<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
<TABLE>
<CAPTION>
Commission File Number: 1-6828 Commission File Number: 1-7959
<S> <C>
STARWOOD LODGING TRUST STARWOOD LODGING
(Exact name of registrant as specified in its charter) CORPORATION
Maryland (Exact name of registrant as specified in its charter)
(State or other jurisdiction Maryland
of incorporation or organization) (State or other jurisdiction
52-0901263 of incorporation or organization)
(I.R.S. employer identification no.) 52-1193298
2231 East Camelback Road, Suite 410 (I.R.S. employer identification no.)
Phoenix, AZ 85016 2231 East Camelback Road, Suite 400
(Address of principal executive Phoenix, AZ 85016
offices, including zip code) (Address of principal executive
(602) 852-3900 offices, including zip code)
(Registrant's telephone number, (602) 852-3900
including area code) (Registrant's telephone number,
including area code)
</TABLE>
Indicate by check mark whether the Registrants (1) have filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrants were required to file such
reports), and (2) have been subject to such filing requirements for the
past 90 days. Yes X No.
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
63,249,247 Shares of Beneficial Interest, par value $0.01 per
share, of Starwood Lodging Trust paired with 63,249,247 Shares of Common
Stock, par value $0.01 per share, of Starwood Lodging Corporation,
outstanding as of October 29, 1997.
<PAGE> 2
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements of Starwood Lodging Trust and
Starwood Lodging Corporation are provided pursuant to the requirements of this
item.
INDEX TO FINANCIAL STATEMENTS
Starwood Lodging Trust and Starwood Lodging Corporation:
Combined Consolidated Balance Sheets - As of September 30, 1997 and
December 31, 1996
Combined Consolidated Statements of Operations - For the three and nine months
ended September 30, 1997 and 1996
Combined Consolidated Statements of Cash Flows - For the nine months ended
September 30, 1997 and 1996
Starwood Lodging Trust:
Consolidated Balance Sheets - As of September 30, 1997 and December 31, 1996
Consolidated Statements of Operations - For the three and nine months ended
September 30, 1997 and 1996
Consolidated Statements of Cash Flows - For the nine months ended
September 30, 1997 and 1996
Starwood Lodging Corporation:
Consolidated Balance Sheets - As of September 30, 1997 and December 31, 1996
Consolidated Statements of Operations - For the three and nine months ended
September 30, 1997 and 1996
Consolidated Statements of Cash Flows - For the nine months ended September 30,
1997 and 1996
Notes to Financial Statements
<PAGE> 3
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Hotel assets held for sale - net ............................................... $ 32,215 $ 21,644
Hotel assets - net ............................................................. 2,323,657 1,100,030
----------- -----------
2,355,872 1,121,674
Mortgage notes receivable - net ................................................ 79,465 90,741
Investments .................................................................... 1,691 948
----------- -----------
Total real estate investments ............................................... 2,437,028 1,213,363
Cash and cash equivalents ...................................................... 28,527 25,426
Accounts, interest and rent receivable ......................................... 71,709 43,278
Notes receivable - net ......................................................... 2,701 2,930
Inventories, prepaid expenses and other assets ................................. 55,633 27,743
----------- -----------
$ 2,595,598 $ 1,312,740
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Collateralized notes payable and lines of credit ............................... $ 1,217,861 $ 422,334
Mortgage and other notes payable ............................................... 218,558 57,232
Accounts payable and other liabilities ......................................... 79,768 57,296
Distributions payable .......................................................... 28,447 19,258
----------- -----------
1,544,634 556,120
----------- -----------
Commitments and contingencies
MINORITY INTEREST .............................................................. 258,926 163,959
----------- -----------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest at September 30, 1997 and December 31, 1996;
$.01 par value; authorized 100,000,000 shares; outstanding 45,725,852 and
40,078,000 at September 30, 1997 and December 31, 1996, respectively ........ 457 401
Corporation common stock at September 30, 1997 and
December 31, 1996; $.01 par value; authorized 100,000,000
shares; outstanding 45,725,852 and 40,078,000 at
September 30, 1997 and December 31, 1996, respectively ...................... 457 401
Additional paid-in capital ..................................................... 1,094,849 827,760
Distributions in excess of earnings ............................................ (303,725) (235,901)
----------- -----------
792,038 592,661
----------- -----------
$ 2,595,598 $ 1,312,740
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended September 30,
1997 1996
---- ----
<S> <C> <C>
REVENUE
Rooms ........................................................ $ 154,004 $ 78,962
Food and beverage ............................................ 56,366 26,004
Other ........................................................ 16,449 9,320
--------- ---------
Total hotel revenue ........................................ 226,819 114,286
Gaming ....................................................... 3,665 5,593
Interest from mortgage and other notes ....................... 3,363 2,944
Rents from leased hotel properties and income from
investments ................................................ 260 223
Management fees and other income ............................. 2,530 129
Gain (loss) on sale of real estate investments ............... 283 (1,037)
--------- ---------
236,920 122,138
--------- ---------
EXPENSES
Rooms ........................................................ 37,385 19,993
Food and beverage ............................................ 42,577 20,844
Other ........................................................ 76,482 39,398
--------- ---------
Total hotel expenses ....................................... 156,444 80,235
Gaming ....................................................... 4,306 5,624
Interest ..................................................... 17,828 6,588
Depreciation and amortization ................................ 49,884 16,368
Administrative and general ................................... 5,454 4,644
--------- ---------
233,916 113,459
--------- ---------
Income before minority interest .............................. 3,004 8,679
Minority interest ............................................ 679 2,580
--------- ---------
Income before extraordinary item ............................. 2,325 6,099
Extraordinary item due to early extinguishment of debt (net of
$971,000 minority interest) ................................ (3,452) --
--------- ---------
NET INCOME (LOSS) .................................. $ (1,127) $ 6,099
========= =========
EARNINGS (LOSS) PER PAIRED SHARE
Income before extraordinary item ............................. $ 0.05 $ 0.19
Extraordinary item ........................................... (0.07) --
--------- ---------
NET INCOME (LOSS) PER PAIRED SHARE ................. $ (0.02) $ 0.19
========= =========
Weighted Average Number of Paired Shares ..................... 48,317 32,900
========= =========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
---- ----
<S> <C> <C>
REVENUE
Rooms ........................................................ $ 403,235 $ 168,090
Food and beverage ............................................ 157,260 49,652
Other ........................................................ 43,119 19,513
--------- ---------
Total hotel revenue ........................................ 603,614 237,255
Gaming ....................................................... 11,392 19,336
Interest from mortgage and other notes ....................... 10,576 7,705
Rents from leased hotel properties and income from
investments ................................................ 701 688
Management fees and other income ............................. 6,726 1,782
Loss on sale of real estate investments ...................... (221) (1,384)
--------- ---------
632,788 265,382
--------- ---------
EXPENSES
Rooms ........................................................ 98,004 42,020
Food and beverage ............................................ 118,058 39,356
Other ........................................................ 200,856 83,020
--------- ---------
Total hotel expenses ....................................... 416,918 164,396
Gaming ....................................................... 12,554 17,816
Interest ..................................................... 41,139 15,360
Depreciation and amortization ................................ 104,271 30,158
Administrative and general ................................... 19,002 10,009
--------- ---------
593,884 237,739
--------- ---------
Income before minority interest .............................. 38,904 27,643
Minority interest ............................................ 10,627 8,933
--------- ---------
Income before extraordinary item ............................. 28,277 18,710
Extraordinary item due to early extinguishment of debt (net of
$971,000 and $413,000 minority interest, respectively) ...... (3,452) 1,077
--------- ---------
NET INCOME ......................................... $ 24,825 $ 19,787
========= =========
EARNINGS PER PAIRED SHARE
Income before extraordinary item ............................. $ 0.60 $ 0.72
Extraordinary item ........................................... (0.07) 0.04
--------- ---------
NET INCOME PER PAIRED SHARE ........................ $ 0.53 $ 0.76
========= =========
Weighted Average Number of Paired Shares ..................... 46,830 26,000
========= =========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................... $ 24,825 $ 19,787
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interest ............................................. 10,627 8,933
Extraordinary item due to early extinguishment of debt ........ 3,452 (1,077)
Depreciation and amortization ................................. 104,271 30,158
Accretion of discount ......................................... (4,309) (2,344)
Warrants and paired shares issued as compensation ............. 2,420 --
Loss on sale of real estate investments ....................... 221 1,384
Changes in operating assets and liabilities:
Increase in accounts receivable, inventories, prepaid expenses
and other assets ............................................ (55,555) (37,964)
Increase in accounts payable and other liabilities ............ 12,709 26,800
----------- ---------
Net cash provided by operating activities ........... 98,661 45,677
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of hotel properties ................................. (841,462) (684,125)
Improvements and additions to hotel assets ...................... (110,912) (13,888)
Purchase of investments ......................................... (1,443) (2,380)
Sale of investments ............................................. 940 2,547
Net proceeds from sale of real estate investments ............... 18,244 11,284
Purchase of mortgage and other notes receivable ................. -- (20,259)
Principal received on mortgage and other notes receivable ....... 15,924 3,234
----------- ---------
Net cash used in investing activities ............... (918,709) (703,587)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under collateralized notes payable and lines of credit 1,565,328 327,586
Borrowings under mortgage and other notes payable ............... 87,965 3,439
Payments on collateralized notes payable and lines of credit .... (769,834) (44,327)
Principal payments on mortgage and other notes payable .......... (98,739) (3,275)
Net proceeds from equity offerings .............................. 129,667 429,485
Contributed capital and adjustments ............................. 614 131
Stock repurchase ................................................ (25,724) --
Distributions paid .............................................. (66,128) (30,206)
----------- ---------
Net cash provided by financing activities ........... 823,149 682,833
----------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS .......................... 3,101 24,923
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF
THE PERIOD ..................................................... 25,426 9,332
----------- ---------
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD ......................................................... $ 28,527 $ 34,255
=========== =========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
STARWOOD LODGING TRUST
UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Hotel assets held for sale - net ............................................... $ 9,925 $ 12,615
Hotel assets - net ............................................................. 2,091,246 988,309
----------- -----------
2,101,171 1,000,924
Mortgage notes receivable - net ................................................ 79,465 90,741
Mortgage notes receivable - Corporation ........................................ 209,642 88,077
Investments .................................................................... 1,451 948
----------- -----------
Total real estate investments ............................................ 2,391,729 1,180,690
Cash and cash equivalents ...................................................... 3,169 3,810
Rent and interest receivable .................................................. 13,823 12,617
Notes receivable - net ......................................................... 2,080 2,237
Notes receivable - Corporation ................................................. 57,712 17,741
Prepaid expenses and other assets .............................................. 22,693 16,271
----------- -----------
$ 2,491,206 $ 1,233,366
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Collateralized notes payable and lines of credit ............................... $ 1,217,861 $ 422,334
Mortgage and other notes payable ............................................... 217,606 55,269
Accounts payable and other liabilities ......................................... 19,233 9,200
Distributions payable .......................................................... 28,348 19,258
----------- -----------
1,483,048 506,061
----------- -----------
Commitments and contingencies
MINORITY INTEREST .............................................................. 247,804 158,005
----------- -----------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest at September 30, 1997 and December 31, 1996;
$.01 par value; authorized 100,000,000 shares; outstanding 45,725,852 and
40,078,000 at
September 30, 1997 and December 31, 1996, respectively ...................... 457 401
Additional paid-in capital ..................................................... 979,885 729,276
Distributions in excess of earnings ............................................ (219,988) (160,377)
----------- -----------
760,354 569,300
----------- -----------
$ 2,491,206 $ 1,233,366
=========== ===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
STARWOOD LODGING TRUST
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended September 30,
1997 1996
---- ----
<S> <C> <C>
REVENUE
Rents from Corporation ....................................... $ 62,066 $ 26,267
Interest from Corporation .................................... 4,486 1,855
Interest from mortgage and other notes ....................... 3,363 2,952
Rents from other leased hotel properties and income from
joint ventures ............................................ 260 223
Other income ................................................. 302 305
Gain (loss) on sale of real estate investments ............... 283 (1,037)
-------- --------
70,760 30,565
-------- --------
EXPENSES
Interest ..................................................... 17,752 6,547
Depreciation and amortization ................................ 45,403 14,191
Administrative and general ................................... 1,914 156
-------- --------
65,069 20,894
-------- --------
Income before minority interest .............................. 5,691 9,671
Minority interest ............................................ 147 2,063
-------- --------
Income before extraordinary item ............................. 5,544 7,608
Extraordinary item due to early extinguishment of debt (net of
$971,000 minority interest) ................................ (3,452) --
-------- --------
NET INCOME ......................................... $ 2,092 $ 7,608
======== ========
EARNINGS PER SHARE
Income before extraordinary item ............................. $ 0.11 $ 0.23
Extraordinary item ........................................... (0.07) --
-------- --------
NET INCOME PER SHARE ............................... $ 0.04 $ 0.23
======== ========
Weighted Average Number of Shares ............................ 48,317 32,900
======== ========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
STARWOOD LODGING TRUST
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
---- ----
<S> <C> <C>
REVENUE
Rents from Corporation ....................................... $ 157,571 $ 54,037
Interest from Corporation .................................... 9,776 5,958
Interest from mortgage and other notes ....................... 10,576 7,648
Rents from other leased hotel properties and income from
joint ventures ............................................ 701 688
Other income ................................................. 1,853 1,378
Gain (loss) on sales of real estate investments .............. 283 (1,384)
--------- --------
180,760 68,325
--------- --------
EXPENSES
Interest ..................................................... 41,012 15,132
Depreciation and amortization ................................ 88,204 21,407
Administrative and general ................................... 7,031 2,886
--------- --------
136,247 39,425
--------- --------
Income before minority interest .............................. 44,513 28,900
Minority interest ............................................ 9,957 8,550
--------- --------
Income before extraordinary item ............................. 34,556 20,350
Extraordinary item due to early extinguishment of debt (net of
$971,000 minority interest) ................................ (3,452) --
--------- --------
NET INCOME ......................................... $ 31,104 $ 20,350
========= ========
EARNINGS PER SHARE
Income before extraordinary item ............................. $ 0.73 $ 0.78
Extraordinary item ........................................... (0.07) --
--------- --------
NET INCOME PER SHARE ............................... $ 0.66 $ 0.78
========= ========
Weighted Average Number of Shares ............................ 46,830 26,000
========= ========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 10
STARWOOD LODGING TRUST
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................... $ 31,104 $ 20,350
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interest ............................................. 9,957 8,550
Extraordinary item due to early extinguishment of debt ........ 3,452 --
Depreciation and amortization ................................. 88,204 21,407
Accretion of discount ......................................... (4,309) (2,344)
Deferred interest - Corporation ............................... (3,076) (2,076)
Warrants and paired shares issued as compensation ............. 2,155 --
(Gain) loss on sale of real estate investments ................ (283) 1,384
Changes in operating assets and liabilities:
Increase in rent and interest receivable, prepaid expenses and
other assets .............................................. (15,977) (12,554)
Increase in accounts payable and other liabilities ............ 270 1,950
----------- ---------
Net cash provided by operating activities ........... 111,497 36,667
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of hotel properties ................................. (841,462) (659,421)
Improvements and additions to hotel assets ...................... (91,386) (7,831)
Purchase of investments ......................................... (1,443) (1,871)
Sale of investments ............................................. 940 2,547
Net proceeds from sale of real estate investments ............... 10,983 11,284
Purchase of mortgage and other notes receivable ................. -- (20,113)
Principal received on mortgage and other notes receivable ....... 15,591 3,201
Net change in notes receivable - Corporation .................... (25,610) (16,031)
----------- ---------
Net cash used in investing activities ............... (932,387) (688,235)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under collateralized notes payable and lines of credit 1,565,328 327,586
Borrowings under mortgage and other notes payable ............... 87,965 2,829
Payments on collateralized notes payable and lines of credit .... (769,834) (44,327)
Principal payments on mortgage and other notes payable .......... (97,728) (35)
Net proceeds from equity offerings .............................. 123,215 408,000
Contributed capital and adjustments ............................. 1,508 128
Stock repurchase ................................................ (24,438) --
Distributions paid .............................................. (65,767) (30,206)
----------- ---------
Net cash provided by financing activities ........... 820,249 663,975
----------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................ (641) 12,407
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD ................................................. 3,810 710
----------- ---------
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD ......................................................... $ 3,169 $ 13,117
=========== =========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 11
STARWOOD LODGING CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Hotel assets held for sale - net ............................................. $ 22,290 $ 9,029
Hotel assets - net ........................................................... 232,411 111,721
--------- ---------
254,701 120,750
Investments .................................................................. 240 --
--------- ---------
Total real estate investments .......................................... 254,941 120,750
Cash and cash equivalents .................................................... 25,358 21,616
Accounts receivable .......................................................... 57,886 30,661
Notes receivable ............................................................. 621 693
Inventories, prepaid expenses and other assets ............................... 32,940 11,472
--------- ---------
$ 371,746 $ 185,192
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage and other notes payable ............................................. $ 952 $ 1,963
Mortgage notes payable - Trust ............................................... 209,642 88,077
Notes payable - Trust ........................................................ 57,712 17,741
Accounts payable and other liabilities ....................................... 60,535 48,096
Distributions payable ........................................................ 99 --
--------- ---------
328,940 155,877
--------- ---------
Commitments and contingencies
MINORITY INTEREST ............................................................ 11,122 5,954
--------- ---------
SHAREHOLDERS' EQUITY
Corporation common stock at September 30, 1997 and December 31, 1996; $.01 par
value; authorized 100,000,000 shares; outstanding 45,725,852 and 40,078,000
at September 30, 1997 and December 31, 1996, respectively ................. 457 401
Additional paid-in capital ................................................... 114,964 98,484
Accumulated deficit .......................................................... (83,737) (75,524)
--------- ---------
31,684 23,361
--------- ---------
$ 371,746 $ 185,192
========= =========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 12
STARWOOD LODGING CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended September 30,
1997 1996
---- ----
<S> <C> <C>
REVENUE
Rooms ........................... $ 154,004 $ 78,962
Food and beverage ............... 56,366 26,004
Other ........................... 16,449 9,320
--------- ---------
Total hotel revenue ........... 226,819 114,286
Gaming .......................... 3,665 5,593
Interest from notes receivable .. -- (8)
Management fees and other income 2,228 (176)
--------- ---------
232,712 119,695
--------- ---------
EXPENSES
Rooms ........................... 37,385 19,993
Food and beverage ............... 42,577 20,844
Other ........................... 76,482 39,398
--------- ---------
Total hotel expenses .......... 156,444 80,235
Gaming .......................... 4,306 5,624
Rent - Trust .................... 62,066 26,267
Interest - Trust ................ 4,486 1,855
Interest - other ................ 76 41
Depreciation and amortization ... 4,481 2,177
Administrative and general ...... 3,540 4,488
--------- ---------
235,399 120,687
--------- ---------
Loss before minority interest ... (2,687) (992)
Minority interest ............... 532 517
--------- ---------
NET LOSS .............. $ (3,219) $ (1,509)
========= =========
NET LOSS PER SHARE .... $ (0.06) $ (0.04)
========= =========
Weighted Average Number of Shares 48,317 32,900
========= =========
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 13
STARWOOD LODGING CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
---- ----
<S> <C> <C>
REVENUE
Rooms ....................................................................... $ 403,235 $ 168,090
Food and beverage ........................................................... 157,260 49,652
Other ....................................................................... 43,119 19,513
--------- ---------
Total hotel revenue ....................................................... 603,614 237,255
Gaming ...................................................................... 11,392 19,336
Interest from notes receivable .............................................. -- 57
Management fees and other income ............................................ 4,873 404
Loss on sale of real estate investments ..................................... (504) --
--------- ---------
619,375 257,052
--------- ---------
EXPENSES
Rooms ....................................................................... 98,004 42,020
Food and beverage ........................................................... 118,058 39,356
Other ....................................................................... 200,856 83,020
--------- ---------
Total hotel expenses ...................................................... 416,918 164,396
Gaming ...................................................................... 12,554 17,816
Rent - Trust ................................................................ 157,571 54,037
Interest - Trust ............................................................ 9,776 5,958
Interest - other ............................................................ 127 228
Depreciation and amortization ............................................... 16,067 8,751
Administrative and general .................................................. 11,971 7,123
--------- ---------
624,984 258,309
--------- ---------
Loss before minority interest ............................................... (5,609) (1,257)
Minority interest ........................................................... 670 383
--------- ---------
Loss before extraordinary item .............................................. (6,279) (1,640)
Extraordinary item due to early extinguishment of debt (net of
$413,000 minority interest) ............................................... -- 1,077
--------- ---------
NET LOSS .......................................................... $ (6,279) $ (563)
========= =========
LOSS PER SHARE
Loss before extraordinary item .............................................. $ (0.13) $ (0.06)
Extraordinary item .......................................................... -- 0.04
--------- ---------
NET LOSS PER SHARE ................................................ $ (0.13) $ (0.02)
========= =========
Weighted Average Number of Shares ........................................... 46,830 26,000
========= =========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 14
STARWOOD LODGING CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ....................................................... $ (6,279) $ (563)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Minority interest ............................................ 670 383
Extraordinary item due to early extinguishment of debt ....... -- (1,077)
Depreciation and amortization ................................ 16,067 8,751
Deferred interest - Trust .................................... 3,076 2,076
Paired shares issued as compensation ......................... 265 --
Loss on sale ................................................. 504 --
Changes in operating assets and liabilities:
Increase in accounts receivable, inventories, prepaid expenses
and other assets ........................................... (39,578) (25,410)
Increase in accounts payable and other liabilities ........... 12,439 24,850
-------- --------
Net cash provided by (used in) operating activities (12,836) 9,010
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of hotel properties ................................ -- (24,704)
Improvements and additions to hotel assets ..................... (19,526) (6,057)
Purchase of investments ........................................ -- (509)
Net proceeds from sale of real estate investments .............. 7,261 --
Purchase of notes receivable ................................... -- (146)
Principal received on notes receivable ......................... 333 33
-------- --------
Net cash used in investing activities .............. (11,932) (31,383)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under mortgage and other notes payable .............. -- 610
Principal payments on mortgage and other notes payable ......... (1,011) (3,240)
Net proceeds from equity offerings ............................. 6,452 21,485
Contributed capital and adjustments ............................ (894) 3
Stock repurchase ............................................... (1,286) --
Distributions paid ............................................. (361) --
Net change in notes payable - Trust ............................ 25,610 16,031
-------- --------
Net cash provided by financing activities ................ 28,510 34,889
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS .......................... 3,742 12,516
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD ................................................ 21,616 8,622
-------- --------
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD ....................................................... $ 25,358 $ 21,138
======== ========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 15
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q which mandate adherence to
Rule 10-01 of Regulation S-X. Accordingly, these statements do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management of
Starwood Lodging Trust (the "Trust") and Starwood Lodging Corporation (the
"Corporation"), all adjustments necessary for a fair presentation, consisting
only of normal recurring accruals, have been included. The financial statements
presented herein have been prepared in accordance with the accounting policies
described in the Company's Joint Annual Report on Form 10-K for the year ended
December 31, 1996 and should be read in conjunction therewith.
NOTE 2. BASIS OF PRESENTATION
The Trust and the Corporation (together, "Starwood Lodging" or the
"Company") have unilateral control of SLT Realty Limited Partnership ("Realty")
and SLC Operating Limited Partnership ("Operating"), respectively, and
therefore, the historical financial statements of Realty and Operating are
consolidated with those of the Trust and the Corporation, respectively. Unless
the context otherwise requires, all references herein to the "Company" refer to
the Trust and the Corporation, and all references to the "Trust" and to the
"Corporation" include the Trust and the Corporation and those entities
respectively owned or controlled by the Trust or the Corporation, including
Realty and Operating. Information with respect to the shares of beneficial
interest of the Trust which are paired with shares of common stock of the
Corporation (the "Paired Shares"), has been adjusted to reflect a three-for-two
stock split effective January 27, 1997. The total number of units outstanding in
each of Realty and Operating was 58,565,022 at September 30, 1997.
For the three and nine months ended September 30, 1996, the Company
accounted for its 58.2% investment in the joint venture that owns the Boston
Park Plaza under the equity method of accounting. Beginning with the Company's
Joint Annual Report on Form 10-K for the year ended December 31, 1996, the
Company has consolidated the results from the Boston Park Plaza and,
accordingly, has recorded a minority interest relating to the 41.8% third party
minority interest in such joint venture. In addition, the Company has restated
its results for the three and nine months ended September 30, 1996 to reflect
the consolidation of this investment.
NOTE 3. 1997 ACQUISITIONS
On January 8, 1997, the Company completed the purchase of the 220-room
Deerfield Beach Hilton Hotel, located in Deerfield Beach, Florida, for
approximately $11.5 million in cash.
<PAGE> 16
On January 17, 1997, the Company completed the purchase of the 263-room
Radisson Hotel Denver South, located in Denver, Colorado, for approximately
$21.75 million in cash.
On February 14, 1997, the Company acquired HEI Hotels, LLC ("HEI"), a
hotel operating company which managed 19 hotels, and the Company acquired ten
hotels (the "HEI Owned Hotels") that HEI owned in a joint venture with PRISA II,
an institutional real estate investment fund managed by Prudential Real Estate
Investors. Realty and Operating issued to PRISA II and the owners of HEI limited
partnership interests in Realty and Operating which are exchangeable for
approximately 6.548 million Paired Shares (valued for purposes of the
transaction at approximately $215 million), and paid $112 million in cash and
notes in connection with the transaction.
The HEI Owned Hotels consist of ten hotel assets (all of which are
managed by the Corporation) with 3,040 hotel rooms, located in Long Beach,
California; Norfolk, Virginia; Baltimore, Maryland; Edison, New Jersey;
Arlington, Virginia; Charleston, South Carolina; King of Prussia, Pennsylvania;
Santa Rosa, California; Novi, Michigan; and Atlanta, Georgia. The nine
additional hotels managed by HEI (the "HEI Managed Hotels"), which contain a
total of 2,297 rooms, are located in Houston, Texas; Ontario, California; Grand
Junction, Colorado; Danbury, Connecticut; Princeton, New Jersey; Smithtown, New
York; Wilmington, Delaware; Bethesda, Maryland and Virginia Beach, Virginia.
On February 21, 1997, the Company completed the purchase of the
578-room Days Inn in Chicago, Illinois for approximately $48.0 million in cash.
On March 11, 1997, the Company completed the purchase of the 120-suite
Hermitage Suites Hotel in Nashville, Tennessee for approximately $15.8 million,
comprised of limited partnership interests in Realty and Operating exchangeable
for 233,106 Paired Shares (valued for the purposes of this transaction at $9.4
million) and $6.4 million in cash.
On March 12, 1997, the Company completed the purchase of the 100-room
Hotel De La Poste in New Orleans, Louisiana for approximately $16.0 million in
cash.
On April 3, 1997, the Company completed the purchase of the 264-suite
Marriott Suites hotel in San Diego, California for approximately $32.5 million
in cash.
On April 4, 1997, the Company completed the purchase of the 129-room
Tremont Hotel in Chicago, Illinois for approximately $14.4 million cash.
On May 7, 1997, the Company completed the purchase of the 172-room
Raphael Hotel in Chicago, Illinois for approximately $17.8 million in cash.
On June 12, 1997, the Company completed a transaction resulting in
operating and ownership control of the 480-room Stamford Sheraton Hotel in
Stamford, Connecticut. The Company had acquired, in October 1996, first mortgage
and other notes secured by the hotel for $10.3 million. The total cost of the
acquisition, including the purchase of the mortgage notes, was approximately
$14.6 million.
<PAGE> 17
On July 10, 1997, the Company completed the purchase of the 385-room
Radisson Plaza Hotel at Town Center in Southfield, Michigan for approximately
$40.0 million in cash.
On August 21, 1997, the Company completed the purchase of a portfolio
of three full-service, luxury properties (the "Mexico Portfolio") located in
Mexico for approximately $133.0 million. The portfolio consists of the 229-room
Westin Regina Resort in Los Cabos, Mexico, the 385-room Westin Regina Resort in
Cancun, Mexico and the 280-room Westin Regina Resort in Puerto Vallarta, Mexico.
On September 11, 1997, the Company completed the purchase of 15
full-service hotels with 4,252 rooms (the "Flatley Portfolio"), predominantly
located in the northeastern United States with a large concentration in suburban
Boston, for approximately $470 million in cash. The portfolio consists of the
376-room Sheraton Tara Hotel, Braintree, Massachusetts, the 370-room Sheraton
Tara Hotel, Framingham, Massachusetts, the 337-room Sheraton Tara Hotel,
Nashua, New Hampshire, the 383-room Sheraton Tara Hotel, Parsippany, New Jersey,
the 367-room Tara's Ferncroft Conference Resort, Danvers, Massachusetts, the
261-room Cape Codder Hotel, Hyannis, Massachusetts, the 224-room Tara Hyannis
Hotel & Resort, Hyannis, Massachusetts, the 280-room Colonial Hilton Hotel,
Lynnfield, Massachusetts, the 200-room Merrimack Hotel & Conference Center,
Merrimack, New Hampshire, the 272-room Sheraton Tara Hotel, Newton,
Massachusetts, the 220-room Sheraton Tara Hotel, South Portland, Maine, the
442-room Tara Hotel, Stamford, Connecticut, the 207-room Sheraton Tara Hotel,
Warwick, Rhode Island, the 194-room Wayfarer Inn, Bedford, New Hampshire and the
119-room Sheraton Tara Lexington Inn, Lexington, Massachusetts.
On September 24, 1997, the Company completed the purchase of the
439-room Crowne Plaza Hotel in New Orleans, Louisiana for approximately $58.8
million.
On September 30, 1997, the Company completed the purchase of the
151-room One Washington Circle Hotel in Washington, D.C. for approximately $19.0
million in cash.
NOTE 4. FINANCING
On February 20, 1997, the Company guaranteed bonds issued by The
Philadelphia Authority for Industrial Development in the principal amount of
$39.5 million due October, 2013 (the "Tax Exempt Bonds"). The Tax Exempt Bonds
bear interest at a rate of 6.5% with no principal amortization, were issued at a
discount to yield 6.7% and are secured by two hotels of the Company located at
the Philadelphia International Airport. Net proceeds from the Tax Exempt Bonds
of approximately $37.6 million were used to partially fund the acquisition of
the 578-room Days Inn in Chicago, Illinois.
On August 5, 1997, in connection with the acquisition of the Mexico
Portfolio, the Company entered into a $118.75 million loan agreement with
Bancomer, SA (the "Bancomer Note"). The Bancomer Note is secured by mortgages on
the Mexico Portfolio, bears interest at the London InterBank Offered Rate
("LIBOR") plus 169 basis points and matures on May 14, 1998.
<PAGE> 18
On September 10, 1997, the Company completed a $1.2 billion, three-year
unsecured revolving credit and term loan facility (the "New Credit Facility").
The New Credit Facility was arranged and structured by Bankers Trust Company and
co-arranged by affiliates of Lehman Brothers with BankBoston and Bank of
Montreal. The New Credit Facility is structured as a $600 million unsecured
revolving credit facility and a $600 million term loan. At closing, the Company
used proceeds from the New Credit Facility to retire approximately $650 million
of its existing indebtedness and to fund the acquisition of the Flatley
Portfolio for approximately $470 million.
The New Credit Facility bears interest based upon a spread above LIBOR.
This spread varies based on the Company's leverage starting at LIBOR plus 100
basis points and once rated, based upon that rating. The initial spread is set
at LIBOR plus 175 basis points.
On September 24, 1997, in connection with the acquisition of the
439-room Crowne Plaza Hotel in New Orleans, Louisiana, the Company entered into
a $29.0 million mortgage loan agreement with Hibernia National Bank (the "Crowne
Plaza Note"). The Crowne Plaza Note is secured by the Crowne Plaza Hotel in New
Orleans, bears interest at LIBOR plus 200 basis points and matures on September
1, 2002.
NOTE 5. EQUITY
On March 26, 1997, the Company completed a public offering of 3,000,000
Paired Shares (the "March 1997 Offering"). Net proceeds from the March 1997
Offering of approximately $130.0 million were used, in part, to fund the
acquisition of the 264-suite Marriott Suites hotel in San Diego, California and
the 129- room Tremont Hotel and the 172-room Raphael Hotel, both located in
Chicago, Illinois.
In April 1997, the Company repurchased 703,500 Paired Shares for an
aggregate cost of approximately $25.7 million.
NOTE 6. HOTEL ASSETS SOLD OR HELD FOR SALE
At September 30, 1997, the Company's hotel portfolio included the
following three properties which were held for sale: the 151-room Bay Valley
Resort in Bay City, Michigan, the 155-room Tyee Hotel in Olympia, Washington,
and the 393-room Marriott Hotel in Milwaukee, Wisconsin.
On April 15, 1997, the Company sold the Radisson Marque Hotel in
Winston-Salem, North Carolina for approximately $7.6 million in cash.
On September 24, 1997, concurrent with its acquisition of the Crowne
Plaza Hotel in New Orleans, Louisiana, the Company sold the 166-room Best
Western in Las Cruces, New Mexico, the 175-room Best Western Airport in El Paso,
Texas and the 142-room Best Western in Savannah, Georgia for approximately $12.0
million in cash.
<PAGE> 19
NOTE 7. INTEREST RATE HEDGING AGREEMENTS
The Company enters into interest rate protection agreements as a means
of managing interest rate exposure on anticipated transactions. The agreements
are with major financial institutions which are expected to fully perform under
the terms of the agreements thereby mitigating the credit risk from the
transactions. The differential to be paid or received under these agreements
will be accrued consistent with the terms of the agreements and market interest
rates and will be recognized, using the effective interest method, in interest
expense over the term of the related debt.
In order for the amount paid or received to be deferred under such
agreements, and therefore treated as a hedge, the Company must determine that it
is probable that the future issuance of debt anticipated by the contract will
occur. In order to assess whether this criteria has been met, the Company
reviews current projections to determine if the issuance of such debt is still
in line with the Company's plans and whether the Company has the ability to
issue such debt.
If the Company were not to issue the anticipated debt, the Company
would still pay or receive the amount determined at settlement and would treat
such amount as a loss or gain, accordingly, and include it in continuing
operations. Further, if prior to settlement, the Company were to determine that
an interest rate protection agreement no longer qualified to be treated as a
hedge, the Company would record a gain or loss at each reporting date based upon
a calculation of what the settlement would have been had it been settled at such
reporting date.
On May 27, 1997, the Company entered into an interest rate protection
agreement which had the effect of fixing the base rate of interest at 6.773% for
debt with an aggregate notional principal amount of $100 million and a term to
maturity of five years. On October 10, 1997, the Company rolled this position to
January 30, 1998, which had the effect of fixing the base rate of interest at
6.9105%. The actual interest rate will be determined by reference to this base
rate.The Company intends to issue this debt in the first quarter of 1998.
On July 29, 1997, the Company rolled a previously transacted interest
rate protection agreement to January 30, 1998, which had the effect of fixing
the base rate of interest at 6.09725% for debt that the Company intends to issue
in the first quarter of 1998 with an aggregate notional principal amount of $100
million and a term to maturity of seven years. The actual interest rate will be
determined by reference to this base rate.
On July 29, 1997, the Company rolled a previously transacted interest
rate protection agreement to January 30, 1998, which had the effect of fixing
the base rate of interest at 6.95% for debt that the Company intends to issue in
the first quarter of 1998 with an aggregate notional principal amount of $150
million and a term to maturity of ten years. The actual interest rate will be
determined by reference to this base rate.
NOTE 8. COMBINED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
Due to the impact of the 40 hotels acquired by the Company in the nine
months ending September 30, 1997, the following combined consolidated pro forma
statements of operations are
<PAGE> 20
presented to supplement the historical statements of operations. These combined
consolidated pro forma statements reflect the acquisition of the HEI Owned
Hotels and the Flatley Portfolio as if they occurred on January 1, 1996:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
--------------------- -----------------------
1997 1996 1997 1996
--------------------- -----------------------
Combined consolidated (in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues ......................... $269,443 $187,856 $753,383 $458,447
Net income ....................... $ (3,434) $ 12,681 $ 15,789 $ 28,194
Net income per share.............. $ (0.07) $ .39 $ .34 $ 1.08
</TABLE>
NOTE 9. SUBSEQUENT EVENTS
On October 2, 1997, the Company completed the sale of 2.5 million
Paired Shares at a net price of $53 per Paired Share to a group of institutional
buyers in a direct placement. Proceeds from this sale of approximately $131.6
million were used to pay down existing indebtedness.
On October 15, 1997, the Company completed a private placement of 2.185
million Paired Shares, at a net price of $57.25 per Paired Share (the closing
price on October 13, 1997), to an affiliate of the Union Bank of Switzerland
("UBS"). Proceeds from this offering of approximately $125.0 million were used
to pay down existing indebtedness. Separately, the Company entered into a
hedging agreement with UBS which provides that during a preliminary term of one
year, Starwood Lodging will have the right at any time to deliver or receive
Paired Shares in settlement of the agreement, based on the market price of the
Company's Paired Shares at the time of election.
On October 20, 1997, Starwood Lodging and ITT Corporation ("ITT")
announced the signing of a definitive merger agreement for Starwood Lodging to
acquire each share of ITT for $15.00 in cash and $67.00 in newly issued Paired
Shares of Starwood Lodging, for a total value of $82.00 per ITT share. ITT's
assets include interests in more than 420 hotels in 63 countries as well as
interests in gaming, telephone directories and educational services. As part of
the acquisition, the Company will assume $3.5 billion in outstanding ITT debt,
for a total transaction value of approximately $13.3 billion. The transaction is
expected to close in the first quarter of fiscal 1998, subject to shareholder,
gaming and antitrust approvals.
On October 31, 1997, the Company completed the purchase of the 552-room
Radisson Plaza and Suite Hotel in Indianapolis, Indiana, for approximately $54
million in cash.
NOTE 10. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No.128, Earnings Per Share
(SFAS 128) which specifies the computation, presentation, and disclosure
requirements for earnings per share. SFAS 128 replaces the presentation of
primary and fully diluted EPS pursuant to Accounting Principles Board Opinion
No. 15 Earnings Per Share (APB 15) with the presentation of basic and diluted
EPS. Basic EPS excludes dilution and is computed by dividing net income
available to common
<PAGE> 21
stockholders by the weighted average number of shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. The Company is required to adopt SFAS 128 with its December
31, 1997 financial statements and restate all prior period EPS information. The
Company will continue to account for EPS under APB 15 until that time. A summary
of the Company's basic EPS and diluted EPS for the three and nine months ended
September 30, 1997 and 1996 follows:
<PAGE> 22
<TABLE>
<CAPTION>
Three months ended September 30, 1997 Three months ended September 30, 1996
-------------------------------------------------------------------------------
Trust Corporation Combined Trust Corporation Combined
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income (loss) before extraordinary item.... $0.12 $(0.07) $0.05 $0.23 $(0.05) $0.18
Extraordinary item............................. (0.08) -- (0.08) -- -- --
-------------------------------------------------------------------------------
Net income (loss) per share.................... $0.04 $(0.07) $(0.03) $0.23 $(0.05) $0.18
===============================================================================
DILUTED EARNINGS PER SHARE
Income (loss) before extraordinary item.... $0.11 $(0.07) $0.04 $0.23 $(0.04) $0.19
Extraordinary item............................. (0.07) -- (0.07) -- -- --
-------------------------------------------------------------------------------
Net income (loss) per share.................... $0.04 $(0.07) ($0.03) $0.23 $(0.04) $0.19
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30, 1997 Nine months ended September 30, 1996
-------------------------------------------------------------------------
Trust Corporation Combined Trust Corporation Combined
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income (loss) before extraordinary item.. $0.78 $(0.14) $0.64 $0.78 $(0.06) $0.72
Extraordinary item....................... (0.08) -- (0.08) -- 0.04 0.04
-------------------------------------------------------------------------
Net income (loss) per share.............. $0.70 $(0.14) $0.56 $0.78 $(0.02) $0.76
=========================================================================
DILUTED EARNINGS PER SHARE
Income (loss) before extraordinary item.. $0.73 $(0.14) $0.59 $0.78 $(0.06) $0.72
Extraordinary item....................... (0.07) -- (0.07) -- 0.04 0.04
-------------------------------------------------------------------------
Net income (loss) per share.............. $0.66 $(0.14) $0.52 $0.78 $(0.02) $0.76
=========================================================================
</TABLE>
In February 1997, the Securities and Exchange Commission issued
Financial Reporting Release No. 48, Disclosure of Accounting Policies for
Derivative Financial Instruments and Derivative Commodity Instruments and
Disclosure of Quantitative and Qualitative Information about Market Risk
Inherent in Derivative Financial Instruments, Other Financial Instruments, and
Derivative Commodity Instruments, (FRR 48). FRR 48 requires clarification and
expansion of existing disclosures for derivative financial instruments, other
financial instruments and derivative commodity instruments, as defined therein.
The amendments require enhanced disclosure with respect to these derivative
instruments in the footnotes to the financial statements. These disclosures are
required in filings that include financial statements for periods ending after
June 15, 1997, and accordingly have been included herein in the footnotes to the
Company's financial statements for the quarter ended September 30, 1997.
Additionally, the amendments expand existing disclosure requirements to
include quantitative and qualitative discussions with respect to market risk
inherent in market risk sensitive instruments. These amendments are designed to
provide additional information about market risk sensitive instruments which
investors can use to better understand and evaluate market risk exposures of
registrants, including the Company. These disclosures, subject to certain market
capitalization requirements, as defined, are effective for filings that include
annual financial statements for years ending after September 15, 1998.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income (SFAS 130), which establishes
standards for reporting and display of comprehensive income and its components.
This statement requires a separate statement to report the components of
comprehensive income for each period reported. The provisions of this statement
are effective for fiscal years beginning after December 15, 1997. Management
believes that they currently do not have items that would require presentation
in a separate statement of comprehensive income.
<PAGE> 23
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information, (SFAS 131), which establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and require that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. This statement is effective for financial statements for periods
beginning after December 15, 1997. Management believes this statement may
require expanded disclosure in the Company's financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis should be read in
conjunction with the Management's Discussion and Analysis included in the
Company's Joint Annual Report on Form 10-K for the year ended December 31, 1996.
HISTORICAL RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996
THE TRUST
Rents from the Corporation, which are based largely on hotel revenues,
increased $35.8 million and $103.5 million for the three and nine months ended
September 30, 1997, respectively as compared to the corresponding periods of
1996. The increase was primarily the result of rents earned by the Trust on 41
hotels containing approximately 10,850 rooms acquired by the Trust since
September 30, 1996 and consisting of the 257-room Westwood Marquis in Los
Angeles, California acquired in December 1996; the 220-room Deerfield Beach
Hilton in Deerfield Beach, Florida and 263-room Radisson Denver South in Denver,
Colorado acquired in January 1997; the HEI Owned Hotels and the 578-room Days
Inn Chicago acquired in February 1997; the 120-suite Hermitage Suites in
Nashville, Tennessee and the 100-room Hotel De La Poste in New Orleans,
Louisiana acquired in March 1997; the 264-suite Marriott Suites hotel in San
Diego, California and the 129-room Tremont Hotel in Chicago, Illinois acquired
in April 1997; the 172-room Raphael Hotel in Chicago, Illinois acquired in May
1997; the 480-room Stamford Sheraton Hotel in Stamford, Connecticut acquired in
June 1997, the 385-room Radisson Plaza Hotel at Town Center in Southfield,
Michigan acquired in July, 1997; the Flatley Portfolio, the 439-room Crowne
Plaza in New Orleans, Louisiana and the 151-room One Washington Circle Hotel in
Washington, D.C. acquired in September, 1997, (the "Recent Acquired Hotels").
The investment in the Acquired Hotels accounted for increased rents of $26.3
million and $53.9 million for the three and nine months ended September 30,
1997, respectively as compared to the corresponding periods in 1996. The
increase in rents from the Corporation was also due to rents earned on 24 hotels
acquired by the Trust during the nine months ended September 30, 1996, and
thereby owned for a partial period in 1996 and a full period in 1997 consisting
of the 442-room Clarion Hotel located at the San Francisco Airport, the
308-suite Doubletree Guest Suites in Irving, Texas, the 254-suite Doubletree
Guest Suites in Ft. Lauderdale, Florida, and the 260-room Westin in Tampa,
Florida acquired in April 1996; the 177-room Days Inn in Philadelphia,
Pennsylvania acquired in June 1996; the 251-suite Westin at the Philadelphia
Airport in Philadelphia, Pennsylvania acquired in July 1996; a portfolio of 8
hotels owned by an institution
<PAGE> 24
(the "Institutional Portfolio") and a portfolio of 9 hotels owned by Hotels of
Distinction Ventures, Inc. (the "HOD Portfolio") (excluding the 293-room
Radisson Marque in Winston-Salem, North Carolina which was purchased by the
Corporation) acquired in August 1996; the 121-room Doral Tuscany and the
199-room Doral Court in New York, New York in September 1996 (together, the
"Earlier Acquired Hotels"). The investment in the Earlier Acquired Hotels
accounted for increased rents of $9.2 million and $48.8 million for the three
and nine months ended September 30, 1997, respectively as compared to the same
periods in 1996. In addition, rents earned by the Trust from continuously owned
properties leased to the Corporation increased by approximately $300,000 and
$800,000 for the three and nine months ended September 30, 1997, as compared to
the corresponding period in 1996.
Interest from the Corporation increased by approximately $2.6 million
and $3.8 million for the three and nine months ended September 30, 1997,
respectively as compared to the corresponding periods of 1996. The increase in
interest income was primarily a result of interest paid on the first mortgage of
the Midland Hotel in Chicago, Illinois which was acquired by the Corporation in
March 1996.
Interest from mortgage and other notes amounted to $3.4 million and
$10.6 million for the three and nine months ended September 30, 1997,
respectively as compared to $3.0 million and $7.6 million for the corresponding
periods in 1996. The increase resulted from the purchase during the third
quarter of 1996 of debt obligations in part secured by the 305-room Holiday Inn
in Milpitas, California and a first mortgage note secured by the King 8 Hotel,
Gambling Hall and Truck Plaza (the "King 8") located in Las Vegas, Nevada which
was sold in the fourth quarter of 1996. The increase was offset in part by
principal amortization.
Other income for the nine months ended September 30, 1997 includes a
$1.2 million gain (net of related expenses) realized in connection with the sale
of securities.
Interest expense increased by approximately $11.2 million and $25.9
million for the three and nine months ended September 30, 1997, respectively as
compared to the corresponding periods of 1996. The increase was due to
borrowings, used to acquire the Recent Acquired Hotels and the Earlier Acquired
Hotels offset by the net proceeds from two public offerings in 1996 and the
March 1997 offering. These borrowings were made under two loan facilities and a
term loan (the "Lehman Facilities") with Lehman Brothers, Inc. and certain of
its affiliates ("Lehman Brothers"), and a loan facility with Goldman Sachs (the
"Goldman Facility" and together with the Lehman Facilities, the "Old Credit
Facilities"); a mortgage secured by the Doral Court and Doral Tuscany in New
York, with the Sumitomo Trust and Banking Co., Ltd. ("Sumitomo") (the "Doral
Mortgage"); a mortgage secured by the Boston Park Plaza with the Life Insurance
Company of Georgia ("Georgia Life") (the "BPP Mortgage"); a short term loan with
The Prudential Insurance Company of America on behalf of Prudential Property
Investment Separate Account II ("Prudential") (the "Prudential Loan"); the Tax
Exempt Bonds; a $200 million three-year, unsecured term loan facility arranged
by Bankers Trust Company (the "Term Facility") and the New Credit Facilities.
Depreciation and amortization expense increased by approximately $31.2
million and $66.8 million during the three and nine months ended September 30,
1997, respectively as compared to the corresponding periods of 1996, principally
due to the acquisition of the Recent
<PAGE> 25
Acquired Hotels and the Earlier Acquired Hotels.
Administrative and general expenses for the three months ended
September 30, 1997 increased by approximately $1.8 million to $1.9 million, as
compared to $156,000 for the corresponding period of 1996. Administrative and
general expenses for the nine months ended September 30, 1997 increased by
approximately $4.1 million to $7.0 million as compared to $2.9 million for the
corresponding period in 1996. The increases resulted predominantly from expenses
incurred as a result of the awards granted under the Trust's Long-Term Incentive
Plan and the increase in payroll costs commensurate with the Company's growth.
Minority interest represents primarily the interest of the limited
partners in Realty for the three and nine months ended September 30, 1997.
Minority interest also represents the interests of third parties in consolidated
joint ventures, including losses after depreciation expense of approximately
$1.5 million and $552,000 for the three and nine months ending September 30,
1997, respectively relating to the 41.8% minority interest of a third-party in
the joint venture that owns the Boston Park Plaza hotel and income after
depreciation expense of approximately $73,000 and $223,000 for the three and
nine months ending September 30, 1997, respectively relating to the 6.5%
minority interest of a third-party in the joint venture that owns the Westwood
Marquis.
THE CORPORATION
Hotel revenues increased by approximately $112.5 million and $366.4
million for the three and nine months ended September 30, 1997, respectively as
compared to the corresponding periods of 1996. The leasing and assumption of
management of the Recent Acquired Hotels and the acquisition of the 293-room
Radisson Marque hotel in Winston-Salem, North Carolina (acquired in August 1996
and sold in April 1997), and the Mexico Portfolio (acquired in August 1997)
resulted in increases in hotel revenues of approximately $82.3 million and
$169.7 million for the three and nine months ended September 30, 1997,
respectively. Furthermore, the leasing, assumption of management, and addition
of the Earlier Acquired Hotels and the 257-room Midland Hotel in Chicago,
Illinois during the nine months ended September 30, 1996 resulted in increases
in hotel revenues of approximately $31.0 million and $188.3 million for the
three and nine months ended September 30, 1997, respectively as compared to the
same periods in 1996. The remaining increase of $800,000 and $8.4 million for
the three and nine months ended September 30, 1997, respectively is attributable
to other continuously owned properties.
Hotel gross margin for the three months ended September 30, 1997 was
$70.4 million, or 31.0% of hotel revenues, as compared to $34.0 million, or
29.8% of hotel revenues, for the same period of 1996. Hotel gross margin for the
nine months ended September 30, 1997 was $186.7 million, or 30.9% of hotel
revenues, as compared to $72.9 million, or 30.7% of hotel revenues, for the same
period of 1996.
Gaming revenues for the three months ended September 30, 1997, as
compared to the corresponding period in 1996, decreased by approximately $1.9
million to $3.7 million. Gaming revenues for the nine months ended September 30,
1997, as compared to the corresponding period in 1996, decreased by
approximately $7.9 million to $11.4 million. Gaming gross margin for the three
months ended September 30, 1997 was a loss of $641,000, as compared to a loss of
<PAGE> 26
$31,000 for the corresponding period in 1996. Gaming gross margin for the nine
months ended September 30, 1997 was a loss of $1.2 million, as compared to a
profit of $1.5 million for the corresponding period in 1996.
The decrease in gaming revenues and the decline in gaming gross margin
predominately resulted from the sale by the Company of the Bourbon Street Hotel
and Casino in September 1996. The real property of the King 8 was sold by the
Trust in 1996 for approximately $18.8 million. The sale by the Corporation of
the personal property of the King 8 for $3 million is scheduled to close
following the receipt by the purchaser or his designee of required gaming
licenses and approvals. A subsidiary of the Corporation leases the real property
from the purchaser and has agreed to continue to operate the hotel and casino
while the purchaser obtains required gaming licenses and approvals.
Management fees and other income for the three months ended September
30, 1997 includes approximately $307,000 of management fee income from the joint
venture that owns the Boston Park Plaza hotel and approximately $700,000 of
management fee income from the HEI Managed Hotels. Management fees and other
income for the nine months ended September 30, 1997 includes approximately
$778,000 of management fee income from the joint venture that owns the Boston
Park Plaza hotel and approximately $1.9 million of management fee income from
the HEI Managed Hotels.
Administrative and general expenses for the three months ended
September 30, 1997 decreased to $3.5 million or 1.5% of revenues, as compared to
$4.5 million or 3.7% of revenues for the corresponding period of 1996.
Administrative and general expenses for the three months ended September 30,
1996 included a $1.5 million charge relating to the relocation of the Company's
corporate offices from Los Angeles to Phoenix. Administrative and general
expenses for the nine months ended September 30, 1997 increased to $12.0 million
or 1.9% of revenues, as compared to $7.1 million or 2.8% of revenues for the
corresponding period in 1996. The increase was primarily a result of increases
in payroll costs commensurate with the Company's growth, the assumption of
management of hotels previously operated by third-parties, and expenses incurred
as a result of awards granted under the Corporation's Long-Term Incentive Plan.
Depreciation and amortization expense increased by approximately $2.3
million and $7.3 million, respectively, for the three and nine months ended
September 30, 1997 as compared to the corresponding periods of 1996.
Minority interest represents primarily the interest of the limited
partners in Operating. Minority interest also represents the interests of third
parties in consolidated joint ventures including approximately $1.1 million and
$2.0 million for the three and nine months ended September 30, 1997,
respectively relating to the 41.8% minority interest of a third-party in the
joint venture that owns the Boston Park Plaza hotel.
For information with respect to rent and interest paid to the Trust
during the three and nine months ended September 30, 1997 and 1996, see, "The
Trust" immediately above.
<PAGE> 27
EXTERNAL GROWTH
During the nine months ended September 30, 1997 the Company acquired
equity interests in 40 hotels containing more than 11,400 rooms at a combined
cost exceeding $1.2 billion, as follows: the 220-room Deerfield Beach Hilton in
Deerfield Beach, Florida (January 1997); the 263-room Radisson Denver South in
Denver, Colorado (January 1997); the HEI Owned Hotels consisting of ten hotels
containing 3,040 rooms (February 1997); the 578-room Days Inn in Chicago,
Illinois (February 1997); the 120-suite Hermitage Suites Hotel in Nashville,
Tennessee (March 1997); the 100-room Hotel De La Poste in New Orleans, Louisiana
(March 1997); the 264-suite Marriott Suites hotel in San Diego, California
(April 1997); the 129-room Tremont Hotel in Chicago, Illinois (April 1997); the
172-room Raphael Hotel in Chicago, Illinois (May 1997); the 480-room Sheraton in
Stamford, Connecticut (June 1997); the 385-room Radisson Plaza Hotel at Town
Center in Southfield, Michigan (July 1997); the Mexico Portfolio consisting of
three hotels containing 894 rooms (August 1997); the Flatley Portfolio
consisting of 15 hotels containing 4,252 rooms (September 1997); the 439-room
Crowne Plaza in New Orleans, Louisiana (September 1997); and the 151-room One
Washington Circle Hotel in Washington, D.C. (September 1997).
On September 9, 1997 the Company announced the execution of a
definitive agreement to acquire Westin Hotels & Resorts ("Westin"). Westin owns,
manages, franchises or represents 108 hotels with approximately 47,800 rooms and
resorts in 23 countries worldwide, with 26 additional projects under
development. Under the terms of the definitive agreement, the Company will
acquire Westin for a combination of securities, cash and assumed debt with an
aggregate value of approximately $1.571 billion (based on the Company's closing
price of $49.4375 per Paired Share on September 8, 1997). As part of the
transaction, the Company will acquire interests in 11 hotels currently owned by
Westin. The Company will also acquire three additional hotel properties recently
acquired by Westin: The Westin Tabor Center in Denver, The Westin Peachtree
Plaza in Atlanta and the Westin Resort St. John in the Virgin Islands for an
additional $258.6 million. The transaction is expected to close by January 31,
1998 and is subject to shareholder and regulatory approval.
INTERNAL GROWTH
On a same-store-sales basis, including the results of all comparable
non-gaming hotels owned or managed as of September 30, 1997 for the period from
their respective dates of acquisition if acquired in 1997 as compared to the
same period in 1996 and excluding three hotels held for sale, six hotels in
Atlanta, Georgia, whose results are not comparable to 1996 due to the
non-recurrence of the Olympic Games, and three hotels under substantial
renovation during the third quarter (the Doral Inn in New York, New York, the
Westin at the Philadelphia Airport in Philadelphia, Pennsylvania, and the Westin
in Tampa, Florida) (the "Comparable Hotels") , room revenue per available room
("REVPAR") for the three months ended September 30, 1997 increased 11.8% from
$67.51 to $75.46 over the same period in 1996 for 89 owned and/or managed hotels
(comparable hotels). The increase in REVPAR resulted from an increase in average
daily rate ("ADR") of 9.5%, from $92.50 to $101.26, while the occupancy rate
increased to 74.5% from 73.0% in the corresponding 1996 period.
<PAGE> 28
On a same-store-sales basis for the Comparable Hotels, (including
results for hotels acquired in 1997 for the period from their respective dates
of acquisition as compared to the same period in 1996) REVPAR for the nine
months ended September 30, 1997, increased 9.7% from $66.35 to $72.77 over the
same period in 1996. The increase in REVPAR resulted from an increase in ADR of
9.9%, from $91.83 to $100.88, while the occupancy rate decreased slightly from
72.3% to 72.1%.
The REVPAR increase for the three and nine months ended September 30,
1997 was largely attributable to the strong increase in REVPAR at the Company's
upscale hotels. These hotels experienced an increase in REVPAR of 12.6% and
10.6% for the three and nine months ended September 30, 1997, respectively as
compared to the corresponding periods of 1996. ADR for the Company's upscale
hotels increased 9.1% and 9.3% for the three and nine months ended September 30,
1997, respectively as compared to the corresponding periods in 1996 while
occupancy rates increased by 230 and 80 basis points for the three and nine
months ended September 30, 1997, respectively when compared to the same periods
in 1996.
The following tables summarize average occupancy, ADR and REVPAR on a
year-over-year basis for the Comparable Hotels (including results for hotels
acquired during 1997 for the period beginning with their respective dates of
acquisition and ending at the end of each period), for the three and nine months
ended September 30, 1997 and 1996:
<PAGE> 29
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30
-------------------------
71 Upscale Hotels(1) 1997 1996
-------------------------
<S> <C> <C>
Occupancy Rate.......................... 74.2% 71.9%
ADR..................................... $104.24 $95.54
REVPAR.................................. $77.33 $68.69
REVPAR % change......................... 12.6%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30
-------------------------
18 Midscale/Economy Hotels(1) 1997 1996
-------------------------
<S> <C> <C>
Occupancy Rate.......................... 76.1 78.0%
ADR..................................... $87.94 $79.66
REVPAR.................................. $66.91 $62.11
REVPAR % change......................... 7.7%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30
-------------------------
89 Non-Gaming Hotels (1) 1997 1996
-------------------------
<S> <C> <C>
Occupancy Rate.......................... 74.5% 73.0%
ADR..................................... $101.26 $92.50
REVPAR.................................. $75.46 $67.51
REVPAR % change......................... 11.8%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
-------------------------
71 Upscale Hotels(1) 1997 1996
-------------------------
<S> <C> <C>
Occupancy Rate.......................... 72.6% 71.8%
ADR..................................... $104.70 $95.76
REVPAR.................................. $76.02 $68.75
REVPAR % change......................... 10.6%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
-------------------------
18 Midscale/Economy Hotels(1) 1997 1996
-------------------------
<S> <C> <C>
Occupancy Rate.......................... 70.2% 74.2%
ADR..................................... $84.45 $76.05
REVPAR.................................. $59.30 $56.43
REVPAR % change......................... 5.1%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
-------------------------
89 Non-Gaming Hotels (1) 1997 1996
-------------------------
<S> <C> <C>
Occupancy Rate.......................... 72.1% 72.3%
ADR..................................... $100.88 $91.83
REVPAR.................................. $72.77 $66.35
REVPAR % change......................... 9.7%
</TABLE>
(1) Excluding three hotels held for sale, three hotels under substantial
renovation, seven hotels in Atlanta Georgia, and four hotels sold during
1997.
Management believes that increases in REVPAR resulted primarily from
increases in demand due to continued favorable economic conditions which have
resulted in increased business and leisure travel throughout the United States,
while the supply of hotel rooms has not increased as rapidly, particularly in
major urban locations.
<PAGE> 30
Management believes that there are several important factors that have
contributed to the improved profitability of hotel properties, including
increased ADR and effective cost management. Because a substantial portion of
the hotels' operating costs and expenses are generally fixed, the Company
derives substantial operating leverage from increases in revenue. The Company's
continued investment in full-service properties has led to a larger component of
food and beverage revenue when compared to the same period last year. Food and
beverage gross margin is typically lower than rooms gross margin. However, the
Company's continued focus on increasing gross margins through cost containment
and cost reductions resulted in increases in hotel gross margins of 120 basis
points from 29.8% to 31.0% for the three months ended September 30, 1997, when
compared to the same period of 1996. Gross margins for the nine months ended
September 30, 1997 increased 20 basis points from 30.7% to 30.9% when compared
to the same period of 1996.
During the nine months ended September 30, 1997, consistent with its
business objective to capture the economic benefits otherwise retained by
third-party operators, the Corporation assumed management of 37 of the 40 hotels
acquired by the Company during the period. Management believes that the
assumption of direct control over the operations of these hotels will allow the
Corporation to effectively use the experience of management to improve
operations. In addition, during the nine months ended September 30, 1997 the
Corporation assumed management of a further ten hotels consisting of the HEI
Managed Hotels and the Northeast Atlanta Hilton located in Atlanta, Georgia.
During the three months ended September 30, 1997, the Company completed
the renovation of the Westin Tampa Airport in Tampa, Florida, the Sheraton
Colony Square in Atlanta, Georgia and the Westin Guest Suites at Philadelphia
International Airport in Philadelphia, Pennsylvania. Renovations have also begun
and should be completed in the summer of 1998 for the Doral Inn which will be
expanded by 70 rooms. Renovations have been scheduled and should be completed in
1998 and 1999 for the Terrace Garden in Atlanta, Georgia, the Atlanta Marque in
Atlanta, Georgia, the Clarion at the San Francisco Airport in Millbrae,
California, the Days Inn at the Philadelphia International Airport, and the
Boston Park Plaza in Boston, Massachusetts.
SEASONALITY AND DIVERSIFICATION
Demand is affected by normally recurring seasonal patterns. Generally
the Company's portfolio of hotels as a whole has performed better in the second
and third quarters due to decreased travel in the winter months. Acquisitions
and renovations have affected this seasonality, however the second and third
quarters continue to represent a better performing period. Additional
acquisitions and renovations may further affect the seasonality of the Company's
current portfolio. The Company has continued to implement a business strategy of
franchise and geographic diversification.
<PAGE> 31
COMBINED LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW PROVIDED BY OPERATING ACTIVITIES
The principal source of cash used to fund the Company's operating
expenses, interest expense, recurring capital expenditures and distribution
payments by the Trust is cash flow provided by operating activities. The Company
anticipates that cash flow provided by operating activities will provide the
necessary funds on a short and long term basis to meet operating cash
requirements including all distributions to shareholders by the Trust. During
the third quarter of 1997, the Trust paid a distribution of $0.39 per share
declared in the second quarter of 1997. During the fourth quarter of 1997, the
Trust paid a distribution of $0.48 per share declared in the third quarter of
1997.
CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES
The Company intends to finance the acquisition of additional hotel
properties, major hotel renovations and capital improvements and provide for
general corporate purposes through its credit facilities described below,
through additional lines of credit and, when market conditions warrant, through
the issuance of additional equity or debt securities.
On August 5, 1997, in connection with the acquisition of the Mexico
Portfolio, the Company entered into the Bancomer Note consisting of a $118.75
million loan agreement with Bancomer, SA. The Bancomer Note is secured by
mortgages on the Mexico Portfolio, bears interest at the LIBOR plus 169 basis
points and matures on May 14, 1998.
On September 10, 1997, the Company entered into the New Credit Facility
consisting of a $1.2 billion, three-year unsecured revolving credit and term
loan facility. At closing, the Company used the New Credit Facility to acquire
the Flatley Portfolio for $470 million and to retire approximately $650 million
of its existing indebtedness including the Old Credit Facilities and the Term
Facility (which the Company entered into in July 1997 to repay existing
indebtedness including the Prudential Loan and for acquisitions).
The New Credit Facility bears interest based upon a spread above LIBOR.
This spread varies based on the Company's leverage starting at LIBOR plus 100
basis points and once rated, based upon that rating. The initial spread is set
at LIBOR plus 175 basis points.
On September 24, 1997, in connection with the acquisition of the
439-room Crowne Plaza Hotel in New Orleans, Louisiana, the Company entered into
the Crowne Plaza Note consisting of a $29.0 million mortgage agreement with
Hibernia National Bank. The Crowne Plaza Note is secured by the Crowne Plaza in
New Orleans, bears interest at LIBOR plus 200 basis point and matures on
September 1, 2002.
<PAGE> 32
The following is a summary of the Company's indebtedness as of
September 30, 1997:
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING AT
FACILITY/LENDER EXPIRATION DATE AMOUNT OF FACILITY 9/30/97 INTEREST RATE AT 9/30/97
--------------- --------------- ------------------ ------- ------------------------
<S> <C> <C> <C> <C>
Mortgage Facility/ October 27, 1997 $71.0 million $69.5 million One Month LIBOR + 1.75%
Lehman Brothers (7.38%)
New Credit September 10, 2000 $1,200.0 million $1,109.64 million One, Two, or Three Month
Facility/Bankers LIBOR + 1.75% (7.38%)
Trust Company
Bancomer Note/ May 14, 1998 $118.75 million $118.75 million One, Two, or Three Month
Bancomer SA LIBOR + 1.69% (7.32%)
Crowne Plaza Note/ September 1, 2002 $29.0 million $29.0 million One Month LIBOR + 2.00%
Hibernia National (7.63%)
Bank
Stamford Note/ January 31, 2000 $10.25 million $10.25 million One Month LIBOR +2.25%
Lehman Brothers (7.88%)
Doral Mortgage/ September, 2001 $27.38 million $27.38 million 7.64%
Sumitomo
BPP Mortgage/ May, 2003 $25.0 million $24.8 million 8.42%
Georgia Life
Tax Exempt Bonds/ October, 2013 $39.47 million $39.47 million 6.70%
-----------------------------------------
Totals $1,520.85 million $1,428.79 million
=========================================
</TABLE>
As previously discussed, during the three months ended September 30,
1997, the Company completed the renovation of the Westin Tampa Airport in Tampa,
Florida, the Sheraton Colony Square in Atlanta, Georgia and the Westin Guest
Suites at Philadelphia International Airport in Philadelphia, Pennsylvania.
Renovations have also begun and should be completed in the summer of 1998 for
the Doral Inn which will be expanded by 70 rooms. Renovations have been
scheduled and should be completed in 1998 and 1999 for the Terrace Garden in
Atlanta, Georgia, the Atlanta Marque in Atlanta, Georgia, the Clarion at the San
Francisco Airport in Millbrae, California, the Days Inn at the Philadelphia
International Airport, and the Boston Park Plaza in Boston, Massachusetts. The
Company plans to spend in excess of $150 million for renovations in 1997
including the renovations mentioned above. Major and minor renovations,
expansions and upgrades of other hotels are also being contemplated. In
addition, the Company intends to develop new hotels on a selective basis and
during 1997 had begun construction of a 426-room hotel in downtown Seattle,
Washington and a 423-room hotel in downtown San Francisco, California. Sources
of capital for major renovations, expansions and upgrades of hotels as well as
new construction are expected to be excess funds from operations, additional
debt financing, and additional equity raised in the public and private markets.
As of September 30, 1997, since January 1, 1995, the Company has
invested approximately $2.2 billion in acquisitions of hotel assets. As part of
its investment strategy, the Company plans to continue to acquire additional
hotels. Future acquisitions are expected to be funded through further draws
under the New Credit Facility, draws under new lines of credit, issuance of
long-term debt on either a secured or unsecured basis, issuance of limited
partnership
<PAGE> 33
units by Realty and Operating that are exchangeable for Paired Shares and the
issuance of additional equity or debt securities by the Company. The Company
intends to incur additional indebtedness in a manner consistent with its policy
of maintaining a ratio of debt-to-total market capitalization of not more than
50%.
Management of each of the Trust and of the Corporation believes that it
will have access to capital resources sufficient to satisfy the cash
requirements of each of the Trust and the Corporation and to expand and develop
their business in accordance with their strategy for future growth.
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") is one measure
of financial performance of an equity REIT such as the Trust. Combined FFO (as
defined by the National Association of Real Estate Investments Trusts) (1) for
the three months ended September 30, 1997 grew by 92.9% to $48.8 million,
compared to combined FFO of $25.3 million for the corresponding period in 1996.
Combined FFO for the nine months ended September 30, 1997 grew by 136.2% to
$133.8 million, compared to combined FFO of $56.6 million for the corresponding
period in 1996. The following table shows the calculation of historical combined
FFO for the indicated periods:
<TABLE>
<CAPTION>
Three months ended
September 30
----------------------
1997 1996
----------------------
(in thousands)
<S> <C> <C>
Income before extraordinary item and minority interest $ 3,004 $ 8,679
Real estate related depreciation and amortization .... 49,884 15,204
Amortization of financing costs ...................... (1,024) (752)
(Gain) Loss on sale of real estate investments ....... (283) 1,037
Corporate relocation costs ........................... -- 1,500
Minority interest-consolidated joint ventures ........ (2,769) (369)
-------- --------
Funds From Operations ................................ $ 48,812 $ 25,299
======== ========
</TABLE>
<TABLE>
<CAPTION>
Nine months ended
September 30
-------------------------
1997 1996
-------------------------
(in thousands)
<S> <C> <C>
Income before extraordinary item and minority interest . $ 38,904 $ 27,643
Real estate related depreciation and amortization ...... 104,271 28,994
Amortization of financing costs ........................ (3,087) (1,513)
Loss on sale of real estate investments ................ 221 1,384
Corporate relocation costs ............................. -- 1,500
Minority interest-consolidated joint ventures .......... (6,544) (1,375)
--------- ---------
Funds From Operations .................................. $ 133,765 $ 56,633
========= =========
</TABLE>
(1) With respect to the presentation of FFO, management elected early
adoption of the "new definition" as recommended in the March 1995
NAREIT White Paper on FFO beginning January 1, 1995. Management and
industry analysts generally consider funds from operations to be one
measure of the financial performance of an equity REIT that provides a
relevant basis for comparison among REITs and it is
<PAGE> 34
presented to assist investors in analyzing the performance of the
Company. FFO is defined as income before minority interest (computed in
accordance with generally accepted accounting principles), excluding
gains (losses) from debt restructuring and sales of property, and real
estate related depreciation and amortization (excluding amortization of
financing costs). FFO does not represent cash generated from operating
activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs.
FFO should not be considered an alternative to net income as an
indication of the Company's financial performance or as an alternative
to cash flows from operating activities as a measure of liquidity.
FFO includes $1.4 million and $700,000 of interest income recognized in
excess of the interest received on mortgage notes receivable (as a result of the
notes having been purchased at a discount) for the three months ended September
30, 1997 and 1996, respectively. FFO includes $4.3 million and $2.3 million of
interest income recognized in excess of interest received on mortgage notes
receivable for the nine months ended September 30, 1997 and 1996, respectively.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
<PAGE> 35
10.1 Credit Agreement in the amount of $1.2 billion between SLT Realty
Limited Partnership and Starwood Lodging Trust and Bankers Trust
Company, Lehman Brothers Holdings Inc., d/b/a Lehman Capital, a
Division of Lehman Brothers Holdings Inc., BankBoston, N.A. and Bank of
Montreal dated as of September 10, 1997.
10.2 Transaction Agreement among the Trust, the Corporation, Realty,
Operating, WHWE L.L.C., Woodstar Investor Partnership, Nomura Asset
Capital Corporation, Juergen Bartels, Westin Hotels & Resorts
Worldwide, Inc., W&S Lauderdale Corp., W&S Seattle Corp, Westin St.
John Hotel Company, Inc., W&S Denver Corp., W&S Atlanta Corp. Hotel
Company Inc. and W&S Hotel L.L.C. (incorporated by reference to Exhibit
10.1 to the Trust's and the Corporation's Joint Current Report on Form
8-K dated September 10, 1997).
11. Combined statement regarding computation of per share earnings.
(b) Reports on Form 8-K.
The Trust and the Corporation filed a Joint Current Report on Form 8-K
dated September 10, 1997 to report, under Item 5 of Form 8- K, a
Transaction Agreement among the Trust, the Corporation, Realty,
Operating, WHWE L.L.C., Woodstar Investor Partnership, Nomura Asset
Capital Corporation, Juergen Bartels, Westin Hotels & Resorts
Worldwide, Inc., W&S Lauderdale Corp., W&S Seattle Corp, Westin St.
John Hotel Company, Inc., W&S Denver Corp., W&S Atlanta Corp. Hotel
Company Inc. and W&S Hotel L.L.C.
The Trust and the Corporation filed a Joint Current Report on Form 8-K
dated September 9, 1997 to report, under Item 2 of Form 8- K, the
acquisition of the Flatley Portfolio, and to file under Item 7 of Form
8-K, the following financial statements and pro forma financial
information:
Starwood Lodging Trust and Starwood Lodging Corporation - Pro Forma
Combined Consolidated and Separate Consolidated Pro Forma Balance
Sheets at June 30, 1997.
Combined Consolidated and Separate Consolidated Pro Forma Statements
of Operations for the six months ended June 30, 1997.
Combined Consolidated and Separate Consolidated Pro Forma Statements
of Operations for the year ended December 31, 1996.
The Flatley Hotels Combined Balance Sheet as of December 31, 1996
Combined Statement of Revenues over Expenses and Equity (Deficit), for
the year ended December 31, 1996.
Combined Statement of Cash Flow for the year ended December 31, 1996.
The Trust and the Corporation filed a Joint Current Report on Form 8-K
dated September September 10, 1997 to report, under Item 5 of Form
8-K, a Transaction Agreement among the Trust, the Corporation, Realty,
Operating, WHWE L.L.C., Woodstar Investor
<PAGE> 36
Partnership, Nomura Asset Capital Corporation, Juergen Bartels, Westin
Hotels & Resorts Worldwide, Inc., W&S Lauderdale Corp., W&S Seattle
Corp, Westin St. John Hotel Company, Inc., W&S Denver Corp., W&S
Atlanta Corp. Hotel Company Inc. and W&S Hotel L.L.C., and to file
under Item 7 of Form 8-K, the following financial statements and pro
forma financial information:
Starwood Lodging Trust and Starwood Lodging Corporation Unaudited
Combined Consolidated Pro Forma Balance Sheet as of June 30, 1997.
Starwood Lodging Trust Unaudited Consolidated Pro Forma Balance Sheet
as of June 30, 1997.
Starwood Lodging Corporation Unaudited Consolidated Pro Forma Balance
Sheet as of June 30, 1997.
Notes to the Unaudited Combined Consolidated and Separate Consolidated
Pro Forma Balance Sheets as of June 30, 1997.
Starwood Lodging Trust and Starwood Lodging Corporation Unaudited
Combined Consolidated Pro Forma Statement of Operations for the six
months ended June 30, 1997.
Starwood Lodging Trust Unaudited Consolidated Pro Forma Statement of
Operations for the six months ended June 30, 1997.
Starwood Lodging Corporation Unaudited Consolidated Pro Forma Statement
of Operations for the six months ended June 30, 1997.
Starwood Lodging Trust and Starwood Lodging Corporation Unaudited
Combined Consolidated Pro Forma Statement of Operations for the
year ended December 31, 1996.
Starwood Lodging Trust Unaudited Consolidated Pro Forma Statement of
Operations for the year ended December 31, 1996.
Starwood Lodging Corporation Unaudited Consolidated Pro Forma Statement
of Operations for the year ended December 31, 1996.
Notes to the Unaudited Combined Consolidated and Separate Consolidated
Pro Forma Statements of Operations for the six months ended June
30, 1997 and the year ended December 31, 1996.
W&S HOTEL L.L.C. AND SUBSIDIARIES
Consolidated Balance Sheets
Consolidated Statements of Operations
Predecessor Business Combined Statements of Operations
Consolidated Statements of Members' Equity
Predecessor Business Combined Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Predecessor Business Combined Statements of Cash Flows
Notes to Financial Statements
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
Registrant Registrant
/s/ RONALD C. BROWN /s/ ALAN M. SCHNAID
- ---------------------------------- ----------------------------------------
Ronald C. Brown Alan M. Schnaid
Senior Vice President and Vice President and Corporate
Chief Financial Officer Controller (Principal Accounting
(Principal Financial Officer) Officer)
Date: October ____, 1997.
<PAGE> 1
CREDIT AGREEMENT
between
SLT REALTY LIMITED PARTNERSHIP
and
STARWOOD LODGING TRUST
and
BANKERS TRUST COMPANY,
LEHMAN BROTHERS HOLDINGS INC., D/B/A LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.,
BANKBOSTON, N.A.
and
BANK OF MONTREAL
Dated as of September 10, 1997
Amount of $1,200,000,000.00
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS ...................................... -1-
1.1. Defined Terms ............................................. -1-
1.2. Computation of Time Periods ............................... -44-
1.3. Accounting Terms .......................................... -44-
1.4. Certain Terms ............................................. -44-
ARTICLE II
AMOUNT AND TERM OF THE LOAN ..................................... -45-
2.1. The Note; Advances ........................................ -45-
2.2. Advances Under the Revolving Credit Facility .............. -45-
2.3. Making the Loan............................................ -45-
2.4. Administrative Fee: Non-Use Fee: Letter of Credit Fee:
Facing Fee ................................................ -47-
2.5. No Additional Advance; Reduction and Termination of the
Commitments ............................................... -48-
2.6. Repayment.................................................. -45-
2.7. Prepayments................................................ -45-
2.8. Conversion/Continuation Option............................. -45-
2.9. Interest................................................... -45-
2.10. Interest Rate Determination and Protection................. -45-
2.11. Increased Costs............................................ -45-
2.12. Illegality................................................. -45-
2.13. Capital Adequacy........................................... -45-
2.14. Payments and Computations ................................. -53-
2.15. Taxes ..................................................... -55-
2.16. Sharing of Payments, Etc .................................. -57-
2.17. Swing Advances ............................................ -57-
2.18. Extension of Maturity Date ................................ -59-
2.19. Letters of Credit ......................................... -60-
ARTICLE III
CONDITIONS OF LENDING ........................................... -65-
3.1. Conditions Precedent to the Initial Advance ............... -65-
3.2. Additional Conditions Precedent to the Initial Advances ... -70-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES .................................. -71-
4.1. Existence; Compliance with Law ............................ -71-
4.2. Power; Authorization; Enforceable Obligations ............. -72-
4.3. Taxes ..................................................... -73-
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
4.4. Full Disclosure.............................................. -73-
4.5. Financial Matters............................................ -73-
4.6. Litigation................................................... -74-
4.7. Margin Regulations........................................... -74-
4.8. Subsidiaries and Unconsolidated Entities..................... -74-
4.9. ERISA........................................................ -75-
4.10. [INTENTIONALLY OMITTED]...................................... -75-
4.11. Restricted Payments.......................................... -75-
4.12. No Burdensome Restrictions; No Defaults...................... -75-
4.13. [INTENTIONALLY OMITTED]..................................... -76-
4.14. Government Regulation........................................ -76-
4.15. Insurance.................................................... -76-
4.16. Labor Matters................................................ -77-
4.17. Force Majeure................................................ -77-
4.18. Use of Proceeds.............................................. -77-
4.19. Environmental Protection..................................... -77-
4.20. Contractual Obligations Concerning Assets.................... -79-
4.21. Intellectual Property........................................ -79-
4.22. Title/Status of Real Property................................ -79-
4.23. Status as a REIT............................................. -82-
4.24. Title/Status of Mortgage Loans............................... -82-
4.25. Operating Leases, Management Agreements and Licenses......... -84-
4.26. Westwood Mortgage............................................ -85-
4.27. Affiliate Debt............................................... -85-
4.28. Assets of the REIT........................................... -85-
4.29. SLC.......................................................... -85-
4.30. Stock........................................................ -85-
4.31. Qualified Ground Leases...................................... -85-
ARTICLE V
FINANCIAL COVENANTS................................................ -86-
5.1. Gross Interest Expense Coverage Ratios....................... -86-
5.2. Unsecured Interest Expense Coverage Ratio.................... -86-
5.3. Debt Service Coverage Ratios................................. -86-
5.4. Maintenance of Equity Value.................................. -87-
5.5. Limitation on Total Indebtedness............................. -87-
5.6. Limitations on Total Secured Indebtedness.................... -87-
5.7. Limitation on Total Unsecured Indebtedness................... -87-
5.8. Limitation on Total Indebtedness of Operating Entities....... -88-
5.9. Eligible Asset Value Coverage Ratios......................... -88-
5.10. [INTENTIONALLY OMITTED]...................................... -88-
5.11. Minimum Rating............................................... -88-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VI
AFFIRMATIVE COVENANTS.............................................. -88-
6.1. Compliance with Laws, Etc.................................... -88-
6.2. Conduct of Business.......................................... -88-
6.3. Payment of Taxes, Etc........................................ -89-
6.4. Maintenance of Insurance..................................... -89-
6.5. Preservation of Existence, Etc............................... -94-
6.6. Access....................................................... -94-
6.7. Keeping of Books............................................. -94-
6.8. Maintenance of Properties, Etc............................... -94-
6.9. Performance and Compliance with Other Covenants.............. -94-
6.10. Application of Proceeds...................................... -94-
6.11. Financial Statements......................................... -94-
6.12. Reporting Requirements....................................... -95-
6.13. Operating Leases, Management Agreements and Licenses......... -98-
6.14. [INTENTIONALLY OMITTED....................................... -99-
6.15. Employee Plans............................................... -99-
6.16. [INTENTIONALLY OMITTED....................................... -99-
6.17. Fiscal Year.................................................. -99-
6.18. Environmental Matters........................................ -99-
6.19. The REIT Requirements ....................................... -100-
6.20. [INTENTIONALLY OMITTED] ..................................... -100-
6.21. Franchise Affiliations ...................................... -100-
6.22. Further Assurances .......................................... -100-
6.23. Eligible Asset Value Determination/Removal, Substitution and
Addition of Eligible Assets.................................. -101-
6.24. Corporate Franchises; Conduct of Business ................... -102-
6.25. Stock....................................................... -102-
6.26. [INTENTIONALLY OMITTED]..................................... -102-
6.27. Notice of Default or Litigation............................. -102-
6.28. Management.................................................. -103-
6.29. Maintenance of Affiliate Debt and Intercompany Debt......... -103-
6.30. Keep Well Covenants......................................... -103-
6.31. Loan Documents.............................................. -103-
6.32. [INTENTIONALLY OMITTED]..................................... -103-
6.33. Unsecured Debt Rating....................................... -103-
6.34. Investment Restrictions..................................... -104-
6.35. Syndication Cooperation..................................... -104-
6.36. Required Remediation........................................ -104-
6.37. Equity or Debt Offerings.................................... -104-
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE VII
NEGATIVE COVENANTS................................................ -104-
7.1. [INTENTIONALLY OMITTED...................................... -105-
7.2. [INTENTIONALLY OMITTED]..................................... -105-
7.3. Lease Obligations........................................... -105-
7.4. Restricted Payments......................................... -105-
7.5. Mergers, Stock Issuances, Asset Sales, Restrictions on
Fundamental Changes, Etc.................................... -106-
7.6. [INTENTIONALLY OMITTED]..................................... -107-
7.7. Change in Nature of Business or in Capital Structure........ -107-
7.8. Modification of Material Agreements......................... -107-
7.9. Accounting Changes.......................................... -107-
7.10. Transactions with Affiliates................................ -107-
7.11. Adverse or Speculative Transactions......................... -108-
7.12. Environmental Matters....................................... -108-
7.13. Borrower's Partnership Agreement............................ -108-
7.14. Management Continuity....................................... -108-
7.15. ERISA Plan Assets........................................... -108-
7.16. Operating Leases............................................ -108-
7.17. Franchise Affiliations...................................... -108-
7.18 Negative Pledge Covenant.................................... -109-
7.19 Westwood Marquis............................................ -109-
7.20 Payments to the REIT........................................ -109-
ARTICLE VIII
EVENTS OF DEFAULT................................................. -109-
8.1. Events of Default........................................... -109-
8.2 Remedies.................................................... -111-
ARTICLE IX
The Administrative Agent.......................................... -112-
9.1. AUTHORIZATION AND ACTION.................................... -112-
9.2. Administrative Agent's Reliance, Etc........................ -112-
9.3. The Agents and Affiliates................................... -113-
9.4. Lender Credit Decision...................................... -113-
9.5. Indemnification............................................. -114-
9.6. Successor Agent............................................. -114-
ARTICLE X
MISCELLANEOUS..................................................... -115-
10.1. Amendments, Etc............................................. -115-
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C>
10.2. Notices, Etc................................................ -116-
10.3. No Waiver; Remedies......................................... -116-
10.4. Costs; Expenses; Indemnities................................ -116-
10.5. Right of Set-off............................................ -118-
10.6. Binding Effect.............................................. -118-
10.7. Assignments and Participations.............................. -118-
10.8. Governing Law; Severability................................. -121-
10.9. Submission to Jurisdiction; Service of Process.............. -121-
10.10. Section Titles............................................. -122-
10.11. Execution in Counterparts.................................. -122-
10.12. Entire Agreement........................................... -122-
10.13. Confidentiality............................................ -122-
10.14. Delivery of Information.................................... -122-
10.15. Estoppel Certificates...................................... -123-
10.16. WAIVER OF JURY TRIAL....................................... -123-
10.17. Joint and Several Obligations.............................. -123-
10.18. Recourse................................................... -123-
</TABLE>
-v-
<PAGE> 7
SCHEDULES
Schedule 1.1-A Borrower Subsidiaries owning Eligible Assets
Schedule 1.1-B Lender's Commitments
Schedule 1.1-D Intercompany Debt
Schedule 1.1-E Joint Ventures
Schedule 1.1-F Operating Entities
Schedule 1.1-J Guarantors
Schedule 1.1-M Mortgage Loan Multipliers
Schedule 1.1-N Qualified Ground Leases
Schedule 4.8 Subsidiaries and Unconsolidated Entities
Schedule 4.16 Collective Bargaining Agreements
Schedule 4.18 Newly Acquired Hotels
Schedule 4.19 Environmental Conditions
Schedule 4.22(a) Owned Real Estate
Schedule 4.22(e) Condemnation
Schedule 4.22(f) Material Damage
Schedule 4.25(a) Eligible Hotels without Licenses
Schedule 4.28 REIT Business Operations
Schedule 6.2 Corporation Business Operations
Schedule 6.11(d) Property Income Statements
Schedule 6.23 Eligible Assets
Schedule 6.23(a) Limited Service Hotels
EXHIBITS
Exhibit A-1 Form of Term Note
Exhibit A-2 Form of Revolving Note
Exhibit A-3 Form of Swing Advance Note
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Notice of Conversion or Continuation
Exhibit D Form of Affiliate Debt Subordination Agreement
Exhibit E Form of Compliance Certificate
Exhibit F Form of Borrowing Base Certificate
Exhibit G Form of Assignment and Acceptance
Exhibit H Letter of Credit Funding Directions
<PAGE> 8
THIS CREDIT AGREEMENT ("Agreement"), is made as of September 10, 1997
among STARWOOD LODGING TRUST, a Maryland real estate investment trust (the
"REIT") and SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership
("Borrower"), the financial institutions listed on the signature pages hereof
(each individually a "Lender" and collectively the "Lenders") and BANKERS TRUST
COMPANY ("BT"), as administrative agent and arranger for the Lenders (in such
capacity, the "Administrative Agent"), LEHMAN BROTHERS HOLDINGS, INC., D/B/A
LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC. ("Lehman"), as
syndication agent and co-arranger ("Syndication Agent") BANKBOSTON, N.A.
("BankBoston"), as co-arranger and co-documentation agent, and BANK OF MONTREAL,
acting by and through its Chicago Branch ("Bank of Montreal"), as co-arranger
and co-documentation agent (together with BankBoston, the "Documentation
Agents"; the Documentation Agents, Administrative Agent and Syndication Agent,
collectively the "Agents").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms. As used in this Agreement, the following terms
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Added Eligible Asset" has the meaning specified in Section 6.23(c).
"Adjusted EBITDA" means, for the Borrower or Borrower Subsidiaries
or any Joint Venture for any period, and calculated on a combined basis with
respect to multiple Hotels, the lesser of (a) Operating Lease Payments received
by the Borrower or such Borrower Subsidiary or with respect to a Joint Venture
Hotel, its JV% thereof, for such period less the aggregate FF&E Reserves,
property taxes, insurance premiums, and other expenses paid or incurred by
Borrower or Borrower Subsidiaries for such period and (b) Adjusted NOI in
respect of such Hotel or Hotels owned or leased by the Borrower or such Borrower
Subsidiary or with respect to a Joint Venture Hotel, its JV% thereof; provided,
however that Adjusted EBITDA shall be deemed to equal zero with respect to any
Hotel or Hotels being operated pursuant to an Operating Lease under which (i) a
monetary default has occurred and is continuing or (ii) a non-monetary default
beyond any applicable notice, grace and cure periods expressly stated in such
Operating Lease has occurred.
"Adjusted Funds From Operations" means, for any Person, for any
period, Net Income (Loss) of such Person for such period plus (a) the sum of the
following amounts of such Person and its Subsidiaries for such period determined
on a consolidated basis in conformity with GAAP to the extent included in the
determination of such Net Income (Loss): (i) depreciation expense, (ii)
amortization expense and other non-cash charges of such Person and its
Subsidiaries with respect to their real estate assets for such period, (iii)
losses from Asset Sales of such Person and its Subsidiaries, losses resulting
from restructuring of Indebtedness of such Person and its Subsidiaries and other
extraordinary losses, (iv) amortization of financing costs and (v) any other
non-recurring expenses which are not a part of Adjusted Funds From Operation in
the ordinary
-1-
<PAGE> 9
course of business and which have been approved by the Borrower's independent
public accountants of recognized national standing; less (b) the sum of the
following amounts of such Person and its Subsidiaries for such period determined
on a consolidated basis in conformity with GAAP to the extent included in the
determination of such Net Income (Loss): (i) gains from Asset Sales of such
Person and its Subsidiaries, gains resulting from restructuring of Indebtedness
of such Person and its Subsidiaries and other extraordinary gains, and (ii) the
applicable share of Net Income (Loss) of such Person's Unconsolidated Entities;
plus (c) such Person's Pro Rata Share of Adjusted Funds From Operations of such
Person's Unconsolidated Entities.
"Adjusted Management Fee EBITDA" means, with respect to any
Management Agreement, fifty percent (50%) of the Management Fees.
"Adjusted Mortgage Loan Value" means, with respect to any Mortgage
Loan, at any time, the lesser of (a) the unpaid principal balance of the
Mortgage Note and (b) an assumed loan amount attributed to the Mortgage Loan
using an interest rate of 10.5% per annum, constant monthly payments of interest
and principal, an amortization term of 23 years and a debt service coverage
ratio, based on Adjusted NOI of the Mortgage Note Hotel, of 1.65 to 1.00;
notwithstanding the foregoing, with respect to the Mortgage Loans set forth on
Schedule 1.1-M, Adjusted Mortgage Loan Value shall equal the applicable
multipliers set forth on such Schedule times the unpaid principal balance of the
related Mortgage Note.
"Adjusted NOI" means, with respect to (i) any Hotel or Hotels owned
or leased by the Borrower or any Borrower Subsidiary or Joint Venture or (ii)
the Hotel known as the Midland Hotel, Chicago, Illinois, subject to the terms of
the definitions of Eligible Assets, or (iii) any Mortgage Note Hotel owned by a
Maker, for any period, the Net Operating Income for such Hotel or Hotels or
Joint Venture Hotels or Mortgage Note Hotels for such period less the FF&E
Reserve for such Hotel or Hotels or Joint Venture Hotels or such Mortgage Note
Hotel for such period.
"Administrative Fee" has the meaning specified in Section 2.4(a).
"Advance" means each advance of the principal balance of the Loan in
accordance with Article II, including Swing Advances, the issuance of any
Letters of Credit and any Unpaid Drawings.
"Affiliate" means, to any Person, any Subsidiary of such Person and
any other Person which, directly or indirectly, controls, is controlled by or is
under common control with such Person and includes each executive officer,
director, trustee, limited liability company manager or general partner of such
Person, and each Person who is the beneficial owner of 10% or more of any class
of voting Stock of such Person. For the purposes of this definition, "control"
means the possession of the power to direct or cause the direction of management
and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise.
"Affiliate Debt" means any and all Indebtedness of Borrower or the
REIT in favor of any Affiliate of Borrower, the REIT or any Loan Party.
-2-
<PAGE> 10
"Agreement" means this Agreement, together with all Exhibits and
Schedules hereto, as the same may be amended, supplemented or otherwise modified
from time to time.
"Applicable Lending Office" means, with respect to each Lender, its
Domestic Lending Office in the case of a Base Rate Portion and its Eurodollar
Lending Office in the case of a Eurodollar Rate Portion.
"Arranger" shall mean BT.
"Assets" means, with respect to any Person, all assets of such
Person that would, in accordance with GAAP, be classified as assets of a company
conducting a business the same as or similar to that of such Person, including,
without limitation, all Hotels, Mortgage Loans, Management Agreements,
Undeveloped Land, Joint Ventures, Hotel Construction and Available Cash
Balances.
"Asset Sale" means any sale, conveyance, transfer, assignment, lease
or other disposition (including, without limitation, by merger or consolidation,
and by condemnation, eminent domain, loss, damage, or destruction, and whether
by operation of law or otherwise) by the Borrower or any Borrower Subsidiary to
any Person (other than to Borrower or any Borrower Subsidiary) of any Stock of
any Borrower Subsidiary, any Stock Equivalents of any Borrower Subsidiary or any
Hotel or Mortgage Loan or Management Agreement, but excluding Operating Leases.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in substantially the form of Exhibit G.
"Available Cash Amount" means, with respect to Available Cash
Balances, as of the date of determination, the combined Dollar amount of such
Available Cash Balances minus trade payables outstanding for more than 60 days.
"Available Cash Balances" means (i) unrestricted Cash and Cash
Equivalents of the Borrower and Borrower Subsidiaries and (ii) any Cash or Cash
Equivalents that have been deposited in an escrow account as a downpayment or
good faith deposit in connection with a proposed acquisition of a Hotel by
Borrower or a Borrower Subsidiary, provided that the return of such downpayment
or good faith deposit to the Borrower or Borrower Subsidiary is under the sole
control of or at the sole direction of the Borrower or Borrower Subsidiary and
there are no conditions precedent that Borrower or Borrower Subsidiary must
comply with to its return other than the giving of notice or similar conditions
that are entirely within the control of Borrower or the Borrower Subsidiary, and
provided that the failure to comply with such conditions would not result in the
forfeiture of such deposit or downpayment and such deposit or downpayment is
required to be returned within five (5) Business Days of Borrower's giving of
notice or compliance with such conditions.
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<PAGE> 11
"Available Credit" means, at any time, an amount equal to (a) the
lower of (i) the then effective Commitments of the Lenders and (ii) the
Borrowing Base at such time, minus (b) the sum, without duplication, of (i) the
Principal Balance at such time and (ii) the Letter of Credit Outstandings at
such time.
"BT Credit Facility" means that certain $200,000,000.00 loan
pursuant to that certain Credit Agreement dated as of July 10, 1997 between
Borrower, the REIT, BT, Lehman and Goldman Sachs Mortgage Company.
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall be
equal at all times to the higher of:
(a) the rate of interest announced publicly by BT at its principal
office from time to time, as its base rate; and
(b) the sum (adjusted to the nearest 1/8 of one percent or, if there
is no nearest 1/8 of one percent, to the next higher 1/8 of one percent) of (i)
1/2 of one percent per annum plus (ii) the Federal Funds Rate.
"Base Rate Margin" means (i) with respect to the Initial Interest
Rate Period, three-quarters of one percent per annum (0.75%), and (ii) with
respect to each Interest Period other than the Initial Interest Rate Period, the
applicable percentage per annum set forth in the column "Base Rate Margin"
determined by reference to the column (a) "Unsecured Debt Rating of Borrower"
then in effect in the event such a rating is assigned by the Rating Agencies or
(b) "Leverage Ratio of Borrower" then in effect in the event an Unsecured Debt
Rating of Borrower has not been assigned by the Rating Agencies, each as set
forth below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Unsecured Debt Rating of Leverage Ratio of Base Rate Margin
Borrower Borrower
- --------------------------------------------------------------------------------
<S> <C> <C>
>=45% and <50% .75%
>=40% and <45% .625%
BB+/Ba1 or worse >=35% and <40% .50%
<35% .40%
BBB-/Baa3 .375%
BBB/Baa2 .25%
BBB+/Baa1 .125%
A-/A3 or better 0.00%
- --------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE> 12
The Base Rate Margin for the Base Rate Portion shall be determined
by reference to the lowest Unsecured Debt Rating or Leverage Ratio of Borrower,
as applicable, in effect from time to time, and each change in the Base Rate
Margin shall be effective as of the first scheduled date for the Payment of
interest hereunder immediately following the date such Unsecured Debt Rating or
Leverage Ratio, as applicable, is announced or determined; provided, however,
(i) that in the event an Unsecured Debt Rating of Borrower is not assigned by
the Rating Agencies within 360 days (or 450 days in the event Borrower executes
a Westin Acquisition Agreement) of the Closing Date, the Base Rate Margin
determined by reference to each Leverage Ratio of less than 40% shall be
increased by .125% per annum commencing on the first scheduled date for the
Payment of interest hereunder immediately following the date which is 360 days
(or 450 days in the event Borrower executes a Westin Acquisition Agreement)
after the Closing Date and continuing until such time as an Unsecured Debt
Rating of Borrower is assigned by the Rating Agencies; (ii) the Base Rate
Margins applicable during the first Extension Period, if any, shall be increased
by .125% above the Base Rate Margins set forth in the above table; and (iii) the
Base Rate Margins applicable during the second Extension Period, if any, shall
be increased by .25% above the Base Rate Margins set forth in the above table.
"Base Rate Portion" means any portion of the Principal Balance,
including without limitation, any Unpaid Drawings, that bears interest with
reference to the Base Rate.
"Borrower Subsidiary" means each of the entities identified on
Schedule 1.1-A, as the same may be supplemented or amended from time to time and
any corporation, partnership, limited liability company or other business entity
ninety-nine percent (99%) or more of whose Stock, partnership or membership
interests are owned, directly or indirectly, and which is controlled, by the
Borrower.
"Borrower's Investment" means, with respect to any Hotel, the
Borrower's or any Borrower Subsidiary's investment in such Hotel (including all
investments constituting, evidencing or secured by an interest in property,
whether tangible or intangible and whether real, personal or mixed, that is used
or intended for use in, or in any manner connected with or relating to, the
ownership or leasing of such Hotel, specifically including, without limitation,
investments in Subsidiaries and Unconsolidated Entities owning or leasing
Hotels), at cost, on a consolidated basis, provided that in determining the cost
of such investments, there shall be included (i) the amount of all cash paid and
the value (as determined by the Board of Directors of the REIT for purposes of
such investment and approved by Borrower's and the REIT's independent public
accountants of recognized national standing) of any other property transferred
therefor by the Borrower or Borrower Subsidiary, (ii) the amount of all
indebtedness and other obligations assumed or incurred by the Borrower or
Borrower Subsidiary or to which the Borrower or Borrower Subsidiary takes
subject, (iii) the value (as determined by the Board of Directors of the REIT
for the purposes of such investment and approved by Borrower's and the REIT's
independent public accountants of recognized national standing) of all operating
partnership units of which the issuer is SLC or an entity that is, or upon such
investment will be, included within the Borrower or Borrower Subsidiary and
which are issued (otherwise than for cash) to, or retained by, any person other
than the Borrower or Borrower Subsidiary in connection with such investment and
which investment (including Personal Property) shall be wholly owned by
-5-
<PAGE> 13
Borrower or a Borrower Subsidiary and (iv) any other costs incurred in
connection with such investment as reasonably acceptable to the Administrative
Agent. For purposes of this definition only "indebtedness" of the Borrower or
Borrower Subsidiary shall mean the consolidated liabilities of the Borrower and
Borrower Subsidiaries for borrowed money (including all notes payable and drafts
accepted representing extensions of credit) and all obligations evidenced by
bonds, debentures, notes or other similar instruments on which interest charges
are customarily paid, including obligations under Capitalized Leases.
"Borrower's Partnership Agreement" means that certain Amended and
Restated Limited Partnership Agreement of SLT Realty Limited Partnership dated
as of June 29, 1995, and an Amended and Restated Certificate of Limited
Partnership of SLT Realty Limited Partnership dated July 5, 1995.
"Borrower's Total Value" means, with respect to each of the
following types of Assets of the Borrower and Borrower Subsidiaries, and, if
applicable, Joint Ventures, at any date, the aggregate value thereof to be
calculated without duplication, as follows:
(a) For Hotels (other than Renovating Hotels and Hotel Construction)
and Limited Service Hotels owned or leased for four (4) Fiscal Quarters or more,
Adjusted EBITDA on a consolidated basis from such Hotels and Limited Service
Hotels for the preceding twelve (12) months divided by ten percent (10%);
notwithstanding the foregoing, the value of the Hotel commonly known as the
Doral Inn, located in New York, New York shall equal the product of (i) ten (10)
and (ii) the Doral Ground Lease Payments actually received by the related
Borrower Subsidiary under the Doral Ground Lease during the preceding twelve
(12) month period; the value of the Hotel known as the Days Inn, Seattle,
Washington, shall be equal to the product of (A) Adjusted EBITDA for the
preceding twelve (12) months and (B) two (2.0) until September 1, 1998, and one
(1.0) from September 2, 1998 to September 1, 1999, and, as of September 1, 1999,
the value of such Hotel shall be deemed to be zero (0), unless and until the
Days Inn Ground Lease shall be amended to comply with all of the conditions set
forth in clauses (a) through (f) of the definition of Qualified Ground Lease
herein; and the value of the Hotel known as the Sixth Avenue Inn, Seattle
Washington shall be equal to the product of (A) Adjusted EBITDA for the
preceding twelve (12) months and (B) two (2.0) until September 1, 1998, and one
(1.0) from September 2, 1998 to September 1, 1999, and, as of September 1, 1999,
the value of such Hotel shall be deemed to be zero (0), unless and until the
Sixth Avenue Ground Lease shall be amended to comply with all of the conditions
set forth in clauses (a) through (f) of the definition of Qualified Ground Lease
herein.
(b) For Hotels (other than Renovating Hotels and Hotel Construction)
and Limited Service Hotels owned or leased for less than four (4) Fiscal
Quarters, ninety-five percent (95%) of the Borrower's Investment in such Hotels
and Limited Service Hotels;
(c) For Renovating Hotels, for the first three months such
Renovating Hotel is actually under renovation during the term of the Loan,
seventy-five percent (75%) of Adjusted EBITDA on a consolidated basis from such
Renovating Hotels divided by ten percent (10%), then
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<PAGE> 14
calculated as in (a) above until the renovation is completed, then for the next
twelve (12) months, calculated as in (b) above, and thereafter, calculated as in
(a) above;
(d) For Mortgage Loans, Adjusted Mortgage Loan Value;
(e) For Management Agreements, Management Fees from such Management
Agreements for the preceding twelve (12) months (based on historical financial
data as reasonably approved by the Administrative Agent) multiplied by three and
one half (3.5);
(f) For Available Cash Balances, the Available Cash Amount;
(g) For Hotel Construction: (i) prior to completion of construction
and delivery of a final certificate of occupancy, provided the Borrower has
demonstrated to the reasonable satisfaction of the Administrative Agent, on a
pro-forma basis through completion of construction, compliance with all
financial covenants set forth in Article V, seventy-five percent (75%) of the
lesser of (A) direct construction costs actually incurred by the Borrower or
Borrower Subsidiary for work in place as part of the Improvements together with
land acquisition costs and reasonable soft costs actually incurred by the
Borrower or Borrower Subsidiary, each as certified by the project manager
employed by the Borrower for such construction and a Responsible Officer of the
Borrower and which is reasonably acceptable to the Administrative Agent, and (B)
direct construction costs, land acquisition costs and reasonable soft costs to
be incurred by the Borrower or Borrower Subsidiary, as budgeted by the Borrower
or Borrower Subsidiary prior to commencement of construction; and (ii) following
completion of construction and delivery of a final certificate of occupancy and
during the first twelve (12) months thereafter, ninety-five percent (95%) of the
lesser of (1) the amount determined in (A) above and (2) one hundred ten percent
(110%) of the amount determined in (B) above;
(h) For Undeveloped Land and Non-Hotel Assets, ninety-five percent
(95%) of the Borrower's Investment, as reasonably approved by the Administrative
Agent, in such Undeveloped Land or Non-Hotel Assets, as applicable;
(i) For Stock Acquisitions, the lesser of (i) the REIT's ,
Borrower's or Borrower Subsidiary's cost basis in such Stock or (ii) ninety-five
percent (95%) of the market value of such Stock at the time of determination;
provided, however, that the value attributable to Joint Venture
Hotels or any Undeveloped Land owned by a Joint Venture shall be the JV% of the
value of the Joint Venture Hotels or such Undeveloped Land calculated in
accordance with the above criteria;
provided, further, that in no event shall more than (i) 20% of
Borrower's Total Value be attributable to Joint Venture Hotels, (ii) 10% of
Borrower's Total Value be attributable to Available Cash Balances and (iii) 10%
of Borrower's Total Value be attributable to Renovating Hotels;
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<PAGE> 15
provided, further, that the value attributable to the Hotels known
commonly as the Westwood Marquis, located in Los Angeles, California and the
Doral Inn, located in New York, New York shall be the value calculated in
accordance with the above criteria multiplied by the percentage of economic
ownership interest (which shall not be less than 90%) then owned by the Borrower
or Borrower Subsidiary in the limited liability companies which own such Hotels;
provided, further that until such time as the Westwood Mortgage has
been paid in full and satisfied or has expired by its terms and in either case
released of record, the value of the Hotel known as the Westwood Marquis,
located in Los Angeles, California, shall not exceed $42,000,000.00, as such
amount may be reduced pursuant to the terms of the Westwood Mortgage as a result
of insurance proceeds or condemnation awards received by the Borrower, Borrower
Subsidiary or Joint Venture with respect to such Hotel and not applied to
restoration. In the event of any default under the Westwood Mortgage that
continues beyond the expiration of any applicable grace or notice periods, the
value of such Hotel shall be deemed to equal zero (0);
provided, further, that if a License under which a Hotel is operated
is in default, such Hotel shall be deemed to not have a License, and if the
related Borrower or Borrower Subsidiary has not either terminated the License or
entered into a replacement License with a nationally recognized Franchise
affiliation reasonably acceptable to the Administrative Agent within ninety (90)
days of such default (subject to a ninety (90) day extension with Administrative
Agent's consent, which consent shall not be unreasonably withheld), the value of
such Hotel shall be deemed zero (0) until such time as the foregoing conditions
are complied with; and
provided, further that in no event shall more than one percent (1%)
of Borrower's Total Value be attributable to Mortgage Loans for which the
financial information required under Section 6.11 for the related Mortgage Note
Hotel is not available.
"Borrowing Base" means (a) during the Initial Interest Rate Period,
the sum of sixty percent (60%) of the Eligible Asset Value, and (b) thereafter,
the sum of fifty percent (50%) of the Eligible Asset Value.
"Borrowing Base Certificate" means a certificate of the Borrower
substantially in the form of Exhibit F.
"Borrowing Base Imbalance" has the meaning provided in Section
2.7(c).
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable Business
Day relates to a Eurodollar Rate Portion, a day on which dealings are also
carried on in the London interbank market.
"Calendar Quarter" shall mean each Fiscal Quarter ending on March
31, June 30, September 30 and December 31.
"Capital Expenditures" means, for any Person for any period, the
aggregate of all expenditures by such Person and its Subsidiaries, except
interest capitalized during construction,
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<PAGE> 16
during such period for property, plant or equipment, including, without
limitation, renewals, improvements, replacements and capitalized repairs, that
would be reflected as additions to property, plant or equipment on a
consolidated balance sheet of such Person and its Subsidiaries prepared in
conformity with GAAP. For the purpose of this definition, the purchase price of
equipment which is acquired simultaneously with the trade-in of existing
equipment owned by such Person or any of its Subsidiaries or with insurance
proceeds shall be included in Capital Expenditures only to the extent of the
gross amount of such purchase price less the credit granted by the seller of
such equipment being traded in at such time or the amount of such proceeds, as
the case may be.
"Capitalized Lease" means, as to any Person, any lease of property
by such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in conformity with GAAP.
"Capitalized Lease Obligations" means, as to any Person, the
capitalized amount of all obligations of such Person or any of its Subsidiaries
under Capitalized Leases, as determined on a consolidated basis in conformity
with GAAP.
"Cash" means coin or currency of the government of the United States
of America.
"Cash and Cash Equivalents" means any or a combination of (i) Cash,
(ii) U.S. Government Obligations (iii) demand deposits, certificates of deposit,
bankers acceptances and time deposits in each case with maturities of ninety
(90) days or less of United States banks having total assets in excess of
$1,000,000,000.00; and (iv) securities commonly known as "commercial paper" with
maturities of ninety (90) days or less issued by a corporation organized and
existing under the laws of the United States of America or any State which at
the times of purchase are rated by Moody's Investors Service, Inc. or by
Standard & Poor's Ratings Services at not less than "P1" if then rated by
Moody's Investors Service, Inc., and not less than "A1", if then rated by
Standard & Poor's Ratings Services.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986 (or any successor
legislation thereto), as amended from time to time.
"Co-Arrangers" means Lehman, Bank of Boston and Bank of Montreal.
"Commitment" means, with respect to each Lender, such Lender's Term
Commitment and Revolving Credit Commitment, individually or together, as the
case may be.
"Compliance Certificate" means each certificate in the form of
Exhibit E which is required to be delivered by the Borrower pursuant to the
terms of this Agreement.
"Contingent Obligation" means, as applied to any Person, any direct
or indirect liability, contingent or otherwise, of such Person with respect to
any Indebtedness or Contractual
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<PAGE> 17
Obligation of another Person, if the purpose or intent of such Person in
incurring the Contingent Obligation is to provide assurance to the obligee of
such Indebtedness or Contractual Obligation that such Indebtedness or
Contractual Obligation will be paid or discharged, or that any agreement
relating thereto will be complied with, or that any holder of such Indebtedness
or Contractual Obligation will be protected (in whole or in part) against loss
in respect thereof. Contingent Obligations of a Person include, without
limitation, (a) the direct or indirect guarantee, endorsement (other than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of an obligation
of another Person (including, in the case of any Guarantor, its obligations
under its Subsidiary Guaranty), and (b) any liability of such Person for an
obligation of another Person through any agreement (contingent or otherwise) (i)
to purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of a loan, advance, stock purchase, capital contribution or
otherwise), (ii) to maintain the solvency or any balance sheet item, level of
income or financial condition of another Person, (iii) to make take-or-pay or
similar payments, if required, regardless of non-performance by any other party
or parties to an agreement, (iv) to purchase, sell or lease (as lessor or
lessee) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such obligation or to assure the holder
of such obligation against loss, or (v) to supply funds to or in any other
manner invest in such other Person (including, without limitation, to pay for
property or services irrespective of whether such property is received or such
services are rendered), if in the case of any agreement described under
subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary purpose or
intent thereof is as described in the preceding sentence. Anything herein to the
contrary notwithstanding, no agreement entered into by the Borrower or any of
its Subsidiaries or Unconsolidated Entities with respect to its acquisition of
any direct or indirect interest in any Hotel shall, prior to the satisfaction in
full of all conditions precedent to the obligations of such Person pursuant to
the agreement, be deemed or construed to constitute a "Contingent Obligation" or
"Indebtedness" of such Person hereunder, provided that pursuant to any such
agreement, the Borrower or its Subsidiary or Unconsolidated Entity is not liable
or responsible for, and does not assume any, development or construction risks.
The amount of any Contingent Obligation shall be determined in accordance with
GAAP. Notwithstanding the foregoing, the Lenders acknowledge that (i) any
Contingent Obligation of the Borrower that has a settlement date no later than
two (2) years from the date of such original issuance and that the Borrower, in
its sole and absolute discretion, has the option of satisfying by the issuance
of new shares of stock to the obligee of such Contingent Obligation and the
aggregate cumulative value at the time of the initial issuance or issuances of
stock to which such issuance or issuances is related is less than
$300,000,000.00, such Contingent Obligation shall not be deemed a Contingent
Obligation within the meaning of this definition, and (ii) the liabilities of
Borrower, certain Borrower Subsidiaries and the REIT under the Westin
Acquisition Agreement shall not be deemed Contingent Obligations and shall not
result in an Event of Default hereunder for the period commencing on the date
hereof and ending on November 10, 1997, provided that, within fifteen (15) days
of the date hereof, Borrower has delivered to the Administrative Agent a fully
executed copy of the Westin Acquisition Agreement. together with all financial
and other information reasonably requested by the Administrative Agent on behalf
of the Lenders in order to determine the effect of the Westin Acquisition
Agreement on compliance with the covenants of this Agreement.
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<PAGE> 18
"Contractual Obligation" of any Person means any obligation,
agreement, undertaking or similar provision of any security issued by such
Person or of any agreement (including, without limitation, any management or
franchise agreement), undertaking, contract, lease, indenture, mortgage, deed of
trust or other instrument (excluding a Loan Document) to which such Person is a
party or by which it or any of its property is bound or to which any of its
properties is subject.
"Corporation" means Starwood Lodging Corporation, a Maryland
corporation.
"Credit Documents" has the meaning specified in Section 2.19(d)
"Credit Facilities" means the Lehman Credit Facility, the Lehman
Term Facility, the Goldman Credit Facility and the BT Credit Facility.
"Days Inn Ground Lease" means that certain Qualified Ground Lease
for the Hotel known as Days Inn, Seattle, Washington as described on Schedule
1.1-N.
"Debt Service" means, for any Person for any period, with respect to
any Indebtedness, (a) Gross Interest Expense on such Indebtedness for such
period plus (b) the aggregate amount of scheduled principal payments on such
Indebtedness of such Person (excluding optional prepayments and scheduled
principal payments in respect of any such Indebtedness which is payable in a
single installment at final maturity), plus preferred stock dividends, required
to be made during such period.
"Default" means any event which with the passing of time or the
giving of notice or both would become an Event of Default.
"Default Rate" has the meaning specified in Section 2.9(b).
"Disbursement Request" means the written request of the Borrower and
the REIT delivered to the Administrative Agent requesting disbursement by each
Lender of its Ratable Portion of the initial Advance made under this Agreement.
"DOL" means the United States Department of Labor, or any successor
thereto.
"Dollars" and the sign "$" each mean the lawful money of the United
States of America.
"Domestic Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite its
name on Schedule 1.1-B or such other office of such Lender as such Lender may
from time to time specify to the Borrower and the Administrative Agent.
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<PAGE> 19
"Doral Ground Lease" shall mean that certain agreement of lease
between StarLex LLC, as landlord, and SBK Delaware Realty Holdings, L.L.C. as
tenant, dated September 20, 1995 with respect to the Hotel commonly known as the
Doral Inn, New York, New York.
"Doral Ground Lease Payments" shall mean the Fixed Rent as defined
in and payable pursuant to the Doral Ground Lease.
"Eligible Assets" means the assets described on Schedule 6.23, as
the same may be amended or supplemented from time to time, provided such Assets
satisfy the definitions of Eligible Hotels, Eligible Mortgage Loans, Eligible
Management Agreements, Available Cash Balances, Eligible Hotel Construction,
Eligible Undeveloped Land and Eligible Renovating Hotels, as applicable, less
Removed Eligible Assets and plus Substitute Eligible Assets which have been
removed or substituted in accordance with Section 6.23; provided, however, (i)
the Hotel known commonly as the Westwood Marquis, located in Los Angeles,
California and the Doral Inn, located in New York, New York shall each be deemed
Eligible Hotels so long as the Borrower or a Borrower Subsidiary (a) continues
to own at least 90%, directly or indirectly, of the membership interests and
voting rights and (b) is the managing member of each of the limited liability
companies owning such Hotel (or in the case of the Doral Inn, the Land (as
defined under Real Estate below) on which the related Hotel is located); (ii)
the Hotel known commonly as the Milwaukee Marriott, Brookfield, Wisconsin shall
be deemed an Eligible Hotel provided that 100% fee simple title in and to such
Hotel is transferred of record to Borrower or a Borrower Subsidiary within
ninety (90) days of the date hereof (provided that each such Hotel otherwise
satisfies the minimum criteria of Eligible Hotels), and in the event that such
title is not so transferred within the foregoing time period, the Milwaukee
Marriott will be deemed an Eligible Mortgage Loan (provided that it satisfies
the minimum criteria for an Eligible Mortgage Loan) and (iii) the Hotel commonly
known as the Midland Hotel, located in Chicago, Illinois shall be deemed an
Eligible Mortgage Loan provided that the related Mortgage Note is secured by a
first priority mortgage lien in the full amount of such note pursuant to a
mortgage in form and substance reasonably acceptable to the Administrative Agent
and such mortgage is executed, delivered and recorded in the appropriate land
records where such Mortgage Note Hotel is located within fourteen (14) days of
the date hereof, and Borrower provides the Administrative Agent, within twenty
one (21) days of the date hereof with a title search showing that such mortgage
is a first lien against such Mortgage Note Hotel subject only to Permitted Liens
(provided that such Mortgage Loan otherwise satisfies the minimum criteria of
Eligible Mortgage Loans); in the event that the foregoing provisions are not
complied within the foregoing time frames, the value of such Mortgage Loan
shall, for all purposes in this Agreements deemed to be zero (0).
"Eligible Asset Value" means, with respect to the Eligible Assets,
at any date or the aggregate value thereof to be calculated, without duplication
as follows:
(a) For Eligible Hotels and Eligible Hotels that are Limited Service
Hotels (other than Eligible Renovating Hotels and Eligible Hotel Construction)
owned or leased for four (4) Fiscal Quarters or more, Adjusted EBITDA on a
consolidated basis from such Eligible Hotels and Eligible Hotels that are
Limited Service Hotels for the preceding twelve (12) months divided by ten
percent (10%); notwithstanding the foregoing, the value of the Hotel commonly
known as
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<PAGE> 20
the Doral Inn, located in New York, New York shall equal the product of (i) ten
(10) and (ii) the Doral Ground Lease Payments actually received by the related
Borrower Subsidiary under the Doral Ground Lease during the preceding twelve
(12) month period; the value of the Hotel known as the Days Inn, Seattle,
Washington, shall be equal to the product of (A) Adjusted EBITDA for the
preceding twelve (12) months and (B) two (2.0) until September 1, 1998, and one
(1.0) from September 2, 1998 to September 1, 1999, and, as of September 1, 1999,
the value of such Hotel shall be deemed to be zero (0), unless and until the
Days Inn Ground Lease shall be amended to comply with all of the conditions set
forth in clauses (a) through (f) of the definition of Qualified Ground Lease
herein; and the value of the Hotel known as the Sixth Avenue Inn, Seattle
Washington shall be equal to the product of (A) Adjusted EBITDA for the
preceding twelve (12) months and (B) two (2.0) until September 1, 1998, and one
(1.0) from September 2, 1998 to September 1, 1999, and, as of September 1, 1999,
the value of such Hotel shall be deemed to be zero (0), unless and until the
Sixth Avenue Ground Lease shall be amended to comply with all of the conditions
set forth in clauses (a) through (f) of the definition of Qualified Ground Lease
herein.
(b) For Eligible Hotels and Eligible Hotels that are Limited Service
Hotels (other than Eligible Renovating Hotels and Eligible Hotel Construction)
owned or leased for less than four (4) Fiscal Quarters, ninety-five percent
(95%) of the Borrower's Investment in such Eligible Hotels.
(c) For Eligible Renovating Hotels, for the first three months such
Renovating Hotel is actually under renovation during the term of the Loan,
seventy-five (75%) of Adjusted EBITDA on a consolidated basis from such
Renovating Hotels divided by ten percent (10%), then calculated as in (a) above
until the renovation is completed, then for the next twelve (12) months,
calculated as in (b) above, and thereafter, calculated as in (a) above (except
such Eligible Renovating Hotel shall be considered a Hotel for the purpose of
such calculations).
(d) For Eligible Mortgage Loans, Adjusted Mortgage Loan Value;
(e) For Eligible Management Agreements, Management Fees from such
Management Agreements for the preceding twelve (12) months (based on historical
financial data as reasonably approved by the Administrative Agent) multiplied by
three and one half (3.5);
(f) For Available Cash Balances, the Available Cash Amount;
(g) For Eligible Hotel Construction: (i) prior to completion of
construction and delivery of a final certificate of occupancy, provided the
Borrower has demonstrated to the reasonable satisfaction of the Administrative
Agent, on a pro-forma basis through completion of construction, compliance with
all financial covenants set forth in Article V, seventy-five (75%) of the lesser
of (A) direct construction costs actually incurred by the Borrower or Borrower
Subsidiary for work in place as part of the Improvements, together with
reasonable soft costs actually incurred by the Borrower or Borrower Subsidiary,
each as certified by the project manager employed by the Borrower for such
construction and a Responsible Officer of the Borrower and which is reasonably
acceptable to the Administrative Agent, and (B) direct
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<PAGE> 21
construction costs and reasonable soft costs to be incurred by the Borrower or
Borrower Subsidiary as budgeted by the Borrower or Borrower Subsidiary prior to
commencement of construction; and (ii) following completion of construction and
delivery of a final certificate of occupancy and during the first twelve (12)
months thereafter, ninety-five percent (95%) of the lesser of (1) the amount
determined in (A) above, and (2) one hundred ten percent (110%) of the amount
determined in (B) above; and
(h) For Eligible Undeveloped Land, ninety-five percent (95%) of the
Borrower's Investment, as reasonably approved by the Administrative Agent, in
such Eligible Undeveloped Land;
provided, that in no event shall more than (i) 10% of the Eligible
Asset Value be attributable to Eligible Mortgage Loans and no more than one (1%)
of the Eligible Asset Value be attributable to Eligible Mortgage Loans for which
the financial information required under Section 6.11 for the related Mortgage
Note Hotel is not available, (ii) 10% of the Eligible Asset Value be
attributable, in the aggregate, to Eligible Hotel Construction (subject to the
limitations in Permitted Investments,) and Eligible Undeveloped Land, provided
that Eligible Undeveloped Land shall not exceed 2.5% of the Eligible Asset
Value), (iii) 5% in the aggregate of the Eligible Asset Value attributable to
Eligible Hotels which are Limited Service Hotels or Eligible Mortgage Loans that
are secured by Mortgaged Note Hotels that are Limited Service Hotels, (iv) 40%
of the Eligible Asset Value be attributable to Eligible Hotels which are not
maintained or operated under a License with a nationally recognized franchise
affiliation reasonably acceptable to the Majority Lenders, provided that if a
License under which an Eligible Hotel is operated is in default, such Hotel
shall be deemed to not have a License, and if the related Borrower or Borrower
Subsidiary has not either terminated the License or entered into a replacement
License with a nationally recognized Franchise affiliation reasonably acceptable
to the Administrative Agent within ninety (90) days of such default, (subject to
a ninety (90) day extension with the Administrative Agent's consent, which shall
not be unreasonably withheld) the value of such Hotel shall be deemed zero (0)
until such time as the foregoing conditions are complied with, (v) 10% of the
Eligible Hotels be deemed Eligible Renovating Hotels to be included in
determining the Eligible Asset Value, (vi) 10% of the Eligible Asset Value be
attributable to Eligible Management Agreements, and (vii) 10% of the Eligible
Asset Value be attributable to Available Cash Balances;
provided, further that until such time as the Westwood Mortgage has
been paid in full and satisfied or has expired by its terms and in either case
released of record, the value of the Eligible Hotel known as the Westwood
Marquis, located in Los Angeles, California, shall not exceed $42,000,000.00, as
such amount may be reduced pursuant to the terms of the Westwood Mortgage as a
result of insurance proceeds or condemnation awards received by the Borrower,
Borrower Subsidiary or Joint Venture with respect to such Hotel and not applied
to restoration. In the event of any default under the Westwood Mortgage beyond
the expiration of any applicable grace or notice periods, the value of such
Hotel shall be deemed to equal zero (0);
provided, however, that the value attributable to any Eligible Hotel
or Eligible Undeveloped Land owned by a Joint Venture shall be the JV% of the
value of such Eligible Hotel
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<PAGE> 22
or such Eligible Undeveloped Land, calculated in accordance with the above
criteria, without duplication;
"Eligible Assignee" means any financial institution or other entity
that has more than $1,000,000,000 in assets and is engaged in the business of
originating, purchasing and participating in unsecured loans and, if such
institution or entity is not a United States entity, which is exempt from
withholding requirements imposed by the United States Internal Revenue Service
with respect to Taxes.
"Eligible Hotel Construction" means, collectively, such of the Hotel
Construction, as approved by the Majority Lenders, which is Unencumbered.
"Eligible Hotels" means, collectively, such of the Hotels owned or
leased by the Borrower or any Borrower Subsidiary as shall meet at any time and
from time to time, each of the following minimum criteria:
(a) such Hotel is Unencumbered;
(b) such Hotel is free of all material structural and title defects
and other material adverse matters;
(c) such Hotel is (i) in compliance, in all material respects, with
all applicable Environmental Laws, and (ii) not subject to any material
Environmental Liabilities and Costs, in each case as initially verified by a
written report of an environmental consultant reasonably acceptable to the
Administrative Agent;
(d) such Hotel is fully-operating with less than 20% of "keys" out
of service due to casualty or condemnation loss or as a consequence of a
material structural repair, alteration or addition;
(e) such Hotel is (i) leased to an Operating Entity pursuant to an
Operating Lease and no (A) monetary defaults exist or (B) material non-monetary
defaults exist beyond any applicable grace, notice and cure periods expressly
stated in such Operating Lease, under such Operating Lease, and (ii) except as
set forth on Schedule 4.25(a) or otherwise permitted pursuant to Section 6.21 or
in the definition of Eligible Asset Value, operated pursuant to and has the
benefit of, a License and with respect to the Hotel known as the Doral Inn, New
York, New York, no (A) monetary defaults exist or (B) material non-monetary
defaults exist beyond any applicable grace, notice and cure periods expressly
stated in such Doral Ground Lease, under such Doral Ground Lease;
(f) such Hotel is 100% owned in fee simple by, or 100% leased
pursuant to a Qualified Ground Lease in favor of, the Borrower or Borrower
Subsidiary (subject however to the proviso in the definition of Eligible
Assets); and
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<PAGE> 23
(g) except as otherwise permitted for purposes of determining
Eligible Asset Value, such Hotel is operated as a full service lodging facility.
"Eligible Management Agreements" means, collectively, those
Management Agreements relating to Managed Hotels, as reasonably approved by the
Majority Lenders, which are Unencumbered.
"Eligible Mortgage Loans" means, collectively, those Mortgage Loans,
which satisfy at any time and from time to time, each of the following minimum
criteria:
(a) such Mortgage Loan is Unencumbered;
(b) the Mortgage or Mortgages which secure such Mortgage Note for
such Mortgage Loan constitutes a valid first mortgage lien (or, if applicable,
one or more subordinate mortgage liens, provided that the Borrower or a Borrower
Subsidiary, as the case may be, is the holder of and mortgagee of record for the
first mortgage lien and all such subordinate mortgage liens), subject to no
other Liens or encumbrances, on the good and marketable fee simple absolute or
leasehold title to the Mortgage Note Hotel, subject only to such exceptions as
shall be reasonably approved by the Administrative Agent; and
(c) except as otherwise permitted for purposes of determining
Eligible Asset Value, the Mortgage Note Hotel is operated as a full service
lodging facility.
"Eligible Mortgage Loan Documents" means, for each Eligible Mortgage
Loan, the related (i) Mortgage Note, (ii) Mortgage, (iii) Mortgage Loan Security
Documents, (iv) casualty and hazard insurance policies, (v) title insurance
policies, and (vi) surveys, opinion letters, and such other correspondence or
servicing information in the holder's possession.
"Eligible Renovating Hotel" means a Hotel which otherwise satisfies
the definition of an Eligible Hotel (other than clause (d) of such definition)
but which is a Renovating Hotel; provided that in no event may the number of
Eligible Renovating Hotels at any one time exceed 10% of the total number of
Eligible Hotels at such time.
"Eligible Undeveloped Land" means such of the Undeveloped Land, as
reasonably approved by the Majority Lenders, which is Unencumbered.
"Engineering Reports" has the meaning specified in Section 3.1(i).
"Environmental Claim" means any accusation, allegation, notice of
violation, action, claim, Environmental Lien, demand, abatement or other Order
or direction (conditional or otherwise) by any Governmental Authority or any
other Person for personal injury (including sickness, disease or death),
tangible or intangible property damage, damage to the environment, nuisance,
pollution, contamination or other adverse effects on the environment, or for
fines, penalties or restriction, resulting from or based upon (i) the existence,
or the continuation of the existence, of a Release (including, without
limitation, sudden or non-sudden accidental or non-
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<PAGE> 24
accidental Releases) of, or exposure to, any Hazardous Material or other
nuisance (to the extent the same relates to any Hazardous Materials), or other
Release in, into or onto the environment (including, without limitation, the
air, soil, surface water or groundwater) at, in, by, from or related to any
property owned or leased by the Borrower or any Borrower Subsidiary or any
Operating Entity or any activities or operations thereof; (ii) the environmental
aspects of the transportation, storage, treatment or disposal of Hazardous
Materials in connection with any property owned or leased by the Borrower or any
Borrower Subsidiary or any Operating Entity or their operations or facilities;
or (iii) the violation, or alleged violation, of any Environmental Laws, Orders
or Environmental Permits of or from any Governmental Authority relating to
environmental matters connected with any property owned or leased by the
Borrower or any Borrower Subsidiary or any Operating Entity.
"Environmental Laws" means any applicable federal, state, local or
foreign law (including common law), statute, code, ordinance, rule, regulation
or other requirement having the force or effect of law relating to the
environment, natural resources, or public or employee health and safety and
includes, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., the
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 et
seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section
6901 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.,
the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Clean Water Act, 33
U.S.C. Section 1251 et seq., the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq. (to the extent the same relates to any Hazardous Materials),
and the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq., as such laws
have been amended or supplemented, and the regulations promulgated pursuant
thereto, and all analogous state and local statutes.
"Environmental Liabilities and Costs" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all reasonable fees, disbursements and expenses
of counsel, experts and consultants and costs of investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of any
claim or demand by any other Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute, including,
without limitation, any thereof arising under any Environmental Law,
Environmental Permit, order or agreement with any Governmental Authority or
other Person, and which relate to any environmental, health or safety condition,
or a Release or threatened Release, and result from the past, present or future
operations of, or ownership of property by, such Person or any of its
Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental
Authority arising under any Environmental Law.
"Environmental Permit" means any Permit required under any
applicable Environmental Laws or Order and all supporting documents associated
therewith.
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<PAGE> 25
"Equity Value" means, with respect to the Borrower and Borrower
Subsidiaries, Total Assets less Total Indebtedness.
"ERISA" means the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control or treated as a single employer with any Loan
Party within the meaning of Section 414 (b), (c), (m) or (o) of the Code.
"ERISA Event" means (i) an event described in Sections 4043(c)(1),
(2), (3), (5), (6), (8) or (9) of ERISA with respect to a Pension Plan; (ii) the
withdrawal of any Loan Party or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (iii) the complete or
partial withdrawal of any Loan Party or any ERISA Affiliate from any
Multiemployer Plan or the insolvency of any Multiemployer Plan; (iv) the filing
of a notice of intent to terminate a Pension Plan or the treatment of a plan
amendment as a termination under section 4041 of ERISA; (v) the institution of
proceedings by the PBGC to terminate or appoint a trustee to administer a
Pension Plan or Multiemployer Plan; (vi) the failure to make any required
contribution to a Pension Plan; (vii) 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 Pension Plan
or Multiemployer Plan; (viii) the imposition of any liability under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of
ERISA; (ix) a prohibited transaction (as described in Code Section 4975 or ERISA
Section 406) shall occur with respect to any Plan; or (x) any Loan Party or
ERISA Affiliate shall request a minimum funding waiver from the IRS with respect
to any Pension Plan.
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" below its
name on Schedule 1.1-B (or, if no such office is specified, its Domestic Lending
Office) or such other office of such Lender as such Lender may from time to time
specify to the Borrower and the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period, an interest rate
per annum equal to the rate per annum obtained by multiplying (a) a rate per
annum equal to the rate for U.S. dollar deposits with maturities comparable to
such Interest Period which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, two (2) Business Days prior to the commencement of such Interest
Period, provided, however, that if such rate does not appear on Telerate Page
3750, the "Eurodollar Rate" applicable to a particular Interest Period shall
mean a rate per annum equal to the rate at which U.S. dollar deposits in an
amount approximately equal to the Principal Balance (or the portion thereof
which will bear interest at a rate determined by reference to the Eurodollar
Rate during the Interest Period to which such Eurodollar Rate is applicable in
accordance with the provisions hereof), and with maturities comparable to the
last day of the Interest Period with respect to which such Eurodollar Rate is
applicable, are offered in immediately available funds in the London Interbank
Market to the London office of BT by leading banks in the Eurodollar market at
11:00 a.m., London time, two (2) Business Days prior to the commencement of the
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<PAGE> 26
Interest Period to which such Eurodollar Rate is applicable, by (b) a fraction
(expressed as a decimal) the numerator of which shall be the number one and the
denominator of which shall be the number one minus the Eurodollar Rate Reserve
Percentage for such Interest Period.
"Eurodollar Rate Portion" means any portion of the Principal Balance
that, for an Interest Period, bears interest at a rate determined with reference
to the Eurodollar Rate.
"Eurodollar Rate Margin" means (i) with respect to the Initial
Interest Rate Period, one and three-quarters percent per annum (1.75%), and (ii)
with respect to each Interest Period other than the Initial Interest Rate
Period, the applicable percentage per annum set forth in the column "Eurodollar
Rate Margin" determined by reference to the column (a) "Unsecured Debt Rating of
Borrower" then in effect in the event such a rating is assigned by the Rating
Agencies or (b) "Leverage Ratio of Borrower" then in effect in the event an
Unsecured Debt Rating of Borrower has not been assigned by the Rating Agencies,
each as set forth below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Unsecured Debt Rating of Leverage Ratio of Eurodollar Rate
Borrower Borrower Margin
- --------------------------------------------------------------------------------
<S> <C> <C>
(greater than/equal to) 45% and <50% 1.75%
(greater than/equal to) 40% and <45% 1.625%
BB+/Ba1 or worse (greater than/equal to) 35% and <40% 1.50%
<35% 1.40%
BBB-/Baa3 1.375%
BBB/Baa2 1.25%
BBB+/Baa1 1.125%
A-/A3 or better 1.00%
- --------------------------------------------------------------------------------
</TABLE>
The Eurodollar Rate Margin for the Eurodollar Rate Portion shall be
determined by reference to the lowest Unsecured Debt Rating or Leverage Ratio of
Borrower, as applicable, in effect on the first day of the related Interest
Period; provided, however, (i) that in the event an Unsecured Debt Rating of
Borrower is not assigned by the Rating Agencies within 360 days (or 450 days in
the event Borrower executes a Westin Acquisition Agreement) of the Closing Date,
the Eurodollar Rate Margins determined by reference to Leverage Ratios of less
than 40% shall be increased by .125% per annum commencing on the first scheduled
date for the payment of interest hereunder immediately following the date which
is 360 days (or 450 days in the event Borrower executes a Westin Acquisition
Agreement) after the Closing Date and continuing until such time as an Unsecured
Debt Rating of Borrower is assigned by the Rating Agencies; (ii) the Eurodollar
Rate Margins applicable during the first Extension Period, if any, shall be
increased by .125% above the Eurodollar Rate Margins set forth in the above
table; and (iii) the Eurodollar
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<PAGE> 27
Rate Margins applicable during the second Extension Period, if any, shall be
increased by .25% above the Eurodollar Rate Margins set forth in the above
table.
"Eurodollar Rate Reserve Percentage" for any Interest Period means
the aggregate reserve percentages (expressed as a decimal) from time to time
established by the Board of Governors of the Federal Reserve System of the
United States and any other banking authority to which any of the Lenders are
now or hereafter subject, including, but not limited to any reserve on
Eurocurrency Liabilities as defined in Regulation D of the Board of Governors of
the Federal Reserve System of the United States at the ratios provided in such
Regulation from time to time, it being agreed that any portion of the Principal
Balance bearing interest at a rate determined by reference to the Eurodollar
Rate shall be deemed to constitute Eurocurrency Liabilities, as defined by such
Regulation, and it being further agreed that such Eurocurrency Liabilities shall
be deemed to be subject to such reserve requirements without benefit of or
credit for prorations, exceptions or offsets that may be available to any of the
Lenders from time to time under such Regulation and irrespective of whether such
Lender actually maintains all or any portion of such reserve.
"Event of Default" has the meaning specified in Section 8.1.
"Extension Period" has the meaning specified in Section 2.18.
"Facility Amount" means the sum of the Revolving Credit Facility and
the Term Loan Facility, but in no event in excess of $1,200,000,000.00, as such
amount may be reduced pursuant to the terms of this Agreement.
"Facing Fee" has the meaning specified in Section 2.4(d).
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Fees" shall mean the Non-Use Fees, the Letter of Credit Fees and
the Facing Fee.
"FF&E Reserve" means, for any Person (or with respect to any Hotel)
for any period, a reserve equal to four percent (4%) of Gross Revenues from any
Hotel owned by such Person (or from such Hotel), for such Period, plus for any
Person, such Person's Pro Rata Share of any FF&E Reserve for any Hotel owned by
such Person's Unconsolidated Entities.
"Final Maturity Date" means September 10, 2000 or such earlier date
on which the Principal Balance, all Obligations and all other sums due in
connection with the Loan shall be due
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<PAGE> 28
as a result of the acceleration of the Loan; subject, however, to extension with
respect to the Term Loan Facility only as provided in Section 2.18.
"Fiscal Quarter" means a period of three consecutive months.
"Fiscal Year" means the twelve month period ending on December 31.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board, or in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination except that, for purposes of Articles V and VII, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited financial
statements referred to in Section 4.5.
"Goldman Credit Facility" means that certain $300,000,000.00 Line of
Credit pursuant to that certain Loan Agreement dated as of August 16, 1996
between Borrower, the REIT and Goldman Sachs Mortgage Company, as amended.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity duly exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Gross Interest Expense" means, for any Person for any period, with
respect to any Indebtedness, the sum of (a) the total interest expense in
respect of such Indebtedness of such Person and its Subsidiaries for such period
determined on a consolidated basis in conformity with GAAP, plus capitalized
interest (excluding interest payable on Non-Recourse Indebtedness used to
finance the construction of a Hotel which does not satisfy the conditions of
Hotel Construction or Eligible Hotel Construction, which is in balance and for
which interest is advanced pursuant to an interest expense reserve) of such
Person and its Subsidiaries, plus (b) such Person's Pro Rata Share of Gross
Interest Expense of such Person's Unconsolidated Entities.
"Gross Revenues" shall mean, with respect to any Hotel for any
period, all income, rents, room rates, additional rents, revenues, issues and
profits and other items including without limitation, all revenues and credit
card receipts collected from guest rooms, restaurants, meeting rooms, bars,
mini-bars, banquet rooms, recreation facilities, vending machines and
concessions derived from the customary operation of such Hotel.
"Gross Room Revenues" shall mean, with respect to any Hotel for any
period, gross revenues derived only from guest rooms of such Hotel.
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<PAGE> 29
"Gross Unsecured Interest Expense" means, for any Person for any
period, the greater of (a) Gross Interest Expense and (b) interest calculated at
a rate of 7.15% per annum, each with respect to Total Unsecured Indebtedness.
"Guarantor" shall mean the Corporation, SLC, the Borrower
Subsidiaries and Operating Entities, all as set forth on Schedule 1.1-J.
"Guaranty" means that guaranty dated the date hereof, executed by
each Guarantor, as such guaranty may be amended, supplemented or otherwise
modified from time to time.
"Hazardous Material" means any substance, material or waste which is
regulated by any Governmental Authority of the United States as a "hazardous
waste," "hazardous material," "hazardous substance," "extremely hazardous
waste," "restricted hazardous waste," "contaminant," "toxic waste," "toxic
substance" or words of similar meaning or import under any provision of
Environmental Law, which includes, but is not limited to, petroleum, petroleum
products, asbestos, urea formaldehyde and polychlorinated biphenyls.
"Hotel" means any Real Estate or Lease comprising an operating
facility offering hotel or other lodging services.
"Hotel Construction" means those certain four (4) full service Hotel
projects to be identified by the Borrower and reasonably approved by the
Majority Lenders (the Borrower shall identify three (3) of such Hotels within
ninety (90) days of the Closing Date and the fourth within 120 days of the
Closing Date) (collectively, the "Initial Hotel Projects") and upon the
completion or postponement of commencement and construction of one or more of
the Initial Hotel Projects, up to an additional three (3) full service Hotel
projects provided that (i) other than the Initial Hotel Projects, no more than
three Hotel projects shall be under construction at any one time, and (ii) the
combined total of actual and projected construction costs for such additional
Hotel Projects and active Initial Hotel Projects shall not, at any time, exceed
$150,000,000. Notwithstanding the foregoing, if such actual and projected costs
for the Initial Hotel Projects exceeds $150,000,000, no additional Hotel Project
may be commenced until a sufficient number of the Initial Hotel Projects have
been completed so that the total amount of such actual and projected
construction costs for the remaining Initial Hotel Projects under construction
is less than $150,000,000.
"Improvements" has the meaning specified in Section 4.22(c).
"Indebtedness" of any Person means, without duplication, the
principal amount of (i) all indebtedness of such Person for borrowed money
(including, without limitation, reimbursement and all other obligations with
respect to surety bonds, letters of credit and bankers' acceptances, whether or
not matured) or for the deferred purchase price of property or services, (ii)
all obligations of such Person evidenced by notes, bonds, debentures or similar
instruments (including, in the case of the Borrower, Borrower Subsidiaries and
the REIT, the Loans outstanding), (iii) all indebtedness of such Person created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
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<PAGE> 30
to repossession or sale of such property), (iv) all Capitalized Lease
Obligations of such Person, (v) all Contingent Obligations of such Person, (vi)
all obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value (other than for other equity securities) any Stock or Stock
Equivalents of such Person, valued, in the case of mandatorily redeemable
preferred stock, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (vii) all obligations of such
Person under any Interest Rate Contracts, (viii) all Indebtedness referred to in
clause (i), (ii), (iii), (iv), (v), (vi) or (vii) above secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon or in property (including, without limitation,
accounts and general intangibles) owned by such Person, even though such Person
has not assumed or become liable for the payment of such Indebtedness, and all
other liabilities so classified on a balance sheet prepared in accordance with
GAAP, and (ix) all liabilities of such Person under Title IV of ERISA; provided,
however, that Indebtedness of a Joint Venture which is Non-Recourse Indebtedness
shall include only the JV% of such Non-Recourse Indebtedness.
"Indemnitees" has the meaning specified in Section 10.4.
"Initial Interest Rate Period" means the period commencing on and
including the Closing Date and ending on and including the date which is one
hundred eighty (180) days following the Closing Date; provided, however, in the
event Borrower executes a Westin Acquisition Agreement, the Initial Interest
Rate Period shall continue through and including the date which is two hundred
seventy (270) days following the Closing Date.
"Intercompany Debt" means the Indebtedness described in Schedule
1.1-D, together with any other Indebtedness of SLC, the Corporation, or any
Operating Entity in favor of Borrower, any Borrower Subsidiary, the REIT or any
Affiliate thereof.
"Interest Period" means, with respect to any Eurodollar Rate
Portion, (i) the period commencing on the date any Eurodollar Rate Portion is
continued or on the date of conversion of a Base Rate Portion to a Eurodollar
Rate Portion or on the date of the making of any Advance, and ending one, two or
three months thereafter, as selected by the Borrower in its Notice of Borrowing
or Notice of Conversion or Continuation given to the Administrative Agent
pursuant to Section 2.3 or 2.8, respectively, and (ii) thereafter, if such
Eurodollar Rate Portion is continued, in whole or in part, as a Eurodollar Rate
Portion pursuant to Section 2.8, a period commencing on the last day of the
immediately preceding Interest Period therefor and ending one, two or three
months thereafter, as selected by the Borrower in its Notice of Borrowing or
Notice of Conversion or Continuation given to the Administrative Agent pursuant
to Section 2.3 or 2.8, respectively; provided, however, that:
(A) if any Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall be extended to the next succeeding
Business Day, provided however, if such Interest Period would otherwise expire
on the Final Maturity Date, and the Final Maturity Date is not a Business Day,
such Interest Period shall expire on the immediately preceding Business Day;
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<PAGE> 31
(B) the Interest Period for any Eurodollar Rate Portion shall
commence on the date of the making of an Advance and each Interest Period
occurring thereafter in respect of such Eurodollar Rate Portion shall commence
on the date on which the next preceding Interest Period expires;
(C) if any Interest Period begins on a day for which there is no
numerically corresponding day in the appropriate subsequent calendar month, such
Interest Period shall end on the last Business Day of such calendar month;
(D) the Borrower may not select any Interest Period which ends after
the Final Maturity Date and the Borrower may not select two or three month
Interest Periods later than 120 days prior to the Final Maturity Date;
(E) the Borrower may not select any Interest Period with respect to
the Term Loan Facility if, after giving effect to the selection of such Interest
Period, the principal balance of the Term Loan Facility maintained as Eurodollar
Rate Portions with Interest Periods ending after the date upon which a Scheduled
Payment is required to be made would exceed the principal balance of the Term
Loan Facility after giving effect to the Scheduled Payment.
(F) there shall be no more than five (5) Eurodollar Rate Portions
outstanding at any one time; and
(G) the Borrower may not select any Interest Period in respect of a
Eurodollar Rate Portion having an aggregate principal amount of less than
$5,000,000.
"Interest Rate Contracts" means interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
insurance, and other agreements or arrangements designed to provide protection
against fluctuations in interest rates.
"Investment" means, with respect to any Person, (a) any loan or
advance to any other Person, (b) the ownership, purchase or other acquisition of
any Stock, Stock Equivalents, other equity interest, obligations or other
securities of (i) any other Person, (ii) all or substantially all of the assets
of any other Person, or (iii) all or substantially all of the assets
constituting the business of a division, branch or other unit operation of any
other Person, or (c) any joint venture or partnership with or any capital
contribution to, or other investment in, any other Person or any real property.
"IRS" means the Internal Revenue Service, or any successor thereto.
"Joint Venture" means each of the entities set forth on Schedule
1.1-E and any joint venture, corporation, partnership, limited liability company
or other business entity (a) in which the Borrower or a Borrower Subsidiary (i)
owns directly or indirectly a JV% of more than 50% and (ii) is the sole managing
general partner or equivalent thereof for such entity and has the sole control
over any sale, financing or re-financing of the related Hotel (notwithstanding
that the other entities comprising the Joint Venture may have a right of first
refusal with respect to such sale,
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<PAGE> 32
financing or refinancing) and has the sole authority to make major management
decisions and (b) which owns a Hotel or Hotels.
"Joint Venture Hotel" means any Hotel owned by a Joint Venture.
"JV%" means, with respect to any Joint Venture, the percentage
ownership interest of Borrower or Borrower Subsidiary, as the case may be, in
such Joint Venture or, with respect to the entities set forth on Schedule 1.1-E,
the applicable percentages set forth thereon.
"Lease Subordination Agreements" mean those certain subordination
agreements dated the date hereof, executed by Borrower and each Borrower
Subsidiary, each Operating Entity, and the Lenders, as the same may be amended,
supplemented or otherwise modified from time to time.
"Lease" means, with respect to the Borrower, any Borrower Subsidiary
or Joint Venture, a leasehold estate in real property owned by the Borrower
,such Borrower Subsidiary or Joint Venture, as lessee, as such may be amended,
supplemented or otherwise modified from time to time to the extent permitted by
this Agreement.
"Legal Proceedings" means any judicial, administrative or arbitral
actions, suits, proceedings (public or private) or governmental proceedings.
"Lehman Credit Facility" means that certain $135,000,000.00
Revolving Line of Credit pursuant to that certain Amended and Restated Line of
Credit Agreement dated as of October 25, 1995, and that certain First Amendment
to Amended and Restated Line of Credit Agreement dated as of October 25, 1995,
both between Borrower, the REIT, Lehman, and BT, as Collateral Agent, as further
amended by that certain Second Amendment to Amended and Restated Line of Credit
Agreement between Borrower, the REIT, Lehman, The First National Bank of Boston,
Bank of Montreal, Sanwa Bank, California, and BT as Collateral Agent, dated as
of August 8, 1996, as amended by that certain Third Amendment to Amended and
Restated Line of Credit Agreement between Borrower, the REIT, Lehman, The First
National Bank of Boston, Bank of Montreal, Sanwa Bank, California, and BT as
Collateral Agent dated as of December 31, 1996.
"Lehman Repo Facility" means that certain Mortgage Loan Funding
Facility made by Lehman Commercial Paper Inc. to the Borrower and SLT Realty
Company, L.L.C., dated July 25, 1995, as amended.
"Lehman Term Facility" means that certain $93,960,000.00 loan
pursuant to that certain Amended and Restated Loan Agreement dated as of April
26, 1996 between Borrower, the REIT, CP Hotel Realty Limited Partnership ("CP"),
Midland Building Corporation ("Midland") and Lehman, as amended by that certain
First Amendment to Amended and Restated Loan Agreement dated as of December 31,
1996 between Borrower, the REIT, CP, Midland and Lehman, as further amended by
that certain Second Amendment to Amended and Restated Loan Agreement dated as of
April 25, 1997 between Borrower, the REIT, CP, Midland and Lehman.
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<PAGE> 33
"Letter of Credit" has the meaning specified in Section 2.19(a).
"Letter of Credit Facility" means a portion of the Revolving Credit
Facility equal to $10,000,000.00 to be advanced by the Letter of Credit Issuer
in whole or in part by the issuance of Letters of Credit pursuant to Section
2.19.
"Letter of Credit Fee" has the meaning specified in Section 2.4(c).
"Letter of Credit Issuer" means Bank of Montreal.
"Letter of Credit Outstandings" means at any given time the sum,
without duplication, of (i) the aggregate Stated Amounts of all Letters of
Credit that have then been issued and (ii) the aggregate amount of all Unpaid
Drawings.
"Letter of Credit Participant" has the meaning specified in Section
2.19(h).
"Letter of Credit Request" has the meaning specified in Section
2.19(d).
"Leverage Ratio" means, with respect to the Borrower, the ratio of
Total Indebtedness to Borrower's Total Value, as determined and certified by a
Responsible Officer of the Borrower to the Administrative Agent no less
frequently than once each Fiscal Quarter during each Fiscal Year.
"License" means, with respect to a Hotel, a license or franchise
agreement in favor of either the Borrower, Borrower Subsidiary or the Operating
Entity as licensee or franchisee permitting the use of hotel system trademarks,
trade names and any related rights in connection with the ownership or operation
of such Hotel.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever intended to assure
payment of any indebtedness or other obligation, including, without limitation,
any conditional sale or other title retention agreement, the interest of a
lessor under a Capitalized Lease Obligation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing,
under the Uniform Commercial Code or comparable law of any jurisdiction, of any
financing statement naming the owner of the asset to which such Lien relates as
debtor. The definition of Lien shall not include any contractual agreement which
is personal in nature and which provides for the payment of a portion of the
proceeds or profits derived from the cash flow of any Asset, provided that such
contractual agreement is not and does not create a lien, encumbrance,
assignment, pledge, security interest, conditional sale or title retention
agreement, either at law or in equity, in the Asset or the cash flow of such
Asset in favor of the payee under such contract.
"Limited Service Hotel" means the Hotels listed on Schedule 6.23(a)
and any Hotel which is operational and which provides lodging services which are
not full service; for purposes
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of this definition, none of the Hotels listed on Schedule 6.23 as of the Closing
Date, other than those also listed on Schedule 6.23(a) shall be deemed a Limited
Service Hotel.
"Loan" means the aggregate principal balance outstanding at any time
under the Revolving Credit Facility (including Swing Advances and Letters of
Credit) and the Term Loan Facility pursuant to this Agreement and all other sums
due under this Agreement and the other Loan Documents.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Guaranty, the Lease Subordination Agreements, the Subordination and
Intercreditor Agreement and each certificate, agreement or document executed by
a Loan Party and delivered to the Administrative Agent or any Lender in
connection with or pursuant to any of the foregoing.
"Loan Party" shall mean, individually and collectively, as the
context requires, the Borrower, the REIT, the Corporation, SLC, SLT Financing
Partnership each Borrower Subsidiary, each Operating Entity and each Joint
Venture.
"Majority Lenders" means, at any time, Non-Defaulting Lenders
holding at least 51% of the then outstanding Commitments of all Non-Defaulting
Lenders.
"Maker" means any Person (other than a Loan Party or any Affiliate
or Subsidiary thereof) who executed or assumed the obligation of and liability
for any Mortgage Note, and with respect to the Hotels known as the Doral Inn,
New York, New York and the Midland Hotel, Chicago, Illinois, the makers of such
notes, notwithstanding that such makers are Loan Parties.
"Managed Hotel" means any Hotel located in the United States of
America owned or ground leased by any Person other than a Loan Party or a
Subsidiary or Affiliate thereof which is managed by Borrower or a Borrower
Subsidiary pursuant to a Management Agreement.
"Management Agreement" means an agreement relating to the operation
and/or management of any Managed Hotel between the Borrower or a Borrower
Subsidiary, as manager (the "Manager"), and any Person (other than a Loan Party
or any Affiliate or Subsidiary thereof), as owner, which agreement is in full
force and effect, under which agreement there exists no monetary default and no
non-monetary default beyond any applicable notice, grace and cure periods
expressly set forth in such agreement, which agreement does not and cannot
create in favor of the manager a leasehold interest, lien (other than a lien for
unpaid Management Fees) or other encumbrance on the real and personal property
comprising the Managed Hotel and under which Manager is at all times in charge
of and responsible for the management and the related Managed Hotel.
"Management Fees" means, with respect to any Management Agreement,
for any period, all base, incentive and other management fees contracted for
under such Management Agreement which are actually received and collected by the
Manager, excluding (i) any fees received by the Manager which are in the nature
of a reimbursement to Manager and (ii) any fees
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<PAGE> 35
received by the Manager which are in excess of the fees provided for in the
Management Agreement.
"Material Adverse Change" means a material adverse change in any of
(i) the condition (financial or otherwise), business, performance, operations or
properties of (A) the Borrower and Borrower Subsidiaries taken as one enterprise
or (B) SLC, the Corporation and its Subsidiaries taken as one enterprise, (ii)
the legality, validity or enforceability of the Loan Documents taken as a whole,
(iii) the ability of the Borrower or the REIT to repay the Obligations or to
perform its obligations under any Loan Document, (iv) the ability of SLC, the
Corporation and the Operating Entities, taken as a whole, to perform their
obligations under the Guaranty or (v) the rights and remedies of the Lenders or
the Administrative Agent under the Loan Documents.
"Material Adverse Effect" means an effect that results in or causes,
or has a reasonable likelihood of resulting in or causing, a Material Adverse
Change.
"Mexican Indebtedness" means that certain $118,750,000.00 loan
pursuant to that certain Credit Agreement dated as of August 18, 1997 between
SLT Mexico, S. de R.L. de CV. Borrower and the REIT as guarantors, and Bancomer,
S.A. Cayman Islands Branch, as Agent and the other lenders listed in such Credit
Agreement.
"Minimum Rating" has the meaning specified in Section 2.18.
"Mortgage" means the mortgage, deed of trust, security deed,
installment land sale contract or similar security instrument creating a Lien in
favor of the Borrower or any Borrower Subsidiary against, inter alia, the real
property and improvements comprising a Mortgage Note Hotel.
"Mortgage Loan" means each mortgage loan now or hereafter owned by
Borrower or any Borrower Subsidiary, the obligor of which is a Maker not in
default under such loan, which loan is evidenced by a Mortgage Note and secured
by the Mortgage Note Security Documents, and for which the debt service coverage
ratio, as determined and certified by a Responsible Officer of the Borrower to
the Administrative Agent no less frequently than once each Fiscal Quarter during
each Fiscal Year, based on Adjusted NOI of the Mortgage Note Hotel, is not less
than 1.1 to 1.0.
"Mortgage Loan Interest Income" means, with respect to any Mortgage
Loan for any period, the total interest income in respect of such Mortgage Loan
for such period received by the Borrower or Borrower Subsidiary, or its JV%
thereof, determined on a consolidated basis in conformity with GAAP.
"Mortgage Note" means each of the promissory notes and other
evidences of indebtedness executed by a Maker in favor of the Borrower or any
Borrower Subsidiary and secured by the lien of a Mortgage Note Security
Documents on a Mortgage Note Hotel, except that the promissory notes secured by
the mortgagor on the Hotels commonly known as the Doral Inn, located in New
York, New York and the Midland Hotel, located in Chicago, Illinois shall be
deemed Mortgage Notes notwithstanding that the Makers of such notes are Loan
Parties.
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<PAGE> 36
"Mortgage Note Hotel" means, collectively, for each Hotel now or
hereafter owned or leased by any Maker, all of the real property, improvements,
inventory, furnishings, equipment, fixtures, and any other agreements,
instruments, contracts, general intangibles, accounts, licenses and other
approvals of any Governmental Authority, chattel paper, documents, books and
records, deposit accounts, and any other assets, relating to such property that
are now or hereafter owned or leased by such Maker, or in the case of the Hotels
commonly known as the Doral Inn, New York, New York and the Midland Hotel,
Chicago, Illinois, the related Loan Party in each case if and to the extent the
same are subject to the applicable Mortgage Note Security Documents.
"Mortgage Note Security Documents" means, with respect to each
Mortgage Note and Mortgage Note Hotel, all presently existing or hereafter
acquired loan agreements, installment land sale contracts, mortgages, deeds of
trust, assignments for security or absolute assignments of rents and leases,
financing statements, fixture filings, security agreements, pledges, deposit
account pledge agreements, collateral assignments (including any collateral
assignments of any management contracts or franchise agreements), guaranties,
letters of credit, credit supports, keep well agreements or other agreements or
undertakings from any Person to or in favor of the Borrower or any Borrower
Subsidiary and securing or supporting the repayment of indebtedness or
performance of any other obligation under the applicable Mortgage Note or any
Mortgage Note Security Documents and all amendments, modifications, supplements,
substitutions and restatements of any of the foregoing.
"Multiemployer Plan" means, as of any applicable date, a
multiemployer plan, as defined in Section 4001(a)(3) of ERISA, and to which any
Loan Party, any of its Subsidiaries or any ERISA Affiliate is making, is
obligated to make, or within the six-year period ending at such date, has made
or been obligated to make, contributions on behalf of participants who are or
were employed by any of them.
"Net Income (Loss)" means, for any Person for any period, the
aggregate of net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in conformity with GAAP.
"Net Operating Income" means, with respect to any Hotel or Hotels or
Mortgage Note Hotels for any period, the sum of the following (without
duplication): the Gross Revenues derived from the customary operation of such
Hotel or Hotels during the period in question, less Operating Expenses
attributable to such Hotel for such period, and shall include only the Gross
Revenues and other such income actually received and earned, in accordance with
GAAP, including any rent loss or business interruption insurance proceeds, and
laundry, parking or other vending or concession income, which are actually
received and earned, attributable to such Hotel or Hotels during the twelve (12)
month period ending at the end of the calendar month for which the Net Operating
Income is being calculated, as set forth on operating statements satisfactory to
the Administrative Agent. Net Operating Income shall be calculated in accordance
with customary accounting principles applicable to real estate and in accordance
with the Uniform System of Accounts. Notwithstanding the foregoing, Net
Operating Income shall not include (i) any condemnation or insurance proceeds
(excluding rent or business interruption insurance proceeds
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<PAGE> 37
applied to such period), (ii) any proceeds resulting from the sale, exchange,
transfer, financing or refinancing of all or any portion of the Hotel or Hotels
for which it is to be determined, (iii) amounts received from tenants as
security deposits, (iv) amounts received as advance reservation deposits unless
earned in accordance with GAAP, and (v) any type of income otherwise included in
Net Operating Income but paid directly by any tenant or guest to a Person other
than Borrower, any Borrower Subsidiary or Operating Entity or their respective
agents or representatives.
"New Orleans Indebtedness" had the meaning specified in Section
5.6(a).
"Newly Acquired Hotels" has the meaning specified in Section 4.18.
"Non-Defaulting Lenders" means any Lender that is not a Non-Funding
Lender.
"Non-Funding Lender" has the meaning specified in Section 2.14(f).
"Non-Hotel Asset" means, with respect to the Borrower or any
Borrower Subsidiary, any Asset which is not a Hotel or a Mortgage Note Hotel and
the Personal Property related thereto.
"Non-Recourse Indebtedness" of any Person means all Indebtedness of
such Person and its Subsidiaries with respect to which recourse for payment is
limited to specific assets encumbered by a Lien securing such Indebtedness;
provided, however, that personal recourse of a holder of Indebtedness against
any obligor with respect thereto for fraud, misrepresentation, misapplication of
cash, waste and other circumstances customarily excluded from non-recourse
provisions in non-recourse secured financing of real estate shall not, by
itself, prevent any Indebtedness from being characterized as Non-Recourse
Indebtedness, provided further that if a personal recourse claim is made in
connection therewith, such claim shall not constitute Non-Recourse Indebtedness
for the purposes of this Agreement.
"Non-Recourse Portion" means, with respect to the REIT, (i) during
the period from the Closing Date through and including November 10, 1997, a
portion of the Term Loan Facility equal to $200,000,000.00 whenever the
outstanding principal amount of the Term Loan Facility exceeds $200,000,000.00
and the outstanding principal amount of the Term Loan Facility whenever the
outstanding principal balance of Term Loan Facility is less than or equal to
$200,000,000.00 and (ii) after November 10, 1997, a portion of the Term Loan
Facility in excess of $400,000,000.00.
"Non-Use Fee" means the applicable percentage per annum set forth in
the column "Non-Use Fee" determined by reference to the column (a)"Unsecured
Debt Rating of Borrower" then in effect in the event such a rating is assigned
by the Rating Agencies, as set forth below, or (b) .25% in the event an
Unsecured Debt Rating of Borrower has not been assigned by the Rating Agencies:
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<PAGE> 38
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Unsecured Debt Rating of Non-Use Fee
Borrower
- --------------------------------------------------------------------------------
<S> <C>
BB+/Ba1 or worse .25%
BBB-/Baa3 .20%
BBB/Baa2 .15%
BBB+/Baa1 .125%
A-/A3 or better .125%
- --------------------------------------------------------------------------------
</TABLE>
The Non-Use Fee shall be determined by reference to the lowest
Unsecured Debt Rating of Borrower in effect from time to time, and each change
in the Non-Use Fee shall be effective as of the first day of the month following
the date such Unsecured Debt Rating is announced.
"Note" and "Notes" have the meanings specified in Section 2.1.
"Notice of Borrowing" has the meaning specified in Section 2.3(a).
"Obligations" means the Loan and all other advances, debts,
liabilities, obligations, covenants and duties owing by the REIT, the Borrower
and any Guarantor to the Agents, any Lender, the Swing Advance Bank, the Letter
of Credit Issuer, any Affiliate of any of them or any Indemnitee, of every type
and description, present or future, arising under this Agreement or under any
other Loan Document, whether direct or indirect (including, without limitation,
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term "Obligations"
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements and any other sum then payable by the REIT, the Borrower
and all Guarantors under this Agreement or any other Loan Document.
"OECD" means the Organization for Economic Cooperation and
Development.
"Operating Entity" means each of the entities identified on Schedule
1.1-F, as the same may be supplemented or amended from time to time, and each
corporation, partnership, limited liability company or other business entity
ninety-nine percent (99%) or more of whose Stock, partnership or membership
interests are owned, directly or indirectly, and which is controlled, by SLC or
the Corporation and which is the lessee of a Hotel under an Operating Lease.
"Operating Expenses" means, with respect to any Hotel or Hotels, for
any given period (and shall include the pro rata portion for such period of all
such expenses attributable to, but not paid during, such period), all expenses
paid, accrued, or payable, as determined in
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accordance with GAAP and the Uniform System of Accounts by Borrower or the
Borrower Subsidiary or Operating Entity, as the case may be, during that period
in connection with the operation of such Hotel or Hotels for which it is to be
determined without duplication, including without limitation:
1. expenses for cleaning, repair, maintenance, decoration and
painting of the such Hotel or Hotels (including, without limitation,
parking lots and roadways), net of any insurance proceeds in respect of
any of the foregoing;
2. wages (including overtime payments), benefits, payroll taxes and
all other related expenses for Borrower's, Borrower Subsidiary's or the
Operating Entity's, as the case may be, on-site personnel, up to and
including (but not above) the level of the on-site general manager,
engaged in the repair, operation and maintenance of such Hotel or Hotels
and service to tenants and on-site personnel engaged in audit and
accounting functions performed by Borrower, Borrower Subsidiary or
Operating Entity;
3. management fees pursuant to any management agreement approved by
the Administrative Agent in its reasonable discretion, but in no event
less than three percent (3%) of Gross Revenues with respect to the
applicable Hotel or Hotels. Such fees shall include all fees for
management services whether such services are performed at such Hotel or
Hotels or off-site;
4. franchise, reservation, marketing and sales fees and other
royalties or similar payments due under any Licenses approved by the
Administrative Agent in its reasonable discretion, but in no event less
than seven percent (7%) of Gross Room Revenues with respect to the
applicable Hotel or Hotels;
5. the cost of all electricity, oil, gas, water, steam, heat,
ventilation, air conditioning and any other energy, utility or similar
item and the cost of building and cleaning supplies;
6. the cost of any leasing commissions and tenant concessions or
improvements payable by Borrower, Borrower Subsidiary or Operating Entity
pursuant to any leases which are in effect for such Hotel or Hotels at the
commencement of that period as such costs are recognized in accordance
with GAAP, but on no less than a straight line basis over the remaining
term of the respective lease, exclusive of any renewal or extension or
similar options;
7. rent, liability, casualty, fidelity, errors and omissions, dram
shop liability, workmen's compensation and other required insurance
premiums;
8. legal, accounting and other professional fees and expenses;
9. the cost (including leasing and financing) of all equipment to be
used in the ordinary course of business, which is not capitalized in
accordance with GAAP;
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<PAGE> 40
10. real estate, personal property and other taxes;
11. advertising and other marketing costs and expenses;
12. casualty losses to the extent not reimbursed by an independent
third party;
13. any payments pursuant to any contractual agreement which
provides for the payment of a portion of the proceeds or profits derived
from the cash flow of any Asset; and
14. ground lease payments.
Notwithstanding the foregoing, Operating Expenses shall not include
(i) depreciation or amortization; (ii) interest, principal, fees, costs and
expense reimbursements of the Lenders in administering the Loan but not in
exercising any of its rights under this Agreement or the Loan Documents; (iii)
any expenditure (other than leasing and financing costs, leasing commissions,
tenant concessions and improvements, and replacement reserves) which is properly
treatable as a capital item under GAAP; or (iv) Operating Lease Payments.
"Operating Lease Payments" means, with respect to any Hotel or
Hotels, the rent due and payable to the Borrower or Borrower Subsidiary under
the related Operating Lease, including, without limitation, all Base Rent, Basic
Rent and all Percentage Rent but excluding Additional Rent and other property
related operating expenses paid or incurred by the Borrower or Borrower
Subsidiary (as each term is defined in the related Operating Lease) minus any
payments pursuant to any contractual arrangement which provides for the Borrower
or Borrower Subsidiary to pay a portion of the proceeds or profits from such
Operating Lease Payments to any Person.
"Operating Lease" means an operating lease between Borrower or a
Borrower Subsidiary, as lessor, and an Operating Entity, as lessee, with respect
to the operation of a single Hotel owned by such lessor and leased and operated
by such lessee thereunder, which Operating Lease has been approved by the
Majority Lenders.
"Order" means any order, injunction, judgment, decree, ruling,
assessment or arbitration award.
"Other Taxes" has the meaning specified in Section 2.15(b).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" means a plan, other than a Multiemployer Plan, which
is covered by Title IV of ERISA or Code Section 412 and which any Loan Party,
any of its Subsidiaries or any ERISA Affiliate maintains, contributes to or has
an obligation to contribute to on behalf of participants who are or were
employed by any of them.
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<PAGE> 41
"Permit" means any permit, approval, authorization, license,
variance, registration, permission or consent required from a Governmental
Authority under an applicable Requirement of Law.
"Permitted Financing" shall mean leases, licenses or financing
arrangements with respect to signage, televisions, audio-visual equipment,
office supplies and equipment, computers, reservation systems, telephone
systems, or vans ("Leased Equipment") for which aggregate annual lease payments,
license fees and debt service is less than $100,000.00 per annum for each real
property owned or leased by the Borrower, Borrower Subsidiary or any Operating
Entity, provided that such Permitted Financing is a Lien only on the related
Leased Equipment. For each real property owned or leased by the Borrower,
Borrower Subsidiary or any Operating Entity, and such amount is an aggregate
limit for that real property on all leasing, licensing or financing by the
Borrower, the Borrower Subsidiary and the Operating Entity.
"Permitted Investments" means, at any time, an aggregate amount of
(a) each of the following categories of investments which shall be less than the
specified dollar amount, percentage of the Borrower's Total Value or number of
Assets at any time, as applicable, and (b) all of the following categories of
investments (other than Joint Venture Hotels and Management Agreements) which,
when combined, shall not be more than twenty percent (20%) of the Borrower's
Total Value, each as of the date of calculation:
<TABLE>
<CAPTION>
Maximum dollar amount
or percentage of
Borrower's Total Value
Permitted Investment or Total Number
-------------------- ---------------
<S> <C>
Undeveloped Land: 2.5%
Hotel Construction other than Initial As limited in the definition
Hotel Projects: of Hotel Construction
Mortgage Loans which are not Eligible
Mortgage Loans: 10%
Renovating Hotels 10%
Limited Service Hotels: 15%
Non-Hotel Investments: 2.5%
Stock Acquisitions 5%
Joint Venture Hotels: 20%
</TABLE>
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<PAGE> 42
<TABLE>
<S> <C>
Management Agreements 10%
</TABLE>
For purposes of calculating the foregoing, the amount of each Permitted
Investment in (a) Undeveloped Land, and Non-Hotel Assets shall be deemed to be
ninety-five percent (95%) of the Borrower's Investment in such Permitted
Investment, verified by Borrower to the satisfaction of the Administrative
Agent, (b) Limited Service Hotels shall be the value of such Permitted
Investment calculated in accordance with the definition of "Borrower's Total
Value," (c) Mortgage Loans other than Eligible Mortgage Loans shall be the
Adjusted Mortgage Loan Value, (d) Hotel Construction shall be the value of such
Hotel Construction calculated in accordance with the definitions of "Borrower's
Total Value" or "Eligible Asset Value" as appropriate, (e) Renovating Hotels
shall be the value of such Renovating Hotels calculated in accordance with the
definition of "Borrower's Value" or "Eligible Asset Value", as appropriate, (f)
Joint Venture Hotels or Undeveloped Land owned by a Joint Venture shall be the
JV% of the value calculated in accordance with clauses (a), (b), (d) and (e)
hereof, as applicable, of such Joint Venture Hotels, (g) Management Agreements
shall be the value of such Management Agreements calculated in accordance with
the definition of "Borrower's Total Value" or "Eligible Asset Value", as
appropriate, and (h) Stock Acquisitions shall be deemed to be the lesser of the
acquiring party's cost basis in such Stock or 95% of the market value of such
Stock at the time of determination.
"Permitted Liens" means, collectively, (a) Liens arising by
operation of law in favor of materialmen, mechanics, warehousemen, carriers,
lessors or other similar Persons incurred by the Borrower or any Borrower
Subsidiary in the ordinary course of business which secure its obligations to
such Person; provided, however, that (i) the Borrower or such Borrower
Subsidiary is not in default with respect to such payment obligation to such
Person, or (ii) the Borrower or such Borrower Subsidiary is in good faith and by
appropriate proceedings diligently contesting such obligation and adequate
provision (by payment reserves or bonding) is made for the payment thereof; (b)
Liens (excluding Environmental Liens) securing taxes, assessments or
governmental charges or levies; provided, however, that neither the Borrower nor
any Borrower Subsidiary is in default in respect of any payment obligation with
respect thereto unless the Borrower or such Borrower Subsidiary is in good faith
and by appropriate proceedings diligently contesting such obligation and
adequate provision (by payment reserves or bonding) is made for the payment
thereof; (c) zoning restrictions, subleases, licenses or concessions for
restaurants, bars, gift shops, antennas, communications equipment and similar
agreements entered into in the ordinary course of such Person's business in
connection with the ownership and operation of a hotel; and easements, licenses,
reservations, restrictions on the use of real property or minor irregularities
incident thereto which do not in the aggregate materially detract from the value
or use of the property or assets of the Borrower or any Borrower Subsidiary or
impair, in any material manner, the use of such property for the purposes for
which such property is held by the Borrower or any such Borrower Subsidiary; (d)
Permitted Financing, and (e) with respect to the Hotel known as the Westwood
Marquis, located in Los Angeles, California, the Westwood Mortgage.
"Person" means an individual, partnership, corporation (including,
without limitation, a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other entity, or a
Governmental Authority.
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<PAGE> 43
"Personal Property" means, for any Person, to the extent owned by
such Person, all machinery, equipment, fixtures (including but not limited to
all heating, air conditioning, plumbing, lighting, communications, elevator
fixtures, inventory and goods), inventory and articles of personal property and
accessions thereof and renewals, replacements thereof and substitutions therefor
(including, but not limited to, beds, bureaus, chiffonniers, chests, chairs,
desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies,
curtains, shades, venetian blinds, screens, paintings, hangings, pictures,
divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens,
pillows, blankets, glassware, silverware, foodcarts, cookware, dry cleaning
facilities, dining room wagons, keys or other entry systems, bars, bar fixtures,
liquor and other drink dispensers, icemakers, radios, television sets, intercom
and paging equipment, electric and electronic equipment, dictating equipment,
private telephone systems, medical equipment, potted plants, heating, lighting
and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and
air-conditioning systems, elevators, escalators, fittings, plants, apparatus,
stoves, ranges, refrigerators, laundry machines, tools, machinery, engines,
dynamos, motors, boilers, incinerators, switchboards, conduits, compressors,
vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call
systems, brackets, electrical signs, bulbs, bells, ash and fuel, conveyors,
cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage
disposals, washers and dryers), other customary hotel equipment and other
tangible property of every kind and nature whatsoever, now or hereafter located
upon the Hotels, or appurtenances thereto, or usable in connection with the
present or future operation and occupancy of the Hotels and all building
equipment, materials and supplies of any nature whatsoever, now or hereafter
located upon the Hotels.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
ERISA, which any Loan Party or any of its Subsidiaries maintains, contributes to
or has an obligation to contribute to on behalf of participants who are or were
employed by any of them.
"Principal Balance" means, collectively, the outstanding principal
balances of the Notes from time to time (including, without limitation, all
Swing Advances and all Unpaid Drawings).
"Pro Rata Share" means, for any Person, with respect to such
Person's Unconsolidated Entities, the percentage ownership interest of such
Person in such Unconsolidated Entity, provided that, in the event that such
Person is the general partner of such Unconsolidated Entity, such Person's Pro
Rata Share with respect to such Unconsolidated Entity shall be one hundred
percent (100%) with respect to any Indebtedness for which recourse may be made
against any general partner of such Unconsolidated Entity.
"Qualified Ground Lease" means any Lease listed on Schedule 1.1-N,
together with any Lease (a) which is a direct ground lease granted by the fee
owner of real property, (b) which may be transferred and/or assigned without the
consent of the lessor (or as to which the Lease expressly provides that (i) such
Lease may be transferred and/or assigned with the consent of the lessor and (ii)
such consent shall not be unreasonably withheld or delayed), (c) which has a
remaining term (including any renewal terms exercisable at the sole option of
the lessee) of at least 50 years, (d) under which no material default has
occurred and is continuing, (e) with respect to
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which a security interest may be granted without the consent of the lessor, and
(f) which contains lender protection provisions reasonably acceptable to the
Administrative Agent and which run to the lenders, including, without
limitation, provisions to the effect that (i) the lessor shall notify the
lenders of the occurrence of any default by the lessee under such Lease and
shall afford the lenders the right to cure such default, and (ii) in the event
that such Lease is terminated, the lenders shall have the option to enter into a
new lease having terms substantially identical to those contained in the
terminated Lease.
"Ratable Portion" or "ratably" means, except as otherwise
specifically provided herein, with respect to any Lender, the quotient obtained
by dividing the Commitment, the Term Commitment or the Revolving Credit
Commitment, as the case may be, of such Lender by the Commitments, the Term
Commitments or the Revolving Credit Commitments, respectively, of all Lenders
and that payments of principal of the Loan and interest thereon shall be made
pro rata in accordance with the respective unpaid principal amounts of the Loan
held by the Lenders.
"Rating Agencies" shall mean both Standard & Poor's Rating Services
and Moody's Investor Service, Inc. If either of such agencies discontinue its
rating of Borrower and/or the REIT (for reasons other than the Borrower or the
REIT discontinuing such rating) or its ratings of real estate investment trusts
generally, Borrower, Administrative Agent and all of the Lenders shall, within
six (6) months of such discontinuance, agree upon another nationally recognized
statistical ratings agency that assigns a rating to Borrower and/or the REIT,
and the term Rating Agencies shall include such substituted rating agency.
During any time that only one Rating Agency is assigning a rating to Borrower
and/or the REIT, that agency's rating shall be used for all calculations under
this Agreement.
"Real Estate" means all of those plots, pieces or parcels of land
now owned or ground leased pursuant to a Qualified Ground Lease or hereafter
acquired by the Borrower, any Borrower Subsidiary or Joint Venture (the "Land"),
including, without limitation, those listed on Schedule 4.22(a) (other than the
Hotel designated thereon as the Midland Hotel), together with the right, title
and interest of the Borrower, such Borrower Subsidiary or Joint Venture, if any,
in and to the streets, the land lying in the bed of any streets, roads or
avenues, opened or proposed, in front of, adjoining or abutting the Land to the
center line thereof, the air space and development rights pertaining to the Land
and the right to use such air space and development rights, all rights of way,
privileges, liberties, tenements, hereditaments and appurtenances belonging or
in any way appertaining thereto, all fixtures, all easements now or hereafter
benefitting the Land and all royalties and rights appertaining to the use and
enjoyment of the Land, including, without limitation, all alley, vault,
drainage, mineral, water, oil and gas rights, together with all Improvements and
other buildings and improvements now or hereafter erected on the Land, and any
fixtures appurtenant thereto.
"Recourse Indebtedness" of any Person means all Indebtedness of such
Person and its Subsidiaries for which recourse for payment may be made against
such Person for the obligations secured thereunder including without limitation,
the entire amount of the Recourse Indebtedness of any Joint Venture which such
Person may own an interest in regardless of such Person's JV%.
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"Register" has the meaning specified in Section 10.7.
"Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching or migration on or into the indoor or outdoor environment or into or
out of any property.
"Remedial Action" means all actions, including without limitation
any Capital Expenditures, required or necessary to (i) clean up, remove, treat
or in any other way address any Hazardous Material or other substance in the
indoor or outdoor environment, (ii) prevent the Release or threat of Release, or
minimize the further Release, of any Hazardous Material or other substance so it
does not migrate or endanger or threaten to endanger public health or welfare or
the indoor or outdoor environment, (iii) perform pre-remedial studies and
investigations or post-remedial monitoring and care, or (iv) bring facilities on
any property owned or leased by the Borrower or any Borrower Subsidiary into
compliance with all Environmental Laws and Environmental Permits.
"Removed Eligible Asset" has the meaning specified in Section 6.23.
"Renovating Hotel" means a Hotel which is operating with greater
than 20% and not more than 50% of "keys" out of service due to a material
structural repair, alteration or addition. Upon the return to service of at
least 80% of keys following the completion of such repair, alteration or
addition and provided no additional material structural repair, alteration or
addition is planned during the next twelve months, the Renovating Hotel shall no
longer be deemed a Renovating Hotel.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and all federal, state and local laws, rules and regulations, including,
without limitation, federal, state or local securities, antitrust and licensing
laws, all food, health and safety laws, and all applicable trade laws and
requirements, including, without limitation, all disclosure requirements of
Environmental Laws, ERISA and all orders, judgments, decrees or other
determinations of any Governmental Authority or arbitrator, applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"Responsible Officer" means, with respect to any Person, any of the
principal executive officers of such Person or any of the principal executive
officers of the general partners of such Person.
"Restricted Payments" has the meaning specified in Section 7.4.
"Revolving Credit Commitment" means, as to each Lender, the
commitment of such Lender to make Advances under the Revolving Credit Facility
to the Borrower pursuant to Sections 2.1, 2.17 and 2.19 in the aggregate
principal amount outstanding not to exceed the amount set forth opposite such
Lender's name on Schedule 1.1-B under the caption "Revolving Credit Commitment,"
as such amount may be reduced or modified pursuant to this Agreement,
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and "Revolving Credit Commitments" means the aggregate Revolving Credit
Commitments of all Lenders, which shall equal the Revolving Credit Facility
Amount.
"Revolving Credit Facility" means a portion of the Facility Amount
equal to $600,000,000 to be advanced, in whole or in part, by the Lenders on the
Closing Date and which may be repaid and reborrowed on a revolving credit basis
pursuant to Article II, and shall include Swing Advances and the Letters of
Credit.
"Revolving Note" has the meaning set forth in Section 2.1.
"Scheduled Payments" has the meaning set forth in Section 2.17(d).
"Secured Recourse Assets" means those Assets of the Borrower or any
Borrower Subsidiary which secure or collateralize all or a portion of Total
Secured Recourse Indebtedness of the Borrower.
"Secured Recourse Asset Value" means, with respect to the Secured
Recourse Assets, at any date, the aggregate value thereof to be calculated in
the manner described pursuant to the definition of "Borrower's Total Value" for
similar type Assets.
"Sixth Avenue Ground Lease" means that certain Qualified Ground
Lease for the Hotel known as Days Inn, Seattle, Washington as described on
Schedule 1.1-N.
"SLC" means SLC Operating Limited Partnership, a Delaware limited
partnership.
"SLT Financing Partnership" shall mean SLT Financing Partnership, a
Delaware general partnership, in which Borrower owns a 99% general partnership
interest and SLT Realty Company, LLC, owns a 1% general partnership interest.
"Solvent" means, with respect to any Person, that the value of the
assets of such Person (at fair value) is, on the date of determination, greater
than the total amount of liabilities (including, without limitation, 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 does not have unreasonably small capital. 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.
"Stamford Indebtedness" means that certain mortgage loan encumbering
the Stamford Sheraton, Stamford, Connecticut, made pursuant to that Forbearance
and Settlement Agreement by and among Stamford Hotel Limited Partnership,
CSH-Stamford Hotel Limited Partnership, Staffel Holdings, Inc., SLT, SLC and
Lehman dated as of December 16, 1996.
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"Stated Amount" means, with respect to a Letter of Credit, at any
time, the maximum amount available to be drawn under such Letter of Credit at
such time (assuming compliance at such time with all conditions to drawing).
"Stock" means shares of capital stock, beneficial or partnership
interests, participations or other equivalents (regardless of how designated) of
or in a corporation or equivalent entity, whether voting or non-voting, and
includes, without limitation, common stock and preferred stock.
"Stock Acquisition" means the purchase by the Borrower, the REIT or
any Borrower Subsidiaries of Stock of an entity primarily engaged in the lodging
or leisure related business.
"Stock Equivalents" means all securities (other than Stock)
convertible into or exchangeable for Stock and all warrants, options or other
rights to purchase or subscribe for any stock, whether or not presently
convertible, exchangeable or exercisable.
"Subordination and Intercreditor Agreement" means an affiliate debt
subordination agreement in substantially the form of Exhibit D, executed by
Borrower, SLC and the Lenders, as the same may be amended, supplemented or
otherwise modified from time to time.
"Subsidiary" means, with respect to any Person, at any date, any
corporation, partnership or other business entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
in accordance with GAAP, if such statements were prepared as of such date.
"Substitute Eligible Asset" has the meaning specified in Section
6.23(c).
"Sumitomo Indebtedness" means that certain $27,375,000 loan pursuant
to that certain Loan Agreement dated as of September 19, 1996 between The
Sumitomo Trust & Banking Co., Ltd., and Emstar Realty LLC.
"Super Majority Lenders" means, at any time, Non-Defaulting Lenders
holding at least 67% of the then outstanding Commitments of all Non-Defaulting
Lenders.
"Swing Advance" has the meaning set forth in Section 2.17.
"Swing Advance Bank" means BT.
"Swing Advance Note" has the meaning set forth in Section 2.1.
"Swing Advance Rate" means an interest rate per annum equal to the
sum of (i) the Federal Funds Rate in effect from time to time plus (ii) 0.25%
plus (iii) the applicable Eurodollar Rate Margin.
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"Tax Affiliate" means, as to any Person, (i) any Subsidiary of such
Person, and (ii) any Affiliate of such Person with which such Person files or is
eligible to file consolidated, combined or unitary tax returns.
"Tax Exempt Indebtedness" means the Indebtedness in the principal
amount of $39,470,000.00 secured by that certain Amended and Restated Mortgage
and Trust Indenture dated as of February 1, 1997 between Philadelphia Authority
for Industrial Development as issuer and First Union National Bank as trustee,
and recorded against the Hotel known as Westin Philadelphia Airport,
Philadelphia, Pennsylvania and the Days Inn Philadelphia Airport, Philadelphia,
Pennsylvania.
"Tax Return" has the meaning specified in Section 4.3.
"Taxes" has the meaning specified in Section 2.15(a).
"Telerate Page 3750" means the display designated as "Page 3750" on
the Associated Press-Dow Jones Telerate Service (or such other page as may
replace Page 3750 on the Associated Press-Dow Jones Telerate Service or such
other service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers' Association
interest settlement rates for U.S. Dollar deposits). Any Eurodollar Rate
determined on the basis of the rate displayed on Telerate Page 3750 in
accordance with the provisions hereof shall be subject to corrections, if any,
made in such rate and displayed by the Associated Press-Dow Jones Telerate
Service within one hour of the time when such rate is first displayed by such
Service.
"Term Loan Commitment" means, as to each Lender, the commitment of
such Lender to make the Advance under the Term Loan Facility to the Borrower
pursuant to Section 2.1 in the aggregate principal amount outstanding not to
exceed the amount set forth opposite such Lender's name on Schedule 1.1-B under
the caption "Term Loan Commitment," as such amount may be reduced or modified
pursuant to this Agreement, and "Term Loan Commitments" means the aggregate Term
Loan Commitments of all Lenders, which shall equal the Term Loan Facility
Amount.
"Term Loan Facility" means a portion of the Facility Amount equal to
$600,000,000 to be advanced on the Closing Date pursuant to Article II.
"Term Note" has the meaning set forth in Section 2.1.
"Total Assets" means, with respect to any Person, at any date, the
total assets of such Person and its Subsidiaries at such date determined on a
consolidated basis in conformity with GAAP.
"Total Indebtedness" of any Person means the sum of the following
(without duplication): (a) all Indebtedness of such Person and its Subsidiaries
determined on a consolidated
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basis in conformity with GAAP, plus (b) such Person's Pro Rata Share of
Indebtedness of such Person's Unconsolidated Entities.
"Total Secured Indebtedness" of any Person means the Total
Indebtedness of such Person and its Subsidiaries for which the obligations
thereunder are secured or collateralized by a pledge of or other encumbrance on
any Assets of such Person or its Subsidiaries or Unconsolidated Entities.
"Total Secured Recourse Indebtedness" of any Person means the Total
Secured Indebtedness of such Person and its Subsidiaries which is Recourse
Indebtedness.
"Total Unsecured Indebtedness" of any Person means the sum of Total
Indebtedness of such Person and its Subsidiaries (a) which is Recourse
Indebtedness and (b) for which the obligations thereunder are not secured or
collateralized by a pledge of or other encumbrance on any Assets of such Person
or its Subsidiaries or Unconsolidated Entities.
"U.S. Government Obligations" means certain obligations of, or
obligations guaranteed as to principal and interest by, the United States
government or any agency or instrumentally thereof, when such obligations have a
maturity of less than 365 days and are backed by the full faith and credit of
the United States and have a predetermined fixed dollar of principal due at
maturity that cannot vary or change. If rated by the Rating Agencies, the
obligation should not have an "r" highlighter affixed to its rating. Interest
may either be fixed or variable. Interest must be tied to a single interest rate
index plus a single fixed spread (if any), and move proportionately, but not
inversely, with that index. These obligations include, but are not limited to:
(a) U.S. Treasury obligations
All direct or fully guaranteed obligations
(b) Farmers Home Administration
Certificates of beneficial ownership
(c) General Services Administration
Participation certificates
(d) U.S. Maritime Administration
Guaranteed Title XI financing
(e) Small Business Administration
Guaranteed participation certificates
Guaranteed pool certificates
(f) U.S. Department of Housing and Urban Development
Local authority bonds
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(g) Washington Metropolitan Area Transit Authority
Guaranteed transit bonds.
"Unconsolidated Entity" means, with respect to any Person, at any
date, any other Person in whom such Person holds an Investment, which Investment
is accounted for in the financial statements of such Person on an equity basis
of accounting and whose financial results would not be consolidated financial
statements of such Person, if such statements were prepared as of such date.
"Undeveloped Land" means any unimproved non-income producing Real
Estate.
"Unencumbered" means, with respect to any Asset, at any date of
determination, the circumstance that such Asset on such date:
(a) is not subject to any Liens (including restrictions on
transferability or assignability) of any kind (including any such Lien or
restriction imposed by (i) any agreement governing Indebtedness, and (ii)
the organizational documents of the Borrower or any Borrower Subsidiary),
other than (x) Permitted Liens, (y) in the case of any Qualified Ground
Lease (to the extent permitted by the definition thereof), restrictions on
transferability or assignability in respect of such Lease, and (z) Liens
securing the Lehman Term Facility, Lehman Credit Facility and Goldman
Credit Facility which Borrower is entitled, as of right, to have released
as a result of the repayment and satisfaction thereof and which the
lenders thereunder have agreed to release, provided that the Credit
Facilities have been paid and satisfied in full as of the date hereof out
of a portion of the proceeds of the initial Advance of the Loan and such
releases have been executed, delivered and recorded or filed in the
appropriate real estate or other records within ninety (90) days of the
date hereof;
(b) is not subject to any agreement (including (i) any agreement
governing Indebtedness, and (ii) if applicable, the organizational
documents of the Borrower or any Borrower Subsidiary) which prohibits or
limits the ability of the Borrower or any Borrower Subsidiary to create,
incur, assume or suffer to exist any Lien upon such Asset other than
Permitted Liens (excluding any agreement or organizational document which
limits generally the amount of Indebtedness which may be incurred by the
Borrower or Borrower Subsidiary); and
(c) is not subject to any agreement (including any agreement
governing Indebtedness) which entitles any Person to the benefit of any
Lien (other than Permitted Liens) on such Asset or would entitle any
Person to the benefit of any such Lien upon the occurrence of any
contingency (including, without limitation, pursuant to an "equal and
ratable" clause).
For the purposes of this Agreement, any Asset owned by a Borrower Subsidiary
shall not be deemed to be Unencumbered unless both (i) such Asset and (ii) all
Stock owned directly or indirectly by Borrower in such Borrower Subsidiary, is
Unencumbered.
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"Uniform System of Accounts" means the Uniform System of Accounts
for Hotels as approved by the American Hotel and Motel Association (as in effect
from time to time) applied on a consistent basis.
"Unpaid Drawing" has the meaning specified in Section 2.19(f).
"Unsecured Debt Rating" means, with respect to a Person, the rating
assigned by the Rating Agencies to such Person's long term unsecured debt
obligations; provided, however, that if such ratings are not equivalent, the
higher rating shall apply, and if such ratings are two or more levels apart, the
rating which is one level below the higher rating shall apply.
"Westin Acquisition Agreement" means a written agreement entered
into by Borrower on September 8, 1997 which agreement shall be binding upon
Borrower and Westin Hotels and Resorts Worldwide, have all required deposits
paid by Borrower, and pursuant to which Borrower or a Borrower Subsidiary agrees
to acquire substantially all of the Assets of Westin Hotels and Resorts
Worldwide within 180 days following the date of such agreement.
"Westwood Mortgage" means that certain Contingent Interest Fee and
Leasehold Deed of Trust made by Laura-West Enterprises and Westwood House Hotel
Inc. to Chicago Title Insurance Company, as trustee for the benefit of The
Equitable Life Assurance Society of the United States, as beneficiary, dated
December 31, 1996 and encumbering the Hotel known as the Westwood Marquis,
located in Los Angeles, California, which deed of trust was assumed by SLT
Westwood Realty LLC and SLC Westwood Operating LLC by Assumption of Deed of
Trust and other Contingent Interest Documents dated December 31, 1996.
1.2. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding" and the word "through" means "to and including."
1.3. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in conformity with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in conformity with GAAP.
1.4. Certain Terms. (a) The words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole, and not to
any particular Article, Section, subsection or clause in this Agreement.
References herein to an Exhibit, Schedule, Article, Section, subsection or
clause refer to the appropriate Exhibit or Schedule to, or Article, Section,
subsection or clause in this Agreement.
(b) The terms "Lender", "Administrative Agent" and "Syndication
Agent" include their respective successors and the term "Lender" includes each
assignee of such Lender who becomes a party hereto pursuant to Section 10.7.
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ARTICLE II
AMOUNT AND TERM OF THE LOAN
2.1. The Note; Advances. (a) Borrower's and the REIT's obligation to
pay the principal of, and interest on, the Loan shall be evidenced (i) with
respect to the Term Loan Facility, by the term notes, each in the form attached
hereto as Exhibit A-1, each dated the date hereof and made by Borrower and the
REIT payable to the order of each Lender in a stated principal amount equal to
the amount of such Lender's Term Commitment and which principal amounts
collectively shall equal the Term Loan Facility Amount (as the same may be
amended, modified, supplemented, extended or consolidated, each a "Term Note"
and collectively, the "Term Notes"); (ii) with respect to the Revolving Credit
Facility, by revolving credit notes, each in the form attached hereto as Exhibit
A-2, each dated the date hereof and made by Borrower and the REIT payable to the
order of each Lender in a stated principal amount equal to the amount of such
Lender's Revolving Credit Commitment and which principal amounts collectively
shall equal the Revolving Credit Facility Amount (as the same may be amended,
modified, supplemented, extended or consolidated, each a "Revolving Credit Note"
and collectively, the "Revolving Credit Notes"); and (iii) with respect to Swing
Advances, a swing advance note in the form attached as Exhibit A-3, dated the
date hereof and made by Borrower and the REIT payable to the order of the Swing
Bank in a principal amount equal to $50,000,000.00 (as the same may be amended,
modified, supplemented, extended or consolidated, a "Swing Advance Note";
together with the Term Notes and the Revolving Credit Notes, each a "Note and
collectively, the "Notes").
(b) On the terms and subject to the conditions contained in this
Agreement, each Lender severally agrees to make (i) an Advance of the entire
Term Loan Facility on the Closing Date, provided that no Lender shall be
required to make such Advance in excess of such Lender's Term Commitment; and
(ii) Advances (other than a Swing Advance or the issuance of a Letter of Credit)
to the Borrower and the REIT from time to time on any Business Day during the
period from the date hereof until the Final Maturity Date in an aggregate amount
not to exceed at any time outstanding such Lender's Revolving Commitment;
provided, however, that at no time shall any Lender be obligated to make an
Advance in excess of such Lender's Ratable Portion of the Available Credit.
Within the limits of each Lender's Commitment, subject to the terms and
conditions of this Agreement with respect to Advances, amounts prepaid pursuant
to Section 2.7(b) and applied to the Revolving Credit Facility may be reborrowed
under this Section 2.1.
2.2. Advances Under the Revolving Credit Facility. Any Advance under
the Revolving Credit Facility which is a) in an amount less than $15,000,000.00
and b) is requested to be made on a date that is not the date on which an
Interest Period for a then outstanding Eurodollar Rate Portion expires shall be
made by the Swing Advance Bank as a Swing Advance, subject to compliance with
the conditions of Section 2.17 with respect to Swing Advances.
2.3. Making the Loan. (a) Each Advance (other than a Swing Advance
or the issuance of a Letter of Credit) shall be made on notice, given by the
Borrower and the REIT to the Administrative Agent not later than (i) 11:00 A.M.
(New York City time) on the third (3rd)
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Business Day prior to the date of the proposed Advance in the case of Eurodollar
Rate Portions, and (ii) 11:00 A.M. (New York City time) on the Business Day
prior to the date of the proposed Advance in the case of Base Rate Portions.
Each such notice (a "Notice of Borrowing") shall be in substantially the form of
Exhibit B, specifying therein (i) the date of such proposed Advance, (ii) the
purpose of such proposed Advance, (iii) the aggregate amount of such proposed
Advance, (iv) the amount thereof, if any, requested to be Eurodollar Rate
Portions, and (v) the Interest Period or Periods for any such Eurodollar Rate
Portions. The Advances shall be made as Base Rate Portions unless (subject to
Section 2.12) the Notice of Borrowing specifies that all or a portion thereof
shall be Eurodollar Rate Portions; provided, however, that the aggregate of the
Eurodollar Rate Portions for each Interest Period must be in an amount of not
less than $5,000,000.
(b) The Administrative Agent shall give to each Lender prompt notice
of the Administrative Agent's receipt of a Notice of Borrowing, and each
Lender's Ratable Portion of the proposed Advance and, if Eurodollar Rate
Portions are properly requested in such Notice of Borrowing, the applicable
interest rate under Section 2.9 promptly after the determination thereof by the
Administrative Agent. Upon notice from the Administrative Agent that the
conditions set forth in Article III have been complied with, each Lender shall,
before 12:00 Noon (New York City time) on the date of the proposed Advance, make
available for the account of its Applicable Lending Office to the Administrative
Agent at its address referred to in Section 10.2, in immediately available
funds, such Lender's Ratable Portion of such proposed Advance. By 12:00 Noon
(New York City time) in the case of Eurodollar Rate Portions and Base Rate
Portions, on the date specified by the Borrower and the REIT in the Notice of
Borrowing, subject to the fulfillment of the applicable conditions set forth in
Article III, the Administrative Agent will make such funds available to the
Borrower at the Administrative Agent's aforesaid address or wire such funds as
directed by Borrower and the REIT; provided that in the event that the
Administrative Agent shall have received notice from a Lender prior to the date
of any proposed Advance that such Lender will not make available to the
Administrative Agent such Lender's Ratable Portion of such Advance, the
Administrative Agent shall be under no obligation to fund such Lender's Ratable
Portion of such Advance.
(c) Each Base Rate Portion shall be in an aggregate amount of not
less than $1,000,000.
(d) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower and the REIT. In the case of any proposed Advance which the related
Notice of Borrowing specifies is to be comprised of Eurodollar Rate Portions,
the Borrower and the REIT shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to fulfill on or
before the date specified in such Notice of Borrowing for such proposed Advance
the applicable conditions set forth in Article III, including, without
limitation, any loss (including, without limitation, loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Lender to fund the Eurodollar Rate
Portion to be made by such Lender as part of such proposed Advance when such
Eurodollar Rate Portion, as a result of such failure, is not made on such date.
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(e) Unless the Administrative Agent shall have received notice from
a Lender on or prior to the date of any proposed Advance that such Lender will
not make available to the Administrative Agent such Lender's Ratable Portion of
such Advance, the Administrative Agent may assume that such Lender has made such
Ratable Portion available to the Administrative Agent on the date of such
Advance in accordance with this Section 2.3 and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower and to the REIT on
such date a corresponding amount. If and to the extent that such Lender shall
not have so made such Ratable Portion available to the Administrative Agent,
such Lender and the Borrower and the REIT severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Administrative Agent,
at (i) in the case of the Borrower, the interest rate applicable at the time to
the Advances and (ii) in the case of such Lender, the Federal Funds Rate unless
such Lender has not repaid such funds within two (2) Business Days after the
date on which the amounts were made available to the Borrower and the REIT, in
which case at the Federal Funds Rate plus 1%, commencing on the third Business
Day after the date on which the amounts were made available to Borrower and the
REIT. If such Lender shall repay to the Administrative Agent such corresponding
amount, such amount so repaid shall constitute such Lender's Ratable Portion of
the Loan for purposes of this Agreement. If the Borrower shall repay to the
Administrative Agent such corresponding amount, such payment shall not relieve
such Lender of any obligation it may have to the Borrower or the REIT hereunder.
(f) The failure of any Lender to make an Advance required to be made
by it on the date for such proposed Advance shall not relieve any other Lender
of its obligation, if any, hereunder to make its Advance on the date for such
proposed Advance, but no Lender shall be responsible for the failure of any
other Lender to make the Advance to be made by such other Lender on the date for
such proposed Advance.
2.4. Administrative Fee; Non-Use Fee; Letter of Credit Fee; Facing
Fee. (a) Borrower and the REIT shall pay to the Administrative Agent an
administrative fee as compensation for administering and servicing the Loan and
performing its duties under this Agreement and the Loan Documents equal to
$50,000 per annum (the "Administrative Fee"). The Administrative Fee shall be
paid in advance on the date hereof and on each anniversary thereof thereafter up
to but not including the Final Maturity Date.
(b) Borrower and the REIT shall pay to the Administrative Agent for
the account of each Lender other than a Non-Funding Lender, the applicable
Non-Use Fee, computed on the average daily unfunded portion of such Lender's
Revolving Credit Commitment, from and including the Closing Date through and
including the Final Maturity Date, payable in arrears, on the first day of each
Calendar Quarter beginning after the Closing Date through the Final Maturity
Date. The Administrative Agent shall notify Borrower within three (3) Business
Days of the last day of the calendar quarter of the amount of the Non-Use Fee
then due. Each payment of the Non-Use Fee, to the extent received by the
Administrative Agent, shall constitute payment by Borrower and the REIT to each
Lender in the amount of such Lender's Ratable Portion of the Non-Use Fee. For
purposes of calculating the Non-Use Fees payable hereunder, (i) Swing Advances
shall be
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included as part of the unfunded portion of the Revolving Credit Commitments and
(ii) Letter of Credit Outstandings shall not be included as part of the unfunded
portion of the Revolving Credit Commitment.
(c) Borrower and the REIT shall pay to the Administrative Agent for
the account of each Lender other than a Non-Funding Lender, a fee in respect of
each Letter of Credit (the "Letter of Credit Fee") computed for each day on and
after the Closing Date at a rate equal to the applicable Eurodollar Rate Margin
on the Stated Amount of each Letter of Credit on such date. Accrued Letter of
Credit Fees shall be due and payable quarterly in arrears, on the first day of
each Calendar Quarter beginning after the Closing Date through the Final
Maturity Date. The Administrative Agent shall notify Borrower within three (3)
Business Days of the last day of the Calendar Quarter of the amount of the
Letter of Credit Fee then due. Each payment of the Letter of Credit Fee, to the
extent received by the Administrative Agent, shall constitute payment by
Borrower and the REIT to each Lender in the amount of such Lender's Ratable
Portion of the Letter of Credit Fee.
(d) Borrower and the REIT shall pay to the Administrative Agent for
the account of the Letter of Credit Issuer a fee in respect of each Letter of
Credit issued by it (the "Facing Fee") computed at the rate of one eighth of one
percent (0.125%) per annum on the average daily Stated Amount of such Letter of
Credit during each Fiscal Quarter. Accrued Facing Fees shall be due and payable
quarterly in arrears, on the first day of each Calendar Quarter beginning on the
Closing Date through the Final Maturity Date.
(e) The Borrower and the REIT agree to pay directly to the Letter of
Credit Issuer upon each issuance of, drawing under, and/or amendment of, a
Letter of Credit issued by it such amount as shall at the time of such issuance,
drawing or amendment be the administrative charge which the Letter of Credit
Issuer is customarily charging for issuances of, drawings under or amendments
of, letters of credit issued by it.
2.5. No Additional Advance; Reduction and Termination of the
Commitments. (a) The Borrower and the REIT shall have no right to any further
advances or readvances under the Term Loan Facility after the funding of the
Term Loan Facility on the Closing Date.
(b) The Borrower may, upon at least three (3) Business Days' prior
notice to the Administrative Agent, terminate in whole or reduce in part the
unused portions of the Revolving Credit Commitments of the Lenders; provided,
however, that each partial reduction shall be in the aggregate amount of not
less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof;
provided further that each such partial reduction shall be applied ratably to
the unused portions of the Lender's Revolving Credit Commitments. All reductions
and terminations pursuant to this Section 2.5(b) shall be permanent and Borrower
and the REIT shall have no right to any advances or readvances with respect to
the amounts so reduced or terminated.
2.6. Repayment. The Borrower and the REIT shall repay the entire
unpaid principal amount of the Loan on the Final Maturity Date.
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2.7. Prepayments. (a) The Borrower shall have no right to prepay the
principal amount of the Loan other than as provided in this Section 2.7.
(b) The Borrower may, upon at least two (2) Business Days' prior
notice (which may be by telephone, provided that confirmation in writing is
received within one (1) Business Day after such telephonic notice) to the
Administrative Agent, stating the proposed date and aggregate principal amount
of the prepayment, prepay the outstanding principal amount of the Loan in whole
or ratably in part, without premium or penalty, together with accrued interest
to the date of such prepayment on the principal amount prepaid; provided,
however, that any prepayment of any Eurodollar Rate Portion made other than on
the last day of an Interest Period for such Eurodollar Rate Portion shall be
subject to payment by the Borrower to the Administrative Agent for the benefit
of the Lenders of any costs, fees or expenses incurred by any Lender in
connection with such prepayment including without limitation any costs to unwind
any Eurodollar Rate contracts; and, provided, further, that each partial
prepayment shall be in an aggregate principal amount not less than $3,000,000 or
integral multiples of $100,000 in excess thereof. Upon the giving of such notice
of prepayment, the principal amount of the Loan specified to be prepaid shall
become due and payable on the date specified for such prepayment. The
Administrative Agent shall notify each Lender of the receipt of such notice of
prepayment on the Business Day following such receipt.
(c) If at any time the sum without duplication of (i) the Principal
Balance and (ii) the Letter of Credit Outstandings exceeds the lower of the
Borrowing Base or the Commitments at such time (a "Borrowing Base Imbalance"),
the Borrower and the REIT shall prepay the Loan in an amount equal to such
excess, together with accrued interest, within one (1) Business Day of receipt
by Borrower and the REIT of written notice from the Administrative Agent that a
Borrowing Base Imbalance exists.
(d) On the last day of each of the third, sixth, ninth and twelfth
full calendar months of each of the first three years following the Closing
Date, Borrower and the REIT shall prepay the outstanding principal balance of
the Term Loan Facility in an amount equal to $1,500,000; if the Final Maturity
Date of the Term Loan Facility is extended as provided in Section 2.18 below, on
the last day of each of the third, sixth, ninth and twelfth full calender months
during the first Extension Period, Borrower and the REIT shall prepay the
outstanding principal balance of the Term Loan Facility in an amount equal to
$25,500,000; if the Final Maturity Date of the Term Loan Facility is further
extended as provided in Section 2.18 below, on the last day of each of the
third, sixth, ninth and twelfth full calendar months during the second Extension
Period, Borrower and the REIT shall prepay the outstanding principal balance of
the Term Loan Facility in an amount equal to $30,000,000 (each such required
payment of principal, a "Scheduled Payment").
(e) In the event Borrower or the REIT is required, pursuant to the
terms of any Indebtedness comprising Total Unsecured Indebtedness of the
Borrower or the REIT, to prepay a portion of the principal balance of such
Indebtedness upon the sale or conveyance of any Asset or of any interest in any
Asset, Borrower and the REIT shall, on the Business Day immediately
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preceding the date on which such payment is due, prepay the Loan in an amount
equal to the amount being prepaid pursuant to the terms of such Indebtedness.
(f) Payments applied to the Principal Balance of the Loan (other
than those payments made pursuant to paragraph (d) above) shall be applied to
the Revolving Credit Facility or the Term Loan Facility as specified by
Borrower; provided that in the event Borrower does not so specify, such payments
shall be applied first to the Revolving Credit Facility and then to the Term
Loan Facility. Each payment applied to the Principal Balance of the Term Loan
Facility (including without limitation all Scheduled Payments) shall reduce the
Facility Amount by the amount of such principal payment and each Lender's Term
Commitment shall be reduced by its Ratable Portion of such principal payment.
2.8. Conversion/Continuation Option. The Borrower may elect (i) at
any time to convert Base Rate Portions to Eurodollar Rate Portions or (ii) at
the end of any Interest Period with respect thereto, to convert Eurodollar Rate
Portions into Base Rate Portions, or to continue such Eurodollar Rate Portions
for an additional Interest Period or (iii) pursuant to Section 2.17, convert a
Swing Advance into a Eurodollar Rate Portion or (iv) pursuant to Section 2.19,
convert an Unpaid Drawing into a Eurodollar Rate Portion; provided, however,
that the aggregate of the Eurodollar Rate Portions for each Interest Period
therefor must be in the amount of $5,000,000 or an integral multiple of $500,000
in excess thereof. Each conversion or continuation shall be allocated among the
Notes of all Lenders in accordance with their Ratable Portion. Each such
election shall be in substantially the form of Exhibit C hereto (a "Notice of
Conversion or Continuation") and shall be made by giving the Administrative
Agent prior to 10:00 a.m. New York City Time, at least three (3) Business Days'
prior notice (in writing or by telephone, provided, that if such notice is by
telephone, written confirmation shall be received within one (1) Business Day of
such telephonic notice) thereof, which notice shall be irrevocable, specifying
(A) the amount and type of conversion or continuation, (B) in the case of a
conversion to or a continuation of Eurodollar Rate Portions, each Interest
Period therefor, and (C) in the case of a conversion, the date of conversion
(which date shall be a Business Day and, if a conversion from Eurodollar Rate
Portions, shall also be the last day of the Interest Period therefor). In no
event shall more than five Eurodollar Rate Portions be outstanding at any one
time. The Administrative Agent shall promptly notify each Lender of its receipt
of a Notice of Conversion or Continuation and of the contents thereof and such
Lender's Ratable Portion of the Loan to be converted. Notwithstanding the
foregoing, no conversion in whole or in part of Base Rate Portions to Eurodollar
Rate Portions, and no continuation in whole or in part of Eurodollar Rate
Portions upon the expiration of any Interest Period therefor, shall be permitted
at any time at which a Default or an Event of Default shall have occurred and be
continuing. If, within the time period required under the terms of this Section
2.8, the Administrative Agent does not receive a Notice of Conversion or
Continuation from the Borrower containing a permitted election to continue any
Eurodollar Rate Portions for an additional Interest Period or to convert any
such portions of the Loan, then, upon the expiration of the Interest Period
therefor, such portions of the Loan will be automatically converted to Base Rate
Portions. Each Notice of Conversion or Continuation shall be irrevocable.
Notwithstanding the foregoing, Borrower shall have no right to convert a Swing
Advance or any Unpaid Drawing into a Eurodollar Portion other than in accordance
with Sections 2.17 and 2.19 respectively.
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2.9. Interest. (a) Borrower and the REIT shall pay interest on the
unpaid principal amount of the Loan from the date hereof until the Principal
Balance and all Obligations shall be paid in full, at the following rates per
annum:
(i) From and including the date hereof through and including
September 15, 1997, a rate per annum equal to 7.65%, payable on October 1,
1997.
(ii) From and including September 16, 1997 and thereafter, for
Base Rate Portions, at a rate per annum equal at all times to the Base
Rate in effect from time to time plus the Base Rate Margin, payable
monthly, in arrears, on October 1, 1997 and on the first day of each month
thereafter and on the Final Maturity Date.
(iii) From and including the commencement of any Interest
Period in accordance with the terms of this Agreement, and thereafter for
Eurodollar Rate Portions, at a rate per annum equal at all times during
the applicable Interest Period for each Eurodollar Rate Portion to the sum
of the Eurodollar Rate for such Interest Period plus the Eurodollar Rate
Margin in effect on the first day of such Interest Period, payable
monthly, in arrears, on October 1, 1997 and the first day of each month
thereafter and on the Final Maturity Date.
(iv) from and including the date on which any Swing Advance is
made, and thereafter for Swing Advances outstanding from time to time, at
a rate per annum equal to the Swing Advance Rate, payable monthly, in
arrears, on the first day of the month immediately succeeding the date on
which a Swing Advance is made and on the first day of each month
thereafter and on the Final Maturity Date or the date such Swing Advance
is repaid in full, if earlier.
(b) Upon the occurrence of an Event of Default, or if the principal
indebtedness is declared immediately due and payable either automatically
pursuant to Section 8.1(f) or by the Administrative Agent pursuant to the
provisions of this Agreement or any other Loan Document, or if the Loan is not
paid in full on the Final Maturity Date, the Borrower and the REIT shall
thereafter, unless and until such date, if any, as the Lenders may elect, in
their sole and absolute discretion, to waive, in writing, all or any portion of
such default rate of interest, pay interest on the Principal Balance from the
date of the Default which gave rise to such Event of Default, such declaration
(whether or not automatic) or the Final Maturity Date, as the case may be, until
the date on which the Principal Balance and all Obligations are paid in full
(whether before or after judgment), at a rate per annum (calculated for the
actual number of days elapsed on the basis of a 360-day year) equal to, on a
daily basis, 3% plus the Base Rate (the "Default Rate"), provided, however, that
such interest rate shall in no event exceed the maximum interest rate which the
Borrower may by law pay.
2.10. Interest Rate Determination and Protection. (a) The Eurodollar
Rate for each Interest Period for Eurodollar Rate Portions shall be determined
by the Administrative Agent two Business Days before the first day of such
Interest Period.
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(b) The Administrative Agent shall give prompt notice to the
Borrower and the Lenders of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.9(a) or (b).
(c) If, with respect to Eurodollar Rate Portions, the Majority
Lenders in good faith notify the Administrative Agent that the Eurodollar Rate
for any Interest Period therefor will not adequately reflect the cost to such
Majority Lenders of making such Eurodollar Rate Portion or funding or
maintaining their respective Eurodollar Rate Portions for such Interest Period,
the Administrative Agent shall forthwith so notify the Borrower and the Lenders,
whereupon
(i) each Eurodollar Rate Portion will automatically, on the
last day of the then existing Interest Period therefor, convert into a
Base Rate Loan Portion; and
(ii) the obligations of the Lenders to make or maintain
Eurodollar Rate Portions or to convert Base Rate Portions into Eurodollar
Rate Portions shall be suspended until the Administrative Agent shall
notify the Borrower that such Lenders have determined that the
circumstances causing such suspension no longer exist.
(d) After January 31, 1998, the Borrower will maintain until such
time as the Principal Balance and all interest accrued and unpaid thereon and
all other sums due hereunder or in the Loan Documents have been paid in full,
interest rate protection agreements with a term of at least one year, or other
interest rate protection or hedge products, in each case on terms and conditions
and with counterparties mutually acceptable to the Borrower and the Lenders (and
with respect to counterparties, the Lenders will not unreasonably withhold their
approval), establishing a fixed or maximum interest rate of no more than ten
percent (10%) per annum with respect to an amount equal to or greater than fifty
percent (50%) of the portion of the Total Indebtedness of the Borrower, the
Borrower's Subsidiaries and the REIT that bears interest at a variable or
floating rate per annum.
2.11. Increased Costs. Notwithstanding the provisions of Section
2.10(c), if, due to either (a) the introduction of or any change in or in the
interpretation of any law or regulation (other than any change by way of
imposition or increase of reserve requirements included in determining the
Eurodollar Rate Reserve Percentage) or (b) compliance with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law), there shall be any increase in the cost to any Lender
of agreeing to make or making, funding or maintaining any Eurodollar Rate
Portion, then the Borrower and the REIT shall from time to time, upon demand by
such Lender (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate as
to the amount of such increased cost, submitted to the Borrower and the
Administrative Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error. If the Borrower so notifies the Administrative
Agent within five Business Days after any Lender notifies the Borrower of any
increased cost pursuant to the foregoing provisions of this Section 2.11, the
Borrower and the REIT may either (i) prepay in full all Eurodollar Rate Portions
of such Lender then outstanding in accordance with Section 2.7(b) and,
additionally, reimburse such Lender for such increased cost
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in accordance with this Section 2.11 or (ii) convert all Eurodollar Rate
Portions of all Lenders then outstanding into Base Rate Portions in accordance
with Section 2.8 and, additionally, reimburse such Lender for such increased
cost in accordance with this Section 2.11. This provision shall survive the
payment in full of the Loan.
2.12. Illegality. Notwithstanding any other provision of this
Agreement, if the introduction of or any change in or in the interpretation of
any law or regulation shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender or its
Eurodollar Lending Office to make Eurodollar Rate Portions or to continue to
fund or maintain Eurodollar Rate Portions, then, on notice thereof and demand
therefor by such Lender to the Borrower through the Administrative Agent, (a)
the obligation of such Lender to make or to continue Eurodollar Rate Portions
and to convert Base Rate Portions into Eurodollar Rate Portions shall terminate
and (b) the Borrower and the REIT shall forthwith prepay in full all Eurodollar
Rate Portions of such Lender then outstanding, together with interest accrued
thereon, unless the Borrower, within five Business Days of such notice and
demand, converts all Eurodollar Rate Portions of all Lenders then outstanding
into Base Rate Portions. This provision shall survive the payment in full of the
Loan.
2.13. Capital Adequacy. If (a) the introduction of or any change in
or in the interpretation of any law or regulation, (b) compliance with any law
or regulation, or (c) compliance with 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 any Lender or any corporation controlling any Lender and such
Lender reasonably determines that such amount is based upon the existence of
such Lender's Commitments and its other commitments and loans of this type,
then, upon demand by such Lender (with a copy of such demand to the
Administrative Agent), the Borrower and the REIT shall pay to the Administrative
Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender in the light of
such circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's
Commitments. A certificate as to such amounts submitted to the Borrower and the
Administrative Agent by such Lender shall be conclusive and binding for all
purposes absent manifest error. This provision shall survive the payment in full
of the Loan.
2.14. Payments and Computations. (a) The Borrower and the REIT shall
make each payment hereunder and under the Notes not later than 11:00 A.M. (New
York City time) on the day when due, in Dollars, to the Administrative Agent for
the ratable benefit of the Lenders at its address referred to in Section 10.2 in
immediately available funds without set-off or counterclaim; provided, however,
in the event Borrower gives telephonic notice to the Administrative Agent by
11:00 AM (New York City time) on the day when due that a payment has been made
by wire transfer of immediately available funds, such payment may be received by
the Administrative Agent not later than 2:00 PM (New York City time) on the same
day. The Administrative Agent will promptly thereafter cause to be distributed
immediately available funds relating to the payment of principal or interest or
fees (other than amounts payable pursuant to Section 2.4(d), 2.4(e), 2.11, 2.12,
2.13, 2.14(f), 2.15, 2.17 or 2.19) to the Lenders, in accordance
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with their respective Ratable Portions, for the account of their respective
Applicable Lending Offices, and like funds relating to the payment of any other
amount payable to any Lender to such Lender for the account of its Applicable
Lending Office, in each case to be applied in accordance with the terms of this
Agreement. To the extent the foregoing payments are received by the
Administrative Agent prior to 11:00 A.M. (New York City time), or prior to 2:00
P.M. (New York City time) if Borrower has given the Administrative Agent the
notice required above, and are not distributed to the Lenders on the same day,
the Administrative Agent shall pay to each Lender in addition to the amount
distributed to such Lender, interest thereon, for each day from the date such
amount is received by the Administrative Agent until the date such amount is
distributed to such Lender, at the Federal Funds Rate. Payment received by the
Administrative Agent after 11:00 A.M. (New York City time) or after 2:00 P.M.
(New York City time), if Borrower has given the Administrative Agent the notice
required above, shall be deemed to be received on the next Business Day.
(b) The Borrower and the REIT hereby authorize each Lender, if and
to the extent payment owed to such Lender is not made when due hereunder, to
charge from time to time against any or all of the Borrower's or the REIT's
accounts with such Lender any amount so due.
(c) All computations of interest based on the Base Rate, the
Eurodollar Rate or the Federal Funds Rate and of fees shall be made by the
Administrative Agent on the basis of the actual number of days elapsed in a
360-day year. Each determination by the Administrative Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(d) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or fees, as the case
may be;
(e) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due hereunder that the
Borrower will not make such payment in full, the Administrative Agent may assume
that the Borrower has made such payment in full to the Administrative Agent on
such date and the Administrative Agent may, in reliance upon such assumption,
cause to be distributed to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Borrower shall not have so
made such payment in full to the Administrative Agent, each Lender shall repay
to the Administrative Agent forthwith on demand such amount distributed to such
Lender together with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to the
Administrative Agent, at the Federal Funds Rate.
(f) If any Lender (a "Non-Funding Lender") has (x) failed to make an
Advance required to be made by it hereunder, and further fails to make such
Advance within three (3) days after notice of such failure to Advance by the
Administrative Agent and the Administrative Agent has determined that such
Lender is not likely to make such Advance or (y) given notice to the Borrower or
the Administrative Agent that it will not make other than as a result of the
termination
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of the obligation of the Lenders to make Advance pursuant to Section 8.2, or
that it has disaffirmed or repudiated any obligation to make, Advances, (i) such
Non-Funding Lender shall lose any and all voting rights hereunder, and (ii) any
payment made on account of the Principal Balance and interest thereon and Fees
shall be made as follows:
(A) in the case of any such payment made on any date when and
to the extent that, in the determination of the Administrative Agent, the
Borrower would be able, under the terms and conditions hereof, to reborrow
the amount of such payment under the Commitments and to satisfy any
applicable conditions precedent set forth in Article III to such
reborrowing, such payment shall be made on account of the Principal
Balance of the Loan held by the Lenders other than the Non-Funding Lender
pro rata according to the respective outstanding principal amounts of the
Loan of such Lenders and otherwise in accordance with the terms of this
Agreement;
(B) otherwise, such payment shall be made on account of the
Principal Balance of the Loan held by the Lenders pro rata according to
the respective outstanding principal amounts of the Loan and otherwise in
accordance with the terms of this Agreement; and
(C) any payment made on account of interest, Fees, on the Loan
shall be made pro rata according to the respective amounts of accrued and
unpaid interest, Fees, due and payable on the Loan with respect to which
such payment is being made; notwithstanding the foregoing, in the event
that any payment of interest, Fees, made by Borrower and the REIT is less
than the full amount of interest, Fees, then accrued and unpaid, such
payment shall be made first to the Non-Defaulting Lenders pro rata
according to the respective amounts of accrued and unpaid interest, Fees,
due and payable on the Loan with respect to which such partial payment is
being made and after such Non-Defaulting Lenders have been paid in full,
to the Non-Funding Lenders, pro rata according to the respective amounts
of the accrued and unpaid interest and Fees due and payable on the Loan
with respect to which such partial payment is being made.
2.15. Taxes. (a) Any and all payments by the Borrower and the REIT
under each Loan Document shall be made free and clear of and without deduction
for any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Administrative Agent, taxes measured by its net income,
and franchise taxes imposed on it, by the jurisdiction under the laws of which
such Lender or the Administrative Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Lender, taxes measured by
its net income, and franchise taxes imposed on it, by the jurisdiction of such
Lender's Applicable Lending Office or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities (excluding, in the case of such Lender or the Administrative Agent,
taxes imposed by reason of any failure of such Lender or the Administrative
Agent, if such Lender or the Administrative Agent is entitled at such time to a
total or partial exemption from withholding that is required to be evidenced by
a United States Internal Revenue Service Form 1001 or 4224 or any successor or
additional form, to deliver to the Administrative Agent or the
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Borrower, from time to time as required by the Administrative Agent or the
Borrower or the REIT, such Form 1001 or 4224 (as applicable) or any successor or
additional form, completed in a manner reasonably satisfactory to the
Administrative Agent or the Borrower) being hereinafter referred to as "Taxes".
If the Borrower or the REIT shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder to any Lender or the Administrative
Agent (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including, without limitation, deductions
applicable to additional sums payable under this Section 2.15) such Lender or
the Administrative Agent (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
or the REIT, as applicable, shall make such deductions, (iii) the Borrower or
the REIT, as applicable, shall pay the full amount deducted to the relevant
taxing authority or other authority in accordance with applicable law, and (iv)
the Borrower or the REIT, as applicable, shall deliver to the Administrative
Agent evidence of such payment to the relevant taxation or other authority.
(b) In addition, the Borrower and the REIT agree to pay any present
or future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies of the United States or any political subdivision
thereof or any applicable foreign jurisdiction which arise from any payment made
under any Loan Document or from the execution, delivery or registration of, or
otherwise with respect to, any Loan Document (collectively, "Other Taxes").
(c) The Borrower and the REIT will indemnify each Lender and the
Administrative Agent for the full amount of Taxes or 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 Agent (as the case may be) and any liability (including, without
limitation, for penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within 30 days from the
date such Lender or the Administrative Agent (as the case may be) makes written
demand therefor.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes, the Borrower will furnish to the Administrative Agent, at its addressed
referred to in Section 10.2, the original or a certified copy of a receipt
evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement of the
Borrower or the REIT hereunder, the agreements and obligations of the Borrower
and the REIT contained in this Section 2.15 shall survive the payment in full of
the Obligations.
(f) Prior to the Closing Date in the case of each Lender that is a
signatory hereto, and on the date of the Assignment and Acceptance pursuant to
which it becomes a Lender in the case of each other Lender and from time to time
thereafter if requested by the Borrower or the REIT or the Administrative Agent,
each Lender organized under the laws of a jurisdiction outside the United States
that is entitled to an exemption from United States withholding tax, or that is
subject to such tax at a reduced rate under an applicable tax treaty, shall
provide the Administrative Agent and the Borrower and the REIT with an IRS Form
4224 or Form 1001 or other applicable form, certificate or document prescribed
by the IRS certifying as to such Lender's
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entitlement to such exemption or reduced rate with respect to all payments to be
made to such Lender hereunder and under the Notes. Unless the Borrower, the REIT
and the Administrative Agent have received forms or other documents satisfactory
to them indicating that payments hereunder or under any Note are not subject to
United States withholding tax or are subject to such tax at a rate reduced by an
applicable tax treaty, the Borrower, the REIT or the Administrative Agent shall
withhold taxes from such payments at the applicable statutory rate in the case
of payments to or for any Lender organized under the laws of a jurisdiction
outside the United States.
(g) Any Lender claiming any additional amounts payable pursuant to
this Section 2.15 shall use its best efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Applicable 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 otherwise
disadvantageous to such Lender.
2.16. Sharing of Payments, Etc. If any Lender (other than the Swing
Advance Bank) shall obtain any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) on account of Advances made
by it (other than pursuant to Section 2.13 or 2.15), and there is a Swing
Advance outstanding in respect of which the Swing Advance Bank has not received
payment in full from the Lenders pursuant to Section 2.17(d) or (e), such Lender
(a "Purchasing Lender") shall purchase a participation in all such Swing
Advances in an amount equal to the lesser of such payment and the amount of such
Swing Advances for which the Swing Advance Bank has not so received payment in
full. If, after giving effect to the foregoing, any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances made by it (other than
pursuant to Sections 2.13 or 2.15) in excess of its Ratable Portion of payments
on account of the Loan obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the principal amounts
evidenced by their Notes as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each of them.
2.17. Swing Advances. (a) The Swing Advance Bank, on the terms and
subject to the conditions contained in this Agreement, shall make advances under
the Revolving Credit Facility (each a "Swing Advance") to the Borrower and the
REIT from time to time on any Business Day during the period from the date
hereof until the day preceding the Final Maturity Date in an aggregate amount
not to exceed at any time outstanding the lesser of (i) $50,000,000, and (ii)
the Swing Advance Bank's Ratable Portion of the Available Credit; provided that
the Swing Advance Bank shall not be requested to make a Swing Advance to
refinance an outstanding Swing Advance. The Swing Advance Bank shall be entitled
to rely on the most recent Borrowing Base Certificate delivered to the
Administrative Agent. Within the limits set forth above, Swing Advances repaid
may be reborrowed under this Section 2.17.
(b) Each Swing Advance shall be made upon a Notice of Borrowing for
a Swing Advance being given by the Borrower and the REIT to the Swing Advance
Bank by no later than 11:00 A.M. (New York City time) on the Business Day of the
proposed Swing Advance. Upon fulfillment of the applicable conditions set forth
in Article III, the Swing Advance Bank will make
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each Swing Advance available on the same day to the Borrower and the REIT at the
Administrative Agent's address referred to in Section 10.2. All Swing Advances
shall bear interest, and be payable as provided in Section 2.9(a)(iv).
(c) Each Swing Advance shall be in an aggregate amount of not less
than $1,000,000.00.
(d) The Swing Advance Bank, (i) at any time in its sole and absolute
discretion, may and (ii) shall at least once each calendar month in which any
Swing Advance is outstanding and (iii) shall, upon receipt of a Notice of
Conversion or Continuation from the Borrower and the REIT, on behalf of the
Borrower and the REIT request each Lender, including the Swing Advance Bank, by
notice given to the Administrative Agent, to make an Advance in an amount equal
to such Lender's Ratable Portion of the Swing Advance outstanding on the date
such notice is given. The Administrative Agent shall give to each Lender prompt
notice of the Administrative Agent's receipt of such notice and each Lender's
Ratable Portion of such Swing Advances. Each Lender shall before 12:00 Noon (New
York City time) on the next Business Day or, if Borrower or the Swing Advance
Bank requested a Conversion of the Swing Advance into a Eurodollar Rate Portion,
on the fourth Business Day after it has received notice from the Administrative
Agent, make available to the Administrative Agent, in immediately available
funds, the amount of its Ratable Portion of the principal amount of such Swing
Advances. Upon such payment by a Lender, the Swing Advances shall be deemed to
have been repaid and such Lender shall be deemed to have made an Advance to the
Borrower and the REIT in the amount of such payment and such Advance shall
constitute a Base Rate Portion unless Borrower and the REIT or the Swing Advance
Bank requested a conversion into a Eurodollar Rate Portion. The Administrative
Agent shall use such funds to repay the Swing Advance to the Swing Advance Bank.
If any Lender fails to make such amount available to the Swing Advance Bank on
the date when such amount would otherwise be required to be made pursuant to the
preceding paragraph, the Swing Advance Bank shall be entitled to recover such
amount on demand from such Lender together with interest accrued from such date
at the Federal Funds Rate unless such Lender has not made such funds available
within two (2) Business Days after the date on which such amount was due, in
which case at the Federal Funds Rate plus one percent (1%) commencing on the
third Business Day after the date on which the amounts were due. To the extent
that any Lender fails to make such payment to the Swing Advance Bank, the
Borrower and the REIT shall repay such Swing Advances on demand and in any event
on the Final Maturity Date.
(e) During the continuance of an Event of Default under Section
8.1(f), each Lender shall acquire, without recourse or warranty, an undivided
participation in each Swing Advance otherwise required to be repaid by such
Lender pursuant to the preceding paragraph, which participation shall be in a
principal amount equal to such Lender's Ratable Portion of such Swing Advance,
by paying to the Swing Advance Bank on the date on which such Lender would
otherwise have been required to make a payment in respect of such Swing Advance
pursuant to the preceding paragraph, in immediately available funds, an amount
equal to such Lender's Ratable Portion of such Swing Advance. If such amount is
not in fact made available to the Swing Advance Bank on the date when such
amount would otherwise be required to be made pursuant to the preceding
paragraph, the Swing Advance Bank shall be entitled to recover such amount on
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demand from that Lender together with interest accrued from such date at the
Federal Funds Rate unless such Lender has not made such funds available within
two (2) Business Days after the date on which such amount was due, in which case
at the Federal Funds Rate plus one percent (1%) commencing on the third Business
Day after the date on which the amounts were due. From and after the date on
which any Lender purchases an undivided participation interest in a Swing
Advance pursuant to this paragraph (e), the Swing Advance Bank shall promptly
distribute to such Lender such Lender's Ratable Portion of all payments of
principal and of interest on such Swing Advance, other than those received from
a Lender pursuant to Section 2.16 or this or the preceding paragraph (d). If any
payment made by or on behalf of the Borrower and the REIT and received by the
Swing Advance Bank with respect to any Swing Advance is rescinded or must
otherwise be returned by the Swing Advance Bank for any reason and the Swing
Advance Bank has made a payment to the Administrative Agent, on account thereof,
each Lender shall, upon notice to the Swing Advance Bank, forthwith pay over to
the Swing Advance Bank an amount equal to such Lender's pro rata share of the
payment so rescinded or returned based on the respective amounts paid in respect
thereof to the Lenders pursuant to the preceding paragraph (d).
2.18. Extension of Maturity Date. (a) Provided no Event of Default
has occurred and is continuing at the time of exercise or the commencement of
the related Extension Period, Borrower and the REIT shall have two (2)
successive options to extend the Final Maturity Date with respect to the Term
Loan Facility only for an additional period of one (1) year on each such option
(each an "Extension Period"), such extended term to begin respectively upon the
Final Maturity Date or the expiration of the first Extension Period as
applicable. If Borrower and the REIT shall elect to exercise the aforesaid
options, it shall do so by giving written notice to the Administrative Agent on
or prior to the date that is sixty (60) days prior to the Final Maturity Date or
the expiration of the first Extension Period, as applicable. Upon receipt by the
Administrative Agent of such notice, the Final Maturity Date shall be extended,
but only upon the following terms and conditions:
(i) Both at the commencement of the related Extension Period and
at all times during the prior twelve (12) months, Borrower and
the REIT have an Unsecured Debt Rating of at least BB+as
assigned by Standard & Poor's Rating Services or Ba1 as
assigned by Moody's Investor Service, Inc. (the "Minimum
Rating");
(ii) On the first day of the first and second Extension Period, as
the case may be, Borrower and the REIT shall pay to the
Administrative Agent on behalf of the Lenders an extension fee
equal to 0.175% of the Principal Balance at the time of
commencement of the related Extension Period;
(iii) The Base Rate Margins and Eurodollar Rate Margins in effect
during each Extension Period shall be determined in accordance
with the respective definitions of such terms as provided in
this Agreement; and
(iv) The Borrower and the REIT shall make prepayments of principal
in accordance with Section 2.7(d).
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(b) Under no circumstances shall Borrower or the REIT have any right
to extend the Final Maturity Date of the Revolving Credit Facility.
2.19. Letters of Credit.(a) Subject to and upon the terms and
conditions herein set forth, the Borrower and the REIT may request the Letter of
Credit Issuer at any time and from time to time on or after the Closing Date and
prior to the Final Maturity Date to issue, for the account of the Borrower and
in support of (x) trade obligations, workmen's compensation, deposits and
downpayments in connection with the acquisition of Assets, and other obligations
of the Borrower or a Borrower Subsidiary incurred in the ordinary course of its
business and/or (y) such other obligations of the Borrower or Borrower
Subsidiary to any other Person that are acceptable to both the Administrative
Agent and the Letter of Credit Issuer, and the Letter of Credit Issuer, subject
to and upon the terms and conditions herein set forth, agrees to issue
irrevocable letters of credit in such form as may be reasonably approved by the
Letter of Credit Issuer and the Administrative Agent (each such letter of
credit, a "Letter of Credit" and collectively, the "Letters of Credit").
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings at such time, would exceed the lesser of (x) $10,000,000.00 and (y)
an amount equal to the Letter of Credit Issuer's Ratable Portion of the
Available Credit at such time and (ii) each Letter of Credit shall have an
expiration date occurring not later than one year after such Letter of Credit's
date of issuance (although any Letter of Credit may be renewable for successive
periods of up to 12 months subject to continued compliance with the conditions
precedent to its issuance), but in no event shall any Letter of Credit have an
expiration date (whether by renewal or otherwise) beyond the Business Day next
preceding the Final Maturity Date.
(c) Notwithstanding the foregoing, in the event that any Lender has
failed to make an Advance required to be made by it hereunder, the Letter of
Credit Issuer shall not be required to issue any Letter of Credit unless the
Letter of Credit Issuer has entered into arrangements satisfactory to it and the
Borrower and the REIT to eliminate the Letter of Credit Issuer's risk with
respect to the participation in Letters of Credit by the Non-Funding Lender,
including, without limitation, by cash collateralizing such Non-Funding Lender's
Ratable Portion of the Letter of Credit Outstandings.
(d) Whenever it desires that a Letter of Credit be issued, the
Borrower shall give the Administrative Agent and the Letter of Credit Issuer
written notice in the form provided by the Letter of Credit Issuer prior to 1:00
P.M. (New York time) at least five Business Days (or such shorter period as may
be acceptable to the Letter of Credit Issuer) prior to the proposed date of
issuance (which shall be a Business Day) (each a "Letter of Credit Request"),
which Letter of Credit Request shall include an application for such Letter of
Credit and any other documents that the Letter of Credit Issuer customarily
requires in connection therewith (the "Credit Documents") to the addresses set
forth on Exhibit H. The Administrative Agent shall promptly notify each Lender
of each Letter of Credit Request.
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(e) The Letter of Credit Issuer shall, on the date of each issuance
of a Letter of Credit by it, give the Administrative Agent, each Lender and the
Borrower and the REIT written notice of the issuance of such Letter of Credit,
accompanied by a copy to the Administrative Agent of the Letter of Credit or
Letters of Credit issued by it. The Letter of Credit Issuer shall provide to the
Administrative Agent a monthly summary describing each Letter of Credit issued
by the Letter of Credit Issuer and then outstanding.
(f) The Borrower and the REIT hereby agree to reimburse the Letter
of Credit Issuer, by making payment to the Administrative Agent in immediately
available funds at its address referred to in Section 10.2, for any payment or
disbursement made by the Letter of Credit Issuer under any Letter of Credit
(each such amount so paid or disbursed until reimbursed, an "Unpaid Drawing") or
by requesting an Advance hereunder in accordance with Section 2.3 or requesting
that the Letter of Credit Issuer exercise its rights under Section 2.19(j) to
convert such Unpaid Drawings into Eurodollar Portions and delivering a Notice of
Conversion or Continuation pursuant to Section 2.8, immediately after, and in
any event on the date on which, the Letter of Credit Issuer notifies the
Administrative Agent and the Borrower and the REIT of such payment or
disbursement (which notice to the Borrower and the REIT shall be delivered
reasonably promptly after any such payment or disbursement), with interest on
the amount so paid or disbursed by the Letter of Credit Issuer, to the extent
not reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or
disbursement, from and including the date paid or disbursed to but not including
the date the Letter of Credit Issuer is reimbursed therefor at a rate per annum
which shall be the rate then applicable to Base Rate Portions (or, if not
reimbursed by the third Business Day after the date of such payment or
disbursement a rate per annum equal to the Default Rate), such interest also to
be payable on demand.
(g) The Borrower's and the REIT's obligation under Section 2.19(f)
above to reimburse the Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower or the REIT may have or have had against
the Letter of Credit Issuer, the Administrative Agent, or any Lender, including,
without limitation, any defense based upon the failure of any drawing under a
Letter of Credit to conform to the terms of the Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds of such
drawing, provided, however, that after paying in full such reimbursement
hereunder, nothing herein shall adversely affect the right of the Borrower or
the REIT, as the case may be, to commence any proceeding against the Letter of
Credit Issuer for any wrongful disbursement made by the Letter of Credit Issuer
under a Letter of Credit as a result of acts or omissions constituting gross
negligence or willful misconduct on the part of the Letter of Credit Issuer.
(h) Immediately upon the issuance by the Letter of Credit Issuer of
any Letter of Credit, the Letter of Credit Issuer shall be deemed to have sold
and transferred to each Lender which holds a Revolving Credit Commitment and
each such Lender (each a "Letter of Credit Participant") shall be deemed
irrevocably and unconditionally to have purchased and received from the Letter
of Credit Issuer, without recourse or warranty, an undivided interest and
participation, to the extent of such Lender's Ratable Portion of the Stated
Amount, in such Letter of Credit, each
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substitute letter of credit, each drawing made thereunder and the obligations of
the Borrower and the REIT under this Agreement with respect thereto (although
Letter of Credit Fees shall be payable directly to the Administrative Agent for
the account of the Lender as provided in Section 2.4(c) and the Letter of Credit
Participants shall have no right to receive any portion of any Facing Fees) and
any security therefor for guaranty pertaining thereto. Upon any change in the
Commitments of the Lenders pursuant to Section 10.7, it is hereby agreed that,
with respect to all outstanding Letters of Credit and Unpaid Drawings, there
shall be an automatic adjustment to the participations pursuant to this Section
2.19(h) to reflect the new Commitments of the assigning and assignee Lenders.
(i) In determining whether to pay under any Letter of Credit, the
Letter of Credit Issuer shall not have any obligation relative to the Letter of
Credit Participants other than to determine that any documents required to be
delivered under such Letter of Credit have been delivered and that they appear
to comply on their face with the requirements of such Letter of Credit. Any
action taken or omitted to be taken by the Letter of Credit Issuer under or in
connection with any Letter of Credit if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for the Letter of Credit
Issuer any resulting liability.
(j) In the event that the Letter of Credit Issuer makes any payment
under any Letter of Credit and (1) the Borrower or the REIT shall not have
reimbursed such amount in full to such Letter of Credit Issuer pursuant to
Section 2.19(f) on the date such payment was made, or (2) the Borrower and the
REIT have delivered a Notice of Conversion or Continuation requesting the Letter
of Credit Issuer to exercise its rights under this Section 2.19(j) to convert
the Unpaid Drawing to a Eurodollar Rate Portion, the Letter of Credit Issuer
shall promptly notify the Administrative Agent, and the Administrative Agent
shall promptly notify each Letter of Credit Participant thereof, and each Letter
of Credit Participant shall promptly and unconditionally no later than one (1)
Business Day after notification with respect to the failure to pay under clause
(1) above or on the fourth Business Day after notification in the case of
Borrower's delivery of a Notice of Conversion or Continuation pursuant to clause
(2) above, pay to the Administrative Agent for the account of the Letter of
Credit Issuer, the amount of such Letter of Credit Participant's Ratable Portion
of the Unpaid Drawing of such Letter of Credit in U.S. dollars and in same day
funds, provided, however, that no Letter of Credit Participant shall be
obligated to pay to the Administrative Agent its Ratable Portion of such
unreimbursed amount for any wrongful payment made by the Letter of Credit Issuer
under a Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Letter of Credit Issuer. Upon
such payment by a Lender, the Unpaid Drawings shall be deemed to have been
repaid and such Lender shall be deemed to have made an Advance to the Borrower
and the REIT in the amount of such payment and such Advance shall constitute a
Base Rate Portion unless Borrower and the REIT have requested a Eurodollar Rate
Portion pursuant to the Notice of Conversion or Continuation, in which case it
shall constitute a Eurodollar Rate Portion. If the Administrative Agent so
notifies any Letter of Credit Participant required to fund a payment under a
Letter of Credit prior to 11:00 A.M. (New York time) on any Business Day, such
Letter of Credit Participant shall make available to the Administrative Agent
for the account of the Letter of Credit Issuer such Letter of Credit of the
amount of such payment on such Business Day or on the fourth Business Day after
such notice if a conversion to a Eurodollar Rate Portion has been
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requested, in same day funds. If and to the extent such Letter of Credit
Participant shall not have so made its Ratable Portion of the amount of such
payment available to the Administrative Agent for the account of the Letter of
Credit Issuer, such Participant agrees to pay to the Administrative Agent for
the account of the Letter of Credit Issuer, forthwith on demand such amount,
together with interest thereon, for each day from such date until the date such
amount is paid to the Administrative Agent for the account of such Letter of
Credit Issuer at the Federal Funds Rate unless such Participant has not repaid
such funds within two (2) Business Days after the date on which such amount was
due, in which case at the Federal Funds Rate plus 1%, commencing on the third
Business Day after the date on which such amount was due. The failure of any
Letter of Credit Participant to make available to the Administrative Agent for
the account of the Letter of Credit Issuer its Ratable Portion of any payment
under any Letter of Credit shall not relieve any other Letter of Credit
Participant of its obligation hereunder to make available to the Administrative
Agent for the account of Letter of Credit Issuer its Ratable Portion of any
payment under any Letter of Credit on the date required, as specified above, but
no Letter of Credit Participant shall be responsible for the failure of any
other Letter of Credit Participant to make available to the Administrative Agent
for the account of such Letter of Credit Issuer such other Letter of Credit
Participant's Ratable Portion of any such payment.
(k) During the continuance of an Event of Default under Section
8.1(f), each Lender shall acquire, without recourse or warranty, an undivided
participation in each Unpaid Drawing otherwise required to be repaid by such
Lender pursuant to the preceding paragraph, which participation shall be in a
principal amount equal to such Lender's Ratable Portion of such Unpaid Drawing,
by paying to the Letter of Credit Issuer on the date on which such Lender would
otherwise have been required to make a payment in respect of such Unpaid Drawing
pursuant to the preceding paragraph, in immediately available funds, an amount
equal to such Lender's Ratable Portion of such Unpaid Drawing. If such amount is
not in fact made available to the Letter of Credit Issuer on the date when such
amount would otherwise be required to be made pursuant to the preceding
paragraph, the Letter of Credit Issuer shall be entitled to recover such amount
on demand from that Lender together with interest accrued from such date at the
Federal Funds Rate unless such Lender has not made such funds available within
two (2) Business Days after such amount was due, in which case at the Federal
Funds Rate plus one percent (1%) commencing on the third Business Day after the
date on which such amount was due. From and after the date on which any Lender
purchases an undivided participation interest in a Unpaid Drawing pursuant to
this paragraph (k), the Letter of Credit Issuer shall promptly distribute to
such Lender such Lender's Ratable Portion of all payments of principal and of
interest on such Unpaid Drawing, other than those received from a Lender
pursuant to Section 2.16 or this or the preceding paragraph (j). If any payment
made by or on behalf of the Borrower and the REIT and received by the Letter of
Credit Issuer with respect to any Unpaid Drawing is rescinded or must otherwise
be returned by the Letter of Credit Issuer for any reason and the Letter of
Credit Issuer has made a payment to the Administrative Agent, on account
thereof, each Lender shall, upon notice to the Letter of Credit Issuer,
forthwith pay over to the Letter of Credit Issuer an amount equal to such
Lender's pro rata share of the payment so rescinded or returned based on the
respective amounts paid in respect thereof to the Lenders pursuant to the
preceding paragraph (j).
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(l) Whenever the Letter of Credit Issuer receives a payment of
a reimbursement obligation as to which the Administrative Agent has received for
the account of the Letter of Credit Issuer any payments from the Letter of
Credit Participants pursuant to clause (j) above, the Letter of Credit Issuer
shall pay to the Administrative Agent and the Administrative Agent shall
promptly pay to each Letter of Credit Participant which has paid its Ratable
Portion thereof, in U.S. dollars and in same day funds, an amount equal to such
Letter of Credit Participant's Ratable Portion of the principal amount thereof
and interest thereon accruing after the purchase of the respective
participations, including without limitation amounts received pursuant to
Section 2.19(f).
(m) The obligations of the Letter of Credit Participants to
make payments to the Administrative Agent for the account of the Letter of
Credit Issuer with respect to Letters of Credit shall be irrevocable and not
subject to counterclaim, set-off or other defense or any other qualification or
exception whatsoever and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, any of the following circumstances:
(i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or the proceeds thereof in whole or in part, which may prove
to be invalid or ineffective for any reason;
(iii) failure of the beneficiary to comply fully with
conditions required in order to demand payment under a Letter of
Credit;
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise; or
(v) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a disbursement under a
Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Letter of Credit Issuer or any Lender holding a
Revolving Credit Commitment hereunder. In furtherance and extension and not in
limitation or derogation of any of the foregoing, any action taken or omitted to
be taken by the Letter of Credit Issuer in good faith (and not constituting
gross negligence or willful misconduct) shall be binding upon the Borrower and
the REIT, each Lender, and shall not put the Issuer under any resulting
liability to the Borrower, the REIT or any such Lender, as the case may be.
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(n) If after the Closing Date, the adoption of any applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Letter of Credit Issuer or any Lender with any
request or directive (whether or not having the force of law) by any such
authority, central bank or comparable agency (in each case made subsequent to
the Closing Date) shall either (i) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against Letters of
Credit issued by such Letter of Credit Issuer or such Lender's participation
therein, or (ii) shall impose on the Letter of Credit Issuer or any Lender any
other conditions affecting this Agreement, any Letter of Credit or such Lender's
participation therein; and the result of any of the foregoing is to increase the
cost to such Letter of Credit Issuer or such Lender of issuing, maintaining or
participating in any Letter of Credit, or to reduce the amount of any sum
received or receivable by the Letter of Credit Issuer or such Lender hereunder
(other than any increased cost or reduction in the amount received or receivable
resulting from the imposition of or a change in the rate of taxes or similar
charges), then, upon demand to the Borrower and the REIT by the Letter of Credit
Issuer or such Lender (a copy of which notice shall be sent by the Letter of
Credit Issuer or the Lender to the Administrative Agent), the Borrower shall pay
to such Letter of Credit Issuer or such Lender such additional amount or amounts
as will compensate the Letter of Credit Issuer or such Lender for such increased
cost or reduction. A certificate submitted to the Borrower by any Letter of
Credit Issuer or any Lender, as the case may be (a copy of which certificate
shall be sent by such Letter of Credit Issuer or such Lender to the
Administrative Agent), setting forth the basis for the determination of such
additional amount or amounts necessary to compensate the Letter of Credit Issuer
or such Lender as aforesaid shall be conclusive and binding on the Borrower and
the REIT absent manifest error, although the failure to deliver any such
certificate shall not release or diminish any of the Borrower's or the REIT's
obligations to pay additional amounts pursuant to this Section 2.19(n).
ARTICLE III
CONDITIONS OF LENDING
3.1. Conditions Precedent to the Initial Advance. The
obligation of each Lender to make its Advance of the Term Loan Facility, its
initial Advance of the Revolving Credit Facility, of the Swing Advance Bank to
make its initial Swing Advance and of the Letter of Credit Issuer to issue its
initial Letter of Credit is subject to satisfaction of the condition precedent
that the Administrative Agent shall have received, on the Closing Date, the
following, each dated the Closing Date unless otherwise indicated, in form and
substance satisfactory to the Lenders and (except for the Notes) in sufficient
copies for each Lender:
(a) Loan Documents, duly executed by the appropriate Loan
Parties and delivered to the Administrative Agent:
(i) This Agreement.
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(ii) The Notes to the order of the Lenders,
respectively.
(iii) The Guaranty.
(iv) The Lease Subordination Agreement.
(v) The Subordination and Intercreditor
Agreement.
(vi) The Disbursement Request.
(b) Organizational Documents; Certifications.
(i) A certificate, signed by a Responsible Officer of
each Loan Party certifying (i) the resolutions of its Board of
Trustees or Directors, as appropriate, approving all Loan
Documents to which it is a party, (ii) all documents
evidencing other necessary trust, partnership, limited
liability company or corporate action, as appropriate, and
required governmental and third party approvals, licenses and
consents with respect to each Loan Document to which it is a
party and the transactions contemplated thereby, (iii) a copy
of its declaration of trust, certificates of incorporation,
by-laws, partnership and operating agreements and certificates
of partnership and articles of organization as appropriate, as
of the Closing Date, and (iv) the names and true signatures of
each of its officers who has been authorized to execute and
deliver any Loan Document or other document required hereunder
to be executed and delivered by or on behalf of such Person.
(ii) A copy of the declaration of trust or articles
or certificate of incorporation or organization or partnership
agreement or certificate of partnership, as appropriate, of
each Loan Party and of each of its Subsidiaries which is not a
Loan Party certified as of a recent date by the Secretary of
State of the state of formation of such Loan Party or
Subsidiary, together with certificates of such official
attesting to the good standing of each such Loan Party and
Subsidiary.
(iii) A certificate of a Responsible Officer of each
of the Borrower, and the REIT, and the chief accounting
officer of each of the Corporation and SLC (or, as applicable,
such Loan Party's general partner), stating that each of the
Borrower, the REIT, the Corporation and SLC is Solvent after
giving effect to the Loan, the application of the proceeds
thereof in accordance with Section 6.10 and the payment of all
estimated legal, accounting and other fees related hereto and
thereto.
(iv) A certificate, signed by a Responsible Officer
of the Borrower, stating that, to the best of such Responsible
Officer's knowledge, the following statements, are true and
correct on the Closing Date:
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(A) The representations and warranties of
the Borrower contained in Article IV and of each Loan
Party in the other Loan Documents are correct in all
material respects on and as of such date as though
made on and as of such date (it being understood and
agreed that any representation or warranty which by
its terms is made on a specified date shall be
required to be true and correct only as of such
specified date); and
(B) No Default or Event of Default will
result from the Loan being made on such date.
(C) All necessary governmental and third
party approvals required to be obtained by each Loan
Party in connection with the transactions
contemplated hereby have been obtained and remain in
effect, and all applicable waiting periods have
expired without any action being taken by any
competent authority which restrains, prevents,
impedes, delays or imposes materially adverse
conditions upon any of the transactions contemplated
hereby.
(D) There exists no judgment, order,
injunction or other restraint prohibiting or imposing
materially adverse conditions upon any of the
transactions contemplated hereby.
(E) There exists no claim, action, suit,
investigation or proceeding (including, without
limitation, shareholder or derivative litigation)
pending or, to the knowledge of the Borrower,
threatened in any court or before any arbitrator or
Governmental Authority which relates to the Loan
Documents or the financing hereunder or which, if
adversely determined, would have a Material Adverse
Effect.
(F) There has been no Material Adverse
Change since December 31, 1996 in the corporate,
capital or legal structure of the REIT, the Borrower
or any Borrower Subsidiary or SLC, the Corporation or
any Operating Entity.
(G) The statements set forth in Section 3.3
are true after giving effect to the Advance being
made on the Closing Date.
(v) A Compliance Certificate, executed by the Chief
Financial Officer of the Borrower substantially in the form
attached as Exhibit E hereto.
(vi) A Borrowing Base Certificate, executed by the
Chief Financial Officer of the Borrower substantially in the
form attached as Exhibit F hereto.
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(c) Legal Opinions. Legal opinions, dated the Closing Date,
from counsel to Borrower, the REIT and each Guarantor in form and substance
reasonably satisfactory to the Lenders and their counsel, that, among other
things: (i) this Agreement and the other Loan Documents have been duly
authorized, executed and delivered by Borrower, the REIT and each Guarantor and
are valid and enforceable in accordance with their terms, subject to bankruptcy
and equitable principles; (ii) that Borrower, the REIT and each Guarantor are
qualified to do business and in good standing under the laws of the jurisdiction
in which it is organized; (iii) based upon a certificate of Borrower and the
other Loan Parties, entering into the Loan Documents shall not cause a breach
of, or a default under, any material agreement, document or instrument to which
Borrower, the REIT and each Guarantor is a party or to which they or any of
their properties or Assets are bound or affected; and (v) the Loan does not
violate the usury laws of the State of New York.
(d) Insurance. Evidence that the insurance required by Section
6.4 is in full force and effect.
(e) UCC Searches. Satisfactory (i.e., showing no Liens other
than Permitted Liens) UCC searches, together with tax lien, judgment and
litigation searches conducted in the appropriate jurisdictions and as requested
by the Lenders, performed by a search firm acceptable to the Administrative
Agent with respect to the Eligible Assets, the REIT, Borrower and each Guarantor
(collectively, the "UCC Searches").
(f) Title Insurance. Existing title insurance policies issued
to Borrower or the applicable Borrower Subsidiary by a title insurance company
satisfactory to the Lenders, together with a "bring-down" or "date down" of such
policies dated no more than 20 days prior to the Closing Date in form and
substance reasonably satisfactory to the Lenders insuring with respect to the
Eligible Hotels, the good and marketable fee simple or leasehold, as the case
may be, title to the related Eligible Hotel, and (ii) with respect to the
Eligible Mortgage Loans, the validity and first priority of the Lien in favor of
the Borrower or Borrower Subsidiary created by the Mortgage Note Security
Documents (each a "Title Policy").
(g) Financial Reports. The (i) financial reports described in
Section 6.11 for the most recently ended fiscal year of Borrower and the
relevant Loan Parties and the unaudited consolidated financial statements of
Borrower and the relevant Loan Parties for each fiscal quarter of Borrower and
such Loan Parties ending since the end of such entity's most recent fiscal year,
(ii) for each Hotel and Mortgage Note Hotel, annual operating statements and
occupancy statements for the most recent fiscal year together with trailing 12
months operating statements, current occupancy statements and the approved
operating and capital budget for the current fiscal year, and (iii) operating
statements for Managed Hotels. Such financial statements shall be acceptable to
the Lenders in their sole discretion.
(h) Environmental Reports. Environmental reports with respect
to each Eligible Hotel (and with respect to the Newly Acquired Hotels, dated
within twelve (12) months prior to the Closing Date), each of which shall be in
form and substance satisfactory to the Lenders and shall include, without
limitation, the following: (i) a Phase I environmental site assessment
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analyzing the presence of environmental contaminants, polychlorinated biphenyls
or storage tanks and other Hazardous Substances at each of the Eligible Hotels,
the risk of contamination from off-site Hazardous Substances and compliance with
Environmental Laws, such assessments shall be conducted in accordance with ASTM
Standard E 1527-93, or any successor thereto published by ASTM, and (ii) such
further site assessments the Lenders may require due to the results obtained in
(i) hereof or in its reasonable discretion.
(i) Engineering Reports. Engineering reports with respect to
each Eligible Hotel (and with respect to the Newly Acquired Hotels, dated within
twelve (12) months prior to the Closing Date), each of which shall be in form
and substance reasonably satisfactory to the Lenders and shall be prepared in
accordance with the Lenders then current guidelines for property inspection
reports by licensed engineers acceptable to Lenders, and such report should
state, among other things, that each Eligible Hotel is in good condition and
repair, free from damage and waste (the "Engineering Reports").
(j) Zoning Compliance. Evidence reasonably satisfactory to the
Lenders to the effect that each of the Newly Acquired Hotels and the use thereof
are in substantial compliance with the applicable zoning, subdivision, and all
other applicable federal, state or local laws and ordinances affecting each of
the Newly Acquired Hotels, and that all building and operating licenses and
permits necessary for the use and occupancy of each of the Newly Acquired Hotels
as hospitality properties or hotels including, but not limited to, current
certificates of occupancy, have been obtained and are in full force and effect.
(k) Operating Leases, Licenses. Certified copies of all
Operating Leases and Licenses with respect to each Eligible Hotel which shall be
reasonably satisfactory to the Lenders.
(l) Flood Plain. Reasonably satisfactory evidence indicating
which of the Newly Acquired Hotels are in a flood plain.
(m) Qualified Ground Leases. If the Borrower or any Borrower
Subsidiary owns a leasehold estate in an Eligible Hotel, (A) a certified copy of
the Qualified Ground Lease for such Eligible Hotel, together with all amendments
and modifications thereto and a recorded memorandum thereof, which Ground Lease
shall be satisfactory in all respects to the Lenders, and (B) a ground lessor
estoppel executed by the ground lessor and fee owner, which estoppel shall be
satisfactory in all respects to the Lenders.
(n) Management Agreements. Certified copies of all Management
Agreements, and if requested by the Lenders, estoppel certificates of the owners
under such Management Agreements in form and substance reasonably satisfactory
to the Lenders.
(o) Further Documentation. Such additional documents,
information and materials as any Lender, through the Administrative Agent, may
reasonably request.
(p) No Violation. The making of the Loan on such date does not
violate any Requirement of Law and is not enjoined, temporarily, preliminarily
or permanently.
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3.2. Additional Conditions Precedent to the Initial Advances.
The obligation of each Lender to make the initial Advance, of the Swing Advance
Bank to make its initial Swing Advance and of the Letter of Credit Issuer to
issue its initial Letter of Credit is subject to the further conditions
precedent that:
(a) No Lender in its sole judgment exercised reasonably shall
have determined (i) that there has been any Material Adverse Change since
December 31, 1996 or (ii) that there has occurred any adverse change which such
Lender deems material in the financial markets generally since December 31, 1996
or (iii) that there is any claim, action, suit, investigation, litigation or
proceeding (including, without limitation, shareholder or derivative litigation)
pending or threatened in any court or before any arbitrator or Governmental
Authority which, if adversely determined, would have a Material Adverse Effect;
and nothing shall have occurred since December 31, 1996 which, in the judgment
of any Lender, has had a Material Adverse Effect.
(b) Each Lender shall be satisfied, in its sole judgment,
exercised reasonably, with the corporate, capital, legal and management
structure of the Borrower, the REIT, SLC, the Corporation and each of their
Subsidiaries, and the Operating Entities and shall be satisfied, in its sole
judgment exercised reasonably, with the nature and status of all Contractual
Obligations, securities, labor, tax, ERISA, employee benefit, environmental,
health and safety matters, in each case, involving or affecting the Borrower,
the REIT, SLC, the Corporation or any of their Subsidiaries or the Operating
Entities.
3.3 Conditions Precedent to Each Advance. The obligation of
each Lender to make any Advance (including the Advance being made by such Lender
on the Closing Date and including any Swing Advance by the Swing Advance Bank
and any Letter of Credit issued by the Letter of Credit Issuer) shall be subject
to the further conditions precedent that:
(a) The following statements shall be true on the date of such
Advance, before and after giving effect to such Advance and to the application
of the proceeds therefrom (and the acceptance by the Borrower and the REIT of
the proceeds of such Advance shall constitute a representation and warranty by
the Borrower and the REIT that on the date of such Advance such statements are
true):
(i) The representations and warranties of the
Borrower and the REIT contained in Article IV and of each Loan Party in
the other Loan Documents are correct on and as of such date as though
made on and as of such date (it being understood and agreed that any
representation or warranty which by its terms is made on a specified
date shall be required to be true and correct only as of such specified
date); and
(ii) No Event of Default exists or will result from
the Advances being made on such date.
(b) The making of the Advances on such date does not violate
any Requirement of Law and is not enjoined, temporarily, preliminarily or
permanently and no litigation shall be pending or threatened, which in the good
faith judgment of the Lenders would enjoin, prohibit or
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restrain, or impose or result in the imposition of any material adverse
condition upon, the making of the Advances or Borrower's and the REIT's
obligation to pay the Loan.
(c) No event, act or condition shall have occurred after the
Closing Date which, in the judgment of the Lenders, has had or could have a
Material Adverse Effect.
(d) No actions, suits or proceedings shall be pending or, to
the knowledge of Borrower or the REIT, threatened with respect to the Loan or
the Loan Documents, Borrower, the REIT or any other Loan Party, or with respect
to the Assets of such parties, which, if adversely determined, would have a
Material Adverse Effect.
(e) The Administrative Agent shall have received a Borrowing
Base Certificate executed by the Chief Financial Officer of the Borrower,
reasonably satisfactory to the Administrative Agent, together with (to the
extent not previously delivered) copies of the documents in respect of each of
the Eligible Assets shown listed thereon.
(f) The Administrative Agent shall have received a Notice of
Borrowing or Notice of Continuation or Conversion executed by the Chief
Financial Officer of the Borrower, reasonably satisfactory to the Administrative
Agent.
(g) The Administrative Agent shall have received such
additional documents, information and materials as any Lender, through the
Administrative Agent, may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lenders and the Administrative Agent to enter
into this Agreement, the Borrower and the REIT represent and warrant to the
Lenders and the Administrative Agent that:
4.1. Existence; Compliance with Law. Each Loan Party and each
of its Subsidiaries (i) is a real estate investment trust or a corporation,
limited liability company or limited partnership, or a qualified REIT subsidiary
as specified herein, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation; (ii) is duly qualified as a
foreign corporation, limited liability company or limited partnership and in
good standing under the laws of each jurisdiction where such qualification is
necessary, except for failures which in the aggregate have no Material Adverse
Effect; (iii) has all requisite corporate, limited liability company or
partnership power and authority and the legal right to own, pledge and mortgage
its properties, to lease (as lessee) the properties that it leases as lessee, to
lease or sublease (as lessor) the properties it owns and/or leases (as lessee)
and to conduct its business as now or currently proposed to be conducted; (iv)
is in compliance with its declaration of trust or certificate of or formation
and by-laws, regulations or partnership or operating agreement, as
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appropriate; (v) is in compliance with all other applicable Requirements of Law
except for such non-compliances as in the aggregate have no Material Adverse
Effect; and (vi) has all necessary licenses, permits, consents or approvals from
or by, has made all necessary filings with, and has given all necessary notices
to, each Governmental Authority having jurisdiction, to the extent required for
such ownership, leasing and conduct, except for licenses, permits consents or
approvals which can be obtained by the taking of ministerial action to secure
the grant or transfer thereof or failures which in the aggregate have no
Material Adverse Effect.
4.2. Power; Authorization; Enforceable Obligations. (a) The
execution, delivery and performance by each Loan Party of the Loan Documents to
which it is a party and the consummation of the transactions related to the
financing contemplated hereby:
(i) are within such Loan Party's corporate,
partnership, limited liability company or trust powers, as appropriate;
(ii) have been duly authorized by all necessary
corporate, partnership, limited liability company or trust action, as
appropriate, including, without limitation, the consent of stockholders
general and/or limited partners and members where required;
(iii) do not and will not (A) contravene any Loan
Party's or any of its Subsidiaries' respective declaration of trust,
certificate of incorporation or formation or by-laws, regulations,
partnership agreement, operating agreement or other comparable
governing documents, (B) violate any other applicable Requirement of
Law (including, without limitation, Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System), or any order or
decree of any Governmental Authority or arbitrator, (C) conflict with
or result in the breach of, or constitute a default under, or result in
or permit the termination or acceleration of, any material Contractual
Obligation of any Loan Party or any of its Subsidiaries, or (D) result
in the creation or imposition of any Lien upon any of the Assets of any
Loan Party or any of its Subsidiaries; and
(iv) do not require the consent of, authorization by,
approval of notice to, or filing or registration with, any Governmental
Authority or any other Person, other than those which have been
obtained or made and copies of which have been or will be delivered to
the Administrative Agent pursuant to Section 3.1, and each of which on
the Closing Date will be in full force and effect.
(b) This Agreement has been, and each of the other Loan
Documents will have been upon delivery thereof pursuant to Section 3.1, duly
executed and delivered by each Loan Party thereto. This Agreement is, and the
other Loan Documents will be, when delivered hereunder, the legal, valid and
binding obligation of each Loan Party thereto, enforceable against it in
accordance with its terms except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting the enforcement of
creditor's rights and remedies generally.
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4.3. Taxes. All federal, state, local and foreign tax returns,
reports and statements (collectively, the "Tax Returns") required to be filed by
the Borrower and the other Loan Parties or any Tax Affiliates thereof have been
filed with the appropriate governmental agencies in all jurisdictions in which
such Tax Returns, are required to be filed, all such Tax Returns are true and
correct in all material respects, and all taxes, charges and other impositions
due and payable have been timely paid prior to the date on which any fine,
penalty, interest, late charge or loss may be added thereto for non-payment
thereof, except where contested in good faith and by appropriate proceedings if
(i) adequate reserve therefore have been established on the books of the
Borrower, such other Loan Party or such Tax Affiliate in conformity with GAAP
and (ii) all such non-payments in the aggregate have no Material Adverse Effect.
Proper and accurate amounts have been withheld by the Borrower, the other Loan
Parties and each of their respective Tax Affiliates from their respective
employees for all periods in full and complete compliance with the tax, social
security and unemployment withholding provisions of applicable federal, state,
local and foreign law and such withholdings have been timely paid to the
respective Governmental Authorities. None of the Borrower, the other Loan
Parties or any of their Tax Affiliates has (i) executed or filed with the IRS
any agreement or other document extending, or having the effect of extending,
the period for assessment or collection of any charges; (ii) agreed or been
requested to make any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise; or (iii) any obligation under any
written tax sharing agreement.
4.4. Full Disclosure. No written statement prepared or
furnished by or on behalf of any Loan Party or any of its Affiliates in
connection with any of the Loan Documents or the consummation of the
transactions contemplated thereby, and no financial statement delivered pursuant
hereto or thereto, taken as a whole, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.
4.5. Financial Matters. (a) The financial statements delivered
to the Lenders, through the Administrative Agent, pursuant to Section 3.1,
fairly present the consolidated financial condition and the results of
operations of the Borrower, the other Loan Parties and the Assets of such
Persons covered thereby on the dates and for the periods covered thereby, except
as disclosed in the notes thereto and, with respect to interim financial
statements, subject to normally recurring year-end adjustments.
(b) Since the dates of such financial statements, there has
been no Material Adverse Change and there have been no events, acts, conditions
or developments that in the aggregate have had a Material Adverse Effect, nor,
to the best of Borrower's or the REIT's knowledge, is there any prospective
event, act, condition or development which could, in the aggregate, have a
Material Adverse Effect.
(c) Neither the Borrower nor any other Loan Party has any
material obligation, contingent liability or liability for taxes, long-term
leases or unusual forward or long-term commitment which is not reflected in such
financial statements or in the notes thereto.
(d) [INTENTIONALLY OMITTED].
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(e) On the Closing Date and after giving effect to the
consummation of the transactions contemplated hereby, the Borrower and the Loan
Parties are, both individually and on a consolidated basis, Solvent.
4.6. Litigation. There are no pending or, to the best
knowledge of the Borrower and the REIT, threatened actions, investigations or
proceedings affecting the REIT, the Borrower, any of their respective
Subsidiaries or any other Loan Party, or any of their respective Assets or
revenues before any court, Governmental Authority or arbitrator, that in the
aggregate, if adversely determined, would have a Material Adverse Effect. The
performance of any action by (a) any Loan Party required or contemplated by any
of the Loan Documents or (b) any Operating Entity required or contemplated by
any Operating Lease is not, to the best knowledge of the Borrower or the REIT,
restrained or enjoined (either temporarily, preliminarily or permanently), and,
to the best knowledge of the Borrower or the REIT, no material adverse condition
has been imposed by any Governmental Authority or arbitrator upon any of the
foregoing transactions contemplated by the aforementioned documents.
4.7. Margin Regulations. Neither the Borrower nor the REIT is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of the Loan 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. Neither the Funding or the
Loan nor the use of the proceeds thereof will violate or be inconsistent with
the provisions of Regulations G, T, U or X issued by the Board of Governors of
the Federal Reserve System.
4.8. Subsidiaries and Unconsolidated Entities.
Set forth on Schedule 4.8 hereto is a complete and accurate
list showing, as of the date hereof, all Subsidiaries and Unconsolidated
Entities of the Borrower and the REIT and, as to each such Subsidiary and
Unconsolidated Entity, the jurisdiction of its formation and the percentage of
the outstanding Stock of each class owned (directly or indirectly) by the
Borrower or the REIT, as the case may be, together with the Assets owned by such
entities. No Stock of any Subsidiary or Unconsolidated Entity of the Borrower or
the REIT is subject to any outstanding option, warrant, right of conversion or
purchase or any similar right. All of the outstanding capital Stock of each such
Subsidiary and Unconsolidated Entity owned by the Borrower or the REIT has been
validly issued, is fully paid and (except for partnership interests)
non-assessable, and all outstanding capital Stock of its Subsidiaries and
Unconsolidated Entities owned by the Borrower or the REIT is free and clear of
all Liens other than pledges of membership interests of certain Borrower
Subsidiaries and Guarantors and certain negative pledge agreements given
pursuant to the Goldman Credit Facility which Borrower is entitled as of right
to have released as a result of the repayment and satisfaction of the
indebtedness thereunder and which the lender thereunder has agreed to release
provided that the Goldman Credit Facility has been paid and satisfied in full as
of the date hereof out of a portion of the initial Advance of the Loan and such
releases have been executed, delivered and recorded or filed in the appropriate
real estate or other records within ninety (90) days of the date hereof. Neither
the REIT, the Borrower nor any such Subsidiary or Unconsolidated Entity is a
party to, or has knowledge of, any agreement restricting
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the transfer or hypothecation of any shares of Stock of any such Subsidiary or
Unconsolidated Entity, other than those imposed by Requirements of Law, or the
Loan Documents.
4.9. ERISA. (a) There are no Multiemployer Plans.
(b) Each Plan and any related trust intended to qualify under
Code Section 401 or 501 has been determined by the IRS to be so qualified and to
the best knowledge of the Borrower and the REIT nothing has occurred which would
cause the loss of such qualification.
(c) None of the Borrower, any of its Subsidiaries, any other
Loan Party or any ERISA Affiliate, with respect to any Pension Plan, has failed
to make any contribution or pay any amount due as required by Section 412 of the
Code or Section 302 of ERISA or the terms of any such plan, and all required
contributions and benefits have been paid in accordance with the provisions of
each such plan.
(d) There are no pending or, to the knowledge of the Borrower
or the REIT, threatened claims, actions or proceedings (other than claims for
benefits in the normal course), relating to any Plan other than those that in
the aggregate, if adversely determined, would have no Material Adverse Effect.
(e) No Pension Plan has any unfunded accrued benefit
liabilities, as determined by using reasonable actuarial assumptions utilized by
such plan's actuary for funding purposes. Within the last five years none of the
Borrower, any of its Subsidiaries or any ERISA Affiliate has caused a Pension
Plan with any such liabilities to be transferred outside of its "controlled
group" (within the meaning of Section 4001(a)(14) of ERISA).
(f) No Plan provides for continuing health, disability,
accident or death benefits or coverage for any participant or his or her
beneficiary after such participant's termination of employment (except as may be
required by Section 4980B of the Code and at the sole expense of the participant
or the beneficiary) which would result in the aggregate under all Plans in a
liability in an amount which would have a Material Adverse Effect.
(g) None of the assets of any of the Loan Parties are subject
to Title I of ERISA because they consist of "plan assets" within the meaning of
DOL Regulation Section 2510.3-101 by reason of an equity investment in any of
the Loan Parties.
4.10. [INTENTIONALLY OMITTED].
4.11. Restricted Payments. From and after the Closing Date,
neither the REIT nor the Corporation have declared or made any Restricted
Payments (other than those permitted pursuant to Section 7.4).
4.12. No Burdensome Restrictions; No Defaults. (a) No Loan
Party nor any of its Subsidiaries (i) is a party to any Contractual Obligation
the compliance with which would have a Material Adverse Effect or the
performance of which by any thereof, either unconditionally or
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upon the happening of an event, will result in the creation of a Lien on the
property or Assets of any such Loan Party or its Subsidiaries, or (ii) is
subject to any charter or corporate restriction which has a Material Adverse
Effect.
(b) No Loan Party or Subsidiary of any Loan Party is in
default under or with respect to any Contractual Obligation owed by it and, to
the knowledge of the Borrower, no other party is in default under or with
respect to any Contractual Obligation owed to any Loan Party or to any
Subsidiary of a Loan Party, other than those defaults which in the aggregate
have no Material Adverse Effect.
(c) No Event of Default or Default has occurred and is
continuing hereunder or with respect to any other Loan Document, the Operating
Leases or any Indebtedness of the Borrower or any other Loan Party.
(d) There is no Requirement of Law the compliance with which
by any Loan Party would have a Material Adverse Effect.
(e) As of the date hereof, no Subsidiary of the Borrower or
any Loan Party is subject to any Contractual Obligation (other than as set forth
in the governing documents thereof) restricting or limiting its ability to
transfer its assets to the Borrower or to any Loan Party or to declare or make
any dividend payment or other distribution on account of any shares of any class
of its Stock or its ability to purchase, redeem, or otherwise acquire for value
or make any payment in respect of any such shares or any shareholder rights.
4.13. [INTENTIONALLY OMITTED].
4.14. Government Regulation. Neither the Borrower nor any
other Loan Party is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended, or subject
to regulation under the Public Utility Holding Company Act of 1985, the Federal
Power Act, the Interstate Commerce Act, or any other federal or state statute or
regulation such that its ability to incur Indebtedness is limited, or its
ability to consummate the transactions contemplated hereby or by any other Loan
Document, or the exercise by the Administrative Agent or any Lender of rights
and remedies hereunder or thereunder, is impaired. The making of the Loan by the
Lenders, the application of the proceeds and repayment thereof by the Borrower
and the REIT and the consummation of the transactions contemplated by the Loan
Documents will not cause the Borrower or any other Loan Party to violate any
provision of any of the foregoing or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
4.15. Insurance. To the best of Borrower's and the REIT's
knowledge, after due inquiry and investigation, no Loan Party or any of its
Subsidiaries has been refused insurance for which it applied or had any policy
of insurance terminated (other than at its request). Each Asset of any Loan
Party and any of its Subsidiaries is insured against the risks in the amount,
and in accordance with the terms of the insurance required in Section 6.4 and
are in full force and effect.
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4.16. Labor Matters. (a) There are no strikes, work stoppages,
or lockouts pending or, to the knowledge of Borrower and the REIT, threatened,
or any slowdowns pending or threatened, against or involving the Borrower or any
other Loan Party or their respective Hotels, other than those which in the
aggregate have no Material Adverse Effect.
(b) There are no unfair labor practice charges, arbitrations
or grievances pending against or involving, or to the knowledge of the Borrower
or the REIT, threatened against or involving the Borrower or any other Loan
Party, other than those which, in the aggregate, if resolved adversely to the
Borrower or such Subsidiary, would have no Material Adverse Effect.
(c) As of the Closing Date, neither the Borrower nor any other
Loan Party are parties to, or have any obligations under any collective
bargaining agreement except as described on Schedule 4.16.
(d) There is no organizing activity involving the Borrower or
any other Loan Party pending or, to the Borrower's or the REIT's knowledge,
threatened by any labor union or group of employees, other than those which in
the aggregate have no Material Adverse Effect. There are no representation
proceedings pending or, to the Borrower's or the REIT's knowledge, threatened
with the National Labor Relations Board, and no labor organization or group of
employees of the Borrower or any other Loan Party have made a pending demand for
recognition, other than those which in the aggregate have no Material Adverse
Effect.
4.17. Force Majeure. Neither the business nor the properties
of any Loan Party or any of their respective Subsidiaries are currently
suffering from the effects of any fire, explosion, accident, strike, lockout or
other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of
the public enemy or other casualty (whether or not covered by insurance), other
than those which in the aggregate have no Material Adverse Effect.
4.18. Use of Proceeds. Borrower shall use the proceeds of the
Loan primarily to (i) satisfy existing indebtedness of Borrower under the Credit
Facilities in the amounts set forth in the Disbursement Request, (ii) fund the
acquisition of fifteen full service Hotels identified on Schedule 4.18 (the
"Newly Acquired Hotels"), (iii) fund the acquisition of the related Personal
Property for the Newly Acquired Hotels, (iv) pay related transaction costs, fees
and expenses, and (v) as to the balance, in the amount set forth in the
Disbursement Request, for general corporate or working capital purposes.
4.19. Environmental Protection. Except as disclosed on
Schedule 4.19 the Borrower and the REIT represent and warrant to the Lenders and
the Administrative Agent that:
(a) to the best knowledge of the REIT, Borrower and its
Subsidiaries, all real property leased or owned by the Borrower or any of its
Subsidiaries or any Operating Entity is free from contamination by any Hazardous
Material which could reasonably be expected to subject the Borrower or any of
its Subsidiaries to Environmental Liabilities and Costs of individually or in
the aggregate $1,000,000 or more;
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(b) the operations of the REIT, Borrower and each of its
Subsidiaries, and the operations at any real property leased or owned by the
Borrower or any of its Subsidiaries or any Operating Entity are in material
compliance in all respects with all applicable Environmental Laws;
(c) neither the Borrower nor any of its Subsidiaries have
liabilities with respect to Hazardous Materials and, to the best knowledge of
the Borrower and its Subsidiaries, no facts or circumstances exist which could
give rise to liabilities with respect to Hazardous Materials which could
reasonably be expected to subject the Borrower or any of its Subsidiaries to
Environmental Liabilities and Costs of individually or in the aggregate
$1,000,000 or more;
(d) (i) the Borrower and its Subsidiaries and Operating
Entities and all real property owned or leased by the Borrower or its
Subsidiaries and Operating Entities have all Environmental Permits necessary for
the operations at such real property and are in material compliance with such
Environmental Permits, (ii) there are no Legal Proceedings pending nor, to the
best knowledge of the Borrower and its Subsidiaries, threatened to revoke, or
alleging the violation of, such Environmental Permits, and (iii) neither the
Borrower, any of its Subsidiaries nor the Operating Entities have received any
notice from any source to the effect that there is lacking any Environmental
Permit required in connection with the current use or operation of any property
leased or owned by the Borrower or any of its Subsidiaries or the Operating
Entities;
(e) neither the Borrower's, nor any of its Subsidiaries'
current facilities and operations, nor any Operating Entity, any predecessor of
the Borrower, any of its Subsidiaries nor any Operating Entity's, any of the
Borrower's or its Subsidiaries' past facilities and operations, nor to the best
knowledge of the Borrower and its Subsidiaries, any owner of premises leased or
operated by the Borrower or its Subsidiaries or Operating Entities, are subject
to any outstanding written Order or Contract, including Environmental Liens,
with any Governmental Authority or other Person, or to any federal, state,
local, foreign or territorial investigation respecting (i) Environmental Laws,
(ii) Remedial Action, (iii) any Environmental Claim, or (iv) the Release or
threatened Release of any Hazardous Material;
(f) neither the REIT, the Borrower nor any of its
Subsidiaries, any Operating Entities are subject to any pending Legal Proceeding
alleging the violation of any Environmental Law with respect to a Hotel nor, to
the best knowledge of the Borrower and its Subsidiaries, are any such
proceedings threatened;
(g) neither the REIT, the Borrower, any of its Subsidiaries,
nor any Operating Entities or predecessor of the Borrower, any of its
Subsidiaries, nor any owner of premises leased by the Borrower or any of its
Subsidiaries or Operating Entities, have filed any notice under federal, state
or local, territorial or foreign law indicating past or present treatment,
storage, or disposal of or reporting a Release of Hazardous Material into the
environment;
(h) none of the operations of the Borrower or any of its
Subsidiaries or any Operating Entities or predecessor of the Borrower or any of
its Subsidiaries or any Operating Entities, or, to the best knowledge of the
Borrower and its Subsidiaries, of any owner of premises
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leased by the Borrower or any of its Subsidiaries or Operating Entities, involve
or previously involved the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Part 261.3 (in effect as
of the date of this Agreement) or any state, local, territorial or foreign
equivalent; and
(i) To the best knowledge of the REIT, the Borrower and its
Subsidiaries after due inquiry and investigation, there is not now, nor has
there been in the past, on, in or under any real property leased or owned by the
Borrower or any of its Subsidiaries or Operating Entities, or any of their
predecessors, (i) any underground storage tanks or surface tanks, dikes or
impoundments (other than for surface water), (ii) any friable
asbestos-containing materials, (iii) any polychlorinated biphenyls, or (iv) any
radioactive substances other than naturally-occurring radioactive material which
would individually or in the aggregate cause a Material Adverse Effect.
4.20. Contractual Obligations Concerning Assets. As of the
date hereof, neither the REIT, the Borrower nor any Borrower Subsidiary nor any
Operating Entity owns or holds, or is obligated under or a party to, any option,
right of first refusal, or other contractual right to purchase or acquire, or
any Contractual Obligation to effect an Asset Sale of, any Hotel owned or leased
by the Borrower or any Borrower Subsidiary except those that in the aggregate
would not have a Material Adverse Effect whether or not exercised.
4.21. Intellectual Property. The Loan Parties and their
Subsidiaries own or license or otherwise have the right to use all material
licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights that are
necessary for the operations of their respective businesses, without
infringement upon or conflict with the rights of any other Person with respect
thereto, including, without limitation, the Licenses and all trade names
associated with any private label brands of any Loan Party or any of its
Subsidiaries. To the best knowledge of the Borrower and the REIT, no material
slogan or other advertising device, product, process, method, substance, part or
component, or other material now employed, or now contemplated to be employed,
by any Loan Party or any of their respective Subsidiaries infringes upon or
conflicts with any rights owned by any other Person, and no claim or litigation
regarding any of the foregoing is pending or threatened.
4.22. Title/Status of Real Property. (a) Each Loan Party and
their respective Subsidiaries owns good and marketable fee simple absolute (or
leasehold, as the case may be) title to all of the Real Estate purported to be
owned by them, which Real Estate is at the date hereof described in Schedule
4.22(a), and good and marketable title to, or valid leasehold interests in, all
other properties and assets purported to be leased by any Loan Party or any of
their respective Subsidiaries, including, without limitation, valid leasehold
interests pursuant to the Operating Leases and all property reflected in the
balance sheet portion of the financial statements referred to in Section 4.5(a).
Each Loan Party and its respective Subsidiaries received all deeds, assignments,
waivers, consents, non-disturbance and recognition or similar agreements, bills
of sale and other documents, and have duly effected all recordings, filings and
other actions necessary to establish, protect and perfect such Loan Party's and
respective Subsidiaries' right,
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title and interest in and to all such property except for such documents or
actions the failure to obtain or accomplish which would not have a Material
Adverse Effect.
(b) All material real property leased at the date hereof by
any Loan Party or any of its respective Subsidiaries is listed on Schedule
4.22(a). Each of such leases is valid and enforceable in accordance with its
terms and is in full force and effect. The Borrower has delivered to the
Administrative Agent true and complete copies of each of such leases and all
documents affecting the rights or obligations of such Loan Party or any of its
Subsidiaries which is a party thereto, including, without limitation, any
non-disturbance and recognition agreements, subordination agreements, attornment
agreements and agreements regarding the term or rental of any of the leases.
None of the Loan Parties or any of their respective Subsidiaries nor, to the
knowledge of the Borrower, any other party to any such lease is in default of
its obligations thereunder or has delivered or received any notice of default
under any such lease, nor has any event occurred which, with the giving of
notice, the passage of time or both, would constitute a default under any such
lease, except for defaults which in the aggregate have no Material Adverse
Effect.
(c) All components of all improvements included within the
Hotels owned or leased, as lessee, by any Loan Party (collectively,
"Improvements"), including, without limitation, the roofs and structural
elements thereof and the heating, ventilation, air conditioning, plumbing,
electrical, mechanical, sewer, waste water, storm water, paving and parking
equipment, systems and facilities included therein, are in good working order
and repair, subject to such exceptions which are not reasonably likely to have,
in the aggregate, a Material Adverse Effect. All water, gas, electrical, steam,
compressed air, telecommunication, sanitary and storm sewage lines and systems
and other similar systems serving the Hotels owned or leased by any Loan Party
or any of their respective Subsidiaries are installed and operating and are
sufficient to enable the real property owned or leased by any Loan Party and
their respective Subsidiaries to continue to be used and operated in the manner
currently being used and operated, and no Loan Party or any of its Subsidiaries
has any knowledge of any factor or condition that reasonably could be expected
to result in the termination or material impairment of the furnishing thereof.
No Improvement or portion thereof is dependent for its access, operation or
utility on any land, building or other Improvement not included in the real
property owned or leased by any Loan Party or any of its Subsidiaries other than
for access provided pursuant to a recorded easement or other right of way
establishing the right of such access.
(d) All Permits required to have been issued or appropriate to
enable all real property owned or leased by any Loan Party or any of its
Subsidiaries to be lawfully occupied and used for all of the purposes for which
they are currently occupied and used have been lawfully issued and are in full
force and effect, other than those which in the aggregate have no Material
Adverse Effect.
(e) Except as disclosed in Schedule 4.22(e), no Loan Party or
any of its Subsidiaries has received any notice, or has any knowledge, of any
pending, threatened or contemplated condemnation proceeding affecting any real
property owned or leased by any Loan Party or any of its Subsidiaries or any
part thereof, or any proposed termination or impairment
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of any parking at any such owned or leased real property or of any sale or other
disposition of any real property owned or leased by any Loan Party or any of its
Subsidiaries or any part thereof in lieu of condemnation, which in the
aggregate, are reasonably likely to have a Material Adverse Effect.
(f) Except for events or conditions set forth in Schedule
4.22(f), (i) no portion of any real property owned or leased by any Loan Party
or any of its Subsidiaries has suffered any material damage by fire or other
casualty loss which has not heretofore been completely repaired and restored to
its condition prior to such casualty, and (ii) no portion of any real property
owned or leased by any Loan Party or any of its Subsidiaries is located in a
special flood hazard area as designated by any Governmental Authority and none
of such events, or conditions are reasonably likely to have in the aggregate, a
Material Adverse Effect.
(g) Each Loan Party or its Subsidiaries has obtained, with
respect to any real property owned or leased by it, all material zoning,
building code, land use, environmental and other similar permits or approvals,
all of which are in full force and effect as of the date hereof and not subject
to revocation, suspension, forfeiture or modification.
(h) Neither the REIT nor the Borrower is aware of any latent
or patent structural or other significant deficiency of any of the real property
owned or leased by any Loan Party or any of its Subsidiaries except as may be
disclosed in the Engineering Reports delivered to Lenders in connection with
such real property; such real property is free of damage and waste that would
have a Material Adverse Effect on the value thereof; and such real property is
free from damage caused by fire or other casualty. There is no pending or, to
the actual knowledge of Borrower or the REIT, threatened condemnation
proceedings affecting such real property or any part thereof.
(i) To the best knowledge of Borrower and the REIT, after due
inquiry and investigation, there are no delinquent taxes, ground rents, water
charges, sewer rents, assessments (including assessments payable in future
installments), insurance premiums, or leasehold payments affecting any of the
real property owned or leased by any Loan Party or any of its Subsidiaries.
(j) Each of the real property owned or leased by any Loan
Party or any of its Subsidiaries is assessed for real estate tax purposes as one
or more wholly independent tax lot or lots, separate from any adjoining land or
improvements not constituting a part of such lot or lots, and no other land or
improvements is assessed and taxed together with such real property or any
portion thereof.
(k) (i) Each Operating Entity is the sole owner of the entire
lessee's interest in the related Operating Lease; (ii) the Operating Leases are
valid and enforceable; (iii) none of the rents reserved in the Operating Leases
have been assigned or otherwise pledged or hypothecated; (iv) no Operating Lease
contains an option to purchase, right of first refusal to purchase, or any other
similar provision; (v) no person or entity (other than pursuant to any space
leases or license or concession agreements) has any possessory interest in, or
right to occupy, the real property which is the subject of the Operating Leases
(excluding transient hotel guests) except thereunder; and (vi) there are no
assignments, pledges, hypothecations or other encumbrances of any
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Operating Leases or any portion of rents due and payable or to become due and
payable thereunder which are presently outstanding.
(l) No portion of any of the real property owned or leased by
any Loan Party or any of its Subsidiaries has been or will be purchased with
proceeds of any illegal activity.
(m) All material contracts, agreements, consents, waivers,
documents and writings of every kind or character at any time to which each Loan
Party or its Subsidiary is a party are valid and enforceable against the related
Loan Party or Subsidiary, as the case may be, and, to the best knowledge of
Borrower and the REIT, are enforceable against all other parties thereto, and in
all respects are what they purport to be and, to the extent that any such
writing shall impose any obligation or duty on the party thereto or constitute a
waiver of any rights which any such party might otherwise have, said writing
shall be valid and enforceable against said party in accordance with the terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally and
to the extent that such contracts, agreements, consents, waivers, documents, and
writings are not enforceable, in whole or in part, such unenforceability shall
not have a Material Adverse Effect.
4.23. Status as a REIT. The REIT is organized in conformity
with the requirements for qualification as an equity-oriented real estate
investment trust under the Code and is grandfathered from the application of
Section 269 (B) of the Code pursuant to Section 132(c)(3) of the Deficit
Reduction Act of 1984. The REIT has met all of the requirements for
qualification as an equity-oriented real estate investment trust under the Code
for its Fiscal Year ended December 31, 1996. The REIT is in a position to
qualify for its current Fiscal Year as a real estate investment trust under the
Code and its proposed methods of operation will enable it to so qualify.
4.24. Title/Status of Mortgage Loans.
(a) Borrower is the sole owner and holder of each of the
Mortgage Loans and the sole holder of the related Mortgage Note, and has good
title to each Mortgage Note and each Mortgage Loan free and clear of any Liens.
Borrower has not waived, modified, altered, satisfied, cancelled or subordinated
any Mortgage Note, any of the Mortgage Note Security Documents or any Mortgage
Loan in any respect. The related Mortgage Note Hotel has not been released from
the lien of the Mortgage, nor has the Maker been released from its obligations
under the Mortgage.
(b) To the best knowledge of the Borrower and the REIT, each
Mortgage Note and each related Mortgage Note Security Document is legal, valid
and binding obligation of each party obligated thereunder, enforceable against
such party in accordance with its terms, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws affecting creditors' rights generally and the Mortgage Note
Security Documents create a first (and in the case of the Mortgage Note Hotel
known as the Milwaukee Marriott, a first, second and third and in the case of
the Mortgage Note Hotels known as the
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Bristol Suites-Dallas, Harvey, the DFW Airport Hotel-Dallas, Harvey and the
Harvey Hotel Addison-Dallas, Harvey, a first and second) priority Lien in the
subject Mortgage Note Hotel.
(c) To the actual knowledge of Borrower and the REIT, each
Mortgage Loan was made in compliance with all Requirements of Law, and does not
violate any usury or similar law regulating the applicable maximum permitted
rates of interest for loans, extensions of credit or forbearances.
(d) To the actual knowledge of Borrower and the REIT, each
Mortgage Note evidences an undisputed, bona fide transaction completed in
accordance in all material respects with the terms and provisions contained in
any documents related thereto, and is genuine and free from adverse claims,
setoffs, default, defenses, retainages, holdbacks and conditions precedent of
any kind or character; and Borrower and the REIT have no knowledge of any fact
or circumstance which would impair the validity or collectibility of any
Mortgage Note.
(e) To the actual knowledge of Borrower and the REIT, there is
no proceeding pending for the total or partial condemnation of any Mortgage Note
Hotel; each Mortgage Note Hotel is being used for the operation of a Hotel, is
in good repair and free and clear of any damage that would affect materially and
adversely the value of the Mortgage Note Hotel and is lawfully used and occupied
under applicable law by the owner thereof and/or by tenants under leases.
(f) To the actual knowledge of Borrower and the REIT, each
Mortgage Note Hotel is free and clear of any mechanics' and materialmen's liens
or liens in the nature thereof, and no rights are outstanding that under law
could give rise to any such liens, any of which liens are or may be prior to, or
equal with, the lien of the Mortgage, except those which are insured against by
the Lender's title insurance policy issued contemporaneously with the recording
of the Mortgage or those which would not have a Material Adverse Effect.
(g) To the actual knowledge of the Borrower and the REIT, each
Mortgage Note Hotel is in compliance with and lawfully used under any applicable
zoning, building or environmental law or regulation and all inspections,
licenses and certificates required, whether by law, regulation or insurance
standards to be made or issued with respect to the Mortgage Note Hotel and with
respect to the use and occupancy of the same, including but not limited to
certificates of occupancy and fire underwriter certificates, have been made by
or issued by the appropriate Governmental Authorities having jurisdiction over
the Mortgage Note Hotel, and neither Borrower nor any other Loan Party has
received notification from any Governmental Authority that the Mortgage Note
Hotel is in material noncompliance with such laws or regulations, is being used,
operated or occupied unlawfully or has failed to have or obtain such inspection,
licenses or certificates, as the case may be. Neither Borrower nor any other
Loan Party has received notice of any violation or failure to conform with any
such law, ordinance, regulation, standard, license or certificate.
(h) To the actual knowledge of Borrower and the REIT, (ii)
Maker is the owner and holder of the landlord's interest under any lease for use
and occupancy of all or any portion of the related Mortgage Note Hotel, and (ii)
Maker has not made any assignments of the landlord's
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interest in any such lease or any portion of the rents, additional rents,
charges, issues or profits due and payable or to become due and payable under
any such lease, which assignments are presently outstanding and have priority
over the related Mortgage Loan or any related Mortgage Note Security Document
given in connection with the related Advance, other than as may be disclosed in
the related title policy;
(i) To the actual knowledge of Borrower and the REIT, all
fixtures and articles of personalty attached to each Mortgage Note Hotel or used
or usable in connection with the operation of each Mortgage Note Hotel, except
for trade fixtures or articles of personalty such as are owned or leased by the
tenants or managing agent of the buildings and improvements, have been fully
paid for and are the property of Maker and are not subject to any conditional
bills of sale, chattel mortgages or any other title retention agreements of a
similar nature or to any other liens or encumbrances not hereinabove
specifically referred to.
(j) To the actual knowledge of Borrower and the REIT, each
Mortgage Note Hotel consists of a single lot or multiple tax lots; no portion of
said tax lots covers property other than the Mortgage Note Hotel.
(k) To the actual knowledge of Borrower and the REIT, for
those Mortgage Note Hotels in which Maker holds a leasehold estate, (i) the
related ground lease is in full force and effect and has not been modified or
amended in any manner whatsoever, (ii) there are no defaults under such ground
lease and no event has occurred, which but for the passage of time, or notice,
or both, would constitute a default under such ground lease, (iii) all rents,
additional rents and other sums due and payable under such ground lease have
been paid in full, and (iv) neither Maker nor the landlord under the ground
lease has commenced any action or given or received any notice for the purpose
of terminating the ground lease.
(l) No Mortgage Loan is in default beyond the expiration of
any applicable grace or notice periods, and during the preceding twelve (12)
months, there has been no default in the payment of regularly scheduled
principal and interest thereunder.
(m) Borrower and the REIT have delivered to the Administrative
Agent all financial information and reports (including without limitation all
financial information and reports required under Section 3.1(g)) with respect to
each Mortgage Loan and Mortgage Note Hotel that it has in its possession.
4.25. Operating Leases, Management Agreements and Licenses.
(a) Each of the Eligible Hotels is (i) leased to an Operating
Entity under an Operating Lease, (ii) except as listed on Schedule 4.25(a), the
subject of a License, and (iii) managed and operated by such Operating Entity.
The Borrower or a Borrower Subsidiary is the sole owner and holder of the
manager's interest under each Management Agreement.
(b) Each of the Operating Leases, Management Agreements and
Licenses in respect of the Eligible Assets (i) is in full force and effect, (ii)
is a legally valid and binding
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obligation of each of the parties thereto, subject to such exceptions which are
not reasonably likely to have, in the aggregate, a Material Adverse Effect, and
(iii) has not been modified, amended or supplemented in any material or adverse
way. Neither the Borrower nor any Borrower Subsidiary has collected any rents
becoming due under any Operating Lease more than 30 days in advance. All rent
and other sums and charges payable by any Operating Entity under each Operating
Lease to which it is a party and all management fees payable by any owner under
each Management Agreement are current, no notice of default or termination under
any such Operating Lease or Management Agreement is outstanding, no termination
event or condition or uncured default on the part of the Operating Entity or
owner exists under any Operating Lease or Management Agreement, as applicable,
and no event of default has occurred which, with the giving of notice or the
lapse of time or both, would constitute such a default or termination event or
condition or uncured default on the part of the Borrower, Borrower Subsidiaries,
the Operating Entity or the owner (as the case may be), subject to such
exceptions which are not reasonably likely to have, in the aggregate, a Material
Adverse Effect. As to all of the Operating Leases, Borrower and each Borrower
Subsidiary has performed all of its repair and maintenance obligations (if any)
and each Operating Entity has performed all of its repair and maintenance
obligations, subject to such exceptions which are not reasonably likely to have,
in the aggregate, a Material Adverse Effect.
4.26. Westwood Mortgage. There is no default beyond the
expiration of any applicable notice or grace periods under the Westwood
Mortgage.
4.27. Affiliate Debt. There is no Affiliate Debt.
4.28. Assets of the REIT. The sole asset of the REIT is its
general partnership interest in Borrower and such other assets that may be
incidental to or required in connection with the ownership of such general
partnership interest or as set forth on Schedule 4.28.
4.29. SLC. The Corporation and entities wholly owned and
controlled by the Corporation are the sole general partners of SLC.
4.30. Stock. The REIT and the Corporation list all of their
outstanding shares of stock on the New York Stock Exchange and such shares trade
as "paired shares" subject to a pairing agreement between the REIT and the
Corporation.
4.31. Qualified Ground Leases. With respect to those Hotels in
which the Borrower or Borrower Subsidiary holds a leasehold estate under a
Ground Lease, with respect to each such Qualified Ground Lease: (i) the Borrower
or Borrower Subsidiary is the owner of a valid and subsisting interest as tenant
under the Ground Lease; (ii) the Qualified Ground Lease is in full force and
effect, unmodified and not supplemented by any writing or otherwise; (iii) all
rent, additional rent and other charges reserved therein have been paid to the
extent they are payable to the date hereof; (iv) the Owner enjoys the quiet and
peaceful possession of the estate demised thereby, subject to any sublease; (v)
to the best knowledge of Borrower or the REIT, the Borrower or Borrower
Subsidiary is not in default under any of the terms thereof and there are no
circumstances which, with the passage of time or the giving of notice or both,
would constitute an event of default thereunder; (vi) the lessor under the
Qualified Ground Lease is not in default
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under any of the terms or provisions thereof on the part of the lessor to be
observed or performed; (vii) the lessor under the Qualified Ground Lease has
satisfied all of its repair or construction obligations, if any, to date
pursuant to the terms of the Qualified Ground Lease.
ARTICLE V
FINANCIAL COVENANTS
As long as any of the Obligations remain outstanding, unless
the Super Majority Lenders otherwise consent in writing, the Borrower and the
REIT agree with the Lenders and the Administrative Agent that:
5.1. Gross Interest Expense Coverage Ratios. The Borrower and
the REIT shall maintain at all times during each Fiscal Quarter commencing on
July 1, 1997 a ratio of (a) the sum of (i) with respect to Hotels (other than
Hotel Construction), Adjusted EBITDA, (ii) with respect to Mortgage Loans,
Mortgage Loan Interest Income, and (iii) with respect to Management Agreements,
Adjusted Management Fee EBITDA, to (b) Gross Interest Expense on Total
Indebtedness, in each case determined on the basis of the four (4) Fiscal
Quarters ending on the date of determination, of not less than (A) 2.0 to 1.0
during the Initial Interest Rate Period and (B) 2.5:1.0 thereafter.
5.2. Unsecured Interest Expense Coverage Ratio. The Borrower
and the REIT shall maintain at all times during the Fiscal Quarter commencing on
July 1, 1997 a ratio of (a) the sum of (i) with respect to Eligible Hotels
(other than Eligible Hotel Construction), Adjusted EBITDA, (ii) with respect to
Eligible Mortgage Loans, Mortgage Loan Interest Income, and (iii) with respect
to Eligible Management Agreements, Adjusted Management Fee EBITDA, to (b) Gross
Unsecured Interest Expense of the Borrower, in each case determined on the basis
of the four (4) Fiscal Quarters ending on the date of determination, of not less
than (A) 2.0 to 1.0 during the Initial Interest Rate Period and (B) 2.5:1.0
thereafter.
5.3. Debt Service Coverage Ratios. (a) The Borrower and the
REIT shall maintain at all times during each Fiscal Quarter commencing on July
1, 1997 a ratio of (i) the sum of (A) with respect to Hotels (other than Hotel
Construction), Adjusted EBITDA, (B) with respect to Mortgage Loans, Mortgage
Loan Interest Income, and (C) with respect to Management Agreements, Adjusted
Management Fee EBITDA, to (ii) Debt Service on Total Indebtedness, in each case
determined on the basis of the four (4) Fiscal Quarters ending on the date of
determination, of not less than (A) 2.0 to 1.0 during the Initial Interest Rate
Period and (B) 2.25:1.00 thereafter.
(b) The Borrower and the REIT shall maintain at all times
during each Fiscal Quarter commencing on July 1, 1997, a ratio of (i) the sum of
(A) with respect to Eligible Hotels (other than Eligible Hotel Construction),
Adjusted EBITDA, (B) with respect to Eligible Mortgage Loans, Mortgage Loan
Interest Income, and (C) with respect to Eligible Management Agreements,
Adjusted Management Fee EBITDA, to (ii) Debt Service on Total Unsecured
Indebtedness, in
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each case determined on the basis of the four (4) Fiscal Quarters ending on the
date of determination, of not less than (A) 2.0 to 1.0 during the Initial
Interest Rate Period and (B) 2.25:1.00 thereafter.
5.4. Maintenance of Equity Value. The Borrower and the REIT
shall maintain at all times an Equity Value of the Borrower of not less than
$591,473,250.00 plus 75% of the net proceeds (after the payment of underwriter
and placement fees and other expenses directly related to such equity offering)
received from equity offerings by the REIT subsequent to June 30, 1997,
calculated on a GAAP basis.
5.5. Limitation on Total Indebtedness. The Borrower and the
REIT shall not, at any time, on a consolidated basis, permit the Total
Indebtedness of the Borrower and the REIT to exceed (a) during the Initial
Interest Rate Period, sixty percent (60%) of Borrower's Total Value and (b)
thereafter, fifty percent (50%) of Borrower's Total Value.
5.6. Limitations on Total Secured Indebtedness. (a) The
Borrower and the REIT shall not, during each Fiscal Quarter on a consolidated
basis, permit the Total Secured Indebtedness of the Borrower and the REIT to
exceed thirty percent (30%) of Borrower's Total Value. None of the Indebtedness
comprising such Total Secured Indebtedness (excluding construction loan
Indebtedness approved by the Administrative Agent and incurred in connection
with a Permitted Investment) shall (i) be secured by any Hotel where (A) the
loan to value ratio, as determined by the Administrative Agent, exceeds 65%
(excluding the Mexican Indebtedness, the Sumitomo Indebtedness, the Lehman Repo
Facility, the Stamford Indebtedness and the Tax Exempt Indebtedness) or (B) the
ratio of Adjusted EBITDA to Gross Interest Expense for such asset is less than
1.50:1.00 (excluding the Tax Exempt Indebtedness and the Stamford Indebtedness)
and (ii) have a maturity later than the Final Maturity Date (excluding
Non-Recourse Indebtedness with a term of not less than 2 years which the
Borrower or a Borrower Subsidiary anticipates incurring with respect to the
acquisition of a certain hotel property known commonly as the Holiday Inn Crown
Plaza, located in New Orleans, Louisiana, (the "New Orleans Indebtedness"), the
Lehman Repo Facility, the Stamford Indebtedness and the Mexican Indebtedness).
(b) The Borrower and the REIT shall not, during each Fiscal
Quarter on a consolidated basis, permit the Total Secured Recourse Indebtedness
of the Borrower and the REIT, to exceed the greater of (i) fifteen percent (15%)
of Borrower's Total Value and (ii) $300,000,000.
5.7. Limitation on Total Unsecured Indebtedness. Subject to
the provisions of Section 2.7(e), the Total Unsecured Indebtedness of the
Borrower and the REIT shall be limited to the sum of (a) the Facility Amount and
(b) the greater of (i) fifteen percent (15%) of Borrower's Total Value and (ii)
$300,000,000; provided, however, in the event an Unsecured Debt Rating of
Borrower of BB or higher is assigned, and so long as such a rating is
maintained, the Total Unsecured Indebtedness of the Borrower and the REIT shall
not be limited; provided further, however, that none of the Indebtedness
comprising such Total Unsecured Indebtedness shall have a stated maturity prior
to the Final Maturity Date.
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5.8. Limitation on Total Indebtedness of Operating Entities.
Subject to the provisions contained in Section 4.27, the Borrower shall not
permit SLC or the Operating Entities to incur any Indebtedness other than trade
payables and intercompany debt incurred in the ordinary course of business, nor
shall SLC or the Operating Entities be permitted to pledge or encumber any of
its Assets in favor of any Person other than Borrower or any Borrower
Subsidiary.
5.9. Eligible Asset Value Coverage Ratios. (a) The Borrower
and the REIT shall maintain at all times during each Fiscal Quarter commencing
on the date hereof, a ratio of (i) Eligible Asset Value to (ii) Total Unsecured
Indebtedness of the Borrower and the REIT, in each case determined on the basis
of the four (4) Fiscal Quarters ending on the date of determination, of not less
than (A) 1.67 to 1.00 during the Initial Interest Rate Period and (B) 2.0:1.0
thereafter.
(b) The Borrower and the REIT shall maintain at all times
during each Fiscal Quarter commencing on the date hereof, a ratio of (i) the sum
of Eligible Asset Value and Secured Recourse Asset Value to (ii) Total Unsecured
Indebtedness and Secured Recourse Indebtedness of the Borrower and the REIT, in
each case determined on the basis of all four (4) Fiscal Quarters ending on the
date of determination, of not less than (A) 1.63 to 1.00 during the Initial
Interest Rate Period and (B) 2.0:1.0 thereafter.
5.10. [INTENTIONALLY OMITTED].
5.11. Minimum Rating. The Borrower and the REIT shall maintain
at all times during each Extension Period an Unsecured Debt Rating of not less
than the Minimum Rating.
ARTICLE VI
AFFIRMATIVE COVENANTS
As long as any of the Obligations remain outstanding, unless
the Super Majority Lenders or, with respect to Section 6.33, all of the Lenders,
or with respect to Section 6.34, the Super Majority Lenders otherwise consent in
writing, the Borrower and the REIT agree with the Lenders and the Administrative
Agent that:
6.1. Compliance with Laws, Etc. The Borrower shall comply, and
shall cause each Loan Party and each of its Subsidiaries to comply, in all
material respects with all Requirements of Law, Contractual Obligations,
commitments, instruments, licenses, permits and franchises, including, without
limitation, all Permits; provided, however, that the Borrower shall not be
deemed in default of this Section 6.1 if all such non-compliances in the
aggregate have no Material Adverse Effect.
6.2. Conduct of Business. The Borrower, the REIT and the
Operating Entities shall (a) conduct, and shall cause such of their Subsidiaries
to conduct, its business in the ordinary course and consistent with past
practice; (b) use, and cause each of their Subsidiaries to use, its
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reasonable efforts, in the ordinary course and consistent with past practice, to
(i) preserve its business and the goodwill and business of the customers,
advertisers, suppliers and others having business relations with the Borrower,
any other Loan Party or any of their Subsidiaries, and (ii) keep available the
services and goodwill of its employees necessary for the operation of its
business; (c) preserve, and cause each of their Subsidiaries to preserve, all
registered patents, trademarks, trade names, copyright and service marks with
respect to its business; and (d) perform and observe, and cause each of their
Subsidiaries to perform and observe, all the terms, covenants and conditions
required to be performed and observed by it under its Contractual Obligations
(including, without limitation, to pay all rent and other charges payable under
any lease and all debts and other obligations as the same become due), and do,
and cause their Subsidiaries to do, all things necessary to preserve and to keep
unimpaired its rights under such Contractual Obligations; provided, however,
that, in the case of each of clauses (a) through (d), the Borrower shall not be
deemed in default of this Section 6.2 if all such failures in the aggregate have
no Material Adverse Effect. The REIT shall continue to conduct its business
directly only through the Borrower and with respect to those entities set forth
on Schedule 4.28, only as currently conducted and shall not own any Assets or
any interest in any Person other than in the Borrower and the specific entities
listed on Schedule 4.28; further, the entities listed on Schedule 4.28 (other
than the Borrower) shall not own any Assets other than the Assets which such
entities own as of the date hereof or any interests in any Person other than as
listed on Schedule 4.28. The Corporation shall continue to conduct its business
directly only through SLC and with respect to those entities set forth on
Schedule 6.2, only as currently conducted.
6.3. Payment of Taxes, Etc. The Borrower shall pay and
discharge, and shall cause each other Loan Party and each of their Subsidiaries,
as appropriate, to pay and discharge, before the same shall become delinquent,
all lawful governmental claims, taxes, assessments, charges and levies, except
where contested in good faith, by proper proceedings, if adequate reserves
therefor have been established on the books of the Borrower, each other Loan
Party or the appropriate Subsidiary in conformity with GAAP.
6.4. Maintenance of Insurance.
(a) Borrower and the other Loan Parties shall (i) maintain
with financially sound and reputable insurance companies insurance on itself and
its properties in commercially reasonable amounts, and (ii) furnish to the
Administrative Agent and the Lenders from time to time, upon written request,
certificates of insurance or certified copies or abstracts of all insurance
policies required under this Agreement and the other Loan Documents and such
other information relating to such insurance as the Administrative Agent or
Lenders may reasonably request.
(b) With respect to each Hotel and Real Estate Asset,
Borrower, each Borrower Subsidiary, each Loan Party and their Subsidiaries and
each Operating Entity, as applicable shall obtain and maintain, or cause to be
maintained, insurance providing at least the following coverages:
(i) comprehensive all risk insurance on the Improvements and
the Personal Property, including contingent liability from Operation of
Building Laws, Demolition
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Costs and Increased Cost of Construction Endorsements, in each case (A)
in an amount equal to 100% of the "Full Replacement Cost," which for
purposes of this Agreement shall mean actual replacement value
(exclusive of costs of excavations, foundations, underground utilities
and footings) with a waiver of depreciation; (B) containing an agreed
amount endorsement with respect to the Improvements owned or leased by
Borrower or the related Loan Party and Personal Property or a waiver of
all co-insurance provisions; (C) providing for no deductible in excess
of $50,000; and (D) containing an "Ordinance or Law Coverage" or
"Enforcement" endorsement if any of the Improvements or the use of the
Asset shall at any time constitute legal non-conforming structures or
uses. The Full Replacement Cost shall be redetermined from time to time
(but not more frequently than once in any twelve (12) calendar months)
at the request of the Administrative Agent by an appraiser or
contractor designated and paid by Borrower or the related Loan Party
and approved by the Administrative Agent, or by an engineer or
appraiser in the regular employ of the insurer. Notwithstanding the
foregoing, if such redetermination is based on an appraisal, the cost
thereof shall be paid by the Borrower or the related Loan Party. After
the first appraisal, additional appraisals may be based on construction
cost indices customarily employed in the trade and shall be at
Borrower's or the related Loan Party's expense. No omission on the part
of Administrative Agent to request any such ascertainment shall relieve
Borrower or the related Loan Party of any of its obligations under this
Section 6.4(b)(i). In addition, Borrower or the related Loan Party
shall obtain (y) flood hazard insurance if any portion of the
Improvements is currently or at any time in the future located in a
federally designated "special flood hazard area" and (z) earthquake
insurance in amounts and in form and substance reasonably satisfactory
to the Administrative Agent in the event the Asset is located in an
area with a high degree of seismic activity, or otherwise as required
by the Administrative Agent, provided that the insurance pursuant to
clauses (y) and (z) hereof shall be on terms consistent with the
comprehensive all risk insurance policy required under this Section
6.4(b)(i), except that the deductible on such insurance and on wind
insurance if the Asset is located in a coast line area, shall not be in
excess of five percent (5%) of the appraised value of the Asset;
(ii) commercial general liability insurance against claims for
personal injury, bodily injury, death or property damage occurring
upon, in or about the Asset, including "Dram Shop" or other liquor
liability coverage if alcoholic beverages are sold from or may be
consumed at the Asset, such insurance (A) to be on the so-called
"occurrence" form with a combined single limit of not less than
$1,000,000 or such greater amount or may be generally required by
institutional lenders for hotels comparable to the Asset; (B) to
continue at not less than the aforesaid limit until required to be
changed by the Administrative Agent or Majority Lenders in writing by
reason of changed economic conditions making such protection
inadequate; and (C) to cover at least the following hazards: (1)
premises and operations; (2) products and completed operations on an
"if any" basis; (3) independent contractors; and (4) blanket
contractual liability for all written and oral contracts;
(iii) business income and rent loss insurance (A) covering all
risks required to be covered by the insurance provided for in Section
6.4(b)(i); (B) containing an extended
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period of indemnity endorsement which provides that from and after the
physical loss to the Improvements and Personal Property has been
repaired, the continued loss of income will be insured until such
income either returns to the same level it was at prior to the loss, or
the expiration of twelve (12) months from the date of the loss,
whichever first occurs, and notwithstanding that the policy may expire
prior to the end of such period; and (C) in an amount equal to 100% of
the projected gross income from the Asset for a period of twelve (12)
months, determined prior to the date hereof and at least once each year
thereafter based on the greatest of: (x) Borrower's reasonable estimate
of the gross income from the Asset, which estimate shall be reasonably
satisfactory to the Administrative Agent and (y ) the gross income set
forth in the Financial Statements delivered to the Lenders in
accordance with this Agreement.
(iv) at all times during which structural construction,
repairs or alterations are being made with respect to the Improvements
(A) owner's contingent or protective liability insurance covering
claims not covered by or under the terms or provisions of the above
mentioned commercial general liability insurance policy; and (B) the
insurance provided for in Section 6.4(b)(i) written in a so-called
builder's risk completed value form (1) on a non-reporting basis, (2)
against all risks insured against pursuant to Section 6.4(b)(i), (3)
including permission to occupy the Asset, and (4) with an agreed amount
endorsement or a waiver of coinsurance provisions;
(v) workers' compensation, subject to the statutory limits of
the state in which the Asset is located, and employer's liability
insurance (A) with a limit per accident and per disease per employee,
and (B) in an amount for disease aggregate in respect of any work or
operations on or about the Asset, or in connection with the Asset or
its operation (if applicable), in each case reasonably required by the
Administrative Agent;
(vi) comprehensive boiler and machinery insurance, if
applicable, in amounts as shall be reasonably required by
Administrative Agent on terms consistent with the commercial general
liability insurance policy required under Section 6.4(b)(ii);
(vii) umbrella liability insurance in an amount not less than
$50,000,000.00 per occurrence or such greater amount as may be
generally required by institutional lenders for hotels comparable to
the Asset on terms consistent with the commercial general liability
insurance policy required under Section 6.4(b)(ii);
(viii) motor vehicle liability coverage for all owned and
non-owned vehicles, including rented and leased vehicles containing
minimum limits per occurrence of $5,000,000;
(ix) a blanket fidelity bond and errors and omissions
insurance coverage insuring against losses resulting from dishonest or
fraudulent acts committed by (A) Borrower's or the related Loan Party's
personnel; (B) any employees of outside firms that provide appraisal,
legal, data processing or other services for Borrower or the related
Loan Party or (C) temporary contract employees or student interns; and
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(x) such other insurance and in such amounts as are required
pursuant to any franchise agreements or as the Administrative Agent
from time to time may reasonably request against such other insurable
hazards which are generally required by institutional lenders for
hotels comparable to the Asset or which are commonly insured against
for property similar to the Asset located in or around the region in
which the Asset is located.
(c) All insurance provided for in this Section 6.4(b) hereof
shall be obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be subject to the approval of the Majority
Lenders as to insurance companies, amounts, forms, deductibles, loss payees and
insurers. The Policies shall be issued by financially sound and responsible
insurance companies authorized to do business in the state in which the Real
Property Asset is located and approved by the Administrative Agent. Each
insurance company must have a rating of "A" or better for claims paying ability
assigned by Standard & Poor's Rating Group (the "Rating Agency") or, if the
Rating Agency does not assign a rating for such insurance company, such
insurance company must have a general policy rating of A or better and a
financial class of VIII or better by A.M. Best Company, Inc. (each such insurer
shall be referred to below as a "Qualified Insurer"). Notwithstanding the
foregoing, Commonwealth Insurance Company shall be deemed a Qualified Insurer
with respect to the excess liability insurance described in Section 6.4(b)(vii)
so long as Commonwealth has a general policy rating of A or better and a
Financial class of VII or better by A.M. Best Company Inc. Not less than thirty
(30) days prior to the expiration dates of the Policies theretofore furnished to
the Administrative Agent pursuant to Section 6.4(b), certified copies of the
Policies marked "premium paid" or accompanied by evidence reasonably
satisfactory to the Administrative Agent of payment of the premiums due
thereunder (the "Insurance Premiums"), shall be delivered by Borrower or the
related Loan Party to the Administrative Agent; provided, however, that in the
case of renewal Policies, Borrower or the related Loan Party may furnish the
Administrative Agent with binders therefor to be followed by the original
Policies when issued.
(d) Neither the Borrower nor any Loan Party shall obtain
duplicate or separate casualty insurance policy(s) relating to the Assets. Any
so called "blanket" insurance policy(s) covering the Assets shall provide at a
minimum the same protection as would a separate policy insuring any individual
Asset in full compliance with the provisions of Section 6.4(b) and issued by a
Qualified Insurer. In the event Borrower or the related Loan Party obtains
separate insurance or an umbrella or a blanket Policy, Borrower or the related
Loan Party shall notify the Administrative Agent of the same and shall cause
certified copies of each Policy to be delivered as required in Section 6.4(b).
Any blanket insurance Policy shall (a) specifically allocate to the Asset the
amount of coverage from time to time required hereunder or (b) be written on an
occurrence basis for the coverages required hereunder with a limit per
occurrence in an amount equal to the amount of coverage required hereunder and
shall otherwise provide the same protection as would a separate Policy insuring
only the Asset in compliance with the provisions of Section 6.4(b).
(e) All Policies of insurance provided for in Section 6.4(b)
shall contain clauses or endorsements to the effect that:
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(i) the Policy shall not be materially changed (other
than to increase the coverage provided thereby) or cancelled
without at least 30 days' written notice to the Administrative
Agent and any other party named therein as an insured; and
(ii) each Policy shall provide that the issuers
thereof shall give written notice to the Administrative Agent
if the Policy has not been renewed thirty (30) days prior to
its expiration.
(f) Borrower or the related Loan Party shall furnish to the
Administrative Agent and to each Lender, on or before thirty (30) days after the
close of each of Borrower's and the related Loan Party's fiscal years, a
statement certified by Borrower or a duly authorized officer of Borrower of the
amounts of insurance maintained in compliance herewith, of the risks covered by
such insurance and of the insurance company or companies which carry such
insurance, together with copies of the Policies, and, if requested by the
Administrative Agent or any Lender, verification of the adequacy of such
insurance by an independent insurance broker or appraiser acceptable to the
Administrative Agent and the Lenders.
(g) If at any time any Lender is not in receipt of written
evidence that all insurance required hereunder is in full force and effect, the
Lender shall promptly notify the Administrative Agent. When the Administrative
Agent becomes aware that it is not in receipt of written evidence that all
insurance required hereunder is in full force and effect, the Administrative
Agent shall have the right, without notice to Borrower or the related Loan
Party, to take such action as the Administrative Agent deems necessary,
including, without limitation, the obtaining of such insurance coverage as it
deems appropriate, and all expenses incurred by the Administrative Agent in
connection with such action or in obtaining such insurance and keeping it in
effect shall be paid by Borrower or the related Loan Party to the Administrative
Agent upon demand and until paid shall bear interest in accordance at the
Default Rate. The Administrative Agent shall promptly notify the other Lenders
of the action it has taken. The Administrative Agent agrees that it shall not
take any action hereunder that would otherwise require the consent of the
Majority Lenders, the Super Majority Lenders or all of the Lenders, as
applicable.
(h) If the Assets shall be damaged or destroyed, in whole or
in part, by fire or other casualty, or condemned or taken by eminent domain,
Borrower or the related Loan Party shall give prompt notice of such damage or
taking to the Administrative Agent and shall promptly commence and diligently
prosecute the completion of the repair and restoration of the Asset as nearly as
possible to the condition the Asset was in immediately prior to such fire or
other casualty or taking (the "Restoration"). Borrower or the related Loan Party
shall pay all costs of such Restoration whether or not such costs are covered by
insurance or any condemnation award. In the event that the related Asset cannot
be restored to the same condition it was in immediately prior to a condemnation,
or all or substantially all of such Asset is condemned or taken by eminent
domain, such Asset shall not be deemed an Eligible Asset or an Asset for
purposes of calculating Total Value and Borrower shall immediately pay an amount
of Principal, if any, required to maintain compliance with the Financial
Covenants set forth herein.
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6.5. Preservation of Existence, Etc. The Borrower shall
preserve and maintain, and shall cause each other Loan Party and each of their
Subsidiaries to preserve and maintain, its corporate or partnership existence,
rights (charter and statutory) and franchises, except as permitted under Section
7.5.
6.6. Access. The Borrower shall, at any reasonable time and
from time to time, permit the Administrative Agent or any of the Lenders, or any
agents or representatives thereof, at the expense of the Lenders (but such
expense to be reimbursed by the Borrower in the event that any of the following
reveal a Default by the Borrower), to (a) examine and make copies of and
abstracts from the records and books of account of the Borrower and each other
Loan Party and each of their Subsidiaries, (b) visit the properties of the
Borrower and each other Loan Party and each of their Subsidiaries, (c) discuss
the affairs, finances and accounts of the Borrower and each other Loan Party and
each of their Subsidiaries with any of their respective officers and directors,
and (d) communicate directly with the Borrower's independent certified public
accountants.
6.7. Keeping of Books. The Borrower shall keep, and shall
cause each other Loan Party and each of their Subsidiaries to keep, proper books
of record and account, in which proper entries shall be made of all financial
transactions and the assets and business of the Borrower and each other Loan
Party and each such Subsidiary.
6.8. Maintenance of Properties, Etc. The Borrower shall
maintain, and shall cause each other Loan Party and each of their Subsidiaries
to maintain and preserve, (i) all of its properties which are used or useful or
necessary in the conduct of its business in good working order and condition,
and (ii) all rights, permits, licenses, approvals and privileges (including,
without limitation, all Permits) which are used or useful or necessary in the
conduct of its business; provided, however, that the Borrower shall not be
deemed in default of this Section 6.8 if all such failures in the aggregate have
no Material Adverse Effect.
6.9. Performance and Compliance with Other Covenants. The
Borrower shall perform and comply with, and shall cause each other Loan Party
and each of their Subsidiaries to perform and comply with, each of the covenants
and agreements set forth in each Contractual Obligation to which it or any of
their Subsidiaries is a party; provided, however, that the Borrower shall not be
deemed in default of this Section 6.9 if all such failures in the aggregate for
each individual Asset have no Material Adverse Effect.
6.10. Application of Proceeds. The Borrower shall use the
entire amount of the proceeds of the Loan as provided in Section 4.18.
6.11. Financial Statements. The Borrower and the REIT shall
furnish to the Lenders:
(a) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year,
consolidated balance sheets of (i) the Borrower, the REIT and their
Subsidiaries, (ii) SLC, the Corporation and their Subsidiaries and (iii) the
Borrower, the REIT, SLC, the Corporation and their Subsidiaries, each as of the
end of
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such quarter and the related consolidated statements of income, retained
earnings and cash flow for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Quarter, all prepared in
conformity with GAAP and certified by the chief financial officer of the REIT
and the Corporation, as appropriate, as fairly presenting the financial
condition and results of operations of the Borrower, the REIT, SLC, the
Corporation and their Subsidiaries at such date and for such period, together
with a Compliance Certificate;
(b) as soon as available and in any event within 90 days after
the end of each Fiscal Year, audited consolidated balance sheets of (i) the
Borrower, the REIT and their Subsidiaries, (ii) SLC, the Corporation and their
Subsidiaries, and (iii) the Borrower, the REIT, SLC, the Corporation and their
Subsidiaries, each as of the end of such year and consolidated statements of
income, retained earnings and cash flow for such Fiscal Year, all prepared in
conformity with GAAP and certified, in the case of such consolidated financial
statements, in a manner reasonably acceptable to the Lenders, by independent
public accountants of recognized national standing (which accountants' opinion
shall be unqualified) together with (i) a schedule in form satisfactory to the
Lenders of the computations used by the Borrower, as appropriate, in
determining, as of the end of such Fiscal Year, compliance with all financial
covenants contained herein, and (ii) a written discussion and analysis by the
management of the Borrower, as appropriate, of the financial statements
furnished in respect of such Fiscal Year, together with a Compliance
Certificate;
(c) promptly after the same are received by the Borrower, a
copy of each management letter provided to the Borrower by its independent
certified public accountants which refers in whole or in part to any inadequacy,
defect, problem, qualification or other lack of fully satisfactory accounting
controls utilized by the Borrower, any other Loan Party or any of their
Subsidiaries; and
(d) within 45 days after the end of each of the first three
Fiscal Quarters of each Fiscal Year and within 90 days after the end of each
Fiscal Year, (i) property level income statements for each Hotel, Mortgage Note
Hotel and Managed Hotel, in the form attached as Schedule 6.11(d), together with
such other information reasonably requested by the Agent, (ii) income statements
for each Management Agreement, together with such other information reasonably
requested by the Lenders through the Administrative Agent, (iii) a Compliance
Certificate as of the end of such Fiscal Quarter, executed by the chief
financial officer of the REIT, and (iii) a Borrowing Base Certificate as of the
end of such Fiscal Quarter, executed by the chief financial officer of the REIT.
6.12. Reporting Requirements. The Borrower and the REIT shall
furnish to the Lenders:
(a) prior to any Asset Sale generating proceeds in excess of
10% of the Borrower's Total Value, a notice (i) describing the assets being
sold, (ii) stating the estimated Asset Sales proceeds in respect of such Asset
Sale and (iii) accompanied by a Compliance Certificate, a Borrowing Base
Certificate and a certificate of the chief financial officer of the REIT stating
that before and after giving effect to such Asset Sale, the Borrower shall be in
compliance
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with all of its covenants set forth in the Loan Documents and that no Default or
Event of Default will result from such Asset Sale;
(b) as soon as available and in any event within 90 days after
the end of each Fiscal Year (or earlier if approved earlier by the Board of
Directors or Trustees of the Borrower or the REIT), an annual budget of the
Borrower, each other Loan Party and their Subsidiaries, as applicable, for each
Eligible Asset for the succeeding Fiscal Year, displaying on a monthly basis
anticipated revenues, EBITDA, and, on an annual basis, with periodic
adjustments, forecasted capital expenditures on an individual basis for each
Eligible Asset;
(c) promptly and in any event within 30 days after the
Borrower, any other Loan Party or any of their Subsidiaries or any ERISA
Affiliate knows or has reason to know that any ERISA Event has occurred, a
written statement of the chief financial officer or other appropriate officer of
the Borrower describing such ERISA Event or waiver request and the action, if
any, which the Borrower, its Subsidiaries and ERISA Affiliates propose to take
with respect thereto and a copy of any notice filed by or with the PBGC or the
IRS pertaining thereto;
(d) promptly and in any event within 10 days after receipt
thereof, a copy of any adverse notice, determination letter, ruling or opinion
the Borrower, any other Loan Party or any of their Subsidiaries or any ERISA
Affiliate receives from the PBGC, DOL or IRS with respect to any Plan, other
than those which, in the aggregate, do not have any reasonable likelihood of
resulting in a Material Adverse Change;
(e) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any domestic or foreign Governmental
Authority or arbitrator, affecting the Borrower, any other Loan Party or any of
their Subsidiaries, except those which in the aggregate, if adversely
determined, would have no Material Adverse Effect.
(f) promptly and in any event within five Business Days after
the Borrower or the REIT becomes aware of the existence of (i) any Default or
Event of Default, (ii) any breach or non-performance of, or any default under,
any Operating Lease or any Contractual Obligation which is material to the
business, prospects, operations or financial condition of the Borrower and its
Subsidiaries taken as one enterprise, or (iii) any Material Adverse Change or
any event, development or other circumstance which has any reasonable likelihood
of causing or resulting in a Material Adverse Change, telephonic or telecopied
notice in reasonable detail specifying the nature of the Default, Event of
Default, breach, non-performance, default, event, development or circumstance,
including, without limitation, the anticipated effect thereof, which notice
shall be promptly confirmed in writing within five days;
(g) promptly, and in any event within five Business Days of
the end of each Fiscal Quarter ending on March 31, June 30, September 30 and
December 31, copies of all reports which, during each such Fiscal Quarter, the
Borrower or the REIT sends to its security holders generally, and promptly after
the filing thereof, copies of all reports and registration statements which the
Borrower, any other Loan Party or any of their Subsidiaries files with the
Securities and
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Exchange Commission or any national securities exchange or the National
Association of Securities Dealers, Inc.;
(h) promptly, upon the request of any Lender, through the
Administrative Agent, copies of all federal tax returns and reports filed by the
Borrower, any other Loan Party or any of their Subsidiaries in respect of taxes
measured by income (excluding sales, use and like taxes);
(i) promptly, and in any event within ten days of the
Borrower, any other Loan Party or any of their Subsidiaries learning of any of
the following, written notice to the Administrative Agent of any of the
following:
(i) the Release or threatened Release of any
Hazardous Material on or from any property owned or leased by the
Borrower, any other Loan Party or any of their Subsidiaries and any
written order, notice, permit, application or other written
communication or report received by the Borrower, any other Loan Party
or any of their Subsidiaries in connection with or relating to any such
Release or threatened Release, unless such Release or threatened
Release is not reasonably likely to subject the Borrower or any of its
Subsidiaries to Environmental Liabilities and Costs, individually or in
the aggregate of $500,000 or more;
(ii) any notice or claim to the effect that the
Borrower, any other Loan Party or any of their Subsidiaries is or may
be liable to any Person as a result of the Release or threatened
Release of any Hazardous Material into the environment;
(iii) receipt by the Borrower, any other Loan Party
or any of their Subsidiaries of notification that any real or personal
property of such entity is subject to an Environmental Lien;
(iv) any Remedial Action taken by the Borrower, any
other Loan Party or any of their Subsidiaries or any other Person on
their behalf in response to any Hazardous Material on, under or about
any real property owned or leased by the Borrower, any other Loan Party
or any of their Subsidiaries, unless such Remedial Action is not
reasonably likely to subject the Borrower, any other Loan Party or any
of their Subsidiaries to Environmental Liabilities and Costs,
individually or in the aggregate of $500,000 or more;
(v) receipt by the Borrower, any other Loan Party or
any of their Subsidiaries of any notice of violation of, or knowledge
by the Borrower or any of their Subsidiaries that there exists a
condition which may result in a violation by the Borrower, any other
Loan Party or any of their Subsidiaries of, any Environmental Law,
unless such violation is not reasonably likely to subject the Borrower,
any other Loan Party or any of their Subsidiaries to Environmental
Liabilities and Costs, individually or in the aggregate of $500,000 or
more;
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(vi) any proposed Capital Expenditure by the
Borrower, any other Loan Party or any of their Subsidiaries intended or
designed to implement any existing or additional Remedial Action,
unless such expenditures are not reasonably likely to exceed
individually or in the aggregate $500,000;
(vii) the commencement of any judicial or
administrative proceeding or investigation alleging a violation of any
Environmental Law; or
(viii) any proposed acquisition of stock, assets or
real property, or any proposed leasing of property by the Borrower, or
any other Loan Party or any of their Subsidiaries, unless such action
is not reasonably likely to subject the Borrower, any other Loan Party
or any of their Subsidiaries to Environmental Liabilities and Costs in
excess, individually or in the aggregate of $500,000;
(j) promptly, such additional financial and other information
respecting the financial or other condition of the Borrower, any other Loan
Party or any of their Subsidiaries or the status or condition of any real or
personal property owned or leased by any such party, or the operation thereof
which the Borrower is entitled to or can otherwise reasonably obtain, as the
Administrative Agent or the Lenders from time to time reasonably requests;
(k) upon written request by any Lender through the
Administrative Agent, a report providing an update of the status of any
Environmental Claim, Remedial Action or any other issue identified in any notice
or report required pursuant to this Section 6.12;
(l) notification of any fire or other casualty or any pending
or threatened condemnation or eminent domain proceeding with respect to all or
any portion of any Hotel or Mortgage Note Hotel;
(m) promptly upon request of the Lenders through the
Administrative Agent, but in no event later than thirty days after such request,
copies of any quality assurance reports or similar reports of inspection or
compliance from the licensor under any License; and
(n) promptly, but in no event later than ten (10) days after
receipt of written notice that any Indebtedness of Borrower, any other Loan
Party or any of their Subsidiaries hereof has been accelerated, written notice
to the Lenders of such acceleration.
6.13. Operating Leases, Management Agreements and Licenses.
(a) The Borrower shall provide the Administrative Agent with a copy of each
Lease which has annual rent payments in excess of five percent (5%) of the Gross
Revenues from the related Eligible Hotel and each Operating Lease relating to an
Eligible Hotel and each Eligible Management Agreement. The Borrower shall, and
shall cause each other Loan Party and each of its Subsidiaries, to (i) comply in
all material respects with all of their respective obligations under all of
their respective Leases, Operating Leases and Management Agreements now or
hereafter held respectively by them with respect to real property; (ii) not
modify, amend, cancel, extend or otherwise change in any materially adverse
manner to the Borrower any of the terms, covenants or conditions of any such
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Leases, Operating Leases or Management Agreements; (iii) not assign any Leases
or sublet any portion of the premises if such assignment or sublet would have a
Material Adverse Effect; (iv) provide the Administrative Agent with a copy of
each notice of default under any Lease, Operating Lease or Management Agreement
received by the Borrower, any other Loan Party or any of their Subsidiaries
immediately upon receipt thereof and deliver to the Administrative Agent a copy
of each notice of default sent under any Lease, Operating Lease or Management
Agreement simultaneously with its delivery of such notice under such Lease,
Operating Lease or Management Agreement except to the extent that such defaults,
in the aggregate, would not have a Material Adverse Effect; (v) notify the
Administrative Agent, not later than 90 days prior to the date of the expiration
of the term of any Lease, Operating Lease or Management Agreement of the
Borrower's any other Loan Party or any of their Subsidiary's intention either to
renew or to not renew any such Lease, Operating Lease or Management Agreement
and, if such party intends to renew such Lease, Operating Lease or Management
Agreement, the terms and conditions of such renewal; and (vi) maintain each
Lease, Operating Lease and Management Agreement in full force and effect and
enforce the obligations of any other parties thereto thereunder, in a timely
manner except to the extent that the failure to do so, in the aggregate, would
not have a Material Adverse Effect.
(b) The Borrower shall take all actions and do all things
within its power or control necessary or required to cause each Operating
Entity, Borrower Subsidiary and other Loan Party to (i) keep, observe, comply
with and perform all of the terms, provisions, covenants and undertakings on its
part required by each Operating Lease, License, sublease and Management
Agreement and (ii) to enforce the provisions of each License and each Management
Agreement, if the failure to comply or enforce such agreements would be
reasonably likely, in the aggregate, to have a Material Adverse Effect.
(c) Each Operating Lease shall be subordinated to the Loan and
the Loan Documents pursuant to a Lease Subordination Agreement.
6.14. [INTENTIONALLY OMITTED].
6.15. Employee Plans. For each Plan and any related trust
hereafter adopted or maintained by a Loan Party or any of its ERISA Affiliates
intended to qualify under Code Section 125, 401 or 501, the Borrower and the
REIT shall (i) seek, and cause such of its ERISA Affiliates to seek, and receive
determination letters from the IRS to the effect that such plan is so qualified;
and (ii) cause such plan to be so qualified.
6.16. [INTENTIONALLY OMITTED].
6.17. Fiscal Year. The Borrower and the REIT shall maintain as
its Fiscal Year the twelve month period ending on December 31 of each year.
6.18. Environmental Matters. (a) The Borrower shall comply and
shall cause each other Loan Party and each of their Subsidiaries and each
property owned or leased by such parties
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to comply in all material respects with all applicable Environmental Laws
currently or hereafter in effect.
(b) If Administrative Agent or Lenders at any time have a
reasonable basis to believe that there may be a material violation of any
Environmental Law by the Borrower or any other Loan Party or any of their
Subsidiaries related to any real property owned or leased by the Borrower, any
other Loan Party or any of their Subsidiaries, or real property adjacent to such
real property, then the Borrower agrees, upon request from the Administrative
Agent or the Lenders, to provide the Administrative Agent, at the Borrower's
expense, with such reports, certificates, engineering studies or other written
material or data as the Administrative Agent or Lenders may reasonably require
so as to reasonably satisfy the Administrative Agent and Lenders that the
Borrower or such other Loan Party of Subsidiary, or real property owned or
leased by them is in material compliance with all applicable Environmental Laws.
Furthermore, Administrative Agent and the Lenders shall have the right to
inspect during normal business hours and on reasonable prior notice, any real
property owned or leased by the Borrower any other Loan Party or any of their
Subsidiaries if at any time Administrative Agent or Lenders have a reasonable
basis to believe that there may be such a material violation of Environmental
Law.
(c) The Borrower shall, and shall cause each other Loan Party
and each of their Subsidiaries to take such Remedial Action or other action as
required by Environmental Laws, as any Governmental Authority requires, except
to the extent contested in good faith and by proper proceedings, or as is
appropriate and consistent with good business practice.
6.19. The REIT Requirements. The REIT shall operate its
business at all times so as to satisfy all requirements necessary to qualify as
an equity-oriented real estate investment trust under Sections 856 through 860
of the Code and shall at all times maintain its status as grandfathered from the
application of Section 269B of the Code pursuant to Section 132(c)(3) of the
Deficit Reduction Act of 1984. The REIT will maintain adequate records so as to
comply with all record-keeping requirements relating to the qualification of the
REIT as an equity-oriented real estate investment trust as required by the Code
and applicable regulations of the Department of the Treasury promulgated
thereunder and will properly prepare and timely file with the IRS all returns
and reports required thereby. The REIT will request from its shareholders all
shareholder information required by the Code and applicable regulations of the
Department of Treasury promulgated thereunder.
6.20. [INTENTIONALLY OMITTED].
6.21. Franchise Affiliations. The Borrower shall cause at
least 50% of the Hotels to be maintained and operated under a License with a
nationally recognized franchise affiliation reasonably acceptable to the
Administrative Agent, provided that if a License is in default beyond the
expiration of any applicable notice or grace period, such Eligible Hotel shall
be deemed not to have a License.
6.22. Further Assurances. At any time upon the request of the
Administrative Agent, the Borrower and the REIT will, promptly and at its
expense, execute, acknowledge and
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deliver such further documents and do such other acts and things as the
Administrative Agent may reasonably request to evidence the Loan made hereunder
and interest thereon in accordance with the terms of this Agreement.
6.23. Eligible Asset Value Determination/Removal, Substitution
and Addition of Eligible Assets. (a) Subject to compliance with the terms and
conditions of Section 3.1, the Administrative Agent and the Lenders have
accepted the Assets listed on Schedule 6.23 as Eligible Assets for the purposes
of this Agreement as of the Closing Date.
(b) Provided the Eligible Asset Value is not reduced below the
Minimum Eligible Asset Value as a result, Borrower shall have the right to
remove an Eligible Asset (a "Removed Eligible Asset") from the list of Eligible
Assets provided Borrower delivers to the Administrative Agent written notice of
the proposed removal not less than ten Business Days prior to the effective date
thereof and a certificate of Borrower certifying that all of the
representations, warranties and covenants contained in this Agreement and the
other Loan Documents, after giving effect to the removal, are true and correct
and that there is no Default or Event of Default hereunder together with a
Compliance Certificate and a Borrowing Base Certificate.
(c) Provided that no Default or Event of Default has occurred
and is continuing, upon the written request of Borrower, Borrower shall have the
right to (i) remove an Eligible Asset upon substitution of another Eligible
Asset (a "Substitute Eligible Asset") in the place of the Removed Eligible Asset
which is similar in all material respects, in the Majority Lenders' reasonable
discretion, to the Removed Eligible Asset, or (ii) add an Asset for acceptance
by the Majority Lenders as an Eligible Asset for all purposes under this
Agreement (an "Added Eligible Asset") which is similar in all material respects,
in the Lenders' reasonable discretion, to existing Eligible Assets of that type,
provided together with such written request Borrower shall deliver to the
Administrative Agent, with respect to the Substitute Eligible Asset or Added
Eligible Asset, as the case may be, the documentation required in Section
3.1(d), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n), (o) or Eligible
Mortgage Loan Documents, as applicable, together with a Borrowing Base
Certificate setting forth on a pro-forma basis the Available Credit assuming
that such Substitute Eligible Asset or Added Eligible Asset, as applicable, is
accepted as an Eligible Asset for the purposes of the Borrowing Base. If the
Substitute Eligible Asset or Added Eligible Asset, as applicable, is owned by a
Loan Party other than a Borrower or the REIT, or a Borrower Subsidiary which is
a Guarantor, such Loan Party shall execute and deliver a Guaranty and a Lease
Subordination Agreement, each in the form of the Guaranty and Lease
Subordination Agreements delivered on the Closing Date, together with the items
required in Sections 3.1(b) and (c). If the Substitute Eligible Asset or Added
Eligible Asset, as applicable, satisfies the definition of an Eligible Asset of
that type, the Administrative Agent shall confirm to Borrower in writing that
such Substitute Eligible Asset shall be deemed an Eligible Asset or Added
Eligible Asset, as applicable, and Schedule 6.23 shall be amended accordingly.
(d) The Borrower shall promptly notify the Administrative
Agent in writing in the event that at any time the Borrower or any other Loan
Party receives or otherwise gains knowledge that (i) any asset included as an
Eligible Asset, ceases, for any reason whatsoever, to
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be an Eligible Asset, (ii) that a Material Adverse Change has occurred or is
likely to occur, or (iii) there is a Borrowing Base Imbalance.
(e) The Administrative Agent, at the reasonable expense of the
Borrower, may, or at the reasonable request of the Majority Lenders, shall make
physical and other verifications of any Hotels or Mortgage Note Hotels included
as Eligible Hotels or Eligible Mortgage Note Hotel in any reasonable manner and
through any medium that the Administrative Agent considers advisable, and the
Borrower shall furnish all such reasonable assistance and information as the
Administrative Agent may require in connection therewith. Upon request, the
Lenders shall have the right to accompany the Administrative Agent in connection
with any visits to any such Hotels or Mortgage Note Hotels.
(f) Notwithstanding anything to the contrary set forth herein,
an Asset shall cease to be an Eligible Asset if it shall cease to comply with
the requirements therefor set forth herein.
6.24. Corporate Franchises; Conduct of Business. (a) Borrower
shall and shall cause each other Loan Party and their Subsidiaries to do or
cause to be done, all things necessary to preserve and keep in full force and
effect its existence and good standing (i) in the State of its organization and
(ii) in each state in which a any real property owned or leased by any such
entity is located, unless such Person is not required to qualify in such State
pursuant to any Requirements of Law, and its respective Licenses, except where
the failure to so preserve any of the foregoing (other than existence and good
standing) could not, individually or in the aggregate, result in a Material
Adverse Effect.
(b) Borrower each other Loan Party and their Subsidiaries
shall carry on and conduct their businesses in substantially the same manner and
substantially the same field of enterprise as they are presently conducted.
6.25. Stock. The REIT and the Corporation shall maintain in
good standing their listing of all outstanding shares of stock on the New York
Stock Exchange and such shares shall continue to trade as "paired shares".
6.26. [INTENTIONALLY OMITTED].
6.27. Notice of Default or Litigation. Promptly after
Borrower, any other Loan Party or any of their Subsidiaries obtains actual
knowledge thereof, Borrower shall give the Administrative Agent notice of (i)
the occurrence of (x) any default that is not cured, or any event of default,
under any partnership agreement of Borrower, any mortgage, deed of trust,
indenture or other debt or security instrument, covering any of the Assets of
any such party or (y) any event of default under any License, Operating Lease or
any other material agreement relating to the Hotels, to which Borrower, any
other Loan Party or any of their Subsidiaries is a party, which, if not cured
could result in a Material Adverse Effect, (ii) any litigation or governmental
proceeding pending or threatened (in writing) against Borrower, any other Loan
Party or any of their Subsidiaries which could result in a Material Adverse
Effect. Each notice delivered pursuant
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to this Section 6.27 shall be accompanied by a certificate of a general partner
or Responsible Officer of Borrower setting forth the details of the occurrence
referred to therein and describing the actions Borrower proposes to take with
respect thereto.
6.28. Management. Each Hotel shall be managed by an Operating
Entity pursuant to a related Operating Lease; provided, however, at any time not
more than 15% of the Hotels may be managed by a Person which is not an Affiliate
of the Borrower, any other Loan Party or any of their Subsidiaries pursuant to
management agreements acceptable to the Administrative Agent.
6.29. Maintenance of Affiliate Debt and Intercompany Debt.
(a) No Affiliate Debt shall be secured or collateralized
by a Lien on any Asset of any Loan Party without the
prior consent of the Super Majority Lenders.
(b) Neither Borrower nor the REIT shall amend or modify
the terms of the subordination of any Affiliate Debt
to the Loan and the Obligations.
(c) All Affiliate Debt shall be subordinated to the Loan
and the Obligations pursuant to the Subordination and
Intercreditor Agreement in the form attached hereto
as Exhibit D.
(d) None of the proceeds of any Intercompany Debt shall
be used for the purpose of enabling any Operating
Entity to satisfy its obligations under any Operating
Lease.
6.30. Keep Well Covenants. (a) Borrower and the REIT shall (a)
cause each Loan Party and their Subsidiaries to be operated and managed in such
a manner that it will fulfill its obligations under the Loan Documents to which
it is a party; (b) not file any petition for relief under the Bankruptcy Code or
under any similar federal or state law against any Loan Party; (c) provide
funding to each Borrower Subsidiary to the extent necessary to enable each
Borrower Subsidiary to fulfill its obligations under the related Subsidiary
Guaranty and to remain Solvent; (d) cause each Operating Entity to be operated
and managed in such a manner that it will fulfill its obligations under the
Operating Lease to which it is a party; and (e) provide funding to each
Operating Entity to fulfill its obligations under the related Subsidiary
Guaranty and to remain Solvent.
6.31. Loan Documents. Borrower shall cause each Loan Party and
their Subsidiaries to comply with all of the terms and conditions of the Loan
Documents.
6.32. [INTENTIONALLY OMITTED].
6.33. Unsecured Debt Rating. Borrower and the REIT shall use
their best efforts to have an Unsecured Debt Rating assigned to the REIT within
360 days (or 450 days in the event Borrower executes a Westin Acquisition
Agreement) after the Closing Date.
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6.34. Investment Restrictions. Borrower shall, and shall cause
each other Loan Party to, invest only in Permitted Investments and Eligible
Assets, without duplication.
6.35. Syndication Cooperation. Borrower and the REIT agree
that they shall, in connection with any sale of all or any portion of the Loan
pursuant to Section 10.7 to an Eligible Assignee or a participant, within ten
(10) business days after request by the Administrative Agent or the assignor
Lender, furnish the Administrative Agent or assignor Lender, with a Compliance
Certificate and such other information as reasonably requested by any potential
Eligible Assignee or participant in performing its due diligence in connection
with its purchase of an interest in the Loan. Borrower and the REIT shall also
enter into any modifications of the Loan Documents reasonably requested by any
prospective Eligible Assignee provided that such modifications do not result in
any increased cost or obligation to Borrower, the REIT or any other Loan Party.
Borrower and the REIT shall also pay all reasonable costs and expenses of the
Administrative Agent, the assignor Lender and the prospective Eligible Assignee
in connection with the transfer. The REIT, Borrower and SLC shall cooperate with
the Administrative Agent and any assignor Lender in any such sale of a portion
of the Loan and shall cause Responsible Officers and members of senior
management of the REIT and the Borrower to attend any meetings with prospective
Eligible Assignees and the Administrative Agent and the assignor Lender, and to
be available during normal business hours for telephone conferences with such
parties or the Administrative Agent, assignor Lender or Eligible Assignee in
connection with any sale of all or a portion of the Loan to an Eligible
Assignee.
6.36. Required Remediation. Borrower and the REIT shall make
all necessary investigations and perform all required Remedial Action with
respect to the environmental conditions set forth on Schedule 4.19 in order to
bring the related Hotels into compliance with all applicable Environmental Laws
and shall submit in writing to the Administrative Agent, within thirty (30) days
of the Closing Date, its plan with respect to such Remedial Action (including
the scheduled timing of such Remedial Action), which plan shall be subject to
the reasonable satisfaction of the Majority Lenders. Notwithstanding anything to
the contrary contained in this Agreement, for the purposes of calculating all
Financial Covenants, the value of each such Hotel shall be reduced by the
amounts set forth on Schedule 4.19 until such time as the required Remedial
Action has been completed to the reasonable satisfaction of the Majority
Lenders.
6.37. Equity or Debt Offerings. All net proceeds (after
payment of underwriter and placement fees and other expenses directly related to
such equity or debt offering) from any equity or debt offering by the REIT shall
be immediately contributed to Borrower.
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ARTICLE VII
NEGATIVE COVENANTS
As long as any of the Obligations remain outstanding, without
the written consent of the Majority Lenders, or with respect to Section 7.18,
all of the Lenders, the Borrower and the REIT agree with the Lenders and the
Administrative Agent that:
7.1. [INTENTIONALLY OMITTED].
7.2. [INTENTIONALLY OMITTED].
7.3. Lease Obligations.
(a) Neither the REIT nor the Borrower shall create or suffer
to exist, or permit any of its Subsidiaries to create or suffer to exist, any
obligations as lessee for the rental or hire of real or personal property of any
kind under other leases or agreements to lease entered into otherwise then in
the ordinary course of business.
(b) Neither the REIT nor the Borrower shall, and shall not
permit any of its Subsidiaries to, become or remain liable as lessee or
guarantor or other surety with respect to any lease, whether an operating lease
or a Capitalized Lease, of any property (whether real or personal or mixed),
whether now owned or hereafter acquired, which (i) the REIT or the Borrower or
any of its Subsidiaries has sold or transferred or is to sell or transfer to any
other Person, or (ii) the REIT or the Borrower or any of its Subsidiaries
intends to use for substantially the same purposes as any other property which
has been or is to be sold or transferred by that entity to any other Person in
connection with such lease.
7.4. Restricted Payments. (a) The REIT and the Corporation,
unless otherwise required in order to maintain the REIT's status as a real
estate investment trust in accordance with the written advice of independent
counsel, shall not declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account or in
respect of any of its Stock or Stock Equivalents (collectively, "Restricted
Payments") during any period of four consecutive Fiscal Quarters, in an
aggregate amount in excess of 85% of the consolidated Adjusted Funds From
Operations of the REIT and the Corporation (without duplication) for such
period; provided however, the repurchase of up to 796,500 shares of common stock
pursuant to the REIT's and the Corporation's existing stock repurchase program
shall not be included in such calculations. Subject to the limitations in this
Section 7.4, any distributions or dividends or other sums received by the REIT
must be paid promptly by the REIT as distributions to the shareholders of the
REIT or to the Borrower, but in no event later than ten (10) Business Days after
such funds have been received by the REIT.
(b) The REIT, unless otherwise required in order to maintain
the REIT's status as a real estate investment trust in accordance with the
written advice of independent counsel, shall not declare or make any Restricted
Payments during any period of four consecutive Fiscal
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Quarters, in an aggregate amount in excess of 85% of the consolidated Adjusted
Funds From Operations of the REIT (without duplication) for such period;
provided however, the repurchase of up to 796,500 shares of common stock
pursuant to the REIT's existing stock repurchase program shall not be included
in such calculations.
7.5. Mergers, Stock Issuances, Asset Sales, Restrictions on
Fundamental Changes, Etc.
(a) The Borrower shall not sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its assets or properties, and
shall not, and shall not permit any other Loan Party or any of their
Subsidiaries to, enter into any merger or consolidation following which the REIT
or an entity wholly owned by the REIT is no longer the sole general partner of
the Borrower or following which a breach of Section 7.14 would occur or the REIT
would no longer control the Board of Directors of the surviving entity; or a
merger or consolidation following which the Corporation or entities wholly owned
by the Corporation are no longer the sole general partners of SLC or the
Corporation no longer controls the Board of Directors of the surviving entity;
if such events occur without the prior written consent of the Lenders, the Loan
shall be due and payable in full, including all principal, interest and fees, on
the earliest to occur of the expiration of each related Interest Period with
respect to Eurodollar Rate Portions or the next payment date with respect to
Base Rate Portions, or the Final Maturity Date. The REIT shall not sell,
transfer, pledge, assign or encumber its general partnership interest in
Borrower and the Corporation shall not sell, transfer, pledge, assign or
encumber its (i) general partnership interest in SLC or (ii) its membership or
partnership interest in any of the Operating Entities. Borrower shall not sell,
transfer pledge, assign or encumber (i) its membership or partnership interest
in any of the Borrower Subsidiaries or (ii) its general partnership interest in
SLT Financing Partnership. SLC shall not sell, transfer, pledge, assign or
encumber its membership or partnership interest in the Operating Entities. SLT
Financing Partnership shall not sell, transfer, pledge, assign or encumber its
membership or partnership interest in any of the Borrower Subsidiaries. SLT
Realty Company LLC shall not sell, transfer, pledge, assign or encumber its
general partnership interest in SLT Financing Partnership.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries or the Operating Entities to effect, enter into, consummate or
suffer to exist any Asset Sale(s) generating proceeds aggregating more than 25%
of the sum of the Borrower's Total Value and the value of the Assets owned by
SLC or the Corporation at the time of such Asset Sale, as determined by the
Administrative Agent, excluding usual and customary turnover of FF&E.
(c) Neither the REIT nor the Borrower shall sell, transfer or
convey, or permit its Subsidiaries to sell, transfer or convey any Assets owned
by any such party to SLC, the Corporation or any of their Subsidiaries without
the prior consent of the Majority Lenders. The Corporation or SLC may sell,
transfer, or convey, or permit its Subsidiaries to sell, transfer or convey any
Assets owned by such party to the REIT, the Borrower or any of their
Subsidiaries without the prior consent of the Majority Lenders, provided that
such sale, transfer or conveyance shall be for a price equal to the fair market
value of such Asset and on such terms and conditions that would apply to a third
party arms-length transaction.
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(d) The Borrower shall not sell or otherwise dispose of, or
factor at maturity or collection, or permit any other Loan Party or any of their
Subsidiaries to sell or otherwise dispose of, or factor at maturity or
collection, any accounts receivables.
7.6. [INTENTIONALLY OMITTED].
7.7. Change in Nature of Business or in Capital Structure.
(a) The REIT and the Borrower shall not make, and shall not
permit any other Loan Party or any of their Subsidiaries to make any material
change in the nature or conduct of its business as carried on at the date
hereof.
(b) The REIT and the Borrower shall not make, and shall not
permit any other Loan Party or any of their Subsidiaries to make, any change in
its capital structure (including, without limitation, in the terms of its
outstanding Stock) or amend its declaration of trust, certificate of
incorporation or by-laws or other equivalent documents other than for changes or
amendments which in the aggregate have no Material Adverse Effect.
7.8. Modification of Material Agreements. The REIT and the
Borrower shall not, and shall not permit any other Loan Party or any of their
Subsidiaries to, alter, amend, modify, rescind, terminate, supplement or waive
any of their respective rights under, or fail to comply in all material respects
with, any of its material Contractual Obligations unless approved by the
Administrative Agent, which approval shall not be unreasonably withheld,
conditioned or delayed; provided, however, that, with respect to any such
failure to comply with any Contractual Obligation, the Borrower shall not be
deemed in default of this Section 7.8 if all such failures in the aggregate
would have no Material Adverse Effect; and provided, further, that in the event
of any breach or event of default by a Person other than the Borrower, any other
Loan Party or any of their Subsidiaries, the Borrower shall promptly notify the
Administrative Agent of any such breach or event of default and take all such
action as may be reasonably necessary in order to endeavor to avoid having such
breach or event of default have a Material Adverse Effect.
7.9. Accounting Changes. The REIT and the Borrower shall not
make, nor permit any other Loan Party or any of their Subsidiaries to make, any
material change in accounting treatment and reporting practices or tax reporting
treatment, except as required by GAAP or law and disclosed to the Lenders and
the Administrative Agent.
7.10. Transactions with Affiliates. The REIT and the Borrower
shall not, and shall not permit any other Loan Party or any of their
Subsidiaries, to enter into any transaction or series of related transactions,
including, without limitation, any Asset Sale or the rendering of any service,
with any Affiliate unless (a) no Default or Event of Default would occur as a
result thereof, and (b) such transaction is (i) in the ordinary course of such
party's business, and (ii) upon fair and reasonable terms no less favorable to
such party, then it would obtain in a comparable arm's length transaction with a
Person which is not an Affiliate.
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7.11. Adverse or Speculative Transactions. The REIT and the
Borrower shall not and shall not permit any other Loan Party or any of their
Subsidiaries to engage in any transaction involving contracts for commodity
options or futures contracts other than Interest Rate Contracts.
7.12. Environmental Matters.
(a) The Borrower shall not, and shall not permit any other
Loan Party or any of their Subsidiaries or any Operating Entity or, to the
extent reasonably practicable, any other Person to dispose of any Hazardous
Material by placing it in or on the ground or waters of any property owned or
leased by the Borrower or any of its Subsidiaries.
(b) The Borrower shall not, and shall not permit any other
Loan Party or any of their Subsidiaries, or, to the extent practicable,
authorize any other Person to, dispose or to arrange for the disposal of any
Hazardous Material on behalf of such party except in material compliance with
all applicable Environmental Laws currently and hereinafter in effect.
7.13. Borrower's Partnership Agreement. Neither Borrower nor
the REIT shall amend or modify Section 7.4 of Borrower's Partnership Agreement
or default under any of its obligations under Borrower's Partnership Agreement.
7.14. Management Continuity. The Borrower acknowledges that
the Lenders have made their determination to enter into this Agreement and the
transactions contemplated herein on the basis of reliance upon the experience,
expertise and reputation of Barry Sternlicht as an expert in the ownership and
asset management of Hotels, and the Borrower will not suffer or permit its
business to be without the active management of such Person, provided that, in
the event of his death, incapacitation or dismissal, replacement management
shall be appointed by the Borrower, such person or persons to be (i) proposed by
the Borrower within 270 days of the event referred to above, and (ii) approved
by the Majority Lenders in their sole and absolute discretion.
7.15. ERISA Plan Assets. The REIT and the Borrower shall not
and shall not permit any other Loan Party or any of their Subsidiaries to have
any of their assets become subject to Title I of ERISA because they constitute
"plan assets" within the meaning of the DOL Regulation Section 2510.3-101 and by
reason of an investment in the Borrower or any such party.
7.16. Operating Leases. No Loan Party which is party to an
Operating Lease shall (a) terminate such Operating Lease, and (b) without the
prior written consent of Lenders, which consent shall not be unreasonably
withheld, modify or amend any Operating Lease (other than modifications of a
ministerial nature which do not amend or modify any economic terms or terms that
would have a Material Adverse Effect).
7.17. Franchise Affiliations. The Borrower shall not permit
the cancellation, termination or surrender of more than 25% in the aggregate
(and 15% during any consecutive 12 month period) of the Licenses held by
Borrower or any other Loan Party or Subsidiary as of the Closing Date which are
issued by a national franchise unless the License being cancelled, surrendered
or terminated is replaced with a License from another national franchise
reasonably
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acceptable to the Administrative Agent in their reasonable discretion or with a
"Starwood" hotel brand on terms and conditions to be mutually agreed upon
between Borrower and the Majority Lenders.
7.18 Negative Pledge Covenant. Neither Borrower, the REIT or
any other Loan Party shall enter into or suffer to exist, or permit any of its
Subsidiaries to enter into or suffer to exist, any mortgage, deed of trust, deed
to secure debt or other security instrument or any other Lien, or any agreement
permitting or conditioning the creation or assumption of any Lien upon any
Eligible Asset, (except for an Eligible Asset that has been removed from the
list of Eligible Assets in accordance with Section 6.23(b) or (c)) Operating
Lease other than (i) in favor of Lender and the Lenders, (ii) Permitted Liens,
or (iii) mechanic's, materialman's or other similar liens which remain
undischarged of record (by payment, bonding or otherwise) for no more than
thirty (30) days.
7.19 Westwood Marquis. Neither Borrower, any Borrower
Subsidiary, any Loan Party or any Joint Venture shall modify or amend the
Westwood Mortgage in any material respect or in any manner adverse to the
interests of the Lenders, or which would increase any amounts payable under or
secured by the Westwood Mortgage under any circumstances.
7.20 Payments to the REIT. Upon the occurrence and during the
continuance of an Event of Default, neither the Borrower nor any Borrower
Subsidiary shall pay any dividends or make any distributions or similar payments
to the REIT.
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default. Each of the following events shall be
an Event of Default:
(a) The Borrower or the REIT shall fail to pay (i) any
principal (including, without limitation, mandatory prepayments of principal)
of, the Loan when the same becomes due and payable or (ii) interest on the Loan,
any fee, any other amount due hereunder or under the other Loan Documents or
other of the Obligations within 2 Business Days after the date the same becomes
due and payable, provided, however, that any interest payable with respect to
any delinquent payment shall be calculated at the Default Rate from the date
such payment was actually due as if there were no grace period; or
(b) Any representation or warranty made or deemed made by any
Loan Party in any Loan Document or by any Loan Party (or any of its officers) in
connection with the Loan Document shall prove to have been incorrect in any
material respect when made or deemed made; or
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(c) Any Loan Party shall fail to perform or observe or comply
with any terms or provisions of Sections 5.1, 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8,
5.9, 5.10, 5.11, 6.3, 6.4, 6.5, 6.11, 6.23(d), 6.27, 6.29, 6.33, 7.5, 7.7, 7.14,
7.15, 7.17 and 7.18.
(d) Any Loan Party shall fail to perform or observe any term,
covenant or agreement other than those specifically enumerated in any other
section of this Article VIII of this Agreement or in any other Loan Document if
such failure shall remain unremedied for thirty days after the earlier of the
date on which (A) a Responsible Officer of the Borrower becomes aware of such
failure or (B) written notice thereof shall have been given to the Borrower by
the Administrative Agent or any Lender; or
(e) Any Loan Party or any of its Subsidiaries shall fail to
pay any principal of or premium or interest on any (i) Recourse Indebtedness of
such Loan Party or Subsidiary having a principal amount of $10,000,000 or more
(excluding Indebtedness evidenced by the Notes), (ii) Non-Recourse Indebtedness
of such Loan Party or Subsidiary having a principal amount, in the aggregate, of
$20,000,000 or more in the event such Loan Party or Subsidiary was the original
obligor under such Indebtedness and (iii) Non-Recourse Indebtedness of such Loan
Party or Subsidiary having a principal amount, in the aggregate, of $25,000,000
or more in the event such Non-Recourse Indebtedness is secured by Assets in
which such Loan Party's or Subsidiary's Investment exceeds, in the aggregate,
$25,000,000, each as when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); or any other
event shall occur or condition shall exist under any agreement or instrument
relating to any such Indebtedness, if the effect of such event or condition is
to accelerate, or to permit the acceleration of, the maturity of such
Indebtedness; or any such Indebtedness shall become or be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), or any Loan Party or any of its Subsidiaries shall be required to
repurchase or offer to repurchase such Indebtedness, prior to the stated
maturity thereof; or
(f) The Borrower or any other Loan Party or any of their
Subsidiaries shall generally not pay its debts as such debts become due, or
shall admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against such party seeking to adjudicated it bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a custodian,
receiver, trustee or other similar official for it or for any substantial part
of its property and, in the case of any such proceedings instituted against such
party (but not instituted by it), either such proceedings shall remain
undismissed or unstayed for a period of 60 days or any of the actions sought in
such proceedings shall occur; or such party shall have taken any corporate
action to authorize any of the actions set forth above in this subsection (f);
or
(g) Any judgment or order for the payment of money which,
either individually or in the aggregate, exceeds $5,000,000 to the extent not
fully covered by insurance shall be rendered against Borrower, any Loan party or
any of their Subsidiaries and either (i) enforcement
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proceedings shall have been commenced by any creditor upon such judgment or
order, or (ii) there shall be any period of 10 consecutive days during which a
stay or enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(h) An ERISA Event shall occur which, in the reasonable
determination of the Majority Lenders, has a reasonable possibility of a
liability, deficiency or waiver request of the Borrower or any ERISA Affiliate,
whether or not assessed, exceeding $1,000,000; or
(i) Any Loan Party or any of its Subsidiaries shall have
entered into any consent or settlement decree or agreement or similar
arrangement with a Governmental Authority or any judgment, order, decree or
similar action shall have been entered against the Borrower or any of its
Subsidiaries, in each case based on or arising from the violation of or pursuant
to any Environmental Law, or the generation, storage, transportation, treatment,
disposal or Release of any Hazardous Material and, in connection with all the
foregoing, such party is likely to incur Environmental Liabilities and Costs in
excess of $1,000,000; or
(j) There shall occur a Material Adverse Change or an event
which has a Material Adverse Effect; or
(k) The REIT shall cease, for any reason, to maintain its
status as an equity-oriented real estate investment trust under Sections 856
through 860 or the Code or its status as grandfathered from the application of
Section 269(B) of the Code pursuant to Section 132(c)(3) of the Deficit
Reduction Act of 1984; or
(l) The REIT shall cease at any time to be the sole general
partner of Borrower or the Corporation shall cease at any time to be the sole
general partner of SLC; or
(m) Any provision of any Guaranty after delivery thereof under
Section 3.1 shall for any reason cease to be valid and binding on any party
thereto, or any party thereto shall so state in writing; or
(n) If at any time more than 15% of the Hotels owned by
Borrower or Borrower Subsidiaries are managed by entities other than the
Guarantor or its Subsidiaries or by an entity approved by the Majority Lenders
in their sole discretion.
8.2 Remedies. (a) If there shall occur and be continuing any
Event of Default, the Administrative Agent shall at the request, or may with the
consent of the Super Majority Lenders by notice to the Borrower and the REIT,
declare the Loan, all interest thereon and all other amounts and Obligations
payable under this Agreement to be forthwith due and payable, whereupon the
Notes, all such interest and all such amounts and Obligations shall become and
be forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower and
the REIT, and the obligation of the Lenders (including the Swing Advance Bank
and the Letter of Credit Issuer) to make any Advances or issue Letters of Credit
hereunder shall thereupon terminate; provided, however, that upon the occurrence
of the Event of Default specified in subparagraph 8.1(f) above, the Loan, all
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such interest and all such amounts and Obligations shall automatically become
and be due and payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the Borrower and the REIT.
In addition to the remedies set forth above, the Administrative Agent may, on
behalf of the Lenders, and with the consent of the Lenders, exercise any
remedies provided by applicable law.
(b) If the Administrative Agent exercises any rights or
remedies pursuant to subparagraph 8.2(a), the Administrative Agent shall not,
without the consent of all of the Lenders, rescind the exercise of said rights
or remedies.
ARTICLE IX
The Administrative Agent
9.1. AUTHORIZATION AND ACTION.
(a) Each Lender hereby appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to the Administrative Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto. Without limitation of the
foregoing, each Lender hereby authorizes the Administrative Agent to execute and
deliver, and to perform its obligations under, each of the Loan Documents to
which the Administrative Agent is a party, and to exercise all rights, powers
and remedies that the Administrative Agent may have under such Loan Documents.
(b) As to any matters not expressly provided for by this
Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Notes), the Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
any action which the Administrative Agent in good faith believes exposes it to
personal liability or is contrary to this Agreement or applicable law unless the
Lenders have agreed in writing to indemnify the Administrative Agent for such
action in a manner satisfactory to the Administrative Agent in its sole
discretion. The Administrative Agent agrees to give to each Lender prompt notice
of (a) each notice and, (b) to the extent the Administrative Agent grants any
consents, approvals, disapprovals or waivers to the Borrower pursuant to the
directions of the Majority Lenders or all of the Lenders as required hereunder,
notice of such consent, approval, disapproval or waiver, given to it by, or by
it to, any Loan Party pursuant to the terms of this Agreement or the other Loan
Documents.
9.2. Administrative Agent's Reliance, Etc. Neither the
Administrative Agent, nor any of its Affiliates or any of the respective
directors, officers, agents or employees of the Administrative Agent or any such
Affiliate shall be liable for any action taken or omitted to be
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taken by it, him, her or them under or in connection with this Agreement or the
other Loan Documents, except for its, his, her or their own gross negligence or
wilful misconduct. Without limitation of the generality of the foregoing, the
Administrative Agent (i) may treat the payee of any Note as the holder thereof
until such Note has been assigned in accordance with Section 10.7; (ii) may rely
on the Register to the extent set forth in Section 10.7(e); (iii) may consult
with legal counsel (including, without limitation, counsel to the Borrower or
any other Loan Party), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accounts or
experts; (iv) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations made
in or in connection with this Agreement or any of the other Loan Documents; (v)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or any
of the other Loan Documents on the part of the Borrower or any other Loan Party
or to inspect the property (including, without limitation, the books and
records) of the Borrower or any other Loan Party; (vi) shall not be responsible
to any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto; and (vii) shall incur no liability to any other Lender or the Borrower
or the REIT under or in respect of this Agreement or any of the other Loan
Documents by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, cable, telex or facsimile transmission)
believed by it to be genuine and signed or sent by the proper party or parties.
9.3. The Agents and Affiliates. With respect to its
Commitment, the Loan made by it and each Note issued to it, each Agent shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not an Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include the Agents in
their individual capacity. Each Agent and each Lender and their respective
affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the Borrower
or any other Loan Party or any of their respective Subsidiaries and any Person
who may do business with or own securities of the Borrower or any other Loan
Party or any of their respective Subsidiaries, all as if the Agents were not the
Administrative Agent, Syndication Agent and Documentation Agent, respectively,
and without any duty to account therefor to the Agents or to Lenders.
9.4. Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements referred to in Article IV 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 Agent 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 this Agreement and other
Loan Documents.
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9.5. Indemnification. The Lenders agree to indemnify the
Administrative Agent and the Agents and their Affiliates, and their respective
directors, officers, employees, agents and advisors (to the extent not
reimbursed by the Borrower or other Loan Parties), without duplication ratably
according to the respective principal amounts of the Notes then held by each of
them, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements
(including, without limitation, fees and disbursements of legal counsel) of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against, the Administrative Agent or the Agents in any way relating to or
arising out of this Agreement or the other Loan Documents or any action taken or
omitted by the Administrative Agent or the Agents under this Agreement or the
other Loan Documents in its capacity as Administrative Agent or Syndication
Agent or Documentation Agent, as the case may be; provided, however, that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent's, the Agent's or such Affiliate's gross
negligence or wilful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Administrative Agent and the Agents, as the case
may be, promptly upon demand for its ratable share of any out-of-pocket expenses
(including, without limitation, fees and disbursements of legal counsel)
incurred by the Administrative Agent and the Agents, as the case may be in
connection with the preparation, execution, delivery administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of its rights or
responsibilities under, this Agreement or the other Loan Documents, to the
extent that the Administrative Agent or the Agents, as applicable, is not
reimbursed for such expenses by the Borrower or another Loan Party.
9.6. Successor Agent. The Administrative Agent may resign at
any time by giving written notice thereof to the Lenders and the Borrower and
may be removed by the Majority Lenders in the event that the Administrative
Agent commits a wilful breach of, or is grossly negligent in the performance of,
its material obligations hereunder. Furthermore, in the event that at any time
the Administrative Agent assigns its entire interest as a Lender hereunder to an
Eligible Assignee as permitted by Section 10.7 hereof, which Eligible Assignee
is not an Affiliate of the Administrative Agent, then the Administrative Agent
shall resign as Administrative Agent. Upon any such resignation or removal
(which shall be effective upon such date as a successor Agent accepts its
appointment), the Majority Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Majority
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor Agent,
which shall be a commercial bank or branch and a foreign bank organized under
the laws of the United States of America or of any State thereof, having a
combined capital and surplus of at least $1,000,000,000. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations under this Agreement and the other Loan Documents. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article IX shall
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inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement and the other Loan Documents.
ARTICLE X
MISCELLANEOUS
10.1. Amendments, Etc. (a) No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Borrower or the
REIT therefrom shall in any event be effective unless the same shall be in
writing and signed by the Majority Lenders subject to Sections 10.1(b) and (c),
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided that, subject to
Sections 10.1(b) and (c) below, the Administrative Agent shall have the right to
make non-material waivers of non-economic provisions of this Agreement or
consent to non-material departures therefrom. The parties hereto agree that any
non-material waiver of any provision of this Agreement or any other Loan
Document shall be effective upon the execution by the party so charged of a
written agreement to such effect.
(b) Notwithstanding anything set forth in subparagraph (a)
above, no amendment, waiver or consent shall, unless in writing and signed by
all the Lenders, do any of the following: (i) waive any of the conditions
specified in Article III except as otherwise provided therein; (ii) increase the
Commitments of the Lenders or subject the Lenders to any additional obligations;
(iii) reduce the principal of, or interest on, the Loan or any fees or other
amounts payable hereunder; (iv) waive or postpone any date fixed for any payment
of principal of, or interest on, the Loan or any fees or other amounts payable
hereunder, other than payable hereunder at the Default Rate; (v) change the
Final Maturity Date; (vi) rescind any acceleration of the Loan; (vii) change the
percentage of the Commitments, the aggregate unpaid principal amount of the
Loans, or the number of Lenders which shall be required for the Lenders or any
of them to take any action hereunder; (viii) change the definitions of
Borrower's Total Value, Eligible Asset Value, Borrowing Base or Available Credit
(provided that the foregoing shall not include changes in any defined terms used
in such definitions); (ix) release any Loan Party from its obligations under any
Note or any Guaranty; (xiii) waive payment of any default rate interest pursuant
to Section 2.9(b); or (x) amend this Section 10.1; and provided, further, that
no amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above to take such
action, affect the rights or duties of the Administrative Agent under this
Agreement or the other Loan Documents.
(c) Notwithstanding anything set forth in subparagraphs (a)
and (b) above, no amendment , waiver or consent shall, unless in writing and
signed by the Super Majority Lenders, (i) waive any Event of Default; (ii) waive
any of the financial covenants specified in this Agreement; (iii) change the
definitions of Eligible Assets, Eligible Hotels, Eligible Mortgage Loans or
Eligible Management Agreements;
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(d) Notwithstanding anything to the contrary in this
Agreement, no provision of Section 2.17, 2.19 or Article IX shall be amended
without the prior written consent of the Swing Advance Bank, the Letter of
Credit Issuer and the Administrative Agent, respectively.
(e) Each Lender shall reply promptly, but in any event within
ten (10) Business Days of receipt by such Lender from the Administrative Agent
of a request for consent, approval, disapproval or waiver, together with all
supporting materials and calculations reasonably required by the Lender to make
its determinations (the "Lender Reply Period"). Unless a Lender shall give
written notice to the Administrative Agent that it objects to consenting,
approving, disapproving or waiving any matter as requested by the Administrative
Agent (together with a written explanation of the reasons behind such objection)
within the Lender Reply Period, such Lender shall be deemed to have consented,
approved, disapproved or waived such matters as specified in the Administrative
Agent's request.
10.2. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including, without limitation,
telegraphic, telex, telecopy or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered by hand, if to the Borrower, at its
address at c/o Starwood Lodging Trust, 2231 East Camelback Road, Suite 410,
Phoenix, Arizona 85016, Attention: Ronald C. Brown, with a copy to Attention:
Rick Smith, with a copy to Sidley & Austin, 555 West Fifth Street, Los Angeles,
California 90013-1010, Attention: Sherwin Samuels, if to any Lender, at its
Domestic Lending Office specified on Schedule 1.1-B; and if to the
Administrative Agent, at its address at 130 Liberty Street, New York, New York
10006, Attention: Caryl Mooney; or, such other address as shall be designated by
such party in a written notice to the other parties and, as to each other party,
at such other address as shall be designated by such party in a written notice
to the Borrower and the Administrative Agent. All such notices and
communications shall, when mailed, telegraphed, telexed, telecopied, cabled or
delivered, be effective when deposited in the mails, delivered to the telegraph
company, confirmed by telex answerback, telecopied with confirmation of receipt,
delivered to the cable company or delivered by hand to the addressee or its
agent, respectively, except that notices and communications to the
Administrative Agent pursuant to Article II or IX shall not be effective until
received by the Administrative Agent.
10.3. No Waiver; Remedies. No failure on the part of any
Lender or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder or under any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
10.4. Costs; Expenses; Indemnities. (a) The Borrower and the
REIT agrees to pay on demand (i) all reasonable costs and expenses of the
Administrative Agent and its respective Affiliates, without duplication, and the
other Agents in connection with the preparation, execution, delivery,
administration, syndication, modification, and amendment of this Agreement, each
of the other Loan Documents and each of the other documents to be delivered
hereunder and thereunder, including, without limitation, the fees and
out-of-pocket expenses of counsel, accountants, appraisers, consultants or
industry experts retained by the Administrative Agent with
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respect thereto and, as to the Administrative Agent, with respect to advising it
as to its rights and responsibilities under this Agreement and the other Loan
Documents, and (ii) all costs and expenses of the Administrative Agent or any of
the Lenders (including, without limitation, the fees and out-of-pocket expenses
of counsel, accountants, appraisers, consultants or industry experts retained by
the Administrative Agent or any Lender) in connection with the restructuring or
enforcement (whether through negotiation, legal proceedings or otherwise) of
this Agreement and the other Loan Documents.
(b) The Borrower and the REIT agrees to indemnify and hold
harmless the Administrative Agent, each Agent and each Lender and their
respective Affiliates, without duplication, and the directors, officers,
employees, agents, attorneys, consultants and advisors of or to any of the
foregoing (including, without limitation, those retained in connection with the
satisfaction or attempted satisfaction of any of the conditions set forth in
Article III) (each of the foregoing being an "Indemnitee") from and against any
and all claims, damages, liabilities, obligations, losses, penalties, actions,
judgments, suits, costs, disbursements and expenses of any kind or nature
(including, without limitation, fees and disbursements of counsel to any such
Indemnitee and experts, engineers and consultants and the costs of investigation
and feasibility studies) which may be imposed on, incurred by or asserted
against any such Indemnitee in connection with or arising out of any
investigation, litigation or proceeding, whether or not any such Indemnitee is a
party thereto, whether direct, indirect, or consequential and whether based on
any federal, state or local law or other statutory regulation, securities or
commercial law or regulation, or under common law or in equity, or on contract,
tort or otherwise, in any manner relating to or arising out of or based upon or
attributable to this Agreement, any other Loan Document, any document delivered
hereunder or thereunder, any Obligation, or any act, event or transaction
related or attendant to any thereof, including, without limitation, arising from
any misrepresentation or breach of warranty under Section 4.18 or any
Environmental Claim or any Environmental Lien or any Remedial Action arising out
of or based upon anything relating to any Asset, including any Mortgage Note
Hotel or real property owned or leased by the REIT, the Borrower or any of its
Subsidiaries or any Operating Entities or any Joint Ventures (collectively, the
"Indemnified Matters"); provided, however, that neither the REIT nor the
Borrower shall have any obligation under this Section 10.4(b) to an Indemnitee
with respect to any Indemnified Matter caused by or resulting from the gross
negligence or willful misconduct of that Indemnitee, as determined by a court of
competent jurisdiction in a final non-appealable judgment or order.
(c) If any Lender receives any payment of principal of, or is
subject to a conversion of, any Eurodollar Rate Loan other than on the last day
of an Interest Period relating to such Loan, as a result of any payment or
conversion made by the Borrower or acceleration of the maturity of the Notes
pursuant to Section 8.2 or for any other reason, the Borrower shall, upon demand
by such Lender (with a copy of such demand to the Administrative Agent), to the
extent not previously paid to such Lender pursuant to any other provision
hereof, pay to the Administrative Agent for the account of such Lender all
amounts required to compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment or
conversion, including, without limitation, any loss (including, without
limitation, loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund or maintain such Loan.
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(d) The Borrower and the REIT shall indemnify the
Administrative Agent, the Agents and the Lenders for, and hold the
Administrative Agent, the Agents and the Lenders harmless from and against, any
and all claims for brokerage commissions, fees and other compensation made
against the Administrative Agent, the Agents and the Lenders for any broker,
finder or consultant with respect to any agreement, arrangement or understanding
made by or on behalf of any Loan Party or any of its Subsidiaries in connection
with the transactions contemplated by this Agreement.
(e) Neither the Administrative Agent, the Syndication Agent
nor any Lender by entering into this Agreement or by taking any action pursuant
hereto, will be deemed a partner or joint venturer with Borrower or the REIT or
any Loan Party and Borrower and the REIT agree to hold Administrative Agent, the
Syndication Agent and each Lender harmless from any damages and expenses
resulting from such a construction of the relationship of the parties hereto or
any assertion thereof.
(f) The Borrower and the REIT agrees that any indemnification
or other protection provided to any Indemnitee pursuant to this Agreement
(including, without limitation, pursuant to this Section 10.4) or any other Loan
Document shall (i) survive payment of the Obligations and (ii) inure to the
benefit of any Person who was at any time an Indemnitee under this Agreement or
any other Loan Document.
10.5. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default each 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
to or for the credit or the account of the Borrower or the REIT against any and
all of the Obligations now or hereafter existing whether or not such Lender
shall have made any demand under this Agreement or any Note or any other Loan
Document and although such Obligations may be unmatured. Each Lender agrees
promptly to notify the Borrower after any such set-off and application made by
such Lender; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Lender
under this Section are in addition to the other rights and remedies (including,
without limitation, other rights of set-off) which such Lender may have.
10.6. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower, the REIT, the Lenders and the
Administrative Agent and when the Administrative Agent shall have been notified
by each Lender that such Lender has executed it and thereafter shall be binding
upon and inure to the benefit of the Borrower, the Administrative Agent and each
Lender and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lenders.
10.7. Assignments and Participations. (a) Each Lender may
sell, transfer, negotiate or assign to one or more other Lenders or Eligible
Assignees all or a portion of the Notes held by it and a commensurate portion of
its rights and obligations hereunder and under the
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other Loan Documents; provided, however, that (i) the aggregate amount of the
Loan being assigned pursuant to each such assignment (determined as of the date
of the Assignment and Acceptance with respect to such assignment) shall in no
event be less than $5,000,000.00, except (x) with the consent of the
Administrative Agent and Borrower (unless such Eligible Assignee, following the
assignment, will hold more than $5,000,000.00 of the Loan), provided that
Borrower's consent shall not be unreasonably withheld, or (y) during the
continuance of an Event of Default, or (z) a Lender may assign a portion of the
Notes held by it to another existing Lender or Lenders only, provided that the
aggregate amount of the Notes retained by the assignor after the transfer
pursuant to this clause (z) shall in no event be less than $10,000,000, and (ii)
each assignee hereunder shall also be an Eligible Assignee. The parties to each
assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording, an Assignment and Acceptance, together with the Notes
(or an Affidavit of Loss and Indemnity with respect to such Notes satisfactory
to the Administrative Agent) subject to such assignment. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in such Assignment and Acceptance, (A) the assignee thereunder shall become a
party hereto and, to the extent that rights and obligations under the Loan
Documents have been assigned to such assignee pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and
thereunder, and (B) the assignor thereunder shall, to the extent that rights and
obligations under this Agreement have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (except those which survive the
payment in full of the Obligations) and be released from its obligations under
the Loan Documents (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Lender's rights and obligations
under the Loan Documents, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any of
the statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document furnished pursuant thereto or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other Loan Document or any other instrument or document
furnished pursuant hereto or thereto; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Loan Party or the performance or observance by any
Loan Party of any of its obligations under this Agreement or any other Loan
Document or of any other instrument or document furnished pursuant hereto or
thereto; (iii) such assigning Lender confirms that it has delivered to the
assignee and the assignee confirms that it has received a copy of this Agreement
and each of the Loan Documents together with a copy of the most recent financial
statements delivered by the Borrower to the Lenders pursuant to each of the
clauses of Section 6.11 (or if no such statements have been delivered, the
financial statements referred to in Section 4.5 of this Agreement) and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Administrative
Agent or the assignor Lender or the other Agents, such assigning Lender or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own
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<PAGE> 127
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Administrative Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(c) The Administrative Agent shall maintain at its address
referred to in Section 10.2 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitments of and principal amount of the
Loans owing to each Lender from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Loan Parties, the Administrative Agent and the Lenders may treat
each Person whose name is recorded in the Register as a Lender for all purposes
of this Agreement. The Register shall be available for inspection by the
Borrower, the Administrative Agent or any Lender at any reasonable time and from
time to time upon reasonable prior notice. The Administrative Agent shall supply
to the Borrower promptly after any amendment thereto, a copy of the amended
Register.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with the Notes subject to such assignment, the Administrative
Agent shall, if such Assignment and Acceptance has been completed, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the Borrower. Within five
Business Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Administrative Agent, in exchange for
such surrendered Notes, new Notes to the order of such Eligible Assignee in an
amount equal to the Notes assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a portion of the Notes
hereunder, new Notes to the order of the assigning Lender in an amount equal to
the amounts retained by it hereunder. Such new Notes shall be dated the same
date as the Surrendered Notes and be in substantially the form of Notes executed
as of the Closing Date.
(e) In addition to the other assignment rights provided in
this Section 10.7, each Lender may assign, as collateral or otherwise, any of
its rights under this Agreement (including, without limitation, rights to
payments of principal or interest on the Loan) to any Federal Reserve Bank
without notice to or consent of the Borrower or the Administrative Agent;
provided, however, that no such assignment shall release the assigning Lender
from any of its obligations hereunder. The terms and conditions of any such
assignment and the documentation evidencing such assignment shall be in form and
substance satisfactory to the assigning Lender and the assignee Federal Reserve
Bank.
(f) Each Lender may sell participations to one or more banks
or other Persons in or to all or a portion of its rights and obligations under
the Loan Documents (including, without limitation, all or a portion of the Notes
held by it) at any time without the consent of the Administrative Agent or any
other Person. The terms of such participation shall not, in any event,
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<PAGE> 128
require the participant's consent to any amendments, waivers or other
modifications of any provision of any Loan Documents, the consent to any
departure by any Loan Party therefrom, or to the exercising or refraining from
exercising any powers or rights which such Lender may have under or in respect
of the Loan Documents (including, without limitation, the right to enforce the
obligations of the Loan Parties), except if any such amendment, waiver or other
modification or consent would reduce the amount, or postpone any date fixed for,
any amount (whether of principal, interest or fees, except interest at the
Default Rate), to which such participant would otherwise be entitled under such
participation. In the event of the sale of any participation by any Lender, (i)
such Lender's obligations under the Loan Documents (including, without
limitation, its Commitments) shall remain unchanged; (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations; (iii) such Lender shall remain the holder of such Notes and
Obligations for all purposes of this Agreement; and (iv) the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement.
(g) Each participant shall be entitled to the benefits of
Sections 2.11, 2.13 and 2.15 as if it were a Lender; provided, however, that
anything herein to the contrary notwithstanding, the Borrower shall not, at any
time, be obligated to pay to any assignee or participant of any interest of any
Lender, under Section 2.11, 2.13 or 2.15, any sum in excess of the sum which if
the Borrower would not at the time of such assignment have been obligated to pay
to such assignor Lender any such amount in respect of such interest had such
assignment not been effected or had such participation not been sold.
10.8. Governing Law; Severability. This Agreement and the
Notes and the rights and obligations of the parties hereto and thereto shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New York. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
10.9. Submission to Jurisdiction; Service of Process. (a) Any
legal action or proceeding with respect to this Agreement or the Notes or any
document related thereto may be brought in the courts of the State of New York
or of the United States of America for the Southern District of New York, and,
by execution and delivery of this Agreement, the Borrower, the REIT and each
Lender hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The parties hereto
hereby irrevocably waive any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which any of them may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions.
(b) The Borrower and the REIT irrevocably consent to the
service of process of any of the aforesaid courts in any such action or
proceeding by the mailing of copies thereof
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<PAGE> 129
by registered or certified mail, postage prepaid, to the Borrower and the REIT
at its address provided herein.
(c) Nothing contained in this Section 10.9 shall affect the
right of the agent, any Lender or any holder of a Note to serve process in any
other manner permitted by law or commence legal proceedings or otherwise proceed
against the Borrower in any other jurisdiction.
10.10. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
10.11. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
10.12. Entire Agreement. This Agreement, together with all of
the other Loan Documents and all certificates and documents delivered hereunder
or thereunder, and the agreements referred to in Section 2.4(b) embody the
entire agreement of the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof.
10.13. Confidentiality. Each Lender and the Administrative
Agent and the Borrower and the REIT agree to keep information obtained by it
pursuant hereto and the other Loan Documents confidential and agrees that it
will only use such information in connection with the transactions contemplated
by this Agreement and not disclose any of such information other than (i) to
such Lender's, Administrative Agent's, Borrower's or the REIT's, as the case may
be, employees, representatives and agents who are or are expected to be involved
in the evaluation of such information in connection with the transactions
contemplated by this Agreement and who are advised of the confidential nature of
such information, (ii) to the extent such information presently is or hereafter
becomes available to such Lender or the Administrative Agent, Borrower or the
REIT, as the case may be, on a non-confidential basis from a source other than
the Borrower, the REIT, any Lender or the Administrative Agent, (iii) to the
extent disclosure is required by law, regulation or judicial order or requested
or required by bank regulators or auditors, or (iv) to assignees or participants
or potential assignees or participants who agree to be bound by the provisions
of this sentence.
10.14. Delivery of Information. Borrower and the REIT
acknowledge and agree that each Lender may provide to each of the other Lenders,
and that Lender and each of the other Lenders may provide to any participant,
originals or copies of this Agreement, all Loan Documents and all other
documents, instruments, certificates, opinions, insurance policies, letters of
credit, reports, requisitions and other materials and information of every
nature or description, and may communicate all oral information, at any time
submitted by or on behalf of Borrower or the REIT or received by Lender in
connection with the Loan or Borrower or the REIT.
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<PAGE> 130
10.15. Estoppel Certificates. (a) Borrower, the REIT and each
Lender each hereby agree at any time and from time to time upon not less than
ten (10) Business Days prior written notice by Borrower or the Administrative
Agent to execute, acknowledge and deliver to the party specified in such notice,
a statement, in writing, certifying whether this Agreement is unmodified and in
full force and effect (or if there have been modifications, whether the same, as
modified, is in full force and effect and stating the modifications hereto), and
stating whether or not, to the best knowledge of such certifying party, any
Default or Event of Default has occurred and is then continuing, and, if so,
specifying each such Default or Event of Default; provided, however, that it
shall be a condition precedent to Lenders' obligation to deliver the statement
pursuant to this Section, that the Lenders, through the Administrative Agent,
shall receive, together with Borrower's request for such statement, a
certificate of a Responsible Officer of Borrower and the REIT stating that no
Default or Event of Default exists as of the date of such certificate (or
specifying such Default or Event of Default).
(b) Within ten (10) Business Days of the Administrative
Agent's request, Borrower shall execute and deliver a certificate of Responsible
Officer of Borrower and the REIT confirming the then aggregate outstanding
principal balance of the Loan, the total outstanding amount of Swing Advances,
the Total Letter of Credit Outstandings, the outstanding principal balance with
respect to the Note of each Eurodollar Rate Portion and each Base Rate Portion,
the Eurodollar Rate Margin and the Base Rate Margin for each Eurodollar Rate
Portion and Base Rate Portion, as applicable, the dates to which all interest
has been paid, and the Interest Period for each Eurodollar Rate Portion and the
dates to which all Fees have been paid. Such statement shall be binding and
conclusive on Borrower absent manifest error.
10.16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES
ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN
STATEMENT OR ACTION OF ANY PARTY HERETO.
10.17. Joint and Several Obligations. Unless the context
clearly indicates otherwise each covenant, agreement, undertaking, condition or
other matter stated herein as a covenant, agreement, undertaking or matter
involving the Borrower and the REIT shall be jointly and severally binding upon
each of the Borrower and the REIT.
10.18. Recourse. The Loan and the Obligations shall be fully
recourse to Borrower and the REIT; however, with respect to the Non-Recourse
Portion only, no personal liability or personal deficiency judgment shall be
asserted or enforced against the REIT except as a result and to the extent of
(i) fraud or intentional misrepresentation by Borrower, the REIT or any other
Loan Party; (ii) Borrower's, the REIT's or any other Loan Party's misapplication
or misappropriation of Gross Revenues received by Borrower after the occurrence
of an Event of Default; (iii) the misapplication or the misappropriation of
insurance proceeds or condemnation awards; or (iv) the occurrence of an Event of
Default under Section 8.1(h) of this Agreement and nothing contained in this
Section 10.18 shall limit, affect or impair any of Lender's rights or remedies
against the
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<PAGE> 131
REIT under Section 10.4(b) of this Agreement with respect to Environmental
Claims, Environmental Liens, Remedial Actions, or Fees. Notwithstanding the
foregoing, the agreement of Lender to not assert or enforce personal liability
or a personal deficiency judgment against the REIT SHALL BECOME NULL AND VOID
and shall be of no further force and effect in the event that there is any
breach of Section 7.4 of Borrower's Partnership Agreement or of the last full
sentence of Section 6.2, Section 6.24(b), 6.37, 7.4, 7.5 or 7.13 of this
Agreement or upon the occurrence of any Event of Default under Section 8.1(F)
with respect to the Borrower, the REIT or any Guarantor. Each Lender
acknowledges and agrees that the name "Starwood Lodging Trust" is a designation
of the REIT and its Trustees (as Trustees but not personally) under a
Declaration of Trust dated August 25, 1969, as amended and restated as of June
6, 1988, as further amended on February 1, 1995 and as further amended on June
19, 1995 and as the same may be further amended from time to time, and all
persons dealing with the REIT shall look solely to the REIT's assets for the
enforcement of any claims against the REIT, as the Trustees, officers, agents
and security holders of the REIT assume no personal liability for obligations
entered into on behalf of the REIT, and their respective individual assets shall
not be subject to the claims of any person relating to such obligations. The
foregoing shall govern all direct and indirect obligations of the REIT under
this Agreement and the other Loan Documents.
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<PAGE> 132
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunder duly
authorized, as of the date first above written.
SLT REALTY LIMITED PARTNERSHIP, a
Delaware limited partnership
By: Starwood Lodging Trust, a Maryland real
estate investment trust, its general partner
By: /s/ Illegible Signature
------------------------------------------
Name:
Title:
STARWOOD LODGING TRUST, a Maryland real
estate investment trust
By: /s/ Illegible Signature
------------------------------------------
Name:
Title:
BANKERS TRUST COMPANY, a--------------------------
By: /s/ Illegible Signature
------------------------------------------
Name:
Title:
LEHMAN BROTHERS HOLDINGS INC., D/B/A
LEHMAN CAPITAL, A DIVISION OF LEHMAN
BROTHERS HOLDINGS INC., a Delaware
corporation
By: /s/ Illegible Signature
------------------------------------------
Name: Illegible Signature
Title: Authorized Signatory
<PAGE> 133
BANKBOSTON N. A.
By: /s/ Kathleen M. Ahern
-----------------------------------------------
Name: Kathleen M. Ahern
Title: Vice President
BANK OF MONTREAL, acting by and through its
Chicago Branch
By: /s/ David A. Mazujian
-----------------------------------------------
Name: DAVID A. MAZUJIAN
Title: DIRECTOR
<PAGE> 1
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED CONSOLIDATED COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
EXHIBIT 11
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- ------------------------
1997 1996 1997 1996
-------- ------- -------- ----------
<S> <C> <C> <C> <C>
Income before extraordinary item ............................................ $ 2,325 $ 6,099 $ 28,277 $ 18,710
Extraordinary item .......................................................... (3,452) -- (3,452) 1,077
-------- ------- -------- ----------
Net income (loss) ........................................................... $ (1,127) $ 6,099 $ 24,825 $ 19,787
======== ======= ======== ==========
Weighted average number of paired shares outstanding during the period ...... 45,632 32,900 44,364 26,000
Stock option equivalents ............................................... 2,393 -- 2,103 --
Restricted stock equivalents ........................................... 290 -- 362 --
Deferred stock equivalents ............................................. 2 -- 1 --
-------- ------- -------- ----------
Paired shares used for computation of primary earnings per paired share ..... 48,317 32,900 46,830 26,000
Additional dilution from stock option equivalents ........................ 480 -- 729 --
-------- ------- -------- ----------
Paired shares used for computation of fully diluted earnings per paired share 48,797 32,900 47,559 26,000
======== ======= ======== ==========
PRIMARY EARNINGS (LOSS) PER PAIRED SHARE
Income before extraordinary item ......................................... $ 0.05 $ 0.19 $ 0.60 $ 0.72
Extraordinary item ....................................................... (0.07) -- (0.07) 0.04
-------- ------- -------- ----------
Net income (loss) per paired share ....................................... $ (0.02) $ 0.19 $ 0.53 $ 0.76
======== ======= ======== ==========
FULLY DILUTED EARNINGS (LOSS) PER PAIRED SHARE
Income before extraordinary item ......................................... $ 0.05 $ 0.19 $ 0.59 $ 0.72
Extraordinary item ....................................................... (0.07) -- (0.07) 0.04
-------- ------- -------- ----------
Net income (loss) per paired share ....................................... $ (0.02) $ 0.19 $ 0.52 $ 0.76
======== ======= ======== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ON THE JOINT ANNUAL REPORT ON FORM 10K.
</LEGEND>
<CIK> 0000316206
<NAME> STARWOOD LODGING CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 25,358,000
<SECURITIES> 0
<RECEIVABLES> 58,507,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 33,180,000
<PP&E> 254,701,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 371,746,000
<CURRENT-LIABILITIES> 328,940,000
<BONDS> 0
0
0
<COMMON> 457,000
<OTHER-SE> 42,349,000
<TOTAL-LIABILITY-AND-EQUITY> 371,746,000
<SALES> 230,484,000
<TOTAL-REVENUES> 232,712,000
<CGS> 0
<TOTAL-COSTS> 160,750,000
<OTHER-EXPENSES> 70,087,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,562,000
<INCOME-PRETAX> (3,219,000)
<INCOME-TAX> (3,219,000)
<INCOME-CONTINUING> (3,219,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,219,000)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ON THE JOINT ANNUAL REPORT ON FORM 10K.
</LEGEND>
<CIK> 0000048595
<NAME> STARWOOD LODGING TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
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