court order, you agree, prior to disclosure thereof, to
notify the Borrower of any request for disclosure of any such non-public
information (x) by any governmental agency or representative thereof (other
than any such request in connection
<PAGE>
____________, 199__
Page 2
with an examination of your financial condition by such governmental agency)
or (y) pursuant to legal process; and provided, finally, that in no event
shall you be obligated to return any materials furnished to you pursuant to
this Confidentiality Agreement.
Would you please indicate your agreement to the foregoing by signing at
the place provided below the enclosed copy of this Confidentiality Agreement.
Very truly yours,
-----------------------------------
By:
--------------------------------
Title:
-----------------------------
THE FOREGOING IS AGREED TO AS OF THE
DATE OF THIS LETTER.
-----------------------------------
By:
--------------------------------
Title:
-----------------------------
<PAGE>
EXHIBIT 10(c)
=============================================================================
FIFTH AMENDED AND RESTATED
MASTER COVENANT AGREEMENT
Dated as of
September 12, 1995
between
LA QUINTA INNS, INC.
and
THE BANKS PARTY HERETO
=============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
Section 1. PARTIES...................................................... 1
Section 2. BACKGROUND................................................... 1
Section 3. DEFINITIONS.................................................. 1
Section 4. BUSINESS COVENANTS OF LA QUINTA.............................. 10
4.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING PRACTICES,
CORPORATE EXISTENCE.......................................... 10
4.2 INSPECTION OF PROPERTIES AND BOOKS........................... 11
4.3 MERGER AND SALE OF ASSETS.................................... 11
4.4 NET WORTH.................................................... 12
4.5 CONTINGENT LIABILITIES....................................... 12
4.6 INCURRENCE AND RETENTION OF DEBT............................. 12
4.7 INVESTMENTS.................................................. 12
4.8 NOTICE OF LITIGATION......................................... 12
4.9 TOTAL DEBT RATIO............................................. 13
4.10 CASH FLOW RATIO.............................................. 13
4.11 SENIOR DEBT RATIO............................................ 13
4.12 LIENS........................................................ 13
4.13 ACCOUNTING CHANGES........................................... 13
4.14 AMENDMENT AND MODIFICATION OF SUBORDINATED DEBT DOCUMENTS.... 13
4.15 LEASE-BACKS.................................................. 14
4.16 ENVIRONMENTAL MATTERS........................................ 14
4.17 ERISA COMPLIANCE............................................. 15
4.18 BUSINESS..................................................... 15
4.19 DEBT......................................................... 15
4.20 BANK DEBT.................................................... 16
4.21 TRANSACTIONS WITH AFFILIATES................................. 16
Section 5. INFORMATION AS TO LA QUINTA.................................. 16
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY LA QUINTA.......... 16
5.2 OFFICER'S CERTIFICATE........................................ 18
Section 6. DEFAULT...................................................... 19
Section 7. MISCELLANEOUS................................................ 19
7.1 NOTICE....................................................... 19
7.2 AMENDMENT, WAIVER, CONSENTS AND APPROVALS.................... 20
7.3 NOTICE OF DEFAULT ON BANK DEBT............................... 20
- i -
<PAGE>
7.4 CONFLICTS.................................................... 20
7.5 PAYMENT OF EXPENSES.......................................... 20
7.6 GOVERNING LAW................................................ 20
7.7 BINDING UPON SUCCESSORS...................................... 20
7.8 COUNTERPARTS................................................. 21
7.9 TERMINATION AND EFFECTIVENESS OF THIS AGREEMENT.............. 21
7.10 ADJUSTMENT OF PERCENTAGES.................................... 21
7.11 EXCEPTIONS TO COVENANTS...................................... 21
7.12 CONFIDENTIALITY.............................................. 21
7.13 ASSIGNMENT................................................... 22
7.14 ACCOUNTING TERMS............................................. 22
- ii -
<PAGE>
Exhibit A: Bank Debt
Exhibit B: Existing Investments
Exhibit C: Subsidiaries and Unincorporated Ventures Investments
Exhibit D: Existing Liens
Exhibit E: Guarantees and Contingent Obligations
Exhibit F: Confidentiality Agreement
Exhibit G: Significant Investments
Exhibit H: Investment Policy
- iii -
<PAGE>
FIFTH AMENDED AND RESTATED
LA QUINTA INNS, INC.
MASTER COVENANT AGREEMENT
SECTION 1. PARTIES.
This Fifth Amended and Restated Master Covenant Agreement ("Agreement") is
by and among La Quinta Inns, Inc., a Texas corporation ("La Quinta"),
NationsBank of Texas, N.A., and any other bank from time to time a party hereto
pursuant to Section 7.13 (individually, a "Bank", collectively, the "Banks").
SECTION 2. BACKGROUND.
La Quinta and certain banks are parties to a Fourth Amended and Restated
Master Covenant Agreement, dated as of April 21, 1995 (said Fourth Amended and
Restated Master Covenant Agreement, as amended, the "Prior Master Covenant
Agreement"), the effect of which is to incorporate the definitions, provisions
and covenants set forth therein into certain credit facilities that La Quinta
has with certain Banks.
La Quinta and the Banks desire to enter into this Agreement in order to
amend certain terms of, and restate in its entirety, the Prior Master Covenant
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, La Quinta and the Banks agree as
follows:
SECTION 3. DEFINITIONS.
For purposes hereof, the terms defined in this Section 3 shall have the
following meanings, and the singular shall include the plural, and vice versa,
unless otherwise specifically required by the context (capitalized terms used
herein and not otherwise defined herein shall have the meaning given to such
terms in the Credit Agreement hereinafter defined):
"AFFILIATE" means, as applied to any Person, (i) any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person or (ii) any other Person that owns or controls 10% or more of any
class of equity securities of that Person or any of its Affiliates. For
purposes of this definition, "CONTROL" (including with correlative meanings,
the terms "CONTROLLING," "CONTROLLED BY," and UNDER COMMON CONTROL
with"), as applied to any Persons, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGREEMENT DATE" means the date of this Agreement.
<PAGE>
"AUTHORIZED OFFICER" means any of the following officers of La Quinta:
President, Senior Vice President-Accounting & Administration, Senior Vice
President-Finance, Vice President & General Counsel or Vice President-Treasurer.
"BANK DEBT" means (i) all obligations, indebtedness and liabilities,
direct, contingent or otherwise (including through participations), whether
funded or unfunded, of La Quinta listed on EXHIBIT A attached hereto and made
a part hereof (pursuant to Section 7.13), arising under and otherwise in
connection with the loans and/or credit facilities briefly described in EXHIBIT
A, as modified to indicate adjustments of percentages (and related amounts)
from time to time as provided for in Sections 5.1(A)(2), 5.1(B)(3), 7.10 and
7.13 hereof and (ii) all interest accruing on all or any part thereof and
attorneys' fees incurred in the enforcement or the collection of all or any part
thereof.
"BOND LETTERS OF CREDIT" has the meaning given to them in the Credit
Agreement.
"CAPITAL LEASES" mean all capital leases and subleases, as defined in
the Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 13, dated November 1976, as amended.
"CAPITAL STOCK" means, with respect to any Person, any capital stock,
partnership or joint venture interests of such Person and shares, interests,
participations or other ownership interests (however designated) of any Person
and any rights (other than debt securities convertible into corporate stock),
warrants or options to purchase any of the foregoing.
"COMBINED" includes, with respect to financial statements and the
calculations of the covenants herein and the definitions related thereto, the
combined accounts of La Quinta and its Subsidiaries and Unincorporated Ventures
which are included in La Quinta's Annual Report to Shareholders and in La
Quinta's Form 10-K filed with the S.E.C. (the "COMBINED FINANCIAL
Statements").
"CONSOLIDATED NET INCOME" means, for any period, determined in
accordance with GAAP, on a Combined basis, consolidated net income for such
period.
"CREDIT AGREEMENT" means that certain Amended and Restated Credit
Agreement (Facility A), dated as of September 12, 1995, among La Quinta, the
lenders a party thereto and NationsBank of Texas, N.A., as Administrative
Lender, as amended, supplemented, modified or restated from time to time.
"CURRENT MATURITIES" means, with respect to any Person, the principal
portion payable by such Person on Long Term Debt during the twelve-month period
immediately succeeding the date of determination.
"DEBT" of any Person means, at any date, without duplication, all
obligations, contingent or otherwise, (i) of such Person for borrowed money
(whether or not the recourse of the lender
- 2 -
<PAGE>
is to the whole of the assets of such Person or only to a portion thereof), (ii)
of such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) representing the balance deferred and unpaid of the purchase
price of any property or services (other than accounts payable or other
obligations arising in the ordinary course of business), if and to the extent
any of the foregoing described in clauses (i), (ii) and (iii) would appear as a
liability on the balance sheet of such Person, (iv) of such Person in respect of
bankers' acceptances, letters of credit or other similar instruments (or
reimbursement obligations with respect thereto), (v) of such Person under
Capital Leases, (vi) all liabilities secured by a Lien on any asset of such
Person to the extent of the value of such asset, whether or not such liability
is an obligation of such Person, (vii) all liability of others guaranteed by
such Person (but only to the extent of such guarantees), (viii) to the extent
not otherwise included, obligations of such Person under currency risk-hedging
agreements and Interest Rate Protection Agreements, (ix) the liquidation
preference and any mandatory redemption payment obligations (without
duplication) of such Person's Subsidiaries in respect of preferred stock issued
by any such Subsidiary, (x) in the case of such Person, the liquidation
preference and any mandatory redemption payment obligations (without
duplication) in respect of Disqualified Capital Stock and (xi) in the case of
such Person, unfunded vested benefits under any Plan.
"DEFAULT" means any default with respect to any Bank Debt which would
permit the acceleration of such Bank Debt, whether or not there has been
satisfied any requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further condition, event
or act.
"DISQUALIFIED CAPITAL STOCK" means with respect to any Person any series
or class of Capital Stock of such Person which is or may be required to be
redeemed, in whole or in part, or may be put to such Person or any of its
Subsidiaries, in whole or in part, at the option of the holder thereof, on or
prior to the final maturity of the Senior Subordinated Notes, or is or may be
convertible or exchangeable into or exercisable for such Capital Stock on or
prior to the final maturity of the Senior Subordinated Notes; PROVIDED, that
Capital Stock will not be deemed to be Disqualified Capital Stock if it may only
be so redeemed or put solely in consideration of Qualified Capital Stock.
"DOMESTIC SUBSIDIARY" means any Subsidiary of La Quinta organized under
the laws of any state within the United States.
"EBITDA" means, for any period, determined in accordance with GAAP on a
Combined Basis, the sum of (i) Operating Income, plus (ii) nonrecurring,
non-cash charges which decrease Operating Income, plus (iii) depreciation,
amortization and non-cash fixed asset retirements, minus (iv) nonrecurring
credits which are included in Operating Income.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT" means any default with respect to any Bank Debt which
would permit the acceleration of such Bank Debt, provided there has been
satisfied any requirement in
- 3 -
<PAGE>
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act.
"EXISTING INVESTMENTS" means those Investments described on EXHIBIT B
hereto.
"FOREIGN SUBSIDIARY" means any Subsidiary which is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles, set forth in the
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and/or in statements of the Financial Accounting
Standards Board, which are applicable in the circumstances as of the date in
question and which shall be applied by the independent accounting firm which
certifies La Quinta's Combined Financial Statements and Parent Company financial
statements, and the requisite that such principles be applied on a consistent
basis shall mean that the accounting principles observed in a current period are
comparable in all material respects to those applied in a preceding period,
other than as a result of changes required by modifications to GAAP. Unless
otherwise indicated herein, all accounting terms will be defined according to
GAAP. Notwithstanding the foregoing, all determinations and computations with
respect to financial covenants and ratios provided for in this Agreement shall
be made in accordance with GAAP as in effect on the date hereof.
"INTEREST EXPENSE" of any Person means, for any period, the aggregate
interest expense in respect of Debt (including amortization of original issue
discount and non-cash interest payments or accruals, and dividends on
Disqualified Capital Stock, but excluding amortization of Debt issuance costs)
of such Person and all commissions, discounts, other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and costs
associated with currency and Interest Rate Agreements, all in accordance with
GAAP; PROVIDED, that interest expense attributable to that portion of the Debt
of another Person that is a direct or indirect, contingent or primary, recourse
obligation of such Person subsequent to the Agreement Date shall be added
thereto.
"INTEREST RATE PROTECTION AGREEMENTS" means any obligation of any Person
under interest rate exchange, collar, cap, swap or similar agreements providing
interest rate protection.
"INVESTMENT" means, in one or a series of related transactions, any
direct or indirect acquisition of all or substantially all assets of any Person,
or any direct or indirect purchase or other acquisition of, or beneficial
interest in, capital stock or other securities of any other Person, or any
direct or indirect loan, advance (other than advances to employees for moving
and travel expenses, drawing accounts and similar expenditures in the ordinary
course of business) or capital contribution or transfer of property, assets or
value to, or investment in, any other Person, including, without limitation the
incurrence or sufferance of Debt or the purchase of accounts receivable by any
other Person that are not current assets or do not arise in the ordinary course
of business.
- 4 -
<PAGE>
"INVESTMENTS" means La Quinta Investments, Inc., a Delaware corporation
and wholly-owned Subsidiary of La Quinta.
"INVESTMENT POLICY" means that certain Amended and Restated La Quinta
Inns, Inc. Statement of Investment Policy as of October 1989 in effect on the
Agreement Date as set forth as EXHIBIT H hereto.
"LIEN" means, with respect to any property, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"LONG TERM DEBT" means any obligation which is due one year or more from
the date of creation thereof which under GAAP is shown as a liability, plus
(without duplication) amounts equal to the aggregate net rentals (after making
allowances for any interest, taxes or other expenses included therein) payable
more than one year from the date of creation thereof under Capital Leases.
"MAINTENANCE CAPITAL EXPENDITURES" means an amount equal to the product
of room revenues (as disclosed in La Quinta's Form 10-K and 10-Q) of La Quinta,
its Subsidiaries and Unincorporated Ventures multiplied by 5%, calculated for
the four consecutive fiscal quarters immediately preceding the date of such
determination.
"MATERIAL ADVERSE EFFECT" has the meaning given to such term in the
Credit Agreement.
"MATERIAL AMOUNT" has the meaning given to such term in the Credit
Agreement.
"NET CASH PROCEEDS" means the aggregate amount of cash received by La
Quinta in respect of the sale of Capital Stock of La Quinta, less the sum of all
fees, commissions and other expenses incurred in connection with such sale.
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, as determined in accordance with
GAAP.
"NET INTEREST EXPENSE" means, with respect to any Person for any period,
the sum of (i) Interest Expense of such Persons for such period minus (ii)
interest income of such Person for such period as reflected on an income
statement of such Person prepared in accordance with GAAP.
"NET WORTH" means an amount equal to the sum of the Capital Stock and
additional paid-in-capital plus retained earnings (or minus accumulated deficit)
of La Quinta and its Subsidiaries and less (i) treasury stock and (ii) amounts
attributable to the extent included, (1) to any write-up in book value of assets
resulting from a revaluation thereof subsequent to June 30, 1995, and (2) to
Disqualified Capital Stock, all in accordance with GAAP.
- 5 -
<PAGE>
"OFFICER'S CERTIFICATE" means a certificate signed in the name of La
Quinta by an Authorized Officer.
"OPERATING INCOME" means, with respect to any Person for any period, the
operating income (loss) of such Person, as determined in accordance with GAAP.
"OPERATING LEASE" means any operating lease, as defined in the Financial
Accounting Standard Board Statement of Financial Accounting Standards No. 13,
dated November, 1976 or otherwise in accordance with GAAP.
"PARENT COMPANY" means, with respect to financial statements and the
definitions related thereto, the uncombined, consolidated financial statements
of La Quinta and its Subsidiaries, including equity method investments, as
defined by GAAP, in Unincorporated Ventures, and designated "La Quinta Inns,
Inc. (Parent Company and Wholly-Owned Subsidiaries)" on La Quinta's audit
report.
"PARTNERS' CAPITAL" means the equity in the net assets of Unincorporated
Ventures of all the partners or venturers (other than La Quinta or a Subsidiary)
of such Unincorporated Ventures, or minority interest holders, as determined in
accordance with GAAP.
"PERMITTED INVESTMENT" means Investments in (i) wholly-owned Domestic
Subsidiaries (a) that are subject to the provisions of this Agreement, (b) that
concurrently therewith unconditionally guarantee the performance of La Quinta's
obligations under the Bank Debt and (c) that concurrently deliver to the Banks
(1) an opinion acceptable to the Banks with respect to the validity and
enforceability of such guarantee and (2) such other documents, such as corporate
resolutions, certificates of incumbency, by-laws and articles of incorporation,
as the Banks shall reasonably require, (ii) Investments in any Person other than
a wholly-owned Subsidiary in any one or a series of related transactions with a
fair market value not in excess of $25,000,000 in the aggregate for all
Investments in all such Persons, (iii) Investments for the purpose of satisfying
La Quinta's or any Subsidiary's guarantee obligations with respect to the Debt
of any Person in which La Quinta or any Subsidiary owned any interest and which
obligation was in existence as of the Agreement Date; (iv) Investments in
Subsidiaries and Unincorporated Ventures which do not guarantee the performance
of La Quinta's obligations under the Credit Agreement made in the ordinary
course of business, consistent with past practices for the purpose of providing
for the day to day operating requirements of such Subsidiary or Unincorporated
Venture, PROVIDED, that such Investments shall (a) not be used for acquisition
or conversion of any inns and (b) be evidenced by a note or other evidence of
indebtedness and (c) not at any time exceed $10,000,000 in aggregate principal
amount, (v) Investments permitted by Sections II.B., II.C. (provided that,
notwithstanding Section II.C.3. of the Investment Policy, Banks shall be
required to have at least $150,000,000 in capital and surplus), II.E. and II.H.
of the Investment Policy, (vi) loans or advances to employees as compensation
for services in the ordinary course of business not in excess of $2,000,000
aggregate principal amount, (vii) Investments in the ordinary course of
business, consistent with past practice, in La Quinta Inns' National Advertising
Fund, (viii) Existing Investments, (ix) Investments in Capital Stock
- 6 -
<PAGE>
of Subsidiaries and Unincorporated Ventures listed on EXHIBIT C hereto for the
purpose of acquiring no less than 100% of the capital stock or partnership
interests, as appropriate, of such Subsidiaries and Unincorporated Ventures, (x)
Investments in notes payable to La Quinta as a result of the sale of inns in an
aggregate principal amount not in excess of $10,000,000, provided that La Quinta
shall obtain and continue to hold a perfected first Lien (subject to Permitted
Liens) in such inns, and (xi) Investments in wholly-owned Foreign Subsidiaries
(a) that are subject to the provisions of this Agreement and (b) not to exceed
in aggregate amount $1,000,000 for all Investments in all Foreign Subsidiaries.
For purposes of the calculation of the amount of any Investments permitted
hereunder, Investments will be calculated at all times at the amount of the
original Investment with no reduction for write-offs or write-downs. No
Investment which is a Permitted Investment other than pursuant to clause (ii) of
the definition of "Permitted Investments" shall reduce the amount of Investments
permitted pursuant to such clause (ii).
"PERMITTED LIENS" means, as applied to any Person:
(i) any Lien in favor of any Bank or a trustee on its behalf to secure
the Bank Debt;
(ii) (a) Liens on real estate for real estate taxes not yet delinquent,
(b) Liens created by lease agreements to secure the payments of rental amounts
and other sums not yet due thereunder, (c) Liens on leasehold interests created
by the lessor in favor of any mortgagee of the leased premises, and (d) Liens
for taxes, assessments, governmental charges, levies or claims that are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on such Person's books, but only so
long as no foreclosure, restraint, sale or similar proceedings have been
commenced with respect thereto;
(iii) Liens of carriers, warehousemen, mechanics, laborers and materialmen
and other similar Liens incurred in the ordinary course of business for sums not
yet due or being contested in good faith, if such reserve or appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(iv) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;
(v) Easements, rights-of-way, restrictions and other similar
encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person;
(vi) Liens created to secure the purchase price of fixed assets acquired
by such Person, which is incurred solely for the purpose of financing the
acquisition of such assets and incurred at the time of acquisition, so long as
(a) each such Lien shall at all times be confined solely to the asset or assets
so acquired (and proceeds thereof), (b) the Liens were placed on such assets at
the time such assets were acquired and (c) the aggregate principal amount of
Debt secured by such Liens does not exceed, together with Debt secured by Liens
permitted pursuant to
- 7 -
<PAGE>
clause (vii) below, $25,000,000, and refinancings thereof so long as any such
Lien remains solely on the asset or assets acquired and the amount of Debt
related thereto is not increased;
(vii) Liens existing on any property acquired by such Person prior to the
acquisition of such property by such Person, provided (a) such Lien shall at all
times be confined solely to the property so acquired (and proceeds thereof) and
(b) the aggregate principal amount of Debt secured by such Liens does not
exceed, together with the Liens permitted pursuant to clause (vi) above,
$25,000,000 and refinancings thereof so long as any such Lien remains solely on
the asset or assets acquired and the amount of the Debt related thereto is not
increased;
(viii) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (a) such Person shall have established adequate reserves for such
judgments or awards, (b) such judgments or awards shall be fully insured and the
insurer shall not have denied coverage, or (c) such judgments or awards shall
have been bonded to the satisfaction of the Banks;
(ix) Any Liens existing on the Agreement Date which are described on
EXHIBIT D hereto, and Liens resulting from the refinancing of the related
Debt, provided that the Debt secured thereby shall not be increased and the
Liens shall not cover additional assets of the Borrower;
(x) any obligations or duties, affecting any property, to any
municipality or public authority with respect to any franchise, grant, license
or permit which do not materially impair the use of any material property for
the purposes for which such property is held by such Person;
(xi) zoning laws or ordinances and municipal regulations which do not
materially impair the use of any material property for the purposes for which
such property is held by such Person;
(xii) Liens, minor irregularities in or deficiencies of title on any
property which do not materially impair the use of any material property for the
purposes for which such property is held by such Person; and
(xiii)Liens otherwise permitted or contemplated by the Loan Papers.
"PERSON" means and includes an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, and a
government or any department, tribunal, agency or political subdivision thereof.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
to all or any of the Pension Benefit Guaranty Corporation's functions under
ERISA.
- 8 -
<PAGE>
"PLAN" means any plan subject to Title IV of ERISA and maintained by La
Quinta or any Subsidiary, or any such plan to which La Quinta or any Subsidiary
or any Unincorporated Venture is required to contribute on behalf of all or any
of its employees; PROVIDED, HOWEVER, "Plan" shall not include those
agreements with former employees described on Schedule 7 of the Credit
Agreement, the obligations pursuant to which do not exceed $450,000 in aggregate
amount.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of La Quinta that is
not Disqualified Capital Stock.
"REPORTABLE EVENT" has the meaning specified in Title IV of ERISA.
"S.E.C." means the United States Securities and Exchange Commission.
"SENIOR DEBT" means Total Debt of La Quinta, its Subsidiaries and
Unincorporated Ventures, as appropriate, other than Subordinated Debt.
"SENIOR SUBORDINATED NOTE" has the meaning given to such term in the
Credit Agreement.
"SIGNIFICANT INVESTMENTS" means those investments of La Quinta in the
joint ventures or partnerships set forth on EXHIBIT G hereto.
"SUBORDINATED DEBT" means any debt, obligation or liability (whether
primary, contingent or otherwise) of La Quinta, a Subsidiary or an
Unincorporated Venture which by its terms is subordinate in right of payment to
the Bank Debt, provided that the Banks approve the terms thereof prior to or at
the time of the issuance thereof.
"SUBSIDIARY" with respect to any Person, means (a) a corporation at
least a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person or (b) a partnership, joint venture or
similar entity in which 100% of the ownership, capital, interest or profits is
at the time, directly or indirectly, owned by such Person, by such Person and
one or more Subsidiaries of such Person or by one or more Subsidiaries of such
Person.
"SUBSIDIARY GUARANTY" shall have the meaning given to such term in the
Credit Agreement.
"TOTAL DEBT" means, with respect to any Person, the sum, without
duplication, of (a) all Debt of such Person minus (b)(i) the aggregate face
amount of Bond Letters of Credit outstanding and (ii) all Debt of such Person of
the type described in (1) clauses (vi) and (vii) of the definition of "Debt"
herein which are set forth in EXHIBIT E hereto and (2) clauses (viii) and (ix)
of the definition of "Debt" herein.
- 9 -
<PAGE>
"TRIBUNAL" means any state, commonwealth, federal, foreign territorial,
or other court or governmental department, commission, board, bureau, agency or
instrumentality.
"UNINCORPORATED VENTURE" means those Persons designated as
"Unincorporated Ventures" on EXHIBIT C hereto.
SECTION 4. BUSINESS COVENANTS OF LA QUINTA.
4.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING PRACTICES, CORPORATE
EXISTENCE. La Quinta covenants and agrees to, and will cause each Subsidiary
and Unincorporated Venture to:
(A) Maintain its material property in good condition and make all
necessary renewals, replacements, additions, betterments and improvements
thereto, consistent with sound business practice and as is customary in the case
of corporations or other entities of established reputation engaged in the same
or a similar business and similarly situated;
(B) Maintain, with financially sound and reputable insurers, or through
its own program of self-insurance, insurance with respect to its material
properties and business against such casualties and contingencies, of such
types, and in such amounts as is customary in the case of corporations or other
entities of established reputation engaged in the same or a similar business and
similarly situated;
(C) Keep books of record and accounts in which entries will be made of
all of its business transactions, and will reflect in it financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP;
(D) Do or cause to be done all things necessary to preserve and keep in
full force and effect its material rights;
(E) Do or cause to be done all things necessary to preserve and keep in
full force and effect its existence (except as may be specifically permitted by
this Agreement); and
(F) Cause to be paid and discharged (i) all lawful taxes assessments and
governmental charges imposed from the income or profits of La Quinta, its
Subsidiaries and Unincorporated Ventures or upon any property belonging to La
Quinta, any Subsidiary or any Unincorporated Venture and (ii) all lawful claims,
whether for labor, materials, supplies, services or anything else, which have
become due and payable and which by law have or may become a Lien upon the
property of La Quinta or any of its Subsidiaries; or Unincorporated Ventures;
PROVIDED, HOWEVER, that La Quinta, its Subsidiaries and Unincorporated
Ventures shall not be required to cause to be paid or discharged any such tax
assessment, charge or claim so long as the amount, applicability or validity
thereof shall be contested in good faith by appropriate proceedings, and
adequate book reserves shall have been established to the extent required by
GAAP with respect thereto.
- 10 -
<PAGE>
4.2 INSPECTION OF PROPERTIES AND BOOKS. La Quinta covenants and
agrees that it will permit, and will cause each Subsidiary and Unincorporated
Venture to permit, any Bank, upon (i) reasonable request, if such request is
prior to the occurrence of a Default or an Event of Default or (ii) request, if
such request is after the occurrence of a Default or an Event of Default, to any
Authorized Officer, to visit and inspect any of the properties of, to examine
the books of account and records of La Quinta, any Subsidiary or Unincorporated
Venture and to take extracts therefrom and to discuss the affairs, finances or
accounts of La Quinta, any Subsidiary or Unincorporated Venture, and to be
advised as to the same by the officers of La Quinta, at all such times during
normal business hours, in such detail and through such agents and
representatives as such Bank may reasonably desire.
4.3 MERGER AND SALE OF ASSETS.
(A) La Quinta covenants and agrees that it will not, and will cause each
Subsidiary and Unincorporated Venture to not, directly or indirectly sell,
transfer or otherwise dispose of any of its assets (whether now owned or
hereafter acquired, and including any interest in a joint venture or
partnership) unless immediately prior to, and after giving effect to, such sale,
transfer or other disposition, La Quinta, its Subsidiaries and Unincorporated
Ventures are and will be in compliance with all covenants hereunder and there
shall otherwise be no Default or Event of Default hereunder; and
(B) La Quinta covenants and agrees that it will not, and will cause each
Subsidiary and Unincorporated Venture to not, merge into or consolidate with any
other Person; provided, however, if after giving effect to any such merger or
consolidation, (i) the business of La Quinta or any Subsidiary or Unincorporated
Venture, as appropriate, will not be materially changed and (ii) La Quinta or
any Subsidiary or Unincorporated Venture, as appropriate, will not be in default
in respect of any of the covenants contained in any material agreement,
including, without limitation, this Agreement, to which La Quinta or any
Subsidiary or Unincorporated Venture is a party or by which its property may be
bound,
(1) Any corporation, partnership or joint venture may merge or
consolidate with La Quinta, provided that La Quinta shall be the
continuing and surviving corporation,
(2) Any Subsidiary may merge with or consolidate with any
corporation, partnership or joint venture, provided that, unless such
merger or consolidation shall be with La Quinta, such Subsidiary shall be
the continuing and surviving corporation, and
(3) Any Unincorporated Venture may merge with or consolidate with
any corporation, partnership or joint venture, provided that, unless such
merger or consolidation shall be with La Quinta or a Subsidiary, such
Unincorporated Venture shall be the continuing and surviving person.
- 11 -
<PAGE>
4.4 NET WORTH. La Quinta covenants and agrees that it will not allow
its Net Worth at any time to be less than the sum of (i) $285,000,000, plus (ii)
50% of Consolidated Net Income (excluding Consolidated Net Income for any fiscal
quarter in which Consolidated Income was a negative number) earned on or after
the Agreement Date, plus (iii) 75% of the Net Cash Proceeds of any equity issues
of La Quinta's Capital Stock after the Agreement Date.
4.5 CONTINGENT LIABILITIES. La Quinta covenants and agrees that it
will not, and will cause each Subsidiary and Unincorporated Venture to not,
guarantee, endorse, contingently agree to purchase, or otherwise become liable,
directly or indirectly, upon the obligation of or in connection with the
earnings, the assets, the stock, or the dividends of any other Person (other
than La Quinta or any Subsidiary), including obligations of La Quinta, each
Subsidiary and Unincorporated Venture arising solely by virtue of any of them
being a general partner or venturer of any Unincorporated Venture, except (i)
the obligations in respect of the written agreements in existence on the
Agreement Date in respect of any Significant Investments, (ii) the guarantees
and other contingent obligations set forth on EXHIBIT E hereto, (iii)
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection, (iv) guarantees of loans to any employee; PROVIDED,
THAT any such guaranty of an employee loan shall not exceed the amount of
$100,000 per employee, and the amount of such guaranties of employee loans,
together with the amount of Investments permitted pursuant to clause (vi) of the
definition of "Permitted Investments," shall not exceed, in the aggregate, more
than $2,000,000, and (v) guarantees and contingent obligations incurred after
the date of this Agreement not to exceed $20,000,000 in aggregate principal
amount.
4.6 INCURRENCE AND RETENTION OF DEBT. La Quinta covenants and agrees
that it will not, and will cause each Subsidiary and Unincorporated Venture to
not, incur, create, assume, or suffer to exist any Debt (other than Debt
existing on the Agreement Date) unless, immediately prior to, and after the
incurrence of, such Debt, La Quinta, its Subsidiaries and Unincorporated
Ventures are and will be in compliance with all covenants hereunder and there
shall otherwise be no Default or Event of Default hereunder.
4.7 INVESTMENTS. La Quinta will not, and will cause each Subsidiary
and Unincorporated Venture to not, make or permit to remain any Investment other
than a Permitted Investment.
4.8 NOTICE OF LITIGATION. La Quinta covenants and agrees that it
will, and will cause each Subsidiary and Unincorporated Venture to, promptly
give notice in writing to its Banks (i) of any litigation to which La Quinta,
any Subsidiary or Unincorporated Venture becomes a party, if (A) the amount in
controversy exceeds $500,000 and (B) La Quinta's insurance carrier does not
acknowledge coverage with respect to such litigation, and (ii) of all
proceedings before any governmental or regulatory agencies (A) affecting or
potentially affecting the business or property of La Quinta, any Subsidiary or
Unincorporated Venture in an amount in excess of $500,000 or (B) materially
affecting the ability of La Quinta, any Subsidiary or Unincorporated Venture to
perform their respective covenants and obligations hereunder or under any Bank
Debt.
- 12 -
<PAGE>
4.9 TOTAL DEBT RATIO. La Quinta covenants and agrees that it will not
allow the ratio of (i) Total Debt to (ii) EBITDA, in each case for the four
consecutive fiscal quarters immediately preceding the date of determination, to
be greater than 4.00 to 1 at the end of any fiscal quarter. For purposes of
this Section 4.9, with respect to assets not owned at all times during the four
consecutive quarters immediately preceding the date of determination of EBITDA,
there shall be (i) included in EBITDA (without duplication) the EBITDA of any
assets acquired during any such four consecutive fiscal quarters immediately
preceding the date of determination and (ii) excluded from EBITDA the EBITDA of
any asset disposed of during any such four consecutive fiscal quarters
immediately preceding the date of determination.
4.10 CASH FLOW RATIO. La Quinta covenants and agrees that it will not
allow the ratio of (i)(a) EBITDA, plus (b) lease expense pursuant to Operating
Leases, minus (c) Maintenance Capital Expenditures to (ii)(a) Net Interest, plus
(b) lease expense pursuant to Operating Leases, plus (c) Current Maturities, in
each case other than Current Maturities (which, with respect to Current
Maturities, shall be for the four consecutive fiscal quarters immediately
succeeding the date of determination) for the four consecutive fiscal quarters
immediately preceding the date of determination, to be less than 1.50 to 1 at
the end of any fiscal quarter.
4.11 SENIOR DEBT RATIO. La Quinta covenants and agrees that it will
not allow the ratio of (i) Senior Debt to (ii) EBITDA, in each case for the four
consecutive fiscal quarters immediately preceding the date of determination, to
be greater than 3.0 to 1 at the end of any fiscal quarter. For purposes of this
Section 4.11, with respect to assets not owned at all times during the four
consecutive quarters immediately preceding the date of determination of EBITDA,
there shall be (i) included in EBITDA (without duplication) the EBITDA of any
assets acquired during any such four consecutive fiscal quarters immediately
preceding the date of determination and (ii) excluded from EBITDA the EBITDA of
any asset disposed of during any such four consecutive fiscal quarters
immediately preceding the date of determination.
4.12 LIENS. La Quinta covenants and agrees that it will not create,
assume or suffer to exist, or permit any Subsidiary or Unincorporated Venture to
create, assume or suffer to exist, any Lien on any asset now owned or hereafter
acquired by it except Permitted Liens.
4.13 ACCOUNTING CHANGES. La Quinta covenants and agrees that it will
not, and will not permit an of its Subsidiaries or Unincorporated Ventures to,
make any change in its accounting treatment or financial reporting practices,
except as permitted or required by GAAP in effect from time to time. La Quinta
will not change its fiscal year or the calculation of its fiscal quarter ends.
4.14 AMENDMENT AND MODIFICATION OF SUBORDINATED DEBT DOCUMENTS. La
Quinta covenants and agrees that it will not, and it will not permit any
Subsidiary or Unincorporated Venture to, directly or indirectly, amend, modify,
supplement, waive compliance with, or assent to noncompliance with, any term,
provision or condition of any of the documents governing or evidencing the
Subordinated Debt, which (i) the Banks deem material (including, without
limitation, relating to events of default, acceleration rights, interest rates,
tenor, maturity date,
- 13 -
<PAGE>
subordination, covenants, prohibition against amending any documents related to
the Bank Debt and definitions with respect thereto (including, without
limitation, the definition of "Senior Debt")) or (ii) places any further
restrictions on La Quinta, its Subsidiaries or Unincorporated Ventures or
increases the obligations of La Quinta, its Subsidiaries or Unincorporated
Ventures thereunder or confers on the holders thereof any additional rights.
4.15 LEASE-BACKS. La Quinta covenants and agrees that it will not, and
will not permit any Subsidiary or Unincorporated Venture to, enter into any
arrangements, directly or indirectly, with any Person, whereby La Quinta, any
Subsidiary or Unincorporated Venture shall sell or transfer any property,
whether now owned or hereafter acquired, used or useful in its business, and
thereafter rent or lease the property sold or transferred in an aggregate amount
(determined at the greater of fair market value or net book value) in excess of
$20,000,000 while this Agreement is in effect.
4.16 ENVIRONMENTAL MATTERS.
(a) La Quinta covenants and agrees that it will not, and will not permit
any of its Subsidiaries or Unincorporated Ventures to, use, generate,
manufacture, produce, store, release, discharge or dispose of on, under or about
any real property owned or leased by La Quinta or any of its Subsidiaries or
Unincorporated Ventures (such owned or leased real property, the "PROPERTY"),
or transport to or from the Property, any Hazardous Substance (as defined
below), or (to the extent within La Quinta's or such Subsidiary's or
Unincorporated Venture's control) permit any other Person to do so, where such
could reasonably be expected to have a Material Adverse Effect.
(b) La Quinta shall keep and maintain and shall cause each Subsidiary
and Unincorporated Venture to keep and maintain, the Property in compliance with
any Environmental Law (as defined below) where the failure to do so could
reasonably be expected to have a Material Adverse Effect.
(c) In the event that any investigation, site monitoring, containment,
cleanup, removal, restoration or other remedial work of any kind or nature (the
"REMEDIAL WORK") with respect to the Property is required to be performed by
La Quinta or any of its Subsidiaries or Unincorporated Ventures under any
applicable local, state or federal law or regulation, any judicial order, or by
any governmental entity because of, or in connection with, the current or future
presence, suspected presence, release or suspected release of a Hazardous
Substance in or into the air, soil, groundwater or surface water at, on, under
or within the Property (or any portion thereof), La Quinta or such Subsidiary or
Unincorporated Venture shall within thirty (30) days after written demand for
performance thereof by the Banks (or such shorter period of time as may be
required under any applicable law, regulation, order or agreement), commence and
thereafter diligently prosecute to completion, all such Remedial Work.
(d) La Quinta will defend, indemnify and hold harmless the Banks, and
their respective employees, agents, officers and directors, from and against any
claims, demands,
- 14 -
<PAGE>
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature known or unknown, contingent or otherwise, arising out
of, or in any way relating to the violation of, noncompliance with or liability
under any Environmental Law applicable to the operations of La Quinta or any
Subsidiary or Unincorporated Venture or the Property, or any orders,
requirements or demands of Tribunal related thereto, including, without
limitation, attorneys' and consultants' fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the extent that
any of the foregoing arise out of the gross negligence or willful misconduct of
the party seeking indemnification therefor. This indemnity shall continue in
full force and effect regardless of the termination of this Agreement.
(e) As used herein, (i) "ENVIRONMENTAL LAW" means any federal, state
or local law, statute, ordinance, or regulation now or hereafter in effect
pertaining to health, industrial hygiene, or the environmental conditions on,
under or about the Property, and (ii) the term "HAZARDOUS SUBSTANCE" means
those substances included within the definitions of "HAZARDOUS SUBSTANCES",
"HAZARDOUS MATERIALS", "TOXIC SUBSTANCES", or "SOLID WASTE" under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Sections 9601 ET SEQ., the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. Sections 6901 ET SEQ. and the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 ET SEQ., and in the regulations
promulgated pursuant to said laws, and such other substances, materials and
wastes which are or become regulated under applicable local, state or federal
law, or which are classified as hazardous or toxic under federal, state, or
local laws or regulations.
4.17 ERISA COMPLIANCE. La Quinta covenants and agrees that it shall,
and shall cause each Subsidiary and Unincorporated Venture to (i) at all times,
make prompt payment of all contributions required under all Plans and required
to meet the minimum funding standard set forth in ERISA with respect to its
Plans, (ii) after the discovery by an Authorized Officer, notify Banks
immediately of any fact, including, but not limited to, any Reportable Event
arising in connection with any of its Plans, which might constitute grounds for
termination thereof by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such Plan, together with a
statement, if requested by any Bank, as to the reason therefor and the action,
if any, proposed to be taken with respect thereto, and (iii) not permit any Plan
to be subject to any involuntary termination proceedings.
4.18 BUSINESS. La Quinta covenants and agrees that it will not, and
will not permit any Subsidiary or Unincorporated Venture to, engage in, directly
or through other Persons, any business other than the businesses now carried on
and other businesses directly related thereto.
4.19 DEBT. La Quinta covenants and agrees that it will not, and will
cause each Subsidiary and Unincorporated Venture to not, (i) default, beyond any
notice, grace or cure period, in any payment equal to or exceeding the aggregate
amount of $1,000,000 of principal of or interest on any Debt with respect to
which recourse may be made against La Quinta or any Subsidiary or Unincorporated
Venture beyond any period of grace provided with respect thereto, or (ii)
default, beyond any notice, grace or cure period, in the performance of any
other agreement, term, covenant or condition contained in any agreement or
instrument under or by
- 15 -
<PAGE>
which any such Debt, the unpaid principal amount of which then equals or exceeds
$1,000,000 is created, evidenced or secured if the effect of such default is to
cause such Debt to become due before its stated maturity.
4.20 BANK DEBT. La Quinta covenants and agrees that it will not, and
will cause each Subsidiary to not, (i) default in any payment of principal of or
interest on any Bank Debt beyond any grace period with respect thereto, or (ii)
default, beyond any notice, grace or cure period, in the performance of any
other covenant or agreement contained in any Bank Debt or made by La Quinta
under or in connection with any Bank Debt, if the effect of such default is to
cause such Bank Debt to become due before its stated maturity.
4.21 TRANSACTIONS WITH AFFILIATES. La Quinta covenants and agrees that
it will not, and will not permit any Subsidiary or Unincorporated Venture to,
directly or indirectly, enter into any transaction (including, but not limited
to, the sale or exchange of property or the rendering of service) with any of
its Affiliates, other than in the ordinary course of business and upon fair and
reasonable terms no less favorable than La Quinta or any Subsidiary or
Unincorporated Venture could obtain or could become entitled to in an
arm's-length transaction with a Person which was not an Affiliate.
SECTION 5. INFORMATION AS TO LA QUINTA.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY LA QUINTA. La Quinta
will deliver to each Bank which has Bank Debt:
(A) As soon as practicable after the end of each of the first three
quarterly fiscal periods in each fiscal year of La Quinta, and in
any event within 45 days thereafter, duplicate copies of
(1) Combined balance sheets, statements of earnings, shareholders'
equity and cash flows for the portion of the fiscal year
ending with such quarter; all in reasonable detail and
accompanied by an Officer's Certificate certifying that the
aforementioned financial statements present fairly the
financial position of La Quinta (Combined Company) at the end
of such quarter and the results of operations and the changes
in financial position for the portion of the fiscal year
ending with such quarter, determined in accordance with GAAP;
(2) An Officer's Certificate certifying to the amount of Bank Debt
outstanding at the end of the fiscal quarter identified on an
EXHIBIT A attached thereto, which for the purpose of this
Agreement shall become EXHIBIT A hereto; and
(3) An Officer's Certificate (with calculations and a new EXHIBIT
E attached thereto) certifying (i) as to any increases or
reductions in interest in the
- 16 -
<PAGE>
Significant Investments, and (ii) compliance with Sections
4.4, 4.5, 4.9, 4.10 and 4.11.
(B) As soon as practicable after the end of each fiscal year of La
Quinta, and in any event within 120 days thereafter, duplicate
copies of:
(1) Combined balance sheets, statements of earnings, shareholders'
equity and cash flows of La Quinta for such year; all in
reasonable detail, prepared on a basis consistent with the
financial statements delivered to all Banks in prior periods
and accompanied by an unqualified opinion and report of KPMG
Peat Marwick, or other independent certified accountants of
recognized standing selected by La Quinta and reasonably
consented to by Banks, which report shall state that no
default under this Agreement and no condition or event which
after notice or lapse of time or both would constitute a
default under this Agreement has come to the knowledge of such
accountants or, if such is not the case, the details of such
default or such condition or event;
(2) Operating statements for such year and the preceding two years
with respect to all properties pledged to any Bank to secure
Bank Debt;
(3) An Officer's Certificate certifying to the amount of Bank Debt
outstanding at the last day of such year identified on an
EXHIBIT A attached thereto, which for the purpose of this
Agreement shall become EXHIBIT A hereto; and
(4) An Officer's Certificate (with calculations and a new EXHIBIT
E attached thereto) certifying (i) as to any increases or
reductions in interest in the Significant Investments, and
(ii) compliance with Sections 4.4, 4.5, 4.9, 4.10 and 4.11.
(C) As soon as practicable after La Quinta or any Subsidiary files with
the S.E.C. any of the following documents and in any event within 10
days thereafter, a copy of:
(1) Any final Registration Statement filed for the registration of
any securities under the Securities Act of 1933, as amended
(except a Registration Statement on Form S-8 for the
registration of stock to be issued in connection with any
Stock Plan);
(2) Each Annual and Periodic Report filed under Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended;
(3) Each definitive Proxy Statement filed pursuant to the
Securities Exchange Act of 1934, as amended; and
- 17 -
<PAGE>
together with any other document filed with the S.E.C. or the New
York Stock Exchange, Inc., as may be requested by any Bank.
(D) Upon request by any Bank, copies of the following:
(1) Each annual report/return, as well as all schedules and
attachments required to be filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the
regulations promulgated thereunder, in connection with each of
its Plans for each Plan year; and
(2) Such additional information concerning any of its Plans as may
be reasonably requested.
(E) Notice to each Bank which has Bank Debt that any warranty or
representation made by La Quinta contained in any instrument or
document delivered pursuant to the Bank Debt shall have been
incorrect in any material respect when made not later than one
business day after the discovery or awareness thereof by an
Authorized Officer.
(F) Promptly, notice to each Bank which has Bank Debt of the breach of
any covenant contained in Section 4.19 hereof.
(G) With reasonable promptness, such other data and information as from
time to time may be reasonably requested by any Bank.
(H) Notwithstanding anything in this Section 5.1 to the contrary, (i) if
the terms of any Subordinated Debt of La Quinta requires delivery of
Parent Company financial statements and (ii) any Bank shall request
delivery of Parent Company financial statements, La Quinta shall
also deliver to such Bank the financial statements required to be
delivered pursuant to (1) Section 5.1(A) on a Parent Company basis
within 60 days after the end of the first three quarterly fiscal
periods of La Quinta and (2) Section 5.1(B) on a Parent Company
basis within 120 days after the end of each fiscal year of La
Quinta.
5.2 OFFICER'S CERTIFICATE. Each set of financial statements delivered
pursuant to Subsection 5.1(A) and (B) shall be accompanied by an Officer's
Certificate stating whether there exists on the date of such certificate any
condition or event which then constitutes, or which after notice or lapse of
time or both, would constitute, a breach of any covenant herein, and if any such
condition or event then exists, specifying the nature and period of existence
thereof and the action La Quinta is taking or proposes to take with respect
thereto.
- 18 -
<PAGE>
SECTION 6. DEFAULT.
La Quinta hereby covenants, acknowledges and agrees that the failure of La
Quinta, any Subsidiary or Unincorporated Venture to perform or observe (i) any
covenant contained in Sections 4.3, 4.4, 4.5, 4.6, 4.7, 4.9, 4.10, 4.11, 4.12,
4.13, 4.14, 4.15, 4.19, 4.20, or 4.21 of this Agreement or (ii) any covenant
contained in Sections 4.1, 4.2, 4.8, 4.16, 4.17 or 4.18 failure to perform or
observe any such covenant has become known to an Authorized Officer or (B)
written notice thereof shall have been given by any Bank to La Quinta or (iii)
any other covenant contained in this Agreement to be performed or observed by it
and such failure continues for a period of 30 days after any Bank has given
written notice specifying such failure to La Quinta, shall be deemed, subject to
the waiver provisions of Section 7.2 hereof, to be a default or event of default
(however designated) under any Bank Debt, notwithstanding the specific
enumeration of the specific defaults or events of default with respect to such
Bank Debt, and any Bank may perform all rights and remedies granted such Bank
under the Bank Debt owing to such as if a default or event of default
specifically enumerated in such Bank Debt had occurred. La Quinta further
acknowledges and agrees that the covenants set forth in this Agreement and the
effect of the failure to perform such covenants as set forth in this Section 6
shall be deemed to be incorporated by reference in such Bank Debt, MUTATIS
MUTANDIS. The grace periods provided for in this Section 6 are in lieu of and
not in addition to any grace periods provided with respect to any Bank Debt.
SECTION 7. MISCELLANEOUS.
7.1 NOTICE. All notices, requests, consents and demands shall be in
writing and shall be delivered by hand or overnight courier service, mailed or
sent by telecopy, to the respective addresses specified below, or, as to any
party, to such other address as may be designated by it in written notice to all
other parties. All notices, requests, consents and demands hereunder shall be
deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by telecopy, or if mailed, on the earlier of
actual receipt or three (3) days after being mailed by certified mail, return
receipt requested, postage prepaid, addressed as aforesaid.
La Quinta Inns, Inc.
112 East Pecan Street, Suite 1200
San Antonio, Texas 78205
Attention: Vice President - Treasurer
with a copy to:
La Quinta Inns, Inc.
112 East Pecan Street, Suite 1200
San Antonio, Texas 78205
Attention: Office of General Counsel
- 19 -
<PAGE>
NationsBank of Texas, N.A.
NationsBank Plaza
901 Main Street, 67th Floor
Dallas, TX 75202
Attention: Douglas E. Hutt
7.2 AMENDMENT, WAIVER, CONSENTS AND APPROVALS. This Agreement may be
amended, and the observance of any provision of this Agreement may be waived and
consent or approval to any action described in this Agreement may be granted,
only with the written consent of La Quinta and Banks holding in aggregate at
least 66-2/3% in principal amount of the Bank Debt as of the last day of the
month preceding the month in which such written amendment, waiver, approval or
consent is requested; provided, however, that no such amendment, waiver,
approval or consent, without the written consent of all of the Banks, shall (i)
change this Section 7.2 or (ii) waive, modify or otherwise affect compliance
with Section 4.20 hereof. All Banks shall receive in writing the request for
any waivers, modifications, amendments, approvals or consents of any of the
provisions hereof.
7.3 NOTICE OF DEFAULT ON BANK DEBT. Each Bank agrees to give prompt
notice to each other Bank of (i) any default in the payment of principal of or
interest on any Bank Debt beyond any period of grace with respect thereto, (ii)
any default in the performance of any other agreement, term, covenant or
condition contained in any Bank Debt beyond any period of grace provided with
respect thereto and (iii) any default in the performance of any covenant of La
Quinta set forth in this Agreement. Each Bank agrees to simultaneously deliver
to each other Bank a copy of any notice delivered to La Quinta pursuant to
Section 6 hereof. Each Bank shall use its best efforts to deliver the notices
provided for in this Section 7.3; however, no Bank shall have any liability to
any other Bank for failing to comply with this Section 7.3.
7.4 CONFLICTS. In the event of any conflict between the terms of this
Agreement and the terms of any Bank Debt with respect to the subject matter
contained herein, the terms and provisions of this Agreement shall control and
prevail.
7.5 PAYMENT OF EXPENSES. La Quinta will pay all reasonable expenses
of the Banks, including, without limitation, the reasonable fees, expenses and
disbursement of counsel, incurred in connection with the transactions
contemplated by this Agreement.
7.6 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas and the laws of the United
States.
7.7 BINDING UPON SUCCESSORS. This Agreement shall be binding upon
La Quinta so long as any Bank Debt is outstanding, and each of the Banks and
their respective successors and assigns, and shall inure to the benefit of La
Quinta and the Banks and successors and assigns of the Banks, except that La
Quinta shall not have the right to assign any of its rights or obligations
hereunder without the written consent of all the Banks.
- 20 -
<PAGE>
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, but in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart. It is not necessary that
each Bank execute the same counterpart, so long as counterparts are executed by
La Quinta and each Bank.
7.9 TERMINATION AND EFFECTIVENESS OF THIS AGREEMENT. This Agreement
shall remain in full force and effect so long as there is any Bank Debt
outstanding. At such time as there is no longer any Bank Debt outstanding, this
Agreement shall terminate and be of no further force and effect. This Agreement
shall be effective upon the execution hereof by the Banks required to amend the
Prior Master Covenant Agreement pursuant to Section 7.2 thereof.
7.10 ADJUSTMENT OF PERCENTAGES. The percentages of each Bank set forth
on EXHIBIT A hereto shall be automatically adjusted subsequent to the date of
this Agreement as a result of (i) any payment or prepayment of any Bank Debt,
(ii) any renewals, extensions, or refinancings of Bank Debt among the Banks,
(iii) participations in Bank Debt sold by one Bank to another Bank or any
purchase or assumption of Bank Debt between or among Banks, or (iv) assignments
of Bank Debt pursuant to Section 7.13 hereof; otherwise, there shall be no
adjustments to the percentages set forth on EXHIBIT A. Further, except as set
forth in Section 7.13 hereof, no other Person may become a party to this
Agreement without the prior written consent of the Banks.
7.11 EXCEPTIONS TO COVENANTS. La Quinta shall not be deemed to be
permitted to take any action or fail to take any action which is permitted as an
exception to any of the covenants contained herein or which is within the
permissible limits of any of the covenants contained herein if such action or
omission would result in the breach of any other covenant contained herein.
7.12 CONFIDENTIALITY. Each Bank agrees (on behalf of itself and each
of its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by La Quinta pursuant to this Agreement which is identified by La
Quinta as being confidential at the time the same is delivered to the Banks,
provided that nothing herein shall limit the disclosure of any such information
(i) to the extent required by statute, rule, regulation or judicial process,
(ii) to counsel for any of the Banks, (iii) to bank examiners, auditors or
accountants of any Bank, (iv) any other Bank, (v) in connection with any
litigation to which any one or more of the Banks is a party, provided, further,
that unless specifically prohibited by applicable laws or court order, each Bank
agrees, prior to disclosure thereof, to notify La Quinta of any request for
disclosure of any such non-public information (x) by any governmental agency or
representative thereof (other than any such request in connection with an
examination of the financial condition of La Quinta or any Subsidiary or
Unincorporated Venture or (y) pursuant to legal process, or (vi) to any
participant (or prospective participant) of any Bank Debt so long as such
participant (or prospective participant) first executes and delivers to the
respective Bank an agreement (a "CONFIDENTIALITY AGREEMENT") in substantially
the form of EXHIBIT F hereto; and
- 21 -
<PAGE>
provided finally that in no event shall any Bank be obligated or required to
return any materials furnished by the Company. The obligations of each Bank
under this Section 7.12 shall supersede and replace the obligations of such Bank
under any confidentiality letter in respect of any Bank Debt initially signed
and delivered by such Bank to La Quinta prior to the date hereof.
7.13 ASSIGNMENT. Each Bank may assign to one or more financial
institutions or funds organized under the laws of the United States, or any
state thereof, or under the laws of any other country that is a member of the
Organization for Economic Cooperation and Development, or a political
subdivision of any such country, which is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its business
(each, an "Assignee") its rights and obligations under the Bank Debt owned by
such Bank and its rights under this Agreement subject, to the extent applicable,
to the terms and provisions of Section 11.6 of the Credit Agreement. Upon the
effectiveness of such assignment, (i) the assignee Bank shall be party hereto
and, to the extent that rights hereunder have been assigned to it, have the
rights of a Bank hereunder and (ii) the assigning Bank shall, to the extent that
rights hereunder have been assigned by it, relinquish such rights under this
Agreement.
7.14 ACCOUNTING TERMS. All accounting terms used herein and not
otherwise defined herein shall be construed in accordance with GAAP, and all
financial computations and determinations shall be made on a Combined basis.
===============================================================================
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
===============================================================================
- 22 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of September 12, 1995
LA QUINTA INNS, INC.
By: /s/ Dewey W. Chambers
------------------------------------
Dewey W. Chambers, Vice
President-Treasurer
The following Subsidiaries of La Quinta
hereby acknowledge and agree to the covenants
and restrictions set forth herein by signing
below:
LA QUINTA REALTY CORP.
By: /s/ John F. Schmutz
-------------------------------------
John F. Schmutz, Vice President
LA QUINTA PLAZA, INC.
By: /s/ John F. Schmutz
-------------------------------------
John F. Schmutz, Vice President
LA QUINTA FINANCIAL CORPORATION
By: /s/ John F. Schmutz
-------------------------------------
John F. Schmutz, Vice President
- 23 -
<PAGE>
LA QUINTA INVESTMENTS, INC.
By: /s/ John F. Schmutz
-------------------------------------
John F. Schmutz, Vice President
LQI ACQUISITION CORPORATION
By:_____________________________________
Its:____________________________________
LQM OPERATING PARTNERS, L.P.
By: La Quinta Realty Corp., its General Partner
By: /s/ John F. Schmutz
-------------------------------
John F. Schmutz, Vice President
LA QUINTA MOTOR INNS, LIMITED PARTNERSHIP
By: La Quinta Realty Corp., its General Partner
By: /s/ John F. Schmutz
-------------------------------
John F. Schmutz, Vice President
- 24 -
<PAGE>
LQM OPERATING PARTNERS, L.P.
By: La Quinta Realty Corp., its General Partner
By: /s/ John F. Schmutz
----------------------------------
John F. Schmutz, Vice President
LQ-BIG APPLE JOINT VENTURE
By: La Quinta Inns, Inc., its Partner
By: /s/ Dewey W. Chambers
----------------------------------
Dewey W. Chambers, Vice President-Treasurer
By: La Quinta Investments, Inc., its Partner
By: /s/ John F. Schmutz
----------------------------------
John F. Schmutz, Vice President
LQ-LNL LIMITED PARTNERSHIP
By: La Quinta Inns, Inc., its Managing General Partner
By: /s/ Dewey W. Chambers
----------------------------------
Dewey W. Chambers, Vice President-Treasurer
- 25 -
<PAGE>
LQ-EAST IRVINE JOINT VENTURE
By: La Quinta Inns, Inc., its Partner
By: /s/ Dewey W. Chambers
----------------------------------
Dewey W. Chambers, Vice President-Treasurer
By: La Quinta Investments, Inc., its Partner
By: /s/ John F. Schmutz
----------------------------------
John F. Schmutz, Vice President
LQ-INVESTMENTS I
By: La Quinta Inns, Inc., its Managing General Partner
By: /s/ Dewey W. Chambers
----------------------------------
Dewey W. Chambers, Vice President-Treasurer
By: La Quinta Investments, Inc., a General Partner
By: /s/ John F. Schmutz
----------------------------------
John F. Schmutz, Vice President
- 26 -
<PAGE>
LQ-INVESTMENTS II
By: La Quinta Inns, Inc., its Managing General Partner
By: /s/ Dewey W. Chambers
----------------------------------
Dewey W. Chambers, Vice President-Treasurer
By: La Quinta Investments, Inc., a General Partner
By: /s/ John F. Schmutz
----------------------------------
John F. Schmutz, Vice President
LA QUINTA INNS OF LUBBOCK, INC.
By: /s/ John F. Schmutz
----------------------------------------
John F. Schmutz, Vice President
LA QUINTA INNS OF PUERTO RICO, INC.
By: /s/ John F. Schmutz
----------------------------------------
John F. Schmutz, Vice President
LQ - BATON ROUGE JOINT VENTURE
By La Quinta Inns, Inc., its
Managing General Partner
By: /s/ John F. Schmutz
----------------------------------------
John F. Schmutz, Vice President
- 27 -
<PAGE>
LA QUINTA DENVER - PEORIA STREET, LTD.
By: La Quinta Inns, Inc.
By: /s/ Dewey W. Chambers
----------------------------------------
Dewey W. Chambers, Vice President-Treasurer
LA QUINTA DEVELOPMENT PARTNERS, L.P.
By: La Quinta Inns, Inc.
By: /s/ Dewey W. Chambers
----------------------------------------
Dewey W. Chambers, Vice President-Treasurer
NATIONSBANK OF TEXAS, N.A.
By: /s/ Douglas E. Hutt
-------------------------------------
Douglas E. Hutt
Senior Vice President
- 28 -
<PAGE>
EXHIBIT 10(d)
===========================================================================
FIFTH AMENDED AND RESTATED
MASTER COVENANT AGREEMENT
Dated as of
September 12, 1995
between
LA QUINTA INNS, INC.
and
THE BANKS PARTY HERETO
===========================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
Section 1. PARTIES...................................................... 1
Section 2. BACKGROUND................................................... 1
Section 3. DEFINITIONS.................................................. 1
Section 4. BUSINESS COVENANTS OF LA QUINTA.............................. 10
4.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING PRACTICES,
CORPORATE EXISTENCE.......................................... 10
4.2 INSPECTION OF PROPERTIES AND BOOKS........................... 11
4.3 MERGER AND SALE OF ASSETS.................................... 11
4.4 NET WORTH.................................................... 12
4.5 CONTINGENT LIABILITIES....................................... 12
4.6 INCURRENCE AND RETENTION OF DEBT............................. 12
4.7 INVESTMENTS.................................................. 12
4.8 NOTICE OF LITIGATION......................................... 12
4.9 TOTAL DEBT RATIO............................................. 13
4.10 CASH FLOW RATIO.............................................. 13
4.11 SENIOR DEBT RATIO............................................ 13
4.12 LIENS........................................................ 13
4.13 ACCOUNTING CHANGES........................................... 13
4.14 AMENDMENT AND MODIFICATION OF SUBORDINATED DEBT DOCUMENTS.... 13
4.15 LEASE-BACKS.................................................. 14
4.16 ENVIRONMENTAL MATTERS........................................ 14
4.17 ERISA COMPLIANCE............................................. 15
4.18 BUSINESS..................................................... 15
4.19 DEBT......................................................... 15
4.20 BANK DEBT.................................................... 16
4.21 TRANSACTIONS WITH AFFILIATES................................. 16
Section 5. INFORMATION AS TO LA QUINTA.................................. 16
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY LA QUINTA.......... 16
5.2 OFFICER'S CERTIFICATE........................................ 18
Section 6. DEFAULT...................................................... 19
Section 7. MISCELLANEOUS................................................ 19
7.1 NOTICE....................................................... 19
7.2 AMENDMENT, WAIVER, CONSENTS AND APPROVALS.................... 20
7.3 NOTICE OF DEFAULT ON BANK DEBT............................... 20
- i -
<PAGE>
7.4 CONFLICTS.................................................... 20
7.5 PAYMENT OF EXPENSES.......................................... 20
7.6 GOVERNING LAW................................................ 20
7.7 BINDING UPON SUCCESSORS...................................... 20
7.8 COUNTERPARTS................................................. 21
7.9 TERMINATION AND EFFECTIVENESS OF THIS AGREEMENT.............. 21
7.10 ADJUSTMENT OF PERCENTAGES.................................... 21
7.11 EXCEPTIONS TO COVENANTS...................................... 21
7.12 CONFIDENTIALITY.............................................. 21
7.13 ASSIGNMENT................................................... 22
7.14 ACCOUNTING TERMS............................................. 22
- ii -
<PAGE>
Exhibit A: Bank Debt
Exhibit B: Existing Investments
Exhibit C: Subsidiaries and Unincorporated Ventures Investments
Exhibit D: Existing Liens
Exhibit E: Guarantees and Contingent Obligations
Exhibit F: Confidentiality Agreement
Exhibit G: Significant Investments
Exhibit H: Investment Policy
- iii -
<PAGE>
FIFTH AMENDED AND RESTATED
LA QUINTA INNS, INC.
MASTER COVENANT AGREEMENT
SECTION 1. PARTIES.
This Fifth Amended and Restated Master Covenant Agreement ("Agreement") is
by and among La Quinta Inns, Inc., a Texas corporation ("La Quinta"), First
Interstate Bank of Texas, N.A., and any other bank from time to time a party
hereto pursuant to Section 7.13 (individually, a "Bank", collectively, the
"Banks").
SECTION 2. BACKGROUND.
La Quinta and certain banks are parties to a Fourth Amended and Restated
Master Covenant Agreement, dated as of April 21, 1995 (said Fourth Amended and
Restated Master Covenant Agreement, as amended, the "Prior Master Covenant
Agreement"), the effect of which is to incorporate the definitions, provisions
and covenants set forth therein into certain credit facilities that La Quinta
has with certain Banks.
La Quinta and the Banks desire to enter into this Agreement in order to
amend certain terms of, and restate in its entirety, the Prior Master Covenant
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, La Quinta and the Banks agree as
follows:
SECTION 3. DEFINITIONS.
For purposes hereof, the terms defined in this Section 3 shall have the
following meanings, and the singular shall include the plural, and vice versa,
unless otherwise specifically required by the context (capitalized terms used
herein and not otherwise defined herein shall have the meaning given to such
terms in the Credit Agreement hereinafter defined):
"AFFILIATE" means, as applied to any Person, (i) any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person or (ii) any other Person that owns or controls 10% or more of any
class of equity securities of that Person or any of its Affiliates. For
purposes of this definition, "CONTROL" (including with correlative meanings,
the terms "CONTROLLING," "CONTROLLED BY," and UNDER COMMON CONTROL
WITH"), as applied to any Persons, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGREEMENT DATE" means the date of this Agreement.
<PAGE>
"AUTHORIZED OFFICER" means any of the following officers of La Quinta:
President, Senior Vice President-Accounting & Administration, Senior Vice
President-Finance, Vice President & General Counsel or Vice President-Treasurer.
"BANK DEBT" means (i) all obligations, indebtedness and liabilities,
direct, contingent or otherwise (including through participations), whether
funded or unfunded, of La Quinta listed on EXHIBIT A attached hereto and made
a part hereof (pursuant to Section 7.13), arising under and otherwise in
connection with the loans and/or credit facilities briefly described in EXHIBIT
A, as modified to indicate adjustments of percentages (and related amounts)
from time to time as provided for in Sections 5.1(a)(2), 5.1(b)(3), 7.10 and
7.13 hereof and (ii) all interest accruing on all or any part thereof and
attorneys' fees incurred in the enforcement or the collection of all or any part
thereof.
"BOND LETTERS OF CREDIT" has the meaning given to them in the Credit
Agreement.
"CAPITAL LEASES" mean all capital leases and subleases, as defined in
the Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 13, dated November 1976, as amended.
"CAPITAL STOCK" means, with respect to any Person, any capital stock,
partnership or joint venture interests of such Person and shares, interests,
participations or other ownership interests (however designated) of any Person
and any rights (other than debt securities convertible into corporate stock),
warrants or options to purchase any of the foregoing.
"COMBINED" includes, with respect to financial statements and the
calculations of the covenants herein and the definitions related thereto, the
combined accounts of La Quinta and its Subsidiaries and Unincorporated Ventures
which are included in La Quinta's Annual Report to Shareholders and in La
Quinta's Form 10-K filed with the S.E.C. (the "COMBINED FINANCIAL
STATEMENTS").
"CONSOLIDATED NET INCOME" means, for any period, determined in
accordance with GAAP, on a Combined basis, consolidated net income for such
period.
"CREDIT AGREEMENT" means that certain Amended and Restated Credit
Agreement (Facility A), dated as of September 12, 1995, among La Quinta, the
lenders a party thereto and NationsBank of Texas, N.A., as Administrative
Lender, as amended, supplemented, modified or restated from time to time.
"CURRENT MATURITIES" means, with respect to any Person, the principal
portion payable by such Person on Long Term Debt during the twelve-month period
immediately succeeding the date of determination.
"DEBT" of any Person means, at any date, without duplication, all
obligations, contingent or otherwise, (i) of such Person for borrowed money
(whether or not the recourse of the lender
- 2 -
<PAGE>
is to the whole of the assets of such Person or only to a portion thereof), (ii)
of such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) representing the balance deferred and unpaid of the purchase
price of any property or services (other than accounts payable or other
obligations arising in the ordinary course of business), if and to the extent
any of the foregoing described in clauses (i), (ii) and (iii) would appear as a
liability on the balance sheet of such Person, (iv) of such Person in respect of
bankers' acceptances, letters of credit or other similar instruments (or
reimbursement obligations with respect thereto), (v) of such Person under
Capital Leases, (vi) all liabilities secured by a Lien on any asset of such
Person to the extent of the value of such asset, whether or not such liability
is an obligation of such Person, (vii) all liability of others guaranteed by
such Person (but only to the extent of such guarantees), (viii) to the extent
not otherwise included, obligations of such Person under currency risk-hedging
agreements and Interest Rate Protection Agreements, (ix) the liquidation
preference and any mandatory redemption payment obligations (without
duplication) of such Person's Subsidiaries in respect of preferred stock issued
by any such Subsidiary, (x) in the case of such Person, the liquidation
preference and any mandatory redemption payment obligations (without
duplication) in respect of Disqualified Capital Stock and (xi) in the case of
such Person, unfunded vested benefits under any Plan.
"DEFAULT" means any default with respect to any Bank Debt which would
permit the acceleration of such Bank Debt, whether or not there has been
satisfied any requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further condition, event
or act.
"DISQUALIFIED CAPITAL STOCK" means with respect to any Person any series
or class of Capital Stock of such Person which is or may be required to be
redeemed, in whole or in part, or may be put to such Person or any of its
Subsidiaries, in whole or in part, at the option of the holder thereof, on or
prior to the final maturity of the Senior Subordinated Notes, or is or may be
convertible or exchangeable into or exercisable for such Capital Stock on or
prior to the final maturity of the Senior Subordinated Notes; PROVIDED, that
Capital Stock will not be deemed to be Disqualified Capital Stock if it may only
be so redeemed or put solely in consideration of Qualified Capital Stock.
"DOMESTIC SUBSIDIARY" means any Subsidiary of La Quinta organized under
the laws of any state within the United States.
"EBITDA" means, for any period, determined in accordance with GAAP on a
Combined Basis, the sum of (i) Operating Income, plus (ii) nonrecurring,
non-cash charges which decrease Operating Income, plus (iii) depreciation,
amortization and non-cash fixed asset retirements, minus (iv) nonrecurring
credits which are included in Operating Income.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT" means any default with respect to any Bank Debt which
would permit the acceleration of such Bank Debt, provided there has been
satisfied any requirement in
- 3 -
<PAGE>
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act.
"EXISTING INVESTMENTS" means those Investments described on EXHIBIT B
hereto.
"FOREIGN SUBSIDIARY" means any Subsidiary which is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles , set forth in the
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and/or in statements of the Financial Accounting
Standards Board, which are applicable in the circumstances as of the date in
question and which shall be applied by the independent accounting firm which
certifies La Quinta's Combined Financial Statements and Parent Company financial
statements, and the requisite that such principles be applied on a consistent
basis shall mean that the accounting principles observed in a current period are
comparable in all material respects to those applied in a preceding period,
other than as a result of changes required by modifications to GAAP. Unless
otherwise indicated herein, all accounting terms will be defined according to
GAAP. Notwithstanding the foregoing, all determinations and computations with
respect to financial covenants and ratios provided for in this Agreement shall
be made in accordance with GAAP as in effect on the date hereof.
"INTEREST EXPENSE" of any Person means, for any period, the aggregate
interest expense in respect of Debt (including amortization of original issue
discount and non-cash interest payments or accruals, and dividends on
Disqualified Capital Stock, but excluding amortization of Debt issuance costs)
of such Person and all commissions, discounts, other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and costs
associated with currency and Interest Rate Agreements, all in accordance with
GAAP; PROVIDED, that interest expense attributable to that portion of the Debt
of another Person that is a direct or indirect, contingent or primary, recourse
obligation of such Person subsequent to the Agreement Date shall be added
thereto.
"INTEREST RATE PROTECTION AGREEMENTS" means any obligation of any Person
under interest rate exchange, collar, cap, swap or similar agreements providing
interest rate protection.
"INVESTMENT" means, in one or a series of related transactions, any
direct or indirect acquisition of all or substantially all assets of any Person,
or any direct or indirect purchase or other acquisition of, or beneficial
interest in, capital stock or other securities of any other Person, or any
direct or indirect loan, advance (other than advances to employees for moving
and travel expenses, drawing accounts and similar expenditures in the ordinary
course of business) or capital contribution or transfer of property, assets or
value to, or investment in, any other Person, including, without limitation the
incurrence or sufferance of Debt or the purchase of accounts receivable by any
other Person that are not current assets or do not arise in the ordinary course
of business.
- 4 -
<PAGE>
"INVESTMENTS" means La Quinta Investments, Inc., a Delaware corporation
and wholly-owned Subsidiary of La Quinta.
"INVESTMENT POLICY" means that certain Amended and Restated La Quinta
Inns, Inc. Statement of Investment Policy as of October 1989 in effect on the
Agreement Date as set forth as EXHIBIT H hereto.
"LIEN" means, with respect to any property, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"LONG TERM DEBT" means any obligation which is due one year or more from
the date of creation thereof which under GAAP is shown as a liability, plus
(without duplication) amounts equal to the aggregate net rentals (after making
allowances for any interest, taxes or other expenses included therein) payable
more than one year from the date of creation thereof under Capital Leases.
"MAINTENANCE CAPITAL EXPENDITURES" means an amount equal to the product
of room revenues (as disclosed in La Quinta's Form 10-K and 10-Q) of La Quinta,
its Subsidiaries and Unincorporated Ventures multiplied by 5%, calculated for
the four consecutive fiscal quarters immediately preceding the date of such
determination.
"MATERIAL ADVERSE EFFECT" has the meaning given to such term in the
Credit Agreement.
"MATERIAL AMOUNT" has the meaning given to such term in the Credit
Agreement.
"NET CASH PROCEEDS" means the aggregate amount of cash received by La
Quinta in respect of the sale of Capital Stock of La Quinta, less the sum of all
fees, commissions and other expenses incurred in connection with such sale.
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, as determined in accordance with
GAAP.
"NET INTEREST EXPENSE" means, with respect to any Person for any period,
the sum of (i) Interest Expense of such Persons for such period minus (ii)
interest income of such Person for such period as reflected on an income
statement of such Person prepared in accordance with GAAP.
"NET WORTH" means an amount equal to the sum of the Capital Stock and
additional paid-in-capital plus retained earnings (or minus accumulated deficit)
of La Quinta and its Subsidiaries and less (i) treasury stock and (ii) amounts
attributable to the extent included, (1) to any write-up in book value of assets
resulting from a revaluation thereof subsequent to June 30, 1995, and (2) to
Disqualified Capital Stock, all in accordance with GAAP.
- 5 -
<PAGE>
"OFFICER'S CERTIFICATE" means a certificate signed in the name of La
Quinta by an Authorized Officer.
"OPERATING INCOME" means, with respect to any Person for any period, the
operating income (loss) of such Person, as determined in accordance with GAAP.
"OPERATING LEASE" means any operating lease, as defined in the Financial
Accounting Standard Board Statement of Financial Accounting Standards No. 13,
dated November, 1976 or otherwise in accordance with GAAP.
"PARENT COMPANY" means, with respect to financial statements and the
calculations of the covenants herein and the definitions related thereto, the
uncombined, consolidated financial statements of La Quinta and its Subsidiaries,
including equity method investments, as defined by GAAP, in Unincorporated
Ventures, and designated "La Quinta Inns, Inc. (Parent Company and Wholly-Owned
Subsidiaries)" on La Quinta's audit report.
"PARTNERS' CAPITAL" means the equity in the net assets of Unincorporated
Ventures of all the partners or venturers (other than La Quinta or a Subsidiary)
of such Unincorporated Ventures, or minority interest holders, as determined in
accordance with GAAP.
"PERMITTED INVESTMENT" means Investments in (i) wholly-owned Domestic
Subsidiaries (a) that are subject to the provisions of this Agreement, (b) that
concurrently therewith unconditionally guarantee the performance of La Quinta's
obligations under the Bank Debt and (c) that concurrently deliver to the Banks
(1) an opinion acceptable to the Banks with respect to the validity and
enforceability of such guarantee and (2) such other documents, such as corporate
resolutions, certificates of incumbency, by-laws and articles of incorporation,
as the Banks shall reasonably require, (ii) Investments in any Person other than
a wholly-owned Subsidiary in any one or a series of related transactions with a
fair market value not in excess of $25,000,000 in the aggregate for all
Investments in all such Persons, (iii) Investments for the purpose of satisfying
La Quinta's or any Subsidiary's guarantee obligations with respect to the Debt
of any Person in which La Quinta or any Subsidiary owned any interest and which
obligation was in existence as of the Agreement Date; (iv) Investments in
Subsidiaries and Unincorporated Ventures which do not guarantee the performance
of La Quinta's obligations under the Credit Agreement made in the ordinary
course of business, consistent with past practices for the purpose of providing
for the day to day operating requirements of such Subsidiary or Unincorporated
Venture, PROVIDED, that such Investments shall (a) not be used for acquisition
or conversion of any inns and (b) be evidenced by a note or other evidence of
indebtedness and (c) not at any time exceed $10,000,000 in aggregate principal
amount, (v) Investments permitted by Sections II.B., II.C. (provided that,
notwithstanding Section II.C.3. of the Investment Policy, Banks shall be
required to have at least $150,000,000 in capital and surplus), II.E. and II.H.
of the Investment Policy, (vi) loans or advances to employees as compensation
for services in the ordinary course of business not in excess of $2,000,000
aggregate principal amount, (vii) Investments in the ordinary course of
business, consistent with past practice, in La Quinta Inns' National Advertising
Fund, (viii) Existing Investments, (ix) Investments in Capital Stock
- 6 -
<PAGE>
of Subsidiaries and Unincorporated Ventures listed on EXHIBIT C hereto for the
purpose of acquiring no less than 100% of the capital stock or partnership
interests, as appropriate, of such Subsidiaries and Unincorporated Ventures, (x)
Investments in notes payable to La Quinta as a result of the sale of inns in an
aggregate principal amount not in excess of $10,000,000, provided that La Quinta
shall obtain and continue to hold a perfected first Lien (subject to Permitted
Liens) in such inns, and (xi) Investments in wholly-owned Foreign Subsidiaries
(a) that are subject to the provisions of this Agreement and (b) not to exceed
in aggregate amount $1,000,000 for all Investments in all Foreign Subsidiaries.
For purposes of the calculation of the amount of any Investments permitted
hereunder, Investments will be calculated at all times at the amount of the
original Investment with no reduction for write-offs or write-downs. No
Investment which is a Permitted Investment other than pursuant to clause (ii) of
the definition of "Permitted Investments" shall reduce the amount of Investments
permitted pursuant to such clause (ii).
"PERMITTED LIENS" means, as applied to any Person:
(i) any Lien in favor of any Bank or a trustee on its behalf to secure
the Bank Debt;
(ii) (a) Liens on real estate for real estate taxes not yet delinquent,
(b) Liens created by lease agreements to secure the payments of rental amounts
and other sums not yet due thereunder, (c) Liens on leasehold interests created
by the lessor in favor of any mortgagee of the leased premises, and (d) Liens
for taxes, assessments, governmental charges, levies or claims that are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on such Person's books, but only so
long as no foreclosure, restraint, sale or similar proceedings have been
commenced with respect thereto;
(iii) Liens of carriers, warehousemen, mechanics, laborers and materialmen
and other similar Liens incurred in the ordinary course of business for sums not
yet due or being contested in good faith, if such reserve or appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(iv) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;
(v) Easements, rights-of-way, restrictions and other similar
encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person;
(vi) Liens created to secure the purchase price of fixed assets acquired
by such Person, which is incurred solely for the purpose of financing the
acquisition of such assets and incurred at the time of acquisition, so long as
(a) each such Lien shall at all times be confined solely to the asset or assets
so acquired (and proceeds thereof), (b) the Liens were placed on such assets at
the time such assets were acquired and (c) the aggregate principal amount of
Debt secured by such Liens does not exceed, together with Debt secured by Liens
permitted pursuant to
- 7 -
<PAGE>
clause (vii) below, $25,000,000, and refinancings thereof so long as any such
Lien remains solely on the asset or assets acquired and the amount of Debt
related thereto is not increased;
(vii) Liens existing on any property acquired by such Person prior to the
acquisition of such property by such Person, provided (a) such Lien shall at all
times be confined solely to the property so acquired (and proceeds thereof) and
(b) the aggregate principal amount of Debt secured by such Liens does not
exceed, together with the Liens permitted pursuant to clause (vi) above,
$25,000,000 and refinancings thereof so long as any such Lien remains solely on
the asset or assets acquired and the amount of the Debt related thereto is not
increased;
(viii)Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (a) such Person shall have established adequate reserves for such
judgments or awards, (b) such judgments or awards shall be fully insured and the
insurer shall not have denied coverage, or (c) such judgments or awards shall
have been bonded to the satisfaction of the Banks;
(ix) Any Liens existing on the Agreement Date which are described on
EXHIBIT D hereto, and Liens resulting from the refinancing of the related
Debt, provided that the Debt secured thereby shall not be increased and the
Liens shall not cover additional assets of the Borrower;
(x) any obligations or duties, affecting any property, to any
municipality or public authority with respect to any franchise, grant, license
or permit which do not materially impair the use of any material property for
the purposes for which such property is held by such Person;
(xi) zoning laws or ordinances and municipal regulations which do not
materially impair the use of any material property for the purposes for which
such property is held by such Person;
(xii) Liens, minor irregularities in or deficiencies of title on any
property which do not materially impair the use of any material property for the
purposes for which such property is held by such Person; and
(xiii)Liens otherwise permitted or contemplated by the Loan Papers.
"PERSON" means and includes an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, and a
government or any department, tribunal, agency or political subdivision thereof.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
to all or any of the Pension Benefit Guaranty Corporation's functions under
ERISA.
- 8 -
<PAGE>
"PLAN" means any plan subject to Title IV of ERISA and maintained by La
Quinta or any Subsidiary, or any such plan to which La Quinta or any Subsidiary
or any Unincorporated Venture is required to contribute on behalf of all or any
of its employees; PROVIDED, HOWEVER, "Plan" shall not include those
agreements with former employees described on Schedule 7 of the Credit
Agreement, the obligations pursuant to which do not exceed $450,000 in aggregate
amount.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of La Quinta that is
not Disqualified Capital Stock.
"REPORTABLE EVENT" has the meaning specified in Title IV of ERISA.
"S.E.C." means the United States Securities and Exchange Commission.
"SENIOR DEBT" means Total Debt of La Quinta, its Subsidiaries and
Unincorporated Ventures, as appropriate, other than Subordinated Debt.
"SENIOR SUBORDINATED NOTE" has the meaning given to such term in the
Credit Agreement.
"SIGNIFICANT INVESTMENTS" means those investments of La Quinta in the
joint ventures or partnerships set forth on EXHIBIT G hereto.
"SUBORDINATED DEBT" means any debt, obligation or liability (whether
primary, contingent or otherwise) of La Quinta, a Subsidiary or an
Unincorporated Venture which by its terms is subordinate in right of payment to
the Bank Debt, provided that the Banks approve the terms thereof prior to or at
the time of the issuance thereof.
"SUBSIDIARY" with respect to any Person, means (a) a corporation at
least a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person or (b) a partnership, joint venture or
similar entity in which 100% of the ownership, capital, interest or profits is
at the time, directly or indirectly, owned by such Person, by such Person and
one or more Subsidiaries of such Person or by one or more Subsidiaries of such
Person.
"SUBSIDIARY GUARANTY" shall have the meaning given to such term in the
Credit Agreement.
"TOTAL DEBT" means, with respect to any Person, the sum, without
duplication, of (a) all Debt of such Person minus (b)(i) the aggregate face
amount of Bond Letters of Credit outstanding and (ii) all Debt of such Person of
the type described in (1) clauses (vi) and (vii) of the definition of "Debt"
herein which are set forth in EXHIBIT E hereto and (2) clauses (viii) and (ix)
of the definition of "Debt" herein.
- 9 -
<PAGE>
"TRIBUNAL" means any state, commonwealth, federal, foreign territorial,
or other court or governmental department, commission, board, bureau, agency or
instrumentality.
"UNINCORPORATED VENTURE" means those Persons designated as
"Unincorporated Ventures" on EXHIBIT C hereto.
SECTION 4.BUSINESS COVENANTS OF LA QUINTA.
4.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING PRACTICES, CORPORATE
EXISTENCE. La Quinta covenants and agrees to, and will cause each Subsidiary
and Unincorporated Venture to:
(A) Maintain its material property in good condition and make all
necessary renewals, replacements, additions, betterments and improvements
thereto, consistent with sound business practice and as is customary in the case
of corporations or other entities of established reputation engaged in the same
or a similar business and similarly situated;
(B) Maintain, with financially sound and reputable insurers, or through
its own program of self-insurance, insurance with respect to its material
properties and business against such casualties and contingencies, of such
types, and in such amounts as is customary in the case of corporations or other
entities of established reputation engaged in the same or a similar business and
similarly situated;
(C) Keep books of record and accounts in which entries will be made of
all of its business transactions, and will reflect in it financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP;
(D) Do or cause to be done all things necessary to preserve and keep in
full force and effect its material rights;
(E) Do or cause to be done all things necessary to preserve and keep in
full force and effect its existence (except as may be specifically permitted by
this Agreement); and
(F) Cause to be paid and discharged (i) all lawful taxes assessments and
governmental charges imposed from the income or profits of La Quinta, its
Subsidiaries and Unincorporated Ventures or upon any property belonging to La
Quinta, any Subsidiary or any Unincorporated Venture and (ii) all lawful claims,
whether for labor, materials, supplies, services or anything else, which have
become due and payable and which by law have or may become a Lien upon the
property of La Quinta or any of its Subsidiaries; or Unincorporated Ventures;
PROVIDED, HOWEVER, that La Quinta, its Subsidiaries and Unincorporated
Ventures shall not be required to cause to be paid or discharged any such tax
assessment, charge or claim so long as the amount, applicability or validity
thereof shall be contested in good faith by appropriate proceedings, and
adequate book reserves shall have been established to the extent required by
GAAP with respect thereto.
- 10 -
<PAGE>
4.2 INSPECTION OF PROPERTIES AND BOOKS. La Quinta covenants and
agrees that it will permit, and will cause each Subsidiary and Unincorporated
Venture to permit, any Bank, upon (i) reasonable request, if such request is
prior to the occurrence of a Default or an Event of Default or (ii) request, if
such request is after the occurrence of a Default or an Event of Default, to any
Authorized Officer, to visit and inspect any of the properties of, to examine
the books of account and records of La Quinta, any Subsidiary or Unincorporated
Venture and to take extracts therefrom and to discuss the affairs, finances or
accounts of La Quinta, any Subsidiary or Unincorporated Venture, and to be
advised as to the same by the officers of La Quinta, at all such times during
normal business hours, in such detail and through such agents and
representatives as such Bank may reasonably desire.
4.3 MERGER AND SALE OF ASSETS.
(A) La Quinta covenants and agrees that it will not, and will cause each
Subsidiary and Unincorporated Venture to not, directly or indirectly sell,
transfer or otherwise dispose of any of its assets (whether now owned or
hereafter acquired, and including any interest in a joint venture or
partnership) unless immediately prior to, and after giving effect to, such sale,
transfer or other disposition, La Quinta, its Subsidiaries and Unincorporated
Ventures are and will be in compliance with all covenants hereunder and there
shall otherwise be no Default or Event of Default hereunder; and
(B) La Quinta covenants and agrees that it will not, and will cause each
Subsidiary and Unincorporated Venture to not, merge into or consolidate with any
other Person; provided, however, if after giving effect to any such merger or
consolidation, (i) the business of La Quinta or any Subsidiary or Unincorporated
Venture, as appropriate, will not be materially changed and (ii) La Quinta or
any Subsidiary or Unincorporated Venture, as appropriate, will not be in default
in respect of any of the covenants contained in any material agreement,
including, without limitation, this Agreement, to which La Quinta or any
Subsidiary or Unincorporated Venture is a party or by which its property may be
bound,
(1) Any corporation, partnership or joint venture may merge or
consolidate with La Quinta, provided that La Quinta shall be the
continuing and surviving corporation,
(2) Any Subsidiary may merge with or consolidate with any
corporation, partnership or joint venture, provided that, unless such
merger or consolidation shall be with La Quinta, such Subsidiary shall be
the continuing and surviving corporation, and
(3) Any Unincorporated Venture may merge with or consolidate with
any corporation, partnership or joint venture, provided that, unless such
merger or consolidation shall be with La Quinta or a Subsidiary, such
Unincorporated Venture shall be the continuing and surviving person.
- 11 -
<PAGE>
4.4 NET WORTH. La Quinta covenants and agrees that it will not allow
its Net Worth at any time to be less than the sum of (i) $285,000,000, plus (ii)
50% of Consolidated Net Income (excluding Consolidated Net Income for any fiscal
quarter in which Consolidated Income was a negative number) earned on or after
the Agreement Date, plus (iii) 75% of the Net Cash Proceeds of any equity issues
of La Quinta's Capital Stock after the Agreement Date.
4.5 CONTINGENT LIABILITIES. La Quinta covenants and agrees that it
will not, and will cause each Subsidiary and Unincorporated Venture to not,
guarantee, endorse, contingently agree to purchase, or otherwise become liable,
directly or indirectly, upon the obligation of or in connection with the
earnings, the assets, the stock, or the dividends of any other Person (other
than La Quinta or any Subsidiary), including obligations of La Quinta, each
Subsidiary and Unincorporated Venture arising solely by virtue of any of them
being a general partner or venturer of any Unincorporated Venture, except (i)
the obligations in respect of the written agreements in existence on the
Agreement Date in respect of any Significant Investments, (ii) the guarantees
and other contingent obligations set forth on EXHIBIT E hereto, (iii)
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection, (iv) guarantees of loans to any employee; PROVIDED,
THAT any such guaranty of an employee loan shall not exceed the amount of
$100,000 per employee, and the amount of such guaranties of employee loans,
together with the amount of Investments permitted pursuant to clause (vi) of the
definition of "Permitted Investments," shall not exceed, in the aggregate, more
than $2,000,000, and (v) guarantees and contingent obligations incurred after
the date of this Agreement not to exceed $20,000,000 in aggregate principal
amount.
4.6 INCURRENCE AND RETENTION OF DEBT. La Quinta covenants and agrees
that it will not, and will cause each Subsidiary and Unincorporated Venture to
not, incur, create, assume, or suffer to exist any Debt (other than Debt
existing on the Agreement Date) unless, immediately prior to, and after the
incurrence of, such Debt, La Quinta, its Subsidiaries and Unincorporated
Ventures are and will be in compliance with all covenants hereunder and there
shall otherwise be no Default or Event of Default hereunder.
4.7 INVESTMENTS. La Quinta will not, and will cause each Subsidiary
and Unincorporated Venture to not, make or permit to remain any Investment other
than a Permitted Investment.
4.8 NOTICE OF LITIGATION. La Quinta covenants and agrees that it
will, and will cause each Subsidiary and Unincorporated Venture to, promptly
give notice in writing to its Banks (i) of any litigation to which La Quinta,
any Subsidiary or Unincorporated Venture becomes a party, if (a) the amount in
controversy exceeds $500,000 and (b) La Quinta's insurance carrier does not
acknowledge coverage with respect to such litigation, and (ii) of all
proceedings before any governmental or regulatory agencies (a) affecting or
potentially affecting the business or property of La Quinta, any Subsidiary or
Unincorporated Venture in an amount in excess of $500,000 or (b) materially
affecting the ability of La Quinta, any Subsidiary or Unincorporated Venture to
perform their respective covenants and obligations hereunder or under any Bank
Debt.
- 12 -
<PAGE>
4.9 TOTAL DEBT RATIO. La Quinta covenants and agrees that it will not
allow the ratio of (i) Total Debt to (ii) EBITDA, in each case for the four
consecutive fiscal quarters immediately preceding the date of determination, to
be greater than 4.00 to 1 at the end of any fiscal quarter. For purposes of
this Section 4.9, with respect to assets not owned at all times during the four
consecutive quarters immediately preceding the date of determination of EBITDA,
there shall be (i) included in EBITDA (without duplication) the EBITDA of any
assets acquired during any such four consecutive fiscal quarters immediately
preceding the date of determination and (ii) excluded from EBITDA the EBITDA of
any asset disposed of during any such four consecutive fiscal quarters
immediately preceding the date of determination.
4.10 CASH FLOW RATIO. La Quinta covenants and agrees that it will not
allow the ratio of (i)(a) EBITDA, plus (b) lease expense pursuant to Operating
Leases, minus (c) Maintenance Capital Expenditures to (ii)(a) Net Interest, plus
(b) lease expense pursuant to Operating Leases, plus (c) Current Maturities, in
each case other than Current Maturities (which, with respect to Current
Maturities, shall be for the four consecutive fiscal quarters immediately
succeeding the date of determination) for the four consecutive fiscal quarters
immediately preceding the date of determination, to be less than 1.50 to 1 at
the end of any fiscal quarter.
4.11 SENIOR DEBT RATIO. La Quinta covenants and agrees that it will
not allow the ratio of (i) Senior Debt to (ii) EBITDA, in each case for the four
consecutive fiscal quarters immediately preceding the date of determination, to
be greater than 3.0 to 1 at the end of any fiscal quarter. For purposes of this
Section 4.11, with respect to assets not owned at all times during the four
consecutive quarters immediately preceding the date of determination of EBITDA,
there shall be (i) included in EBITDA (without duplication) the EBITDA of any
assets acquired during any such four consecutive fiscal quarters immediately
preceding the date of determination and (ii) excluded from EBITDA the EBITDA of
any asset disposed of during any such four consecutive fiscal quarters
immediately preceding the date of determination.
4.12 LIENS. La Quinta covenants and agrees that it will not create,
assume or suffer to exist, or permit any Subsidiary or Unincorporated Venture to
create, assume or suffer to exist, any Lien on any asset now owned or hereafter
acquired by it except Permitted Liens.
4.13 ACCOUNTING CHANGES. La Quinta covenants and agrees that it will
not, and will not permit an of its Subsidiaries or Unincorporated Ventures to,
make any change in its accounting treatment or financial reporting practices,
except as permitted or required by GAAP in effect from time to time. La Quinta
will not change its fiscal year or the calculation of its fiscal quarter ends.
4.14 AMENDMENT AND MODIFICATION OF SUBORDINATED DEBT DOCUMENTS. La
Quinta covenants and agrees that it will not, and it will not permit any
Subsidiary or Unincorporated Venture to, directly or indirectly, amend, modify,
supplement, waive compliance with, or assent to noncompliance with, any term,
provision or condition of any of the documents governing or evidencing the
Subordinated Debt, which (i) the Banks deem material (including, without
limitation, relating to events of default, acceleration rights, interest rates,
tenor, maturity date,
- 13 -
<PAGE>
subordination, covenants, prohibition against amending any documents related to
the Bank Debt and definitions with respect thereto (including, without
limitation, the definition of "Senior Debt")) or (ii) places any further
restrictions on La Quinta, its Subsidiaries or Unincorporated Ventures or
increases the obligations of La Quinta, its Subsidiaries or Unincorporated
Ventures thereunder or confers on the holders thereof any additional rights.
4.15 LEASE-BACKS. La Quinta covenants and agrees that it will not, and
will not permit any Subsidiary or Unincorporated Venture to, enter into any
arrangements, directly or indirectly, with any Person, whereby La Quinta, any
Subsidiary or Unincorporated Venture shall sell or transfer any property,
whether now owned or hereafter acquired, used or useful in its business, and
thereafter rent or lease the property sold or transferred in an aggregate amount
(determined at the greater of fair market value or net book value) in excess of
$20,000,000 while this Agreement is in effect.
4.16 ENVIRONMENTAL MATTERS.
(a) La Quinta covenants and agrees that it will not, and will not permit
any of its Subsidiaries or Unincorporated Ventures to, use, generate,
manufacture, produce, store, release, discharge or dispose of on, under or about
any real property owned or leased by La Quinta or any of its Subsidiaries or
Unincorporated Ventures (such owned or leased real property, the "PROPERTY"),
or transport to or from the Property, any Hazardous Substance (as defined
below), or (to the extent within La Quinta's or such Subsidiary's or
Unincorporated Venture's control) permit any other Person to do so, where such
could reasonably be expected to have a Material Adverse Effect.
(b) La Quinta shall keep and maintain and shall cause each Subsidiary
and Unincorporated Venture to keep and maintain, the Property in compliance with
any Environmental Law (as defined below) where the failure to do so could
reasonably be expected to have a Material Adverse Effect.
(c) In the event that any investigation, site monitoring, containment,
cleanup, removal, restoration or other remedial work of any kind or nature (the
"REMEDIAL WORK") with respect to the Property is required to be performed by
La Quinta or any of its Subsidiaries or Unincorporated Ventures under any
applicable local, state or federal law or regulation, any judicial order, or by
any governmental entity because of, or in connection with, the current or future
presence, suspected presence, release or suspected release of a Hazardous
Substance in or into the air, soil, groundwater or surface water at, on, under
or within the Property (or any portion thereof), La Quinta or such Subsidiary or
Unincorporated Venture shall within thirty (30) days after written demand for
performance thereof by the Banks (or such shorter period of time as may be
required under any applicable law, regulation, order or agreement), commence and
thereafter diligently prosecute to completion, all such Remedial Work.
(d) La Quinta will defend, indemnify and hold harmless the Banks, and
their respective employees, agents, officers and directors, from and against any
claims, demands,
- 14 -
<PAGE>
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature known or unknown, contingent or otherwise, arising out
of, or in any way relating to the violation of, noncompliance with or liability
under any Environmental Law applicable to the operations of La Quinta or any
Subsidiary or Unincorporated Venture or the Property, or any orders,
requirements or demands of Tribunal related thereto, including, without
limitation, attorneys' and consultants' fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the extent that
any of the foregoing arise out of the gross negligence or willful misconduct of
the party seeking indemnification therefor. This indemnity shall continue in
full force and effect regardless of the termination of this Agreement.
(e) As used herein, (i) "ENVIRONMENTAL LAW" means any federal, state
or local law, statute, ordinance, or regulation now or hereafter in effect
pertaining to health, industrial hygiene, or the environmental conditions on,
under or about the Property, and (ii) the term "HAZARDOUS SUBSTANCE" means
those substances included within the definitions of "HAZARDOUS SUBSTANCES",
"HAZARDOUS MATERIALS", "TOXIC SUBSTANCES", or "SOLID WASTE" under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. Sections 9601 ET SEQ., the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Sections 6901 ET SEQ. and the Hazardous
Materials Transportation Act, 49 U.S.C. Sections 1801 ET SEQ., and in the
regulations promulgated pursuant to said laws, and such other substances,
materials and wastes which are or become regulated under applicable local,
state or federal law, or which are classified as hazardous or toxic under
federal, state, or local laws or regulations.
4.17 ERISA COMPLIANCE. La Quinta covenants and agrees that it shall,
and shall cause each Subsidiary and Unincorporated Venture to (i) at all times,
make prompt payment of all contributions required under all Plans and required
to meet the minimum funding standard set forth in ERISA with respect to its
Plans, (ii) after the discovery by an Authorized Officer, notify Banks
immediately of any fact, including, but not limited to, any Reportable Event
arising in connection with any of its Plans, which might constitute grounds for
termination thereof by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such Plan, together with a
statement, if requested by any Bank, as to the reason therefor and the action,
if any, proposed to be taken with respect thereto, and (iii) not permit any Plan
to be subject to any involuntary termination proceedings.
4.18 BUSINESS. La Quinta covenants and agrees that it will not, and
will not permit any Subsidiary or Unincorporated Venture to, engage in, directly
or through other Persons, any business other than the businesses now carried on
and other businesses directly related thereto.
4.19 DEBT. La Quinta covenants and agrees that it will not, and will
cause each Subsidiary and Unincorporated Venture to not, (i) default, beyond any
notice, grace or cure period, in any payment equal to or exceeding the aggregate
amount of $1,000,000 of principal of or interest on any Debt with respect to
which recourse may be made against La Quinta or any Subsidiary or Unincorporated
Venture beyond any period of grace provided with respect thereto, or (ii)
default, beyond any notice, grace or cure period, in the performance of any
other agreement, term, covenant or condition contained in any agreement or
instrument under or by
- 15 -
<PAGE>
which any such Debt, the unpaid principal amount of which then equals or exceeds
$1,000,000 is created, evidenced or secured if the effect of such default is to
cause such Debt to become due before its stated maturity.
4.20 BANK DEBT. La Quinta covenants and agrees that it will not, and
will cause each Subsidiary to not, (i) default in any payment of principal of or
interest on any Bank Debt beyond any grace period with respect thereto, or (ii)
default, beyond any notice, grace or cure period, in the performance of any
other covenant or agreement contained in any Bank Debt or made by La Quinta
under or in connection with any Bank Debt, if the effect of such default is to
cause such Bank Debt to become due before its stated maturity.
4.21 TRANSACTIONS WITH AFFILIATES. La Quinta covenants and agrees that
it will not, and will not permit any Subsidiary or Unincorporated Venture to,
directly or indirectly, enter into any transaction (including, but not limited
to, the sale or exchange of property or the rendering of service) with any of
its Affiliates, other than in the ordinary course of business and upon fair and
reasonable terms no less favorable than La Quinta or any Subsidiary or
Unincorporated Venture could obtain or could become entitled to in an
arm's-length transaction with a Person which was not an Affiliate.
SECTION 5. INFORMATION AS TO LA QUINTA.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY LA QUINTA. La Quinta
will deliver to each Bank which has Bank Debt:
(A) As soon as practicable after the end of each of the first three
quarterly fiscal periods in each fiscal year of La Quinta, and in
any event within 45 days thereafter, duplicate copies of
(1) Combined balance sheets, statements of earnings, shareholders'
equity and cash flows for the portion of the fiscal year
ending with such quarter; all in reasonable detail and
accompanied by an Officer's Certificate certifying that the
aforementioned financial statements present fairly the
financial position of La Quinta (Combined Company) at the end
of such quarter and the results of operations and the changes
in financial position for the portion of the fiscal year
ending with such quarter, determined in accordance with GAAP;
(2) An Officer's Certificate certifying to the amount of Bank Debt
outstanding at the end of the fiscal quarter identified on an
EXHIBIT A attached thereto, which for the purpose of this
Agreement shall become EXHIBIT A hereto; and
(3) An Officer's Certificate (with calculations and a new EXHIBIT
E attached thereto) certifying (i) as to any increases or
reductions in interest in the
- 16 -
<PAGE>
Significant Investments, and (ii) compliance with Sections
4.4, 4.5, 4.9, 4.10 and 4.11.
(B) As soon as practicable after the end of each fiscal year of La
Quinta, and in any event within 120 days thereafter, duplicate
copies of:
(1) Combined balance sheets, statements of earnings, shareholders'
equity and cash flows of La Quinta for such year; all in
reasonable detail, prepared on a basis consistent with the
financial statements delivered to all Banks in prior periods
and accompanied by an unqualified opinion and report of KPMG
Peat Marwick, or other independent certified accountants of
recognized standing selected by La Quinta and reasonably
consented to by Banks, which report shall state that no
default under this Agreement and no condition or event which
after notice or lapse of time or both would constitute a
default under this Agreement has come to the knowledge of such
accountants or, if such is not the case, the details of such
default or such condition or event;
(2) Operating statements for such year and the preceding two years
with respect to all properties pledged to any Bank to secure
Bank Debt;
(3) An Officer's Certificate certifying to the amount of Bank Debt
outstanding at the last day of such year identified on an
EXHIBIT A attached thereto, which for the purpose of this
Agreement shall become EXHIBIT A hereto; and
(4) An Officer's Certificate (with calculations and a new EXHIBIT
E attached thereto) certifying (i) as to any increases or
reductions in interest in the Significant Investments, and
(ii) compliance with Sections 4.4, 4.5, 4.9, 4.10 and 4.11.
(C) As soon as practicable after La Quinta or any Subsidiary files with
the S.E.C. any of the following documents and in any event within 10
days thereafter, a copy of:
(1) Any final Registration Statement filed for the registration of
any securities under the Securities Act of 1933, as amended
(except a Registration Statement on Form S-8 for the
registration of stock to be issued in connection with any
Stock Plan);
(2) Each Annual and Periodic Report filed under Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended;
(3) Each definitive Proxy Statement filed pursuant to the
Securities Exchange Act of 1934, as amended; and
- 17 -
<PAGE>
together with any other document filed with the S.E.C. or the New
York Stock Exchange, Inc., as may be requested by any Bank.
(D) Upon request by any Bank, copies of the following:
(1) Each annual report/return, as well as all schedules and
attachments required to be filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the
regulations promulgated thereunder, in connection with each of
its Plans for each Plan year; and
(2) Such additional information concerning any of its Plans as may
be reasonably requested.
(E) Notice to each Bank which has Bank Debt that any warranty or
representation made by La Quinta contained in any instrument or
document delivered pursuant to the Bank Debt shall have been
incorrect in any material respect when made not later than one
business day after the discovery or awareness thereof by an
Authorized Officer.
(F) Promptly, notice to each Bank which has Bank Debt of the breach of
any covenant contained in Section 4.19 hereof.
(G) With reasonable promptness, such other data and information as from
time to time may be reasonably requested by any Bank.
(H) Notwithstanding anything in this Section 5.1 to the contrary, (i) if
the terms of any Subordinated Debt of La Quinta requires delivery of
Parent Company financial statements and (ii) any Bank shall request
delivery of Parent Company financial statements, La Quinta shall
also deliver to such Bank the financial statements required to be
delivered pursuant to (1) Section 5.1(A) on a Parent Company basis
within 60 days after the end of the first three quarterly fiscal
periods of La Quinta and (2) Section 5.1(B) on a Parent Company
basis within 120 days after the end of each fiscal year of La
Quinta.
5.2 OFFICER'S CERTIFICATE. Each set of financial statements delivered
pursuant to Subsection 5.1(A) and (B) shall be accompanied by an Officer's
Certificate stating whether there exists on the date of such certificate any
condition or event which then constitutes, or which after notice or lapse of
time or both, would constitute, a breach of any covenant herein, and if any such
condition or event then exists, specifying the nature and period of existence
thereof and the action La Quinta is taking or proposes to take with respect
thereto.
- 18 -
<PAGE>
SECTION 6. DEFAULT.
La Quinta hereby covenants, acknowledges and agrees that the failure of La
Quinta, any Subsidiary or Unincorporated Venture to perform or observe (i) any
covenant contained in Sections 4.3, 4.4, 4.5, 4.6, 4.7, 4.9, 4.10, 4.11, 4.12,
4.13, 4.14, 4.15, 4.19, 4.20, or 4.21 of this Agreement or (ii) any covenant
contained in Sections 4.1, 4.2, 4.8, 4.16, 4.17 or 4.18 failure to perform or
observe any such covenant has become known to an Authorized Officer or (b)
written notice thereof shall have been given by any Bank to La Quinta or (iii)
any other covenant contained in this Agreement to be performed or observed by it
and such failure continues for a period of 30 days after any Bank has given
written notice specifying such failure to La Quinta, shall be deemed, subject to
the waiver provisions of Section 7.2 hereof, to be a default or event of default
(however designated) under any Bank Debt, notwithstanding the specific
enumeration of the specific defaults or events of default with respect to such
Bank Debt, and any Bank may perform all rights and remedies granted such Bank
under the Bank Debt owing to such as if a default or event of default
specifically enumerated in such Bank Debt had occurred. La Quinta further
acknowledges and agrees that the covenants set forth in this Agreement and the
effect of the failure to perform such covenants as set forth in this Section 6
shall be deemed to be incorporated by reference in such Bank Debt, MUTATIS
MUTANDIS. The grace periods provided for in this Section 6 are in lieu of and
not in addition to any grace periods provided with respect to any Bank Debt.
SECTION 7. MISCELLANEOUS.
7.1 NOTICE. All notices, requests, consents and demands shall be in
writing and shall be delivered by hand or overnight courier service, mailed or
sent by telecopy, to the respective addresses specified below, or, as to any
party, to such other address as may be designated by it in written notice to all
other parties. All notices, requests, consents and demands hereunder shall be
deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by telecopy, or if mailed, on the earlier of
actual receipt or three (3) days after being mailed by certified mail, return
receipt requested, postage prepaid, addressed as aforesaid.
La Quinta Inns, Inc.
112 East Pecan Street, Suite 1200
San Antonio, Texas 78205
Attention: Vice President - Treasurer
with a copy to:
La Quinta Inns, Inc.
112 East Pecan Street, Suite 1200
San Antonio, Texas 78205
Attention: Office of General Counsel
- 19 -
<PAGE>
First Interstate Bank of Texas, N.A.
700 North St. Mary's Street
Suite 300
San Antonio, Texas 78205
Attention: Charles T. Bridgeman
7.2 AMENDMENT, WAIVER, CONSENTS AND APPROVALS. This Agreement may be
amended, and the observance of any provision of this Agreement may be waived and
consent or approval to any action described in this Agreement may be granted,
only with the written consent of La Quinta and Banks holding in aggregate at
least 66-2/3% in principal amount of the Bank Debt as of the last day of the
month preceding the month in which such written amendment, waiver, approval or
consent is requested; provided, however, that no such amendment, waiver,
approval or consent, without the written consent of all of the Banks, shall (i)
change this Section 7.2 or (ii) waive, modify or otherwise affect compliance
with Section 4.20 hereof. All Banks shall receive in writing the request for
any waivers, modifications, amendments, approvals or consents of any of the
provisions hereof.
7.3 NOTICE OF DEFAULT ON BANK DEBT. Each Bank agrees to give prompt
notice to each other Bank of (i) any default in the payment of principal of or
interest on any Bank Debt beyond any period of grace with respect thereto, (ii)
any default in the performance of any other agreement, term, covenant or
condition contained in any Bank Debt beyond any period of grace provided with
respect thereto and (iii) any default in the performance of any covenant of La
Quinta set forth in this Agreement. Each Bank agrees to simultaneously deliver
to each other Bank a copy of any notice delivered to La Quinta pursuant to
Section 6 hereof. Each Bank shall use its best efforts to deliver the notices
provided for in this Section 7.3; however, no Bank shall have any liability to
any other Bank for failing to comply with this Section 7.3.
7.4 CONFLICTS. In the event of any conflict between the terms of this
Agreement and the terms of any Bank Debt with respect to the subject matter
contained herein, the terms and provisions of this Agreement shall control and
prevail.
7.5 PAYMENT OF EXPENSES. La Quinta will pay all reasonable expenses
of the Banks, including, without limitation, the reasonable fees, expenses and
disbursement of counsel, incurred in connection with the transactions
contemplated by this Agreement.
7.6 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas and the laws of the United
States.
7.7 BINDING UPON SUCCESSORS. This Agreement shall be binding upon
La Quinta so long as any Bank Debt is outstanding, and each of the Banks and
their respective successors and assigns, and shall inure to the benefit of La
Quinta and the Banks and successors and assigns of the Banks, except that La
Quinta shall not have the right to assign any of its rights or obligations
hereunder without the written consent of all the Banks.
- 20 -
<PAGE>
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, but in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart. It is not necessary that
each Bank execute the same counterpart, so long as counterparts are executed by
La Quinta and each Bank.
7.9 TERMINATION AND EFFECTIVENESS OF THIS AGREEMENT. This Agreement
shall remain in full force and effect so long as there is any Bank Debt
outstanding. At such time as there is no longer any Bank Debt outstanding, this
Agreement shall terminate and be of no further force and effect.
7.10 ADJUSTMENT OF PERCENTAGES. The percentages of each Bank set forth
on EXHIBIT A hereto shall be automatically adjusted subsequent to the date of
this Agreement as a result of (i) any payment or prepayment of any Bank Debt,
(ii) any renewals, extensions, or refinancings of Bank Debt among the Banks,
(iii) participations in Bank Debt sold by one Bank to another Bank or any
purchase or assumption of Bank Debt between or among Banks, or (iv) assignments
of Bank Debt pursuant to Section 7.13 hereof; otherwise, there shall be no
adjustments to the percentages set forth on EXHIBIT A. Further, except as set
forth in Section 7.13 hereof, no other Person may become a party to this
Agreement without the prior written consent of the Banks.
7.11 EXCEPTIONS TO COVENANTS. La Quinta shall not be deemed to be
permitted to take any action or fail to take any action which is permitted as an
exception to any of the covenants contained herein or which is within the
permissible limits of any of the covenants contained herein if such action or
omission would result in the breach of any other covenant contained herein.
7.12 CONFIDENTIALITY. Each Bank agrees (on behalf of itself and each
of its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by La Quinta pursuant to this Agreement which is identified by La
Quinta as being confidential at the time the same is delivered to the Banks,
provided that nothing herein shall limit the disclosure of any such information
(i) to the extent required by statute, rule, regulation or judicial process,
(ii) to counsel for any of the Banks, (iii) to bank examiners, auditors or
accountants of any Bank, (iv) any other Bank, (v) in connection with any
litigation to which any one or more of the Banks is a party, provided, further,
that unless specifically prohibited by applicable laws or court order, each Bank
agrees, prior to disclosure thereof, to notify La Quinta of any request for
disclosure of any such non-public information (x) by any governmental agency or
representative thereof (other than any such request in connection with an
examination of the financial condition of La Quinta or any Subsidiary or
Unincorporated Venture or (y) pursuant to legal process, or (vi) to any
participant (or prospective participant) of any Bank Debt so long as such
participant (or prospective participant) first executes and delivers to the
respective Bank an agreement (a "CONFIDENTIALITY AGREEMENT") in substantially
the form of EXHIBIT F hereto; and provided finally that in no event shall any
Bank be obligated or required to return any materials
- 21 -
<PAGE>
furnished by the Company. The obligations of each Bank under this Section 7.12
shall supersede and replace the obligations of such Bank under any
confidentiality letter in respect of any Bank Debt initially signed and
delivered by such Bank to La Quinta prior to the date hereof.
7.13 ASSIGNMENT. Each Bank may assign to one or more financial
institutions or funds organized under the laws of the United States, or any
state thereof, or under the laws of any other country that is a member of the
Organization for Economic Cooperation and Development, or a political
subdivision of any such country, which is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its business
(each, an "Assignee") its rights and obligations under the Bank Debt owned by
such Bank and its rights under this Agreement subject, to the extent applicable,
to the terms and provisions of Section 11.6 of the Credit Agreement. Upon the
effectiveness of such assignment, (i) the assignee Bank shall be party hereto
and, to the extent that rights hereunder have been assigned to it, have the
rights of a Bank hereunder and (ii) the assigning Bank shall, to the extent that
rights hereunder have been assigned by it, relinquish such rights under this
Agreement.
7.14 ACCOUNTING TERMS. All accounting terms used herein and not
otherwise defined herein shall be construed in accordance with GAAP, and all
financial computations and determinations shall be made on a Combined basis.
===============================================================================
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
===============================================================================
- 22 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of September 12, 1995
LA QUINTA INNS, INC.
/s/ Dewey W. Chambers
By:____________________________________
Dewey W. Chambers, Vice
President-Treasurer
The following Subsidiaries of La Quinta
hereby acknowledge and agree to the covenants
and restrictions set forth herein by signing
below:
LA QUINTA REALTY CORP.
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
LA QUINTA PLAZA, INC.
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
LA QUINTA FINANCIAL CORPORATION
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
- 23 -
<PAGE>
LA QUINTA INVESTMENTS, INC.
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
LQI ACQUISITION CORPORATION
By:________________________________
Its:_______________________________
LQM OPERATING PARTNERS, L.P.
By: La Quinta Realty Corp., its General Partner
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
LA QUINTA MOTOR INNS, LIMITED PARTNERSHIP
By: La Quinta Realty Corp., its General Partner
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
- 24 -
<PAGE>
LQM OPERATING PARTNERS, L.P.
By: La Quinta Realty Corp., its General Partner
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
LQ-BIG APPLE JOINT VENTURE
By: La Quinta Inns, Inc., its Partner
/s/ Dewey W. Chambers
By:________________________________
Dewey W. Chambers, Vice President-Treasurer
By: La Quinta Investments, Inc., its Partner
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
LQ-LNL LIMITED PARTNERSHIP
By: La Quinta Inns, Inc., its Managing General Partner
/s/ Dewey W. Chambers
By:________________________________
Dewey W. Chambers, Vice President-Treasurer
- 25 -
<PAGE>
LQ-EAST IRVINE JOINT VENTURE
By: La Quinta Inns, Inc., its Partner
/s/ Dewey W. Chambers
By:________________________________
Dewey W. Chambers, Vice President-Treasurer
By: La Quinta Investments, Inc., its Partner
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
LQ-INVESTMENTS I
By: La Quinta Inns, Inc., its Managing General Partner
/s/ Dewey W. Chambers
By:________________________________
Dewey W. Chambers, Vice President-Treasurer
By: La Quinta Investments, Inc., a General Partner
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
- 26 -
<PAGE>
LQ-INVESTMENTS II
By: La Quinta Inns, Inc., its Managing General Partner
/s/ Dewey W. Chambers
By:________________________________
Dewey W. Chambers, Vice President-Treasurer
By: La Quinta Investments, Inc., a General Partner
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
LA QUINTA INNS OF LUBBOCK, INC.
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
LA QUINTA INNS OF PUERTO RICO, INC.
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
LQ - BATON ROUGE JOINT VENTURE
By La Quinta Inns, Inc., its
Managing General Partner
/s/ John F. Schmutz
By:________________________________
John F. Schmutz, Vice President
- 27 -
<PAGE>
LA QUINTA DENVER - PEORIA STREET, LTD.
By: La Quinta Inns, Inc.
/s/ Dewey W. Chambers
By:________________________________
Dewey W. Chambers, Vice President-Treasurer
LA QUINTA DEVELOPMENT PARTNERS, L.P.
By: La Quinta Inns, Inc.
/s/ Dewey W. Chambers
By:________________________________
Dewey W. Chambers, Vice President-Treasurer
FIRST INTERSTATE BANK OF TEXAS, N.A.
/s/ Charles T. Bridgeman
By:_____________________________________
Charles T. Bridgeman
Title:_____________________________
- 28 -
<PAGE>
EXHIBIT 12
LA QUINTA INNS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- ------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes
and extraordinary items and
cumulative effect of accounting
change............................ $ 44,848 $ 27,577 $ 61,991 $ 31,836 $ (7,270) $ 2,185 $ 3,398
Partners' equity in earnings and
losses............................ 8,976 5,522 11,406 12,965 15,081 9,421 8,408
Partners' equity in earnings of
combined unincorporated ventures
that do not have fixed charges.... (995) (762) (1,577) (1,652) (1,504) (845) (802)
Fixed charges...................... 21,274 19,751 40,814 32,477 34,270 40,012 42,269
Interest capitalized............... (388) (597) (889) -- (50) -- --
Amortization of capitalized
interest.......................... 399 377 772 799 799 1,064 1,064
--------- --------- ---------- --------- --------- --------- ---------
Earnings as adjusted............. $ 74,114 $ 51,868 $ 112,517 $ 76,425 $ 41,326 $ 51,837 $ 54,337
--------- --------- ---------- --------- --------- --------- ---------
--------- --------- ---------- --------- --------- --------- ---------
Fixed charges:
Interest on long-term debt
(before capitalized interest)... $ 20,771 $ 19,196 $ 39,749 $ 31,366 $ 33,137 $ 38,713 $ 40,911
Portion of rental expense
allocated to interest........... 503 555 1,065 1,111 1,133 1,299 1,358
--------- --------- ---------- --------- --------- --------- ---------
Total fixed charges............ $ 21,274 $ 19,751 $ 40,814 $ 32,477 $ 34,270 $ 40,012 $ 42,269
--------- --------- ---------- --------- --------- --------- ---------
--------- --------- ---------- --------- --------- --------- ---------
Ratio of earnings to fixed
charges........................... 3.5x 2.6x 2.8x 2.4x 1.2x 1.3x 1.3x
--------- --------- ---------- --------- --------- --------- ---------
--------- --------- ---------- --------- --------- --------- ---------
</TABLE>
COMPUTATION OF PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
The following computations for the six months ended June30, 1995 and for the
year ended December31, 1994 reflect, on a pro-forma basis, earnings available
for fixed charges, fixed charges and the resultant ratio, after giving effect to
the AEW Transaction and the sale of the Senior Notes and the anticipated
application of the net proceeds therefrom.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1995 1994
----------- ------------
<S> <C> <C>
Earnings as adjusted.................................................... $ 74,114 $ 112,517
Adjustments related to the AEW Transaction.............................. (548) (1,096)
----------- ------------
Pro forma, adjusted earnings............................................ $ 73,566 $ 111,421
----------- ------------
----------- ------------
Fixed charges........................................................... $ 21,274 $ 40,814
Pro forma adjustments:
Adjustment related to the AEW Transaction............................. 1,658 3,316
Interest expense, including debt issuance costs, relating to the
proceeds of the Senior Notes......................................... 3,875 7,750
Interest expense reduction attributable to the substitution of the
proceeds from the sale of the Senior Notes to refinance existing
debt................................................................. (3,688) (7,306)
----------- ------------
Pro forma fixed charges............................................. $ 23,119 $ 44,574
----------- ------------
----------- ------------
Pro forma ratio of earnings to fixed charges............................ 3.2x 2.5x
----------- ------------
----------- ------------
</TABLE>
<PAGE>
EXHIBIT 23(A)
The Board of Directors
La Quinta Inns, Inc.
We consent to the use of our audit report, dated January 23, 1995 related to
the combined balance sheets as of December 31, 1994 and 1993, and the related
combined statements of operations, shareholders equity and cash flows for each
of the years in the three-year period ended December 31, 1994, incorporated
herein by reference and to the reference to our firm under the heading "Experts"
in the Prospectus.
Our audit report refers to the adoption of Statement of Financial Accounting
Standards No. 109 in 1993.
KPMG PEAT MARWICK LLP
San Antonio, Texas
September 19, 1995
