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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 1-9443
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RED LION INNS LIMITED PARTNERSHIP
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-3029959
- ------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4001 Main Street, Vancouver, Washington 98663
- --------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (360) 696-0001
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Units representing limited
partnership interests American Stock Exchange
-------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act
None
------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [X]
The aggregate market value of units of non-voting limited partnership interests
held by non-affiliates was $99,636,250 at March 25, 1996, and is based on a
closing price of $24.125 and 4,130,000 units outstanding and held by non-
affiliates.
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TABLE OF CONTENTS
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Item of Form 10-K Page
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<S> <C>
PART I 3
Item 1 - Business 3
Item 2 - Properties 6
Item 3 - Legal Proceedings 7
Item 4 - Submission of Matters to a Vote
of Security Holders 7
PART II 7
Item 5 - Market for the Registrant's Common
Equity and Related Stockholder Matters 7
Item 6 - Selected Financial Data 8
Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9
Item 8 - Financial Statements and Supplementary Data 13
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 30
PART III 30
Item 10 - Directors and Executive Officers of
the Registrant 30
Item 11 - Executive Compensation 31
Item 12 - Security Ownership of Certain Beneficial
Owners and Management 31
Item 13 - Certain Relationships and Related
Transactions 31
PART IV 33
Item 14 - Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 33
SIGNATURES 35
</TABLE>
2
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PART I
Item 1 Business
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GENERAL DEVELOPMENT OF BUSINESS:
Red Lion Inns Limited Partnership and its subsidiary limited partnership, Red
Lion Inns Operating L.P. (the "Partnership" and the "Operating Partnership",
respectively; collectively, the "Partnership"), were formed in 1987 under the
Delaware Revised Uniform Limited Partnership Act for the purpose of owning,
through the Operating Partnership, ten Red Lion hotels (the "Hotels" or
individually, a "Hotel"). The Hotels had been previously owned by Red Lion, a
California Limited Partnership ("Historical Red Lion").
Red Lion Hotels, Inc. ("Red Lion") was incorporated in Delaware in March 1994.
On August 1, 1995 (the "Formation Date"), Historical Red Lion contributed
substantially all of its assets (excluding 17 hotels, certain minority joint
venture interests and certain current assets) and certain liabilities to Red
Lion. In connection with this transaction, Historical Red Lion assigned its
management agreement ("Management Agreement") to Red Lion, which continues to
operate and manage the Hotels thereunder. The general partner of the Partnership
and Operating Partnership is Red Lion Properties, Inc. (the "General Partner"),
a wholly owned subsidiary of Red Lion. Red Lion became a publicly held company
in July 1995. Red Lion files reports and other information with the Securities
and Exchange Commission in accordance with the Securities Exchange Act of 1934.
On April 14, 1987, the Partnership completed an initial public offering of units
representing limited partnership interests ("Unit" or "Units") totaling $98.8
million. These proceeds, accompanied by a $105.9 million mortgage loan, were
used to acquire the Hotels, through the Operating Partnership, from Historical
Red Lion for $195 million. Since the completion of this acquisition, the
Partnership's limited partners have had an effective 98.01% ownership interest
in the Hotels, with the General Partner retaining the remaining 1.99% ownership
interest.
Since April 14, 1987, the day-to-day management of the Hotels has been conducted
pursuant to the Management Agreement. Red Lion provides the same management
services to the Hotels that it renders to the other Red Lion lodging facilities,
including a centralized reservation system, purchasing, training, marketing,
sales, advertising, administration, maintenance, accounting and planning
programs.
The statements contained in this report that are not statements of historical
fact may include forward-looking statements that involve a number of risks and
uncertainties. Moreover, from time to time the Partnership may issue other
forward-looking statements. The following factors are among the factors that
could cause actual results to differ materially from the forward-looking
statements: national or local economic conditions affecting the supply and
demand for hotel space, competition in hotel operations, including additional or
improved services or facilities of competitors and price pressures. The
forward-looking statements should be considered in light of these factors.
DESCRIPTION OF BUSINESS:
Red Lion manages the Hotels as part of a full service hotel chain which operates
in the western half of the United States. The Red Lion hotel system,
established in 1959, currently includes 54 lodging facilities with a total of
approximately 14,250 rooms and has approximately 11,200 employees. The chain
includes owned, leased and managed hotels. Revenues for Red Lion were $492.4
million for the year ended December 31, 1995. The lodging facilities are
designed to provide guests with a full range of high-quality hotel
accommodations in convenient locations at competitive prices.
The Partnership's Hotels are located in western and mid-western states and
compete primarily in the upscale sector of the hospitality market. Red Lion has
had particular success in establishing its presence in medium-sized urban
markets. The Hotels are typically located near airports or major traffic
arteries and are convenient to commercial centers or tourist destinations. The
Hotels vary in size, ranging from 208 rooms to 476 rooms.
Red Lion's operating strategy emphasizes a commitment to customer service and
customer value, reinvestment in facilities, quality food and beverage services
and maintenance of a strong base of group business and direct sales and
marketing. The hospitality industry is highly competitive. Red Lion
distinguishes itself from competing hotel chains by providing exceptional
service and value to its customers, with high-quality facilities, food and
beverage services which attract local clientele as well as Hotel guests, and
extensive meeting and convention facilities.
3
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The Hotels offer a variety of meeting and convention facilities which attract
not only business conventions and conferences, but also local functions such as
banquets and receptions. A network of over 140 on-site sales representatives
along with national sales support from offices in Seattle, Portland, San
Francisco, Sacramento, Los Angeles, Washington D.C., Chicago, and Red Lion's
Vancouver, Washington executive office, work to expand Red Lion's share of
convention market business.
All of the Hotels offer full-service accommodations. In addition to
restaurants, lounges, banquet and meeting space, most of the Hotels offer
oversized rooms with oversized beds, premium television channel and movie
availability, complimentary airport shuttle service, free parking, swimming
pools, room service and valet services. Their guest amenities may include health
and fitness facilities, gift shops, concierge services and business centers.
Red Lion develops and implements advertising, public relations, market research
and training programs on behalf of the Hotels. Technical training and
assistance is provided to each Hotel for other areas such as front office
operations, reservations, housekeeping, property maintenance, energy management,
laundry, valet services, telephone systems and guest services. Other services
provided by Red Lion include accounting and cash management, risk management,
credit and collection, tax compliance, legal, computer and point of sale systems
support and internal audit. Red Lion's food and beverage division establishes
quality levels and monitors performance, provides culinary training, assists in
menu design, pricing, accounting and cost controls.
Red Lion purchases for the Hotels certain operating supplies, furnishings and
equipment allowing Red Lion to ensure consistently high quality and to control
costs.
A centralized reservation system is available to customers throughout the United
States and Canada. Red Lion is in the process of upgrading and improving its
central reservation system on a toll free basis, a project expected to be
implemented in 1996. The improved system will provide, among other features, a
real time inventory of all Red Lion's rooms, which will enhance Red Lion's
ability to manage occupancy yields and room rates. Red Lion also participates
in major national and international airline reservations systems which allow
travel agents to book Red Lion hotel reservations.
The Partnership's full service hotels generally feature large guest rooms,
extensive meeting and convention facilities and full service restaurant and
catering facilities that attract meeting and convention functions from groups
and associations as well as banquets and receptions from the local community.
The Partnership's consistently high levels of reinvestment in its facilities
demonstrate its commitment to maintaining high quality properties. During the
last four years, an average of approximately 7.8% of revenues has been invested
annually in room and facilities refurbishments, renovations and furniture and
equipment replacements. This investment has resulted in attractive, newly
appointed accommodations, updated restaurants and modern equipment.
The Partnership has no employees. Hotel and administrative personnel are
employed by Red Lion. The Partnership is not responsible for the payment of
executive compensation to the officers of the General Partner. The Partnership
reimburses Red Lion for the cost of providing such services at the Hotel level
and reimburses the General Partner for Partnership administrative costs. For
further discussion of reimbursements to the General Partner and executive
compensation, see Items 11 and 13 of this report.
4
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The table below presents comparative information on certain characteristics of
the Hotels:
Average Number of Rooms Per Hotel/(1)/ - 306
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<CAPTION>
YEAR ENDED DECEMBER 31,
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1995 1994 1993
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<S> <C> <C> <C>
Occupancy Percentage/(2)/ 73.5% 72.8% 73.3%
Average Room Rate/(3)/ $ 74.79 $ 70.22 $ 66.67
Average Gross Revenue per room
per year/(2)/ $34,551 $32,813 $31,358
Average Gross Operating Profit
per room per year/(2)/ $12,779 $11,618 $10,593
Average Food and Beverage
Revenues per room per year/(2)/ $11,095 $11,021 $10,788
</TABLE>
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/(1)/ As of December 31, 1995.
/(2)/ Calculated on a per available room per year basis.
/(3)/ Based on rooms occupied.
5
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Item 2 Properties
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Each of the Hotels offers full-service accommodations, with meeting space and at
least two food outlets.
The following table presents certain information concerning the Hotels:
NUMBER OF
PROPERTY LOCATION GUEST ROOMS
- -------------------------------------- -------------------- -----------
Red Lion Hotel/ Sacramento, CA 448
Sacramento
Red Lion Hotel/ Colorado Springs, CO 299
Colorado Springs
Red Lion Hotel/ Boise, ID 304
Riverside
Red Lion Hotel/ Omaha, NE 413
Omaha/(1)/
Red Lion Inn/ Springfield, OR 234
Springfield/(1)/
Red Lion Hotel/ Portland, OR 476
Lloyd Center
Red Lion Hotel/ Portland, OR 235
Downtown
Red Lion Inn/ Bellevue, WA 208
Bellevue Center
Red Lion Inn/ Spokane, WA 237
Spokane Valley
Red Lion Inn/ Yakima, WA 209
Yakima Valley -----
Total Rooms 3,063
=====
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/(1)/ Property subject to full or partial ground lease.
6
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During 1995, the Partnership completed approximately $10.3 million in capital
improvements at the Hotels including $3.6 million for room renovations.
Approximately $1.6 million of the room renovation cost was attributable to an
extensive guest room refurbishment at the Partnership's Sacramento property.
Other improvements included public area refurbishments, electronic lock and
structural upgrades.
Item 3 Legal Proceedings
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The Partnership is subject to litigation arising in the ordinary course of
business. In the opinion of management, these actions will not have a material
adverse effect, if any, on the financial position or results of operations or
liquidity of the Partnership or its subsidiary.
Item 4 Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------------
There were no matters submitted to a vote of unitholders during the year ended
December 31, 1995.
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder
- ---------------------------------------------------------------------------
Matters
- -------
Red Lion Inns Limited Partnership Units are listed on the American Stock
Exchange under the symbol RED. Per Unit market prices during 1995 and 1994
were:
<TABLE>
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QUARTER ENDED
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MAR. 31 JUN. 30 SEP. 30 DEC. 31
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1995
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High $23 5/8 $22 1/2 $24 3/8 $24 1/4
Low 20 7/8 20 1/2 21 7/8 22 1/2
1994
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High 28 7/8 25 3/4 25 3/4 24 5/8
Low 24 3/4 23 1/2 24 21 1/8
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Cash distributions to unitholders were:
Per Unit
Record Payment Cash
1995 Date Date Distribution
- -------------- ---------------- ----------------- ---------------
First Quarter April 30, 1995 May 15, 1995 $ .55
Second Quarter July 31, 1995 August 15, 1995 .55
Third Quarter October 31, 1995 November 15, 1995 .55
Fourth Quarter January 31, 1996 February 15, 1996 .55
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$ 2.20
=======
1994
- --------------
First Quarter April 30, 1994 May 13, 1994 $ .55
Second Quarter July 31, 1994 August 15, 1994 .55
Third Quarter October 31, 1994 November 15, 1994 .55
Fourth Quarter January 31, 1995 February 15, 1995 .55
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$ 2.20
=======
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</TABLE>
At December 31, 1995, the Partnership had 895 unitholders of record,
representing 6,126 identified beneficial owners.
7
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Item 6 Selected Financial Data
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(in thousands, except for operating statistics and per Unit amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
Financial Data:
Partnership revenues (a) $ 39,142 $ 35,620 $ 32,510 $ 31,659 $ 30,826
Income before cumulative effect
of change in accounting principle 4,517 2,929 3,206 3,038 2,997
Per limited partner Unit 1.07 0.69 0.76 0.72 0.71
Cumulative effect of change in
accounting principle -- -- (1,351) -- --
Per limited partner Unit -- -- (0.32) -- --
Net income 4,517 2,929 1,855 3,038 2,997
Per limited partner Unit 1.07 0.69 0.44 0.72 0.71
Cash flow available for distribution
and incentive management fees 16,122 13,752 10,456 10,211 9,961
Per limited partner Unit 3.81 3.25 2.47 2.41 2.35
Cash distribution per limited
partner Unit 2.20 2.20 2.20 2.20 2.1875
Hotel Operating Data:
Gross revenues of the Hotels 105,829 100,603 96,237 95,745 96,959
Hotel gross operating
profit as a percentage of
gross revenues 37.0% 35.4% 33.8% 33.1% 31.8%
Number of rooms at end of period 3,063 3,066 3,069 3,071 3,075
Occupancy percentage (b) 73.5% 72.8% 73.3% 72.7% 73.0%
Average room rate (c) $ 74.79 $ 70.22 $ 66.67 $ 64.56 $ 63.58
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
- -------------------
Total assets $166,267 $165,205 $168,043 $171,873 $176,095
Long-term obligations 118,939 124,831 125,374 125,514 126,520
Partners' capital 18,234 23,031 29,416 36,875 43,151
- ----------------------------
</TABLE>
(a) Partnership revenues represent the gross operating profit of the Hotels
which is the amount credited from Red Lion pursuant to the Management
Agreement.
(b) Calculated on a per available room per year basis.
(c) Based on rooms occupied.
8
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Item 7 Management's Discussion and Analysis of Financial Condition and
- --------------------------------------------------------------------------
Results of Operations
---------------------
BEGINNING JANUARY 1, 1998, THE PARTNERSHIP WILL BE SUBJECT TO TAXES ON ITS
INCOME. THE EFFECT OF THIS WILL BE TO REDUCE THE CASH AVAILABLE FOR
DISTRIBUTIONS TO PARTNERS BY THE AMOUNT OF THESE INCOME TAXES. DISTRIBUTIONS TO
PARTNERS WILL BE CONSIDERED TAXABLE DIVIDENDS.
The revenues of the Partnership represent the gross operating profit of the
Hotels which is credited to the Partnership from Red Lion under the terms of the
Management Agreement. The gross operating revenues and expenses of the Hotels
are included in the consolidated financial statements of Red Lion, and are
excluded from the financial statements of the Partnership, because Red Lion, and
not the Partnership, has operating responsibility for the Hotels. The following
table sets forth Red Lion's operating revenues and expenses associated with the
Hotels (in thousands).
GROSS OPERATING REVENUES AND EXPENSES OF THE HOTELS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1995 1994 1993
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<S> <C> <C> <C>
REVENUES:
Rooms $ 61,496 $ 57,247 $54,778
Food and beverage 33,983 33,791 33,108
Other 10,350 9,565 8,351
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Total revenues 105,829 100,603 96,237
-------- -------- -------
OPERATING COSTS AND EXPENSES:
Departmental direct expenses
Rooms 15,202 14,290 13,791
Food and beverage 26,599 26,742 26,883
Other 3,824 3,680 3,548
Administration and general 8,904 8,391 8,146
Sales, promotion and advertising 5,005 4,637 4,326
Utilities 3,167 3,316 3,265
Repairs and maintenance 3,986 3,927 3,768
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Total operating costs and
expenses 66,687 64,983 63,727
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Gross operating profit of Hotels
managed by Red Lion $ 39,142 $ 35,620 $32,510
======== ======== =======
</TABLE>
FISCAL 1995 COMPARED TO FISCAL 1994
GROSS REVENUES OF THE HOTELS: Gross revenues increased to $105.8 million in 1995
from $100.6 million in 1994, an increase of $5.2 million, or 5.2%.
Room revenues rose to $61.5 million from $57.2 million in 1994, an increase of
$4.3 million, or 7.5%. The increase in room revenues is due to higher room
rates and an increase in occupancy. Average daily room rates advanced to
$74.79 from $70.22 in 1994, an increase of $4.57, or 6.5%. Occupancy improved
to 73.5% from 72.8%.
Food and beverage revenues of $34.0 million were essentially unchanged.
9
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Other revenues increased by $.8 million, or 8.2% from 1994 primarily due to
higher banquet room and equipment rentals and higher occupancy rates.
GROSS OPERATING COSTS AND EXPENSES OF THE HOTELS: Gross operating costs and
expenses of the Hotels rose to $66.7 million from $65.0 million in 1994, an
increase of $1.7 million, or 2.6%. The increase is largely due to a $0.9
million increase in rooms expense and a $0.5 million increase in administrative
and general costs.
With the improved gross revenues of the Hotels and careful management of
operating costs, the gross operating profit of the Hotels improved by 9.9% for
the year ended December 31, 1995.
PARTNERSHIP REVENUES: Revenues (which represent the gross operating profit of
the Hotels credited from Red Lion) increased to $39.1 million from $35.6 million
in 1994, an increase of $3.5 million, or 9.9%. The changes in gross revenues and
expenses of the Hotels that affect the amounts credited from Red Lion are
discussed above.
OPERATING INCOME: Operating income before incentive management fee, depreciation
and amortization rose to $31.4 million from $28.5 million in 1994, an increase
of 10.2%. As a percentage of Hotel gross revenues, this item increased to 29.7%
from 28.4% in the prior year. These increases reflect the improvement in
operations discussed above.
OPERATING COSTS & EXPENSES: Operating costs and expenses increased by $0.8
million from 1994. The increase is largely due to the $1.0 million increase in
incentive management fees explained below (see Incentive Management Fee) and
increases in property taxes and leases and rents, offset by a $0.8 million
decrease in depreciation and amortization due to assets having been fully
depreciated early in 1995.
INCENTIVE MANAGEMENT FEE: Incentive management fees payable to Red Lion are
equal to the sum of 15% of adjusted gross operating profit up to $36 million and
25% of adjusted gross operating profit in excess of $36 million. Adjusted gross
operating profit is gross operating profit (Partnership revenues) less base
management fees (3% of gross revenues of the Hotels). Incentive management fees
are only payable to the extent that cash flow available for distributions and
incentive management fees, as defined in the Management Agreement ("Cash Flow"),
exceeds the amount required to pay the annual priority distribution to limited
partners of $2.20 per Unit. Cash Flow is defined as pre-tax income (or loss)
before noncash charges (primarily depreciation and amortization) and incentive
management fees, but after the reserve for capital improvements and principal
payments on mortgage debt.
Incentive management fees recognized in 1995 increased to $5.4 million from $4.4
million in 1994, an increase of $1.0 million, or 21.6%. In 1995, incentive
management fees equalled 15% of adjusted gross operating profit. In 1994,
incentive management fees were 13.6% of adjusted gross operating profit because
Cash Flow was insufficient to pay the full amount.
NET INCOME: Net income increased to $4.5 million ($1.07 per limited partner
Unit) from $2.9 million in 1994 ($.69 per limited partner Unit), an increase of
$1.6 million, or 54%. The increase resulted primarily from reduced depreciation
and amortization expense and from the fact that in 1995, for the first time,
Cash Flow exceeded the amount required to pay incentive management fees with the
$1.0 million excess flowing through as increased earnings.
Interest expense increased $0.9 million to $11.3 million due to increases in
interest rates and amortization of deferred loan costs. Amortization of
deferred loan costs for 1995 amounted to $0.7 million.
The 1995 and 1994 years included $272,000 and $50,000, respectively, for
deferred income taxes for book and tax depreciation differences estimated to
exist on January 1, 1998, when the Partnership ceases to be a nontaxable entity.
For further discussion, refer to Liquidity and Capital Resources and Note 3 to
the Partnership's consolidated financial statements.
CASH FLOW AVAILABLE FOR DISTRIBUTION AND INCENTIVE MANAGEMENT FEES: Cash Flow
available for incentive management fees for the year ended December 31, 1995 was
$6,808,000, which exceeded the incentive management fee of $5,395,000 for the
year by $1,413,000. Under the Management Agreement 25% of any such excess Cash
Flow at year end is to be paid to Red Lion to pay down any non-interest bearing
deferred incentive management fees currently outstanding. A portion of the
excess Cash Flow equal to $0.4 million will be used to pay down the $6.0
million balance of the deferred incentive management fees to $5.6 million. The
additional $1.0 million of excess Cash Flow will be used to pay down the balance
of interest-bearing payables to Red Lion.
10
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Cash Flow available for distribution and incentive management fees increased to
$16.1 million ($3.81 per limited partner Unit) from $13.8 million in 1994
($3.25 per limited partner Unit), an increase of $2.3 million, or 16.7%. The
increase in Cash Flow available for distribution and incentive management fees
is due to improved operations as discussed above. For further discussion of
Cash Flow, see Note 6 to the Partnership's consolidated financial statements.
FISCAL 1994 COMPARED TO FISCAL 1993
GROSS REVENUES OF THE HOTELS: Gross revenues increased to $100.6 million from
$96.2 million in 1993, an increase of $4.4 million, or 4.5%.
Room revenues increased to $57.2 million from $54.8 million in 1993, an increase
of $2.4 million, or 4.5%. Average daily room rates increased to $70.22 from
$66.67 in 1993, an increase of $3.55, or 5.3%. The increase in room revenues
from higher rates was somewhat offset by a .5 percentage point decline in
occupancy to 72.8% from 73.3% in 1993.
Food and beverage revenues of $33.8 million were essentially unchanged.
Other revenues increased by $1.2 million, or 14.5% from 1993 primarily due to
higher banquet room rentals.
GROSS OPERATING COSTS AND EXPENSES OF THE HOTELS: Gross operating costs and
expenses of the Hotels increased to $65.0 million from $63.7 million in 1993, an
increase of $1.3 million, or 2.0%. The increase is due primarily to increases
in rooms expense, sales, promotion and advertising expense and administrative
and general costs of $0.5 million, $0.3 million and $0.2 million, respectively.
With the improved gross revenues of the Hotels and careful management of
operating costs, the gross operating profit of the Hotels improved by 9.6% for
the year ended December 31, 1994.
PARTNERSHIP REVENUES: Revenues (which represent the gross operating profit of
the Hotels credited from Red Lion) increased to $35.6 million from $32.5 million
in 1993, an increase of $3.1 million, or 9.6%. The changes in gross revenues
and expenses of the Hotels that affect the amounts credited from Red Lion are
discussed above.
OPERATING INCOME: Operating income before incentive management fee, depreciation
and amortization increased to $28.5 million from $24.8 million in 1993, an
increase of $3.7 million, or 15%. As a percentage of Hotel gross revenues, this
item increased to 28.4% from 25.8% in 1993, an increase of 2.6% . These
increases reflect the improvement in operations discussed above.
OPERATING COSTS & EXPENSES: Operating costs and expenses increased by $3.1
million from the prior year. The increase is largely due to a $3.3 million
(289%) increase in incentive management fees from $1.1 million in 1993 to $4.4
million in 1994. This increase resulted from the increase in Cash Flow as
discussed below.
NET INCOME: Net income increased to $2.9 million ($0.69 per limited partner
Unit) from the prior year's $1.9 million ($0.44 per limited partner Unit), an
increase of $1.0 million, or 58%. Before the cumulative effect of a change in
accounting for income taxes which reduced 1993 net income, net income decreased
$.3 million, or 8.6%, primarily because of higher depreciation and amortization
expense. The 1993 year included a non-cash charge of $1.3 million for the
cumulative effect of the change in accounting for income taxes resulting from
the adoption, in January 1993, of Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" ("SFAS 109"). This new method required
the Partnership to record income tax liabilities arising principally from
differences between book and tax depreciation which will be in existence when
the Partnership becomes a taxable entity in 1998. For further discussion, see
Note 3 to the Partnership's consolidated financial statements.
Interest expense increased $0.2 million to $10.4 million from $10.2 million in
1993. The increase was due to increases in interest rates.
CASH FLOW AVAILABLE FOR DISTRIBUTIONS AND INCENTIVE MANAGEMENT FEES: Cash Flow
increased in 1994 by $3.3 million, or 31%, to $13.8 million from $10.5 million
in 1993. The increase in Cash Flow resulted from the previously discussed
increase in operating income before incentive fees and depreciation. After
payment of $9.3 million of cash distributions in 1994 (unchanged from 1993), the
Partnership had sufficient Cash Flow to pay current incentive management fees of
$4.4 million in 1994 compared to $1.1 million in 1993. For further discussion
of Cash Flow, see Note 6 to the Partnership's consolidated financial statements.
11
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LIQUIDITY AND CAPITAL RESOURCES
The Partnership's principal source of cash is hotel operations. During the
three years ended December 31, 1995, the Hotels generated sufficient cash from
operations to cover operating needs. It is expected that, for 1996, cash
provided by both operations and the lending facility discussed below, or by Red
Lion, will be sufficient to meet anticipated cash requirements.
The Partnership has in place a $14.1 million revolving loan facility at a
variable rate of interest. Borrowings under the revolving loan facility
averaged $12,273,000, $11,698,000 and $11,784,000 during 1995, 1994 and 1993,
respectively, and the balance outstanding was $13,302,000 at December 31, 1995.
The average interest rates for borrowings under the revolving loan facility in
1995, 1994 and 1993 were 8.3%, 5.7%, and 4.6% for those years, respectively. The
Partnership has received the final commitment and is currently in the process of
completing documents on a replacement for its credit facilities following
expiration of the extended term. For further discussion of the Partnership's
credit facilities, see Note 5 to the Partnership's consolidated financial
statements.
During 1995, 1994 and 1993, the Partnership made total capital improvements
amounting to $10,346,000, $8,139,000 and $6,389,000, respectively. Major
improvements included guest room renovations and common area refurbishments.
These capital expenditures were reserved and funded from Hotel operations in the
amounts of $3,175,000, $3,018,000 and $2,887,000 in 1995, 1994 and 1993,
respectively, pursuant to provisions of the Management Agreement requiring 3% of
gross revenues to be set aside for capital improvements. Capital expended
above the reserved amounts has been funded principally from advances made by Red
Lion. At December 31, 1995, the Partnership has commitments related to capital
improvement projects of $2,632,000. For further discussion of capital
improvements and advances from Red Lion see Notes 4 and 8 to the Partnership's
consolidated financial statements.
During 1995, 1994 and 1993, the Partnership's cash flow available for
distribution covered 100% of the priority cash distributions and also allowed
for payment of current incentive management fees to Red Lion of $5,395,000,
$4,438,000 and $1,142,000, respectively.
INCOME TAXES: IN ACCORDANCE WITH CERTAIN PROVISIONS OF THE OMNIBUS BUDGET
RECONCILIATION ACT OF 1987, THE PARTNERSHIP WILL BE TREATED AS A CORPORATION FOR
INCOME TAX PURPOSES BEGINNING JANUARY 1, 1998. DISTRIBUTIONS TO PARTNERS AFTER
THAT TIME WILL BE CONSIDERED TAXABLE DIVIDENDS. THE PAYMENT BY THE PARTNERSHIP
OF INCOME TAXES WILL CAUSE THE AMOUNT OF CASH AVAILABLE FOR DISTRIBUTIONS TO
PARTNERS TO BE REDUCED.
SFAS 109 requires, among other things, recording deferred income taxes based on
the difference between the financial statement and income tax bases of assets
and liabilities using enacted tax rates. The cumulative effect of this
accounting change resulted in a first quarter 1993 noncash charge to income of
$1,351,000, or $.32 per Unit. This charge reflects the tax effect, as of January
1, 1993, of cumulative differences between the book and tax bases of the
Partnership's assets from depreciation differences that are estimated to exist
on January 1, 1998 when the Partnership becomes a taxable entity. Similarly, tax
provisions have been recorded in 1994 and 1995 for the estimated depreciation
differences associated with capital additions and disposals in those years.
SEASONALITY: Operations of the Hotels are affected by seasonality. Revenues
are typically lower in winter periods than in summer periods.
INFLATION: The effects of inflation, as measured by fluctuations in the
Consumer Price Index, have not had a material impact on the Partnership's
revenues or net income during the three years covered by this report.
NEW ACCOUNTING STANDARDS: The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets to Be Disposed Of" ("SFAS 121"). During
the year December 31, 1995, the Partnership adopted SFAS 121. There was no
effect of this new accounting standard on the Partnership's consolidated
financial statements.
12
<PAGE>
Item 8 Financial Statements and Supplementary Data
- ---------------------------------------------------------
REPORT OF MANAGEMENT
The consolidated financial statements and other financial information of Red
Lion Inns Limited Partnership (a Delaware limited partnership) and its
subsidiary limited partnership (the "Partnership") in this report were prepared
by management, which is responsible for their contents. They reflect amounts
based upon management's best estimates and informed judgments. In management's
opinion, the financial statements present fairly the financial position, results
of operations and cash flows of the Partnership in conformity with generally
accepted accounting principles.
The Partnership maintains a system of internal accounting controls and
procedures which is designed to provide reasonable assurance that transactions
are executed as authorized, that they are properly recorded to produce reliable
financial records, and that accountability for assets is maintained.
The consolidated financial statements for the year ended December 31, 1995, have
been audited to the extent required by generally accepted auditing standards by
Deloitte & Touche LLP, independent auditors. In connection therewith,
management has considered the recommendations made by the independent auditors
in connection with their audit and has responded in an appropriate, cost
effective manner.
/s/David J. Johnson /s/Michael Vernon
- ------------------- -----------------
David J. Johnson Michael Vernon
President Chief Financial Officer
Chief Executive Officer
Director
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Red Lion Inns Limited Partnership and its Subsidiary Limited Partnership:
We have audited the accompanying consolidated balance sheet of Red Lion Inns
Limited Partnership (a Delaware limited partnership) and its subsidiary limited
partnership (the "Partnership") as of December 31, 1995, and the related
consolidated statements of income, partners' capital, and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Red Lion Inns Limited Partnership
and its subsidiary limited partnership as of December 31, 1995, and the results
of their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/s/Deloitte & Touche LLP
- ------------------------
Deloitte & Touche LLP
Portland, Oregon
February 24, 1996
(March 14, 1996 as to Note 5)
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Red Lion Inns Limited Partnership and its Subsidiary Limited Partnership:
We have audited the accompanying consolidated balance sheet of Red Lion Inns
Limited Partnership (a Delaware limited partnership) and its subsidiary limited
partnership as of December 31, 1994, and the related consolidated statements of
income, partners' capital and cash flows for each of the two years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Partnerships' management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Red Lion Inns
Limited Partnership and its subsidiary limited partnership as of December 31,
1994, and the results of their operations and their cash flows for each
of the two years in the periods ended December 31, 1994 in conformity with
generally accepted accounting principles.
As discussed in Note 3 to the consolidated financial statements, effective
January 1, 1993, the Partnership changed its method of accounting for income
taxes.
/s/Arthur Andersen LLP
- ----------------------
Arthur Andersen LLP
Portland, Oregon
February 7, 1995
15
<PAGE>
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
--------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit amounts)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
CASH $ 229 $ --
PROPERTY AND EQUIPMENT:
Land 17,705 17,705
Buildings and improvements 164,605 159,602
Furnishings and equipment 55,596 51,638
Construction in progress 2,229 1,454
-------- --------
240,135 230,399
Less -- accumulated depreciation (74,306) (65,226)
-------- --------
165,829 165,173
-------- --------
DEFERRED LOAN COSTS, net 209 32
-------- --------
Total assets $166,267 $165,205
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 19 $ --
Payable to affiliate 24,231 12,322
Accrued distributions to partners 2,329 2,329
Interest payable 334 800
Property taxes payable 284 392
Current portion of long-term debt 1,897 1,500
-------- --------
Total current liabilities 29,094 17,343
-------- --------
LONG-TERM PAYABLE TO AFFILIATE,
NET OF CURRENT PORTION 4,573 9,726
-------- --------
LONG-TERM DEBT, NET OF CURRENT PORTION 112,693 113,704
-------- --------
DEFERRED INCOME TAXES 1,673 1,401
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 9)
PARTNERS' CAPITAL:
Limited Partners, 4,940,000 units 30,887 35,554
issued
Less - 806,500 treasury units, at (11,202) (11,202)
cost -------- --------
Limited Partners, net 19,685 24,352
General Partner (1,451) (1,321)
-------- --------
Total partners' capital 18,234 23,031
-------- --------
Total liabilities and partners' $166,267 $165,205
capital ======== ========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except unit amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $ 39,142 $ 35,620 $ 32,510
OPERATING COSTS AND EXPENSES:
Property taxes 2,770 2,573 2,791
Base management fees 3,175 3,018 2,887
Incentive management fees 5,395 4,438 1,142
Depreciation and amortization 9,955 10,725 10,249
Other 1,748 1,491 2,017
---------- ---------- ----------
Total operating costs and expenses 23,043 22,245 19,086
---------- ---------- ----------
Operating income 16,099 13,375 13,424
INTEREST EXPENSE 11,310 10,396 10,218
---------- ---------- ----------
Income before income taxes and
cumulative effect
of change in accounting principle 4,789 2,979 3,206
Income tax provision (272) (50) --
Cumulative effect of change in
accounting for income taxes -- -- (1,351)
---------- ---------- ----------
NET INCOME $ 4,517 $ 2,929 $ 1,855
========== ========== ==========
ALLOCATION OF NET INCOME:
General Partner $ 90 $ 58 $ 37
========== ========== ==========
Limited Partners $ 4,427 $ 2,871 $ 1,818
========== ========== ==========
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE PER
LIMITED PARTNER UNIT $1.07 $0.69 $ 0.76
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES PER
LIMITED PARTNER UNIT -- -- (0.32)
---------- ---------- ----------
NET INCOME PER LIMITED PARTNER UNIT $1.07 $0 .69 $ 0.44
========== ========== ==========
AVERAGE LIMITED PARTNER UNITS 4,133,500 4,133,500 4,133,500
OUTSTANDING ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands, except unit amounts)
<TABLE>
<CAPTION>
Limited Partners
----------------------------------------------
Issued Units Treasury Units
------------ --------------
General
Units Amount Units Amount Partner Total
--------- ------------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 4,940,000 $49,053 (806,500) $(11,202) $ (976) $36,875
Distributions to partners -- (9,094) -- -- (220) (9,314)
Net income -- 1,818 -- -- 37 1,855
--------- ------- -------- -------- ------- -------
Balance at December 31, 1993 4,940,000 41,777 (806,500) (11,202) (1,159) 29,416
Distributions to partners -- (9,094) -- -- (220) (9,314)
Net income -- 2,871 -- -- 58 2,929
--------- ------- -------- -------- ------- -------
Balance at December 31, 1994 4,940,000 35,554 (806,500) (11,202) (1,321) 23,031
Distributions to partners -- (9,094) -- -- (220) (9,314)
Net income -- 4,427 -- -- 90 4,517
--------- ------- -------- -------- ------- -------
Balance at December 31, 1995 4,940,000 $30,887 (806,500) $(11,202) $(1,451) $18,234
========= ======= ======== ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,517 $ 2,929 $ 1,855
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 9,955 10,725 10,249
Amortization of other assets
(principally deferred loan costs) 658 -- --
Deferred income taxes 272 50 1,351
Increase (decrease) in payables
and accruals (411) (407) 44
-------- ------- --------
Net cash provided by
operating activities 14,991 13,297 13,499
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (10,307) (8,100) (6,374)
Cash reserved for capital improvements (3,175) (3,018) (2,887)
Cash withdrawn from reserve for
capital improvements 3,175 3,018 2,887
------- ------- --------
Net cash used in investing
activities (10,307) (8,100) (6,374)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution of cash to partners (9,314) (9,314) (9,314)
Advances from affiliate 6,614 4,368 3,608
Payments on term loan (1,500) (1,372) (1,254)
Net borrowings (repayments) under
revolving credit facility 566 908 (120)
Capital leases 14 -- --
Other financing activities (835) -- --
-------- ------- --------
Net cash used in financing
activities (4,455) (5,410) (7,080)
-------- ------- --------
INCREASE (DECREASE) IN CASH 229 (213) 45
CASH AT BEGINNING OF YEAR -- 213 168
-------- ------- --------
CASH AT END OF YEAR $ 229 $ -- $ 213
======== ======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for
interest, net of capitalized portion $ 11,118 $10,389 $ 10,227
======== ======= ========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1995, 1994 and 1993.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of Red
Lion Inns Limited Partnership, a Delaware limited partnership (the
"Partnership"), and its subsidiary limited partnership, Red Lion Inns Operating
L.P., a Delaware limited partnership (the "Operating Partnership"). The
Partnership was organized for the purpose of acquiring and owning, through
the Operating Partnership, ten Red Lion hotels (the "Hotels" or individually, a
"Hotel"). On April 14, 1987 (the date of the Partnership's inception), the
Operating Partnership acquired the Hotels from Red Lion, a California Limited
Partnership ("Historical Red Lion"), which continued to manage the Hotels under
a long-term management agreement (the "Management Agreement"). All significant
intercompany transactions and accounts have been eliminated.
Red Lion Hotels, Inc. ("Red Lion") was incorporated in Delaware in March 1994.
On August 1, 1995, Historical Red Lion contributed substantially all of its
assets (excluding 17 hotels, certain minority joint venture interests and
certain current assets) and certain liabilities to Red Lion. In connection with
this transaction, Historical Red Lion assigned the Management Agreement to Red
Lion, which continues to operate and manage the Hotels thereunder. The
Management Agreement expires in 2012 and can be extended by Red Lion for an
additional ten five-year periods. Red Lion became a publicly held company in
July 1995. Red Lion files reports and other information with the Securities and
Exchange Commission in accordance with the Securities Exchange Act of 1934.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses, and
the disclosure of contingent assets and liabilities. While management endeavors
to make accurate estimates, actual results could differ from estimates.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
OPERATING REVENUES AND EXPENSES AND WORKING CAPITAL
Revenues reported in the accompanying statements of income represent the gross
operating profit of the Hotels which is credited to the Partnership from Red
Lion under the terms of the Management Agreement. Operating revenues and
expenses and the current assets and current liabilities of the Hotels are
included in the consolidated financial statements of Red Lion and are excluded
from the accompanying consolidated financial statements of the Partnership. The
amounts are excluded from the accompanying consolidated financial statements of
the Partnership because Red Lion, and not the Partnership, had operating
responsibility for the Hotels and such operating responsibility is substantially
the same as that for owned hotels.
PROPERTY AND EQUIPMENT
The Partnership recorded the April 14, 1987 acquisition of property and
equipment on the basis of an allocation of the purchase price to the assets
acquired. Subsequent additions and improvements have been capitalized at their
cost.
Normal repairs and maintenance are charged to Hotel operating costs and expenses
as incurred. Upon sale or retirement of property and equipment, the cost and
related accumulated depreciation are removed from the respective accounts and
the resulting gain or loss, if any, is included in income.
Base stock (linens, china, silverware and glassware) for the Hotels has been
depreciated to 50 percent of its initial cost on a straight-line basis over a
three-year period and subsequent replacements are expensed when purchased in
accordance with industry practice. The carrying value of base stock is included
in furnishings and equipment in the accompanying consolidated balance sheets.
Depreciation is computed on a straight-line basis using the following estimated
useful lives:
Buildings and improvements ............................. 5 to 35 years
Furnishings and equipment .............................. 3 to 15 years
20
<PAGE>
DEFERRED LOAN COSTS
Deferred loan costs consist primarily of financing fees on the Partnership's
mortgage loan and are being amortized over the term of the loan.
INCOME TAXES
No current provision for federal or state income taxes has been provided by the
Partnership in the accompanying consolidated financial statements since such
taxes are the responsibility of the individual partners. However, as discussed
in Note 3, deferred income taxes have been provided for the projected
differences between the book and tax bases of property and equipment on January
1, 1998, when the Partnership will cease to be a nontaxable entity and income
will be taxed at the Partnership level with distributions to individual partners
taxed as dividends.
CASH DISTRIBUTIONS
The Partnership declares each quarterly distribution in the month following the
end of the quarter to which it applies. Fourth quarter distributions are accrued
in the accompanying consolidated balance sheets for both of the years presented.
2. ORGANIZATION:
The Partnership was formed on January 16, 1987, under the Delaware Revised
Uniform Limited Partnership Act and will continue until December 31, 2062,
unless sooner terminated under the provisions of the Partnership agreement. The
Partnership was formed to acquire, own and operate the Hotels through its
interest in the Operating Partnership.
Red Lion Properties, Inc. (the "General Partner"), a wholly-owned subsidiary of
Red Lion, is the General Partner of the Partnership and the Operating
Partnership. On April 14, 1987, the Partnership completed an initial public
offering of units representing limited partnership interests ("Unit" or "Units")
totaling $98.8 million. These proceeds, accompanied by a $105.9 million mortgage
loan, were used to acquire, through the Operating Partnership, the Hotels from
Historical Red Lion for approximately $195 million. After completion of this
acquisition, the Partnership's limited partners have an effective 98.01%
ownership interest in the Hotels with the General Partner retaining the
remaining 1.99% ownership interest.
The allocation of the Partnership's profits and losses is based on the relative
ownership interests in accordance with the terms of the partnership agreement.
Cash flow available for distribution, as defined in the partnership agreement,
will generally be distributed to the partners in proportion to their respective
ownership interests. Such distributions occur until certain preferential
distributions are achieved and then cash flow is allocated to both the general
and limited partners depending on factors related to the source of the net cash
flow and cash distributions as specified in the partnership agreement (see Note
6).
3. INCOME TAXES:
During 1987, Congress passed the Omnibus Budget Reconciliation Act which, among
other things, treats then existing publicly-traded partnerships as corporations
for tax purposes for years beginning after December 31, 1997. The Partnership
is not currently a taxable entity. The effect of treating publicly-traded
partnerships as corporations will be to tax the income of the partnership at the
entity level and reflect distributions to partners as dividends. Additional
costs to the Partnership for such taxes will reduce the amount available for
distribution to the partners.
During the first quarter of 1993, the Partnership adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). This
statement requires, among other things, the recording of deferred income taxes
based on the difference between the financial statement and income tax bases of
assets and liabilities using enacted tax rates. The cumulative effect of this
accounting change resulted in a noncash charge to income of $1,351,000, or $.32
per Unit. This charge reflects the tax effect, as of January 1, 1993, of
cumulative differences between the book and tax bases of the Partnership's
assets from depreciation differences that are estimated to exist when the
Partnership becomes a taxable entity on January 1, 1998. The cumulative effect
of the change in accounting method is comprised of federal deferred income taxes
of $1,209,000 and state deferred income taxes, net of federal benefits, of
$142,000.
21
<PAGE>
In accordance with SFAS 109, deferred income taxes have been provided for the
book and tax depreciation differences on property and equipment acquired
subsequent to January 1, 1993, which are expected to reverse subsequent to 1997.
Accordingly, deferred income taxes were provided as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Federal $ 231 $ 45 $ --
State 41 5 --
----- ----- -----
Total $ 272 $ 50 $ --
===== ===== =====
</TABLE>
The effective tax rate of 40% utilized in the calculation of the deferred tax
provision differs from the federal statutory rate of 34% primarily due to the
impact of state taxes, net of federal benefit.
4. CAPITAL IMPROVEMENTS:
A cash reserve for capital improvements has been established in accordance with
the provisions of the Management Agreement. Funding of 3% of gross revenues is
to be used for renovations, refurbishments and other capital expenditures.
During the years ended December 31, 1995, 1994 and 1993, $3,175,000, $3,018,000
and $2,887,000, respectively, were accumulated in this reserve and then
withdrawn to fund capital improvements. Capital improvements which include the
above amounts totalled $10,346,000, $8,139,000 and $6,389,000 for the years
ended December 31, 1995, 1994 and 1993, respectively. Those capital
improvements in excess of the 3% reserve were funded primarily by Red Lion (see
Note 8).
5. LONG-TERM DEBT:
Long-term debt at December 31 consists of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Mortgage note, payable in varying
installments through April 14, 1996 $100,969 $102,469
Revolving loan facility, due
April 14, 1996 13,302 12,735
Other long-term obligations 319 --
-------- --------
Total long-term debt 114,590 115,204
Less current portion 1,897 1,500
-------- --------
$112,693 $113,704
======== ========
</TABLE>
The mortgage note, which had an average interest rate of 8.4% for 1995 and is
based on LIBOR plus 2.25% (8.2% at December 31, 1995), is due on April 14,
1996.
The current revolving loan facility allows borrowings up to $14.1 million. This
facility has been used to cover, among other items, the cost of Units
repurchased and incurs interest at floating interest rates. The Partnership must
pay a nominal commitment fee on the unused portion of the line. The credit line
is due on April 14, 1996. Borrowings under the line averaged $12,273,000,
$11,698,000 and $11,784,000 during 1995, 1994 and 1993, respectively. The
average interest rates for borrowings under the line for the years ended
December 31, 1995, 1994 and 1993 were 8.3%, 5.7 % and 4.6%, respectively. Both
the credit line and mortgage note are secured by the Hotels.
22
<PAGE>
On March 14, 1996 the Partnership received the final commitment for a new $125
million credit facility which will mature in March 1999. It is anticipated that
the final documents will be completed in April, 1996. The credit facility will
include a $120 million term loan and a $5 million revolving credit line.
Borrowings under the facility will bear interest at LIBOR plus 2.25% and will be
secured by the Hotels. Principal payments on the three-year term loan will
amount to $1.5 million, $2.4 million and $3.3 million for 1996, 1997 and 1998,
respectively, with a lump-sum payment due at the end of the term. Accordingly,
the mortgage note and revolving loan facility have been classified as long-term
on the consolidated balance sheet.
6. CASH DISTRIBUTIONS TO PARTNERS:
Since inception, the Partnership has made quarterly cash distributions to
partners to the extent that cash flow has been available for distribution as
defined in the Management Agreement.
The Partnership declared cash distributions of $9.3 million in 1995, 1994 and
1993. On a per Unit basis, declared cash distributions were $2.20 in 1995, 1994
and 1993. These priority distributions were $2.00 per Unit during the first 12
months of operations, increasing annually at the rate of $.05 per Unit until
annual distributions reached $2.20 per Unit in the second quarter of 1991. In
accordance with the Management Agreement, Red Lion subordinates current payment
of its incentive management fee receivable (see Note 8) as necessary to permit
current payment of priority distributions to limited partners by the
Partnership.
During 1995, 1994 and 1993, the Partnership's cash flow available for
distribution covered 100% of the priority cash distributions and also allowed
payment of current incentive management fees to Red Lion of $5,395,000,
$4,438,000 and $1,142,000, respectively.
For the first 36 months of operations, the General Partner also agreed to make
available to the Partnership a $4 million non-interest bearing revolving credit
facility which was to be used in the event that cash flow available for
distributions was insufficient to make priority distributions. During the 36
month period which ended April 30, 1990, the General Partner was required to
fund $3,726,000 from the facility. This amount will be repaid out of either (i)
cash flow after payment of priority distributions and incentive management fees,
or (ii) sale or refinancing proceeds prior to any distribution to limited
partners.
In connection with the subordination of incentive management fees noted above,
the Partnership reached, in 1988, the maximum deferred amount of $6 million of
such fees in accordance with the Management Agreement. The deferred amount,
which does not accrue interest, will be paid out of either (i) 25% of cash flow
after payment of priority distributions and current incentive management fees or
(ii) sale or refinancing proceeds prior to any distribution to the limited
partners.
23
<PAGE>
Following is a calculation of 1995, 1994 and 1993 cash flow available for
distribution and related cash flow available for payment of incentive management
fees (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net income $ 4,517 $ 2,929 $ 1,855
Add (Deduct):
Depreciation and amortization 9,955 10,725 10,249
Incentive management fee 5,395 4,438 1,142
Amortization of other assets
(principally deferred loan costs) 658 -- --
Cash reserved for capital
improvements (3,175) (3,018) (2,887)
Repayments on term loan (1,500) (1,372) (1,254)
Income tax provision 272 50 --
Cumulative effect of change
in accounting for income taxes -- -- 1,351
------- ------- -------
Cash flow available for
distribution and incentive
management fee 16,122 13,752 10,456
Distributions to partners (9,314) (9,314) (9,314)
------- ------- -------
Cash flow available for payment
of incentive management fee 6,808 4,438 1,142
Incentive management fee (5,395) (4,438) (1,142)
------- ------- -------
Excess cash flow $ 1,413 $ -- $ --
======= ======= =======
</TABLE>
7. LEASES:
Two of the Hotels hold leases on all or a portion of their land. The leases
contain rental provisions which are based on increases in the Consumer Price
Index. The terms of the leases exceed the estimated remaining useful lives of
the Hotels. The Partnership leases certain equipment under operating leases.
Total land and equipment rent expenses for 1995, 1994 and 1993 were $132,000,
$94,000 and $88,000, respectively.
Future minimum rental payments, substantially all of which relate to land
leases, are as follows (in thousands):
<TABLE>
<CAPTION>
MINIMUM
RENTAL
YEAR ENDING DECEMBER 31, PAYMENT
------------------------ -------
<S> <C>
1996 $ 277
1997 277
1998 277
1999 277
2000 277
Thereafter 17,679
-------
$19,064
=======
</TABLE>
24
<PAGE>
8. RELATED PARTY TRANSACTIONS:
The General Partner is responsible for the management and administration of the
Partnership. In accordance with the partnership agreement, the Partnership
reimburses the General Partner for related administrative costs.
Under the Management Agreement, the Partnership pays base and incentive
management fees to Red Lion. Base management fees payable to Red Lion are equal
to 3% of the annual gross revenues of the Hotels. Incentive management fees
payable to Red Lion are equal to the sum of 15% of adjusted gross operating
profit up to $36 million (operating profit target) and 25% of adjusted gross
operating profit in excess of the operating profit target. Adjusted gross
operating profit is gross operating profit (the revenues reported in the
accompanying financial statements) less base management fees (3% of gross
revenues of the Hotels).
Incentive management fees are only payable to the extent that cash flow
available for distributions and incentive management fees, as defined in the
Management Agreement ("Cash Flow"), exceeds the amount required to pay the
annual priority distribution to Limited Partners of $2.20 per Unit. Cash Flow
is defined as pre-tax income (or loss) before noncash charges (primarily
depreciation and amortization) and incentive management fees, but after the
reserve for capital improvements and principal payments on mortgage debt.
The Hotels, in accordance with the Management Agreement, are also charged by Red
Lion for their pro rata share of support services such as computer, advertising,
public relations, promotional and sales and central reservation services.
All Partnership personnel are employees of Red Lion and its affiliates. All
costs for services of such employees are reimbursed to Red Lion by the Operating
Partnership. These costs include salaries, wages, payroll taxes and other
employee benefits. Additionally, auxiliary enterprises owned by Red Lion sell
operating supplies, furnishings and equipment to the Partnership.
The aggregate amounts, excluding personnel related expenses, charged by Red Lion
to the Partnership during 1995, 1994 and 1993 under the arrangements described
above are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Management fees $ 8,570 $7,456 $4,029
Support services 4,141 3,778 3,653
Purchases from auxiliary
enterprises 11,248 9,513 9,409
General Partner administrative
expenses 473 434 457
</TABLE>
25
<PAGE>
Amounts payable to affiliate consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Amounts payable to affiliate $30,998 $23,208
Working capital of Hotels (2,194) (1,160)
------- -------
Amounts payable to affiliate, net of
working capital $28,804 $22,048
======= =======
Amounts payable to affiliate consists
of the following:
Payable to affiliate $24,231 $12,322
Long-term payable to affiliate, net of
current portion 4,573 9,726
------- -------
Total amounts payable $28,804 $22,048
======= =======
</TABLE>
Included in the amounts payable to affiliate and long-term payable to affiliate,
net of current portion and net of working capital of the Hotels are $19,078,000
and $12,322,000 at December 31, 1995 and 1994, respectively, representing
amounts payable to Red Lion primarily for capital improvements funded by Red
Lion which exceeded the 3% reserve established in accordance with the provisions
of the Management Agreement (see Note 4). Such amounts incur interest at the
rate of prime plus 0.5% (9.0 % at December 31, 1995).
Long-term payables to affiliate are non-interest bearing amounts comprised of
deferred incentive management fees and a General Partner credit facility. These
items are more fully discussed in Note 6. Deferred incentive management fees
payable were $6,000,000 at December 31, 1995 and 1994. Of such amount at
December 31, 1995, $4,800,000 is classified as a current payable to affiliate as
such amount is anticipated to be paid to Red Lion in April 1996 out of the
planned refinancing discussed in Note 5. An additional $353,000, which equals
25% of the Partnership's excess cash flow in 1995, will be paid to Red Lion in
1996 as required by the Management Agreement and is classified as a current
payable to affiliate. The amount drawn against the General Partner credit
facility was $3,726,000 at December 31, 1995 and 1994 and is classified as a
long-term payable.
Amounts payable to affiliate are recorded net of an amount for the working
capital of the Hotels of $2,194,000 and $1,160,000 at December 31, 1995 and
1994, respectively. The working capital of the Hotels consists of cash held in
hotel accounts, accounts receivable, inventories, prepaid expenses, hotel
accounts payable, and certain taxes other than property, income and payroll
taxes. Since Red Lion has operating responsibilities associated with the Hotels,
these working capital items are excluded from the accompanying consolidated
financial statements.
The following schedules show the operating revenues and expenses and current
assets and current liabilities of the Hotels not reflected in the accompanying
financial statements (in thousands):
26
<PAGE>
GROSS OPERATING REVENUES AND EXPENSES OF THE HOTELS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Rooms $ 61,496 $ 57,247 $54,778
Food and beverage 33,983 33,791 33,108
Other 10,350 9,565 8,351
-------- -------- -------
Total revenues 105,829 100,603 96,237
-------- -------- -------
OPERATING COSTS AND EXPENSES:
Departmental direct expenses
Rooms 15,202 14,290 13,791
Food and beverage 26,599 26,742 26,883
Other 3,824 3,680 3,548
Administration and general 8,904 8,391 8,146
Sales, promotion and advertising 5,005 4,637 4,326
Utilities 3,167 3,316 3,265
Repairs and maintenance 3,986 3,927 3,768
-------- -------- -------
Total operating costs and
expenses 66,687 64,983 63,727
-------- -------- -------
Gross operating profit of Hotels
managed by Red Lion $ 39,142 $ 35,620 $32,510
======== ======== =======
</TABLE>
27
<PAGE>
WORKING CAPITAL OF THE HOTELS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1994
------ ------
<S> <C> <C>
Cash $ 277 $ 297
Accounts receivable 3,352 2,781
Inventories 1,152 1,146
Prepaid expenses 1,079 1,091
------ ------
Total current assets 5,860 5,315
------ ------
Accounts payable 2,868 3,381
Taxes payable (other than property,
income and payroll taxes) 798 774
------ ------
Total current liabilities 3,666 4,155
------ ------
Net Hotel working capital $2,194 $1,160
====== ======
</TABLE>
9. COMMITMENTS AND CONTINGENCIES:
At December 31, 1995, the Partnership had commitments relating to capital
improvement projects of $2,632,000.
The Partnership is subject to litigation arising in the ordinary course of
business. In the opinion of management, these actions will not have a material
adverse effect, if any, on the financial position or results of operations or
liquidity of the Partnership or its subsidiary.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Partnership's financial instruments, and the
methods and assumptions used to estimate such fair values at December 31, 1995
and 1994, are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Long-term payable to affiliate (Note 8) $ 4,573 $ 3,714 $ 9,726 $ 8,045
Long-term debt 114,590 114,590 115,204 115,204
</TABLE>
The carrying amount of cash, accounts payable, payable to affiliate, accrued
expenses, and other long-term obligations is a reasonable approximation of their
fair value.
The fair value of long-term payable to affiliate is determined using estimated
rates for similar notes, based on anticipated repayment dates. Based on
borrowing rates currently quoted by financial institutions for debt with similar
terms and remaining maturities, the carrying value of long-term debt
approximates fair value.
28
<PAGE>
11. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data are as follows (in thousands, except per
Unit amounts, room and occupancy statistics):
<TABLE>
<CAPTION>
1995 QUARTER ENDED
- ---- ----------------------------------------
MAR. 31 JUN. 30 SEP. 30 DEC. 31
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Partnership revenues $ 7,730 $11,222 $11,486 $ 8,704
Operating income 2,978 4,445 5,560 3,116
Net income (loss) 230 1,555 2,741 (9)
Per Unit 0.05 0.37 0.65 --
Gross revenues of the Hotels 23,638 28,430 28,234 25,527
Cash flow available for distribution and
incentive management fees 1,921 5,289 5,610 3,302
Per Unit 0.45 1.25 1.33 0.78
Average Units outstanding 4,134 4,134 4,134 4,134
Occupancy percentage 66.9% 80.9% 81.7% 64.7%
Average room rate $ 72.50 $ 75.87 $ 77.13 $ 72.83
<CAPTION>
1994 QUARTER ENDED
- ---- --------------------------------------
MAR. 31 JUN. 30 SEP. 30 DEC. 31
------- ------- ------- -------
<S> <C> <C> <C> <C>
Partnership revenues $ 7,018 $10,209 $10,382 $ 8,011
Operating income 2,544 3,993 3,360 3,478
Net income (loss) (17) 1,413 729 804
Per Unit -- 0.33 0.17 0.19
Gross revenues of the Hotels 22,592 26,707 26,468 24,836
Cash flow available for distribution and
incentive management fees 1,654 4,638 4,715 2,745
Per Unit 0.39 1.10 1.11 0.65
Average Units outstanding 4,134 4,134 4,134 4,134
Occupancy percentage 67.1% 78.1% 80.8% 65.2%
Average room rate $ 67.25 $ 71.81 $ 72.00 $ 69.13
</TABLE>
29
<PAGE>
Item 9 Changes in and Disagreements with Accountants on
- --------------------------------------------------------------
Accounting and Financial Disclosure
-----------------------------------
Not applicable.
PART III
Item 10 Directors and Executive Officers of the Registrant
- ----------------------------------------------------------------
The Partnerships have no directors or officers. Management functions of the
Partnerships are performed by the General Partner. The following information is
provided regarding the officers and directors of the General Partner:
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE GENERAL PARTNER
- ---------------------- --- -----------------------------------------
<S> <C> <C>
David J. Johnson 49 President and Chief Executive Officer
Director
Michael Vernon 48 Chief Financial Officer
Beth A. Ugoretz 40 Senior Vice President,
Secretary and General Counsel
Michael J. Crowley 41 Regional Vice President (Oregon/Idaho)
Anupam Narayan 42 Vice President, Assistant Secretary and
Treasurer
Jack G. Reiss 45 Regional Vice President (Frontier)
George G. Schweitzer 40 Regional Vice President (Washington)
Edward A. Gilhuly 36 Director
Roger S. Meier 70 Director
Michael W. Michelson 44 Director
</TABLE>
Mr. Johnson has been a director of the General Partner since October 1991 and
has held his present position with Red Lion since September 1991. Mr. Johnson
has been the Chairman of the Board and director of Red Lion Hotels, Inc. since
August 1995. From 1989 to September 1991, Mr. Johnson was a general partner
with Hellman and Freedman, a San Francisco based investment firm.
Mr. Vernon recently joined the General Partner and Red Lion in August 1995.
Prior to joining Red Lion, Mr. Vernon was Chief Executive Officer of the Port of
Sacramento, California, from 1990 to 1995.
Ms. Ugoretz was appointed to her present position with the General Partner in
June 1993. From 1983 to June 1993, Ms. Ugoretz was an associate and then a
partner at the law firm of Stoel Rives Boley Jones & Grey, with whom she served
as partner from 1990.
Mr. Crowley was appointed to his current position with the General Partner in
October 1992. He has served in the same capacity with Red Lion for more than
the last five years.
Mr. Narayan was appointed to his present position with the General Partner in
May 1992. Prior to 1992, Mr. Narayan held the position of Assistant Treasurer
from 1985.
Mr. Reiss has held his present position with the General Partner and Red Lion
for more than the last five years.
Mr. Schweitzer has held his present position with the General Partner and Red
Lion for more than the last five years.
Mr. Gilhuly has been a general partner or an executive with Kohlberg Kravis
Roberts & Co. ("KKR") for more than five years. Mr. Gilhuly is also a director
of Red Lion Hotels, Inc.; Layne, Inc.; Owens-Illinois, Inc.; Owens-Illinois
Group, Inc.; and Union Texas Petroleum Holdings, Inc.
30
<PAGE>
Mr. Meier has been President and Chief Executive Officer of AMCO, Inc., a
privately-owned investment enterprise, for more than the last five years. Mr.
Meier is a director of Fred Meyer, Inc.; Key Bank of Oregon, a wholly owned
subsidiary of Keycorp, and trustee of Acorn Fund and Acorn International.
Mr. Michelson is a general partner in KKR and has been associated with KKR for
more than five years. Mr. Michelson is a director of Red Lion Hotels, Inc.;
AutoZone, Inc.; Fred Meyer, Inc.; Owens-Illinois, Inc.; Owens-Illinois Group,
Inc., and Union Texas Petroleum Holdings, Inc.
Messrs. Gilhuly, Meier and Michelson have all held their directorships with the
General Partner since its formation in December 1986.
Item 11 Executive Compensation
- -------------------------------------
The Partnership has no directors, officers or employees. Under the agreement of
the limited partnership, the General Partner is responsible for the management
and administration of the Partnership. As discussed in Item 13 below, the
General Partner is reimbursed for certain management and administrative costs
but receives no fees for providing these services to the Partnership and the
Partnership is not responsible for the payment of compensation to the officers
of the General Partner. The Hotels are operated by Red Lion in accordance with
the Management Agreement (see Item 13).
Item 12 Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------------
As of December 31, 1995, the following owner beneficially owned more than five
percent of the total number of outstanding Units.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF OF OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- --------------------- ----------------- -------------------- --------
<S> <C> <C> <C>
Units representing FMR Corporation 514,000 Units 12.44%
limited partnership 82 Devonshire St.
interests Boston, MA 02109
</TABLE>
_____________
/(1)/ This information relating to FMR Corporation was obtained from FMR's
compliance department.
Item 13 Certain Relationships and Related Transactions
- ------------------------------------------------------------
Substantially all of the directors and principal officers of the General Partner
are directors and/or principal officers of Red Lion. The General Partner is
responsible for the management and administration of the Partnership. In
accordance with the partnership agreement, the Partnership reimburses the
General Partner for administrative costs.
Under the Management Agreement, the Partnership pays base and incentive
management fees to Red Lion. Base management fees payable to Red Lion are equal
to 3% of the annual gross revenues of the Hotels. Incentive management fees
payable to Red Lion are equal to the sum of 15% of adjusted gross operating
profit up to $36 million (operating profit target) and 25% of adjusted gross
operating profit in excess of the operating profit target. Adjusted gross
operating profit is gross operating profit (the revenues reported in the
accompanying financial statements) less base management fees (3% of gross
revenues of the Hotels).
Incentive management fees are only payable to the extent that cash flow
available for distributions and incentive management fees, as defined in the
Management Agreement ("Cash Flow"), exceeds the amount required to pay the
annual priority distribution to Limited Partners of $2.20 per Unit. Cash Flow
is defined as pre-tax income (or loss) before noncash charges (primarily
depreciation and amortization) and incentive management fees, but after the
reserve for capital improvements and principal payments on mortgage debt.
31
<PAGE>
Incentive management fees earned but not paid are deferred without interest up
to a maximum amount of $6 million and will be repaid out of either (i) 25% of
Cash Flow in excess of amounts sufficient to pay the priority distribution and
the current incentive management fee, or (ii) sale or refinancing proceeds prior
to any distribution to limited partners. The $6 million maximum deferred
incentive management fee amount was reached in November 1988. The Partnership
generated sufficient Cash Flow to cover 100% of its priority distributions to
partners and to pay Red Lion current incentive management fees of $5,395,000,
$4,438,000 and $1,142,000 for 1995, 1994 and 1993, respectively. In addition, as
a result of $1,413,000 in excess Cash Flow in 1995, $353,000 will be paid to Red
Lion to reduce the $6 million in deferred incentive management fees. An
additional $4.8 million is expected to be paid in April 1996 out of the planned
refinancing of the Partnership's credit facilities to further reduce the
deferred incentive management fees.
The Partnership, in accordance with the Management Agreement, is also charged by
Red Lion for its pro rata share of support services such as computer,
advertising, public relations, promotional and sales and central reservation
services.
All Partnership personnel are employees of Red Lion and its affiliates. All
costs of services of such employees are reimbursed to Red Lion by the Operating
Partnership. These costs include salaries, wages, payroll taxes and other
employee benefits. Additionally, auxiliary enterprises owned by Red Lion sell
operating supplies and furnishings and equipment to the Partnership.
For the first 36 full months of operations which ended April 30, 1990, the
General Partner agreed to make available to the Partnership a $4 million non-
interest bearing revolving credit facility which was to be used in the event
that cash flow available for distribution was insufficient to make priority
distributions. During the 36-month period, the General Partner was required to
fund $3,726,000 from the facility. This amount will be repaid out of either (i)
cash flow after payment of priority distributions and incentive management fees,
or (ii) sale or refinancing proceeds prior to any distribution to limited
partners. Amounts due under this facility are included in long-term payable to
affiliate, net of current portion, on the Partnership's consolidated balance
sheets.
Amounts payable to Red Lion of $19,078,000 and $12,322,000 at December 31, 1995
and 1994, respectively, consist of amounts payable to Red Lion primarily for
capital improvements funded by Red Lion which exceeded the 3% reserve
established in accordance with the provisions of the Management Agreement (see
Notes 4 and 8 to the Partnership's consolidated financial statements). These
amounts bear interest at prime plus 0.5% (9.0% at December 31, 1995).
For further discussion of related party transactions, see Notes 6 and 8 to the
Partnership's consolidated financial statements.
32
<PAGE>
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- ------------------------------------------------------------------------------
a. The following documents are filed herewith and made a part of this
report:
1. The consolidated financial statements and supplementary information set
forth in Item 8 of Part II beginning on page 13 of this report.
2. Financial Statement Schedules:
None
3. Exhibits:
2.1 Amended and Restated Agreement of Limited Partnership of Red Lion Inns
Limited Partnership. Incorporated by reference to Exhibit 2.1 to the
Company's Registration Statement on Form S-1, Registration No.
33-11954.
2.2 Amended and Restated Agreement of Limited Partnership of Red Lion Inns
Operating L.P. Incorporated by reference to Exhibit 2.2 to the
Company's Registration Statement on Form S-1, Registration No.
33-11954.
3.1 Amended and Restated Certificate of Limited Partnership of Red Lion
Inns Limited Partnership. Incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form S-1, Registration No.
33-11954.
3.2 Certificate of Limited Partnership of Red Lion Inns Operating L.P.
Incorporated by reference to Exhibit 3.2 to the Company's Registration
Statement on Form S-1, Registration No. 33-11954.
4. Form of Unit Certificate. Incorporated by reference to Exhibit 5 to
the Company's Registration Statement on Form 10.
10.1(a) Management Agreement between Red Lion Inns Operating L.P. and RL
Acquisition Company. Incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-1, Registration No.
33-11954.
10.1(b) Assignment and Assumption Agreement, dated August 1, 1995, between Red
Lion, a California Limited Partnership and Red Lion Hotels, Inc.
relating to the assignment of the Management Agreement.
10.2(a) Purchase and Sale Agreement between RL Acquisition Company and Red Lion
Inns Operating L.P. Incorporated by reference to Exhibit 10.2(a) to the
Company's Registration Statement on Form S-1, Registration No.
33-11954.
10.2(b) Supplemental Purchase and Sale Agreement between RL Acquisition Company
and Red Lion Inns Operating L.P. Incorporated by reference to Exhibit
10.2(b) to the Company's Registration Statement on Form S-1,
Registration No. 33-11954.
10.3 Lease dated as of June 23, 1980, by and between Lloyd Corporation,
Ltd., as Lessor, and Red Lion Inn/Lloyd Center, Inc., as Lessee.
Incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-1, Registration No. 33-11954.
10.4 Lease dated as of October 23, 1968, by and between First National Bank
of Omaha, as Lessor, and Downtown Development Co., Ltd., as Lessee.
Incorporated by reference to Exhibit 10.4 to the Company's Registration
Statement on Form S-1, Registration No. 33-11954.
10.5 Assignment of Lease dated April 8, 1985, from Omaha Red Lion, Inc.,
to RL Acquisition Company. Incorporated by reference to Exhibit 10.5
to the Company's Registration Statement on Form S-1, Registration No.
33-11954.
10.6 Lease dated June 1, 1973, between Charles F. Larson, as Lessor and
James A. McClory, as Lessee. Incorporated by reference to Exhibit
10.6 to the Company's Registration Statement on Form S-1,
Registration No. 33-11954.
33
<PAGE>
10.7 Purchase and Sale Agreement and Escrow Instructions dated as of April
3, 1987, by and between Lloyd Properties and Red Lion Inn/Lloyd Center,
Inc. Incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-1, Registration No. 33-11954.
10.8 Amended and Restated Credit Agreement, dated April 14, 1995, between
United States National Bank of Oregon, the Canadian Imperial Bank of
Commerce and Red Lion Inns Operating L.P.
10.9 First Amendment to Amended and Restated Credit Agreement, dated July
17, 1995.
27 Article 5 Financial Data Schedule for 10-K.
b. Reports on Form 8-K:
One report on Form 8-K was filed during the last quarter of the fiscal
year ended December 31, 1995. A Form 8-K dated December 22, 1995
reported under Item 4 a change in the Partnership's public accountants.
34
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RED LION INNS LIMITED PARTNERSHIP
By: RED LION PROPERTIES, INC.
Its sole General Partner
Date: April 1, 1996
By: /s/David J. Johnson
----------------------------
David J. Johnson
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated on April 1, 1996.
Signatures Title
- -------------------- --------------------
/s/David J. Johnson President and Chief Executive Officer
- ------------------- Director
David J. Johnson
/s/Michael Vernon Chief Financial Officer
- ------------------- (Principal Financial Officer and Principal
Michael Vernon Accounting Officer)
/s/Michael W. Michelson Director
- -----------------------
Michael W. Michelson
/s/Edward A. Gilhuly Director
- --------------------
Edward A. Gilhuly
/s/Roger S.Meier Director
- ----------------
Roger S. Meier
35
<PAGE>
INDEX OF EXHIBITS
Exhibit
Number Description
------ -----------
2.1 Amended and Restated Agreement of Limited Partnership of Red Lion Inns
Limited Partnership. Incorporated by reference to Exhibit 2.1 to the
Company's Registration Statement on Form S-1, Registration No.
33-11954.
2.2 Amended and Restated Agreement of Limited Partnership of Red Lion Inns
Operating L.P. Incorporated by reference to Exhibit 2.2 to the
Company's Registration Statement on Form S-1, Registration No.
33-11954.
3.1 Amended and Restated Certificate of Limited Partnership of Red Lion
Inns Limited Partnership. Incorporated by reference to Exhibit 3.1 to
the Company's Registration Statement on Form S-1, Registration No.
33-11954.
3.2 Certificate of Limited Partnership of Red Lion Inns Operating L.P.
Incorporated by reference to Exhibit 3.2 to the Company's Registration
Statement on Form S-1, Registration No. 33-11954.
4. Form of Unit Certificate. Incorporated by reference to Exhibit 5 to the
Company's Registration Statement on Form 10.
10.1(a) Management Agreement between Red Lion Inns Operating L.P. and RL
Acquisition Company. Incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-1, Registration No.
33-11954.
10.1(b) Assignment and Assumption Agreement, dated August 1, 1995, between Red
Lion, a California Limited Partnership and Red Lion Hotels, Inc.
relating to the assignment of the Management Agreement.
10.2(a) Purchase and Sale Agreement between RL Acquisition Company and Red Lion
Inns Operating L.P. Incorporated by reference to Exhibit 10.2(a) to the
Company's Registration Statement on Form S-1, Registration No. 33-
11954.
10.2(b) Supplemental Purchase and Sale Agreement between RL Acquisition Company
and Red Lion Inns Operating L.P. Incorporated by reference to Exhibit
10.2(b) to the Company's Registration Statement on Form S-1,
Registration No. 33-11954.
10.3 Lease dated as of June 23, 1980, by and between Lloyd Corporation,
Ltd., as Lessor, and Red Lion Inn/Lloyd Center, Inc., as Lessee.
Incorporated by reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-1, Registration No. 33-11954.
10.4 Lease dated as of October 23, 1968, by and between First National Bank
of Omaha, as Lessor, and Downtown Development Co., Ltd., as Lessee.
Incorporated by reference to Exhibit 10.4 to the Company's Registration
Statement on Form S-1, Registration No. 33-11954.
10.5 Assignment of Lease dated April 8, 1985, from Omaha Red Lion, Inc., to
RL Acquisition Company. Incorporated by reference to Exhibit 10.5 to
the Company's Registration Statement on Form S-1, Registration No.
33-11954.
10.6 Lease dated June 1, 1973, between Charles F. Larson, as Lessor and
James A. McClory, as Lessee. Incorporated by reference to Exhibit 10.6
to the Company's Registration Statement on Form S-1, Registration No.
33-11954.
10.7 Purchase and Sale Agreement and Escrow Instructions dated as of April
3, 1987, by and between Lloyd Properties and Red Lion Inn/Lloyd Center,
Inc. Incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-1, Registration No. 33-11954.
10.8 Amended and Restated Credit Agreement, dated April 14, 1995, between
United States National Bank of Oregon, the Canadian Imperial Bank of
Commerce and Red Lion Inns Operating L.P.
10.9 First Amendment to Amended and Restated Credit Agreement, dated July
17, 1995.
27 Article 5 Financial Data Schedule for 10-K.
36
<PAGE>
EXHIBIT 10.1(b)
ASSIGNMENT AND ASSUMPTION AGREEMENT
(Management Agreement and Assignment of Management Agreement)
================================================================================
This Agreement and Assumption Agreement, dated as of August 1, 1995, (the
"Agreement"), is by and between Red Lion, a California Limited Partnership ("Red
Lion") and Red Lion Hotels, Inc., a Delaware corporation ("RLI"). Capitalized
terms not defined herein shall have the meanings assigned to them in the
Assignment of Management Agreement (as defined below).
RECITALS
WHEREAS, Red Lion and Red Lion Inns Operating L.P., a Delaware Limited
Partnership ("Owner"), are parties to a Management Agreement, dated as of April
6, 1987, as amended (the "Management Agreement"). Red Lion was formerly known as
RL Acquisition Company, a California limited partnership, the name under which
it originally signed the Management Agreement and the Assignment of Management
Agreement.
WHEREAS, Red Lion is party to an Assignment of Management Agreement dated as of
April 6, 1987, by and among Owner (as assignor), United States National Bank of
Oregon, a national banking association ("USNB"), and Canadian Imperial Bank of
Commerce, an extranational banking association, as co-agents (collectively, as
assignee), and Red Lion (as manager), as amended (the "Assignment of Management
Agreement"). CIBC Inc. ("CIBC"), a Delaware corporation, is successor with
respect to the interest of Canadian Imperial Bank of Commerce under the
Assignment of Management Agreement.
WHEREAS, Red Lion intends to assign, transfer and convey to RLI all of its
interests, rights, duties and obligations under the Management Agreement and the
Assignment of Management Agreement and RLI intends to assume all of Red Lion's
interests, rights, duties and obligations under the Management Agreement and the
Assignment of Management Agreement, in each case, pursuant to this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants
and promises set forth herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. ASSIGNMENT.
----------
Red Lion hereby assigns, grants, conveys and transfers to RLI all of Red
Lion's interests, rights, duties and obligations under the Management
Agreement and the Assignment of Management as if RLI originally were named
as manager in each thereof.
2. ASSUMPTION.
----------
RLI hereby assumes all of Red Lion's interests, rights, duties and
obligations under the Management Agreement and the Assignment of
Management Agreement as if RLI originally were named as manager in each
thereof. RLI affirms the Management Agreement and the Assignment of
Management Agreement and agrees to be bound by each. This assumption by RLI
is made also for the benefit of (i) Owner in satisfaction of the
requirements of Section 9.1 of the Management Agreement and (ii) USNB and
CIBC, co-agents, as assignee under the Assignment of Management Agreement,
satisfaction of the requirements of Section 5.1 thereof.
1
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3. MISCELLANEOUS
-------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment and
Assumption Agreement as of the date first above written.
RED LION, a California Limited Partnership
By: RLA-GP, Inc., a Delaware corporation,
General Partner
By: /s/ David J. Johnson
-----------------------------------------
David J. Johnson
Executive Vice President
RED LION HOTELS, INC., a Delaware corporation
By: /s/ David J. Johnson
-----------------------------------------
David J. Johnson
President and Chief Executive Officer
2
<PAGE>
EXHIBIT 10.8
AMENDED AND RESTATED CREDIT AGREEMENT
BY
AND
AMONG
RED LION INNS OPERATING L.P.
"BORROWER",
THE LENDERS LISTED HEREIN,
"LENDERS"
AND
UNITED STATES NATIONAL BANK OF OREGON
AND
CIBC INC.
"CO-AGENTS"
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated as of April 14,
1995, and entered into by and among RED LION INNS OPERATING L.P., a Delaware
limited partnership ("BORROWER"), having its principal office at 4001 Main
Street, Vancouver, Washington, 98663, THE FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES HEREOF (each individually referred to herein as a "LENDER" and
collectively as "LENDERS"), and UNITED STATES NATIONAL BANK OF OREGON, a
national banking association ("USNB"), having its principal office at 111 S.W.
Fifth Avenue, Tower 7, Portland, Oregon 97204, and CIBC INC., a Delaware
corporation ("CIBC"), having an office at 300 South Grand Avenue, Suite 2700,
Los Angeles, California 90071, (each individually referred to herein as a "CO-
AGENT" and collectively as "CO-AGENTS").
RECITALS:
A. Pursuant to that certain Credit Agreement, dated as of April 6,
1987, as amended by that certain First Amendment to Credit Agreement, dated as
of January 1, 1990, (as so amended the "ORIGINAL CREDIT AGREEMENT"), by and
among Borrower, USNB and Canadian Imperial Bank of Commerce, an extranational
banking association ("CANADIAN IMPERIAL"), USNB and Canadian Imperial agreed to
lend, and Borrower agreed to borrow, a term loan (the "ORIGINAL TERM LOAN") in
the maximum principal amount of One Hundred Twenty Million Dollars
($120,000,000.00), of which One Hundred Five Million Eight Hundred Seventy
Thousand Dollars ($105,870,000) was disbursed to Borrower, and one or more
revolving loans (collectively, the "ORIGINAL REVOLVING LOAN"), in an aggregate
principal amount not to exceed Fourteen Million One Hundred Thirty Thousand
Dollars ($14,130,000.00) on the terms and conditions and for the purposes set
forth therein. The Original Term Loan is evidenced by that certain Secured
Promissory Note (Term) dated April 6, 1987 in the original principal amount of
One Hundred Twenty Million Dollars ($120,000,000.00), executed by Borrower, and
maker, in favor of USNB and Canadian Imperial, as holder (the "ORIGINAL TERM
NOTE"). The Original Revolving Loan is evidenced by (i) that certain Secured
Promissory Note (Revolving) dated April 6, 1987, in the original principal
amount of Ten Million Dollars ($10,000,000.00), and (ii) that certain Secured
Promissory Note (Revolving) dated January 1, 1990, in the original principal
amount of Four Million, One Hundred Thirty Thousand Dollars ($4,130,000.00),
each executed by Borrower, as maker, in favor of USNB and Canadian Imperial, as
holder (collectively, the "ORIGINAL REVOLVING NOTE").
B. Repayment of the Original Term Note and the Original Revolving
Note and Borrower's performance of its obligations under the Original Credit
Agreement and the other Loan Documents (as defined in the Original Credit
Agreement) are secured
1
<PAGE>
by those instruments listed in Section 3.6 of the Original Credit Agreement.
-----------
C. Concurrently herewith, Canadian Imperial has assigned its interest
in and to the Original Credit Agreement, the Original Term Note, the Original
Revolving Note and the other Loan Documents to CIBC.
D. The parties hereto wish to amend and restate their respective
obligations under the Original Credit Agreement on the terms, and subject to the
conditions, set forth herein. The parties expressly disclaim any intent to
effect a novation or an extinguishment or discharge of the Original Credit
Agreement or a discharge of any obligations under the Original Term Note, the
Original Revolving Note and the other Loan Documents as a result of entering
into this Agreement and the other documents contemplated herein.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement
----------------------
shall have the following meanings:
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination
Date with respect to a Eurodollar Rate Loan, the rate obtained by dividing
--------
(i) the offered quotation (rounded upward to the nearest 1/16 of one
percent) to first class banks in the interbank Eurodollar market by USNB
for U.S. dollar deposits of amounts in same day funds comparable to the
principal amount of the Eurodollar Rate Loan of USNB for which the Adjusted
Eurodollar Rate is then being determined with maturities comparable to the
Interest Period for which such Adjusted Eurodollar Rate will apply as of
approximately 11:00 A.M. (London, England time) on such Interest Rate
Determination Date by (ii) a percentage equal to 100% minus the stated
-- -----
maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves)
applicable to any member bank of the Federal Reserve System in respect of
"Eurocurrency liabilities" as defined in Regulation D (or any successor
category of liabilities under Regulation D).
2
<PAGE>
"AFFECTED LENDER" has the meaning assigned to that term in Section
-------
3.4.
"AFFILIATE" means (a) with respect to Borrower, RL and any Person
directly or indirectly controlling, controlled by or under common control
with RL, and (b) with respect to any other Person, any other Person
directly or indirectly controlling, controlled by or under common control
with that Person. For purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with") as applied to any Person shall mean
the possession, directly or indirectly, of the power to direct the
management and policies of that Person, whether through ownership, by
contract or otherwise.
"AGREEMENT" means this Amended and Restated Credit Agreement dated as
of April 14, 1995, as it may be amended from time to time.
"AMENDMENT DOCUMENTS" has the meaning assigned to that term in Section
-------
2.1(a) of this Agreement.
------
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance entered
into by a Lender and an Eligible Assignee, and accepted by USNB, in
substantially the form of Exhibit B annexed hereto.
---------
"ASSIGNMENT OF AGREEMENTS" means a first priority assignment of, and
security interest in, all contracts and agreements affecting any Project
and, to the extent to which they may be assigned, all other rights,
licenses, permits, authorizations, approvals and agreements relating to or
required for the use, occupancy or operation of any such Project,
including, without limitation, liquor licenses, executed by Borrower and
RL, in its capacity as Manager, as assignor, in favor of USNB and Canadian
Imperial as assignee, as the same may be amended from time to time.
"ASSIGNMENT OF MANAGEMENT AGREEMENT" means a first priority assignment
of the Management Agreement, executed by Borrower as assignor, USNB and
Canadian Imperial as assignee, and RL as manager, as the same may be
amended from time to time.
"ASSIGNMENT OF PERSONAL PROPERTY LEASES" means a first priority
assignment of, and security interest in, all Personal Property Leases for
the Projects, executed by Borrower and RL, in its capacity as Manager, as
assignor, in favor of USNB and Canadian Imperial as assignee. A separate
Assignment of Personal Property Leases has been executed by Borrower and
delivered to USNB and Canadian Imperial with respect to each
3
<PAGE>
Project and such Assignments shall collectively be referred to herein as
the "Assignments of Personal Property Leases".
"ASSIGNMENT OF PURCHASE AGREEMENTS" means a first priority assignment
of the Purchase Agreements, executed by Borrower as assignor, in favor of
USNB and Canadian Imperial as assignee, together with the consent of the
sellers under the Purchase Agreements, in form and substance satisfactory
to USNB and Canadian Imperial, as the same may be amended from time to
time.
"AUTHORIZED REPRESENTATIVE OF BORROWER" means the person or persons
designated by Borrower to submit a Notice of Borrowing on behalf of
Borrower and to take any and all actions on behalf of Borrower under any of
the Loan Documents. Until Co-Agents receive written notice to the contrary,
the Authorized Representative of Borrower shall be Anupam Narayan or Charla
Swartz.
"BASE RATE" means, at any time, the higher of (x) the Prime Rate or
(y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective
Rate.
"BASE RATE LOANS" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in Section 3.2.
-----------
"BORROWER" means Red Lion Inns Operating L.P., a Delaware limited
partnership.
"BORROWER'S PARTNERSHIP AGREEMENT" means that certain Amended and
Restated Agreement of Limited Partnership of Red Lion Inns Operating L.P.
dated as of January 16, 1987 and all modifications and amendments thereto,
pursuant to which Borrower has been formed.
"BORROWING BASE" means, as of the time of determination, an amount
equal to the Borrowing Base Value of all Projects.
"BORROWING BASE VALUE" means, with respect to any Project, the amount
set forth in the column entitled "Borrowing Base Value" opposite the name
of such Project on Exhibit A.
---------
"BUSINESS DAY" means (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the state(s) of Oregon, New York and
California or is a day on which banking institutions located in such
state(s) are authorized or required by law or other governmental action to
close, and (ii) with respect to all notices, determinations, fundings and
payments in connection with the Eurodollar Rate or any Eurodollar Loan, any
day that is a Business Day
4
<PAGE>
described in clause (i) above and that is also a Eurodollar Business Day.
"CANADIAN IMPERIAL" means Canadian Imperial Bank of Commerce, an
extranational banking association.
"CAPITAL EXPANSIONS" means, with respect to any Project, those capital
improvements which materially change the use of any Project or which result
in a fifteen percent (15%) increase or decrease in the square footage of
said Project.
"CAPITAL IMPROVEMENTS" means all repairs, replacements, refurbishments
or additions to the FF&E and all capital repairs, renovations and
improvements other than Capital Expansions.
"CASH FLOW AMOUNT" means, with respect to any Project as at any date
of determination, the Cash Flow Available for Debt Service (as defined in
the Management Agreement) attributable to such Project for the twelve-month
period immediately preceding the date of determination, as determined by
Co-Agents.
"CERTIFICATE OF NONFOREIGN STATUS" means an affidavit, signed under
penalty of perjury by the General Partner stating (a) that Borrower is not
a "foreign corporation," "foreign partnership," "foreign trust," or
"foreign estate," as those terms are defined in the Internal Revenue Code
and the regulations promulgated thereunder, (b) Borrower's U.S. employer
identification number, and (c) the address of Borrower's principal place of
business. Such affidavit shall be consistent with the requirements of the
regulations promulgated under Section 1445 of the Internal Revenue Code,
and shall otherwise be in form and substance acceptable to Co-Agents.
"CIBC" means CIBC Inc., a Delaware corporation.
"COLLATERAL" means, with respect to any Project, all FF&E, inventory
and other items of personal property in which Borrower now or hereafter
owns or acquires any interest or right, and which are used or useful in the
operation, use or occupancy of the applicable Project; all of Borrower's
accounts receivable and cash on hand from the operation of the applicable
Project; all of Borrower's documents, instruments, contract rights and
general intangibles relating to the use, operation or occupancy of the
applicable Project (including, without limitation, to the extent to which
they may be assigned, all liquor licenses); the FF&E Reserve; all insurance
proceeds from any policies of insurance covering any of the aforesaid; and
Condemnation Proceeds.
"COMMITMENTS" means the commitments of Lenders to make or maintain
Loans as set forth in Section 3.1.
-----------
5
<PAGE>
"COMMITMENT AMOUNT" means One Hundred Sixteen Million One Hundred
Thirteen Thousand Eight Hundred Sixty Dollars ($116,113,860).
"COMMITMENT LETTER" means that certain letter dated January 10, 1995,
from Co-Agents to Borrower and accepted by Borrower on January 12, 1995.
"COMMITMENTS" means, collectively, the Revolving Loan Commitment and
the Term Loan Commitments.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the
form attached hereto as Exhibit C delivered to Co-Agents by the President,
---------
Chief Executive Officer or Chief Financial Officer of the General Partner
pursuant to Section 6.2(c).
--------------
"CONDEMNATION PROCEEDS" means, with respect to any Project, all
compensation, awards, damages, rights of action and proceeds awarded to
Borrower by reason of the taking of said Project, or any part thereof or
interest therein, for public or quasi-public use under the power of eminent
domain, by reason of any public improvement or condemnation proceeding or
in any other manner.
"DEBT SERVICE" means, as at any date of calculation, the sum of the
following: (a) the aggregate amount of mandatory repayments of principal of
the Term Loans required to be made by Borrower pursuant to Section 3.1(e)
--------------
during the succeeding twelve-month period; (b) the aggregate amount of
mandatory repayments of principal of all Subordinate Indebtedness
(excluding Subordinate Indebtedness on any Project to be withdrawn pursuant
to Section 4.1) required to be made by Borrower under the terms of such
-----------
Subordinate Indebtedness during the succeeding twelve-month period; and (c)
the aggregate annualized amount of interest which would have accrued on
the following amounts at the following interest rates: (i) the outstanding
principal balance of the Term Loans at an interest rate per annum equal to
the Base Rate (on the date of calculation) plus one and one quarter percent
(1.25%); (ii) the aggregate Revolving Loan Commitments at an interest rate
per annum equal to the Base Rate (on the date of calculation) plus one and
one quarter percent (1.25%); and (iii) for each Subordinate Indebtedness
(excluding Subordinate Indebtedness on any Project to be withdrawn pursuant
to Section 4.1), the face amount of said Subordinate Indebtedness at a per
-----------
annum interest rate equal to the fixed rate of interest set forth in said
Subordinate Indebtedness or, if the interest rate set forth in said
Subordinate Indebtedness is variable, then at the interest rate set forth
in the next following sentences. If said Subordinate Indebtedness provides
for a variable rate of interest, the per annum interest rate shall be the
interest rate that would be in effect under the "prime rate" option
6
<PAGE>
(including any mark-up over "prime") set forth in said Subordinate
Indebtedness on the date of calculation. If no "prime rate" option is
provided under said Subordinate Indebtedness, then the per annum interest
rate shall be the interest rate used in clause (ii) above plus one percent
(1%).
"DEED OF TRUST" means any one of the following, and "DEEDS OF TRUST"
means all of the following, as each has been modified or amended on or as
of the date hereof and as may be further amended from time to time:
(a) Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing (Bellevue Center), dated as of April 6,
1987, executed by Borrower, as grantor, to Title Company, as
trustee, for the benefit of USNB and Canadian Imperial;
(b) Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing (Boise), dated as of April 6, 1987,
executed by Borrower, as grantor, to Title Company, as
trustee, for the benefit of USNB and Canadian Imperial;
(c) Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing (Colorado Springs), dated as of April 6,
1987, executed by Borrower, as grantor, to Public Trustee of
El Paso County Colorado, as trustee, for the benefit of USNB
and Canadian Imperial;
(d) Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing (Lloyd Center), dated as of April 6,
1987, executed by Borrower, as grantor, to Title Company, as
Trustee, for the benefit of USNB and Canadian Imperial;
(e) Deed of Trust, Assignment of Rents, Security Agreement
and Financing Statement (Omaha), dated as of April 6, 1987,
executed by Borrower, as grantor, to Security Land Company,
as trustee, for the benefit of USNB and Canadian Imperial;
(f) Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing (Portland Center), dated as of April 6,
1987, executed by Borrower, as grantor, to Title Company, as
trustee, for the benefit of USNB and Canadian Imperial;
7
<PAGE>
(g) Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing (Sacramento I), dated as of April 6,
1987, executed by Borrower, as grantor, to Title Company, as
trustee, for the benefit of USNB and Canadian Imperial;
(h) Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing (Spokane), dated as of April 6, 1987,
executed by Borrower, as grantor, to Title Company, as
trustee, for the benefit of USNB and Canadian Imperial;
(i) Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing (Springfield), dated as of April 6, 1987,
executed by Borrower, as grantor, to Title Company, as
trustee, for the benefit of USNB and Canadian Imperial;
(j) Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing (Yakima Valley), dated as of April 6,
1987, executed by Borrower, as grantor, to Title Company, as
Trustee, for the benefit of USNB and Canadian Imperial.
"DEED OF TRUST AMENDMENTS" has the meaning given that term in Section
-------
2.1(a) of this Agreement.
------
"EFFECTIVE DATE" means the date upon which each of the conditions set
forth in Section 2.1 has been satisfied.
-----------
"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States
or any state thereof; (iii) a commercial bank organized under the laws of
any other country or a political subdivision thereof; provided that (x)
--------
such bank is acting through a branch or agency located in the United States
or (y) such bank is organized under the laws of a country that is a member
of the Organization for Economic Cooperation and Development or a political
subdivision of such country; and (iv) any other entity which is an
"accredited investor" (as defined in Regulation D under the Securities Act
of 1933, as amended) which extends credit or buys loans as one of its
businesses including, but not limited to, insurance companies, mutual funds
and lease financing companies, in each case (under clauses (i) through (iv)
above) that is reasonably acceptable to the Co-Agents and possesses assets,
calculated in accordance with GAAP, in excess of Five Hundred Million
8
<PAGE>
Dollars ($500,000,000); and (B) any Lender and any Affiliate of any Lender;
provided that no Affiliate of Borrower shall be an Eligible Assignee.
--------
"ENGINEER'S REPORT" means that certain Revaluation of 12 Inns and New
Observation of 1 Inn of the Red Lion/Thunderbird Inn Chain dated January 2,
1987 and prepared by Merritt & Harris, Inc., and all amendments,
modifications, supplements and addenda thereto.
"ENVIRONMENTAL ACTIVITIES" means the use, generation, transportation,
treatment, storage, disposal, holding, existence, release, emission,
discharge, processing, manufacturing, abatement, removal, disposition or
handling of any Hazardous Materials at any time on, in or under any of the
Projects.
"ENVIRONMENTAL INDEMNITY" means that certain Environmental Indemnity,
dated as of January 1, 1990, executed and delivered by Borrower and General
Partner, as reaffirmed by the reaffirmation referred to in Section
-------
2.1(a)(vi) and as the same may hereafter be amended from time to time.
----------
"ENVIRONMENTAL LAWS" has the meaning given that term in Section 6.27
------------
of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA AFFILIATE", as applied to any Person, means any trade or
business (whether or not incorporated) which is a member of a group of
which that Person is a member and which is under common control within the
meaning of the regulations promulgated under Section 414 of the Internal
Revenue Code.
"ESTABLISHED RELEASE PRICE" means, with respect to any Project, an
amount calculated by multiplying the Commitment Amount times the percentage
set forth in the column entitled "Release Percentage" opposite the name of
such Project on Exhibit A.
"EURODOLLAR RATE LOANS" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
Section 3.2.
-----------
"EVENT OF DEFAULT" means the occurrence of any of the events listed in
Section 7.1(a) and the expiration of any applicable grace or cure period
--------------
provided in Section 7.1(b).
--------------
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average
of the rates on overnight
9
<PAGE>
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 USNB from three Federal funds brokers of
recognized standing selected by USNB.
"FF&E" means the furniture, furnishings, fixtures, machinery and
equipment installed and used in the Projects, including, without
limitation, all necessary furniture and furnishings for guest rooms, public
areas and non-public areas (such as kitchen, laundry and cleaning
facilities, rooms for the use of employees, storage areas, front desk and
administrative offices), floor and window coverings, decorative light
fixtures and equipment, but excluding, however, the Projects' major
mechanical and electrical equipment and systems (for example, the
elevators).
"FF&E RESERVE" means an interest bearing account or accounts
maintained with a bank or banks acceptable to Co-Agents to pay for the cost
of Capital Improvements. Co-Agents shall have a first priority security
interest in all funds deposited into the FF&E Reserve pursuant to the Deeds
of Trust.
"FINANCIAL CONDITION CERTIFICATE" means a certificate to be delivered
by Borrower to Lenders pursuant to Section 2.1 regarding the financial
-----------
condition of Borrower which shall be in the form of Exhibit I annexed
---------
hereto.
"FINANCING STATEMENT" means each UCC-1 financing statement executed by
Borrower as debtor, in favor of USNB and Canadian Imperial, as secured
party, and perfecting the security interest in the Collateral, filed in the
offices of the secretaries of state in such jurisdictions (and in such
other offices for recording or filing such statements) as USNB and Canadian
Imperial have required to perfect the security interest or reflect such
interest in appropriate public records, as the same may be amended from
time to time. Separate Financing Statements have been executed and
delivered to USNB and Canadian Imperial for each state in which a Project
is located and for the state in which Borrower's principal place of
business is located, which Financing Statements have been amended to
reflect the assignment to CIBC of all of Canadian Imperial's rights under
the Loan Documents. All such Financing Statements shall collectively be
referred to herein as the "Financing Statements".
"FIXTURE FILING" means each fixture filing, executed by Borrower as
debtor, in favor of USNB and Canadian Imperial as secured party, and filed
in the official records of any county
10
<PAGE>
in which a Project is located, as the same may be amended from time to
time. A separate Fixture Filing has been executed and delivered with
respect to each Project, which Fixture Filings have been amended to reflect
the assignment to CIBC of all of Canadian Imperial's rights under the Loan
Documents. All such Fixture Filings shall collectively be referred to
herein as the "Fixture Filings".
"FNBO" has the meaning assigned to that term in Section 2.1(a).
--------------
"FUNDING DATE" means the date of funding of an Loan.
"GENERAL PARTNER" means Red Lion Properties, Inc., a Delaware
corporation.
"GROUND LEASE" means, with respect to those Projects located on land
leased in whole or in part from third parties, the long-term ground lease
(including all modifications, consolidations, restatements, novations, and
supplements thereto) pursuant to which Borrower leases such land.
"GROUND LEASE AMENDMENTS" means, with respect to those Projects
subject to a Ground Lease, an agreement executed by the respective ground
lessors thereunder, Borrower and USNB and Canadian Imperial, relating to,
among other things, mortgagee protection provisions.
"HAZARDOUS MATERIALS" means any of the equipment, chemicals, materials
or substances described in subsections (a) through (d) of Section 5.17.
------------
"IMPROVEMENTS" means, with respect to any Project, the buildings,
parking facilities and related on-site and off-site improvements,
including, without limitation, landscaping, curbs and underground utilities
comprising the respective Project.
"INCENTIVE FEE" has the meaning given such term in the Management
Agreement.
"INDEBTEDNESS", as applied to any Person, means (a) all indebtedness
for borrowed money, including Subordinate Indebtedness, (b) notes payable
and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money, and (c) any obligation owed
for all or any part of the deferred purchase price of personal property or
services which purchase price is (i) due more than six (6) months from the
date of incurrence of the obligation in respect thereof, or (ii) evidenced
by a note or similar written instrument; provided, however, in no event
shall Indebtedness include an intercompany payable from Borrower to
11
<PAGE>
the General Partner in an amount, as of the date hereof, equal to
$12,322,000.
"INDEMNIFICATION AGREEMENT" means the agreement executed by Borrower,
USNB and Canadian Imperial, relating to securities matters.
"INTEREST PAYMENT DATE" means (a) with respect to any Base Rate Loan,
the first Business Day of each month, and (b) with respect to any
Eurodollar Rate Loan, the last day of each Interest Period applicable to
such Loan; provided that in the case of each Interest Period of more than
--------
three months, "Interest Payment Date" shall also include the date that is
three months after the commencement of such Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in Section
-------
3.2(b).
------
"INTEREST RATE DETERMINATION DATE" means each date for calculating the
Adjusted Eurodollar Rate for purposes of determining the interest rate in
respect of an Interest Period. The Interest Rate Determination Date shall
be the second Business Day prior to the first day of the related Interest
Period for a Eurodollar Rate Loan.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"LEGAL ACTION" has the meaning given such term in Section 5.5.
-----------
"LENDER" and "LENDERS" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to Section 9.1.
-----------
"LOAN" or "LOANS" means one or more of the Term Loans or Revolving
Loans or any combination thereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Assignment of
Management Agreement, the Assignment of Purchase Agreements, the
Subordination Agreement, the Deeds of Trusts, the Assignments of
Agreements, the Assignments of Personal Property Leases, the Financing
Statements, the Fixture Filings, the Financial Condition Certificate, the
fee letter referred to in Section 2.1(o) and the Certificates of Nonforeign
--------------
Status, as the same may be amended from time to time.
"MAJOR PERSONAL PROPERTY LEASES" means, with respect to any Project,
all Personal Property Leases having, on an
12
<PAGE>
individual basis, an annual amount of rental or other payments in excess of
One Hundred Thousand Dollars ($100,000).
"MANAGEMENT AGREEMENT" means the Management Agreement between RL and
Borrower, providing for the management of the Projects, as the same may be
amended from time to time.
"MANAGER" means a manager and operator of the Projects reasonably
acceptable to Co-Agents.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
"MATURITY DATE" means April 14, 1996.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is maintained for employees of Borrower
or any ERISA Affiliate of Borrower.
"NOTES" means the Revolving Notes and the Term Notes.
"NOTICE OF BORROWING" means a notice substantially in the form of
Exhibit D annexed hereto delivered by Borrower to USNB pursuant to Section
--------- -------
3.1 with respect to a proposed borrowing.
---
"NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in
the form of Exhibit E annexed hereto delivered by Borrower to USNB pursuant
---------
to Section 3.2(d) with respect to a proposed conversion or continuation of
--------------
the applicable basis for determining the interest rate with respect to the
Loans specified therein.
"O&M REPORT" means that certain Operations and Maintenance Plan
prepared by Certified Engineering & Testing Co., Inc., and all amendments,
modifications, supplements and addenda thereto.
"OBLIGATIONS" means all obligations of every nature of Borrower from
time to time owed to any Co-Agent or any Lender under the Loan Documents,
whether for principal, interest, fees, expenses, indemnification or
otherwise.
"ORIGINAL CREDIT AGREEMENT" has the meaning given that term in Recital
A of this Agreement.
"ORIGINAL REVOLVING LOAN" has the meaning assigned to that term in
Recital A of this Agreement.
"ORIGINAL REVOLVING NOTE" has the meaning assigned to that term in
Recital A of this Agreement.
13
<PAGE>
"ORIGINAL TERM LOAN" has the meaning assigned to that term in Recital
A of this Agreement.
"ORIGINAL TERM NOTE" has the meaning assigned to that term in Recital
A of this Agreement.
"PENSION PLAN" means any employee plan which is subject to the
provisions of Title IV of ERISA and which is maintained for employees of
Borrower or any ERISA Affiliate of Borrower, other than a Multiemployer
Plan.
"PERMITTED INDEBTEDNESS" means (a) Subordinate Indebtedness, (b)
accrued, but unpaid, Incentive Fees, provided said amount does not exceed
at any time Six Million Dollars ($6,000,000), (c) a $3,726,000 loan from
the General Partner to Borrower in existence as of the date hereof and (d)
other Indebtedness incurred by Borrower in the ordinary course of business,
provided the sum of said other Indebtedness and the aggregate outstanding
principal amount of the Revolving Loans does not exceed at any time Twenty
Million Dollars ($20,000,000).
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
"PERSONAL PROPERTY LEASES" means, with respect to any Project, all
leases, service agreements or other agreements for or relating to any items
of personal property used or to be used in connection with the use,
occupancy or operation of said Project, as the same may be amended from
time to time.
"POTENTIAL BANKRUPTCY DEFAULT" means the occurrence of any event
described in subsection 7.1(a)(iv), 7.1(a)(v) or 7.1(a)(vi).
"POTENTIAL EVENT OF DEFAULT" means a condition or event which, after
notice or lapse of time or both, would constitute an Event of Default if
that condition or event were not cured or removed within any applicable
grace or cure period.
"PRELIMINARY TITLE REPORT" means, with respect to any Project, a
preliminary title report issued by the Title Company covering the
applicable Project and showing all exceptions to title, together with all
underlying documents relating thereto.
"PRIME RATE" means the rate that USNB announces from time to time as
its prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not
14
<PAGE>
necessarily represent the lowest or best rate actually charged to any
customer. USNB or any other Lender may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
"PROJECTS" means the real estate projects listed on Exhibit A,
excluding those Projects withdrawn from the Borrowing Base pursuant to
Section 4.1.
-----------
"PRO RATA SHARE" means, with respect to each Lender, the percentage
obtained by dividing (x) the sum of the Term Loan Exposure of that Lender
--------
plus the Revolving Loan Exposure of that Lender by (y) the sum of the
---- --
aggregate Term Loan Exposure of all Lenders plus the aggregate Revolving
----
Loan Exposure of all Lenders, as such percentage may be adjusted by
assignments permitted pursuant to Section 8.1. The initial Pro Rata Share
-----------
of each Lender is set forth opposite the name of that Lender in Exhibit F
---------
annexed hereto.
"PURCHASE AGREEMENTS" means that certain Agreement of Purchase and
Sale of Assets dated as of April 6, 1987, by and among RL and Red Lion
Inn/Lloyd Center Inc., as seller, and Borrower, as buyer.
"REAPPRAISED VALUE" means, with respect to each Project, the appraised
value of such Project as established by the appraisal prepared by
Hospitality Valuation Services referred to in Section 2.1(i).
--------------
"RED LION" means Red Lion Inns Limited Partnership, a Delaware limited
partnership.
"REQUISITE LENDERS" means Lenders having or holding 66% or more of
the sum of the aggregate Term Loan Commitments of all Lenders plus the
----
aggregate Revolving Loan Commitments of all Lenders.
"REVOLVING LOAN COMMITMENT" or "REVOLVING LOAN COMMITMENTS" means the
commitment or commitments of a Lender or Lenders to make Revolving Loans as
set forth in Section 3.1(a)(ii).
------------------
"REVOLVING LOAN EXPOSURE" means, with respect to any Lender as of any
date of determination (i) prior to the termination of the Revolving Loan
Commitments, that Lender's Revolving Loan Commitment and (ii) after the
termination of the Revolving Loan Commitments, the aggregate outstanding
principal amount of the Revolving Loans of that Lender.
"REVOLVING LOANS" means the Loans made by Lenders to Borrower pursuant
to Section 3.1(a)(ii).
------------------
15
<PAGE>
"REVOLVING NOTES" means the promissory notes of Borrower issued
pursuant to Section 2.1, substantially in the form of Exhibit G annexed
----------- ---------
hereto, as they may be amended, supplemented or otherwise modified from
time to time, which promissory notes evidence the same Indebtedness that is
evidenced by the Original Revolving Note.
"RL" means Red Lion, a California limited partnership (formerly known
as RL Acquisition Company, a California limited partnership).
"SET ASIDE AMOUNT" means the amount of the Revolving Loan Commitments,
if any, specifically designated by Borrower for the payment of the cost of
repair and restoration of one or more of the Projects pursuant to Sections
--------
1.05 and 1.14 of the Deeds of Trust.
---- ----
"STANDBY FEE" has the meaning assigned to that term in Section 3.8.
-----------
"SUBORDINATE INDEBTEDNESS" means, with respect to any Project, the
principal amount of all Indebtedness secured by mortgages, deeds of trust,
pledge agreements or security agreements encumbering the applicable Project
(other than encumbrances and security interests evidencing purchase money
indebtedness incurred in connection with the acquisition of personal
property) which are junior in priority to the liens and security interests
created by the Deeds of Trust, regardless of whether such Indebtedness is
non-recourse to the credit of Borrower, and which Indebtedness satisfies
all of the conditions set forth in Section 6.7(b) hereof.
--------------
"SUBORDINATE LENDERS" means, with respect to any Project, Persons
holding any Subordinate Indebtedness encumbering such Project.
"SUBORDINATION AGREEMENT" means, collectively, each Subordination
Agreement executed by Borrower, RL and the Co-Agents pursuant to Section
-------
2.1(a), as the same may be amended from time to time.
------
"TAX" or "TAXES" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld
or assessed; provided that "TAX ON THE OVERALL NET INCOME" of a Person
--------
shall be construed as a reference to a tax imposed by the jurisdiction in
which that Person's principal office (and/or, in the case of a Lender, its
lending office) is located on all or part of the net income, profits or
gains of that Person (whether worldwide, or only insofar as such income,
profits or gains are considered to arise in or to relate to a particular
jurisdiction, or otherwise).
16
<PAGE>
"TENANTS" means, with respect to any Project, all persons or entities
occupying space in the Improvements.
"TENANT LEASE" means, with respect to any Project, a lease of, or
other occupancy agreement with respect to, space in the Improvements.
"TERM LOAN COMMITMENT" or "TERM LOAN COMMITMENTS" means the commitment
or commitments of a Lender or Lenders to make or maintain Term Loans as set
forth in Section 3.1(a)(i).
-----------------
"TERM LOAN EXPOSURE" means, with respect to any Lender, the
outstanding principal amount of the Term Loans of that Lender.
"TERM LOANS" means the Loans made or maintained by Lenders to Borrower
pursuant to Section 3.1(a)(i).
-----------------
"TERM NOTES" means the promissory notes of Borrower issued pursuant to
Section 2.1, substantially in the form of Exhibit H annexed hereto, as they
----------- ---------
may be amended, supplemented or otherwise modified from time to time, which
promissory notes evidence the same Indebtedness that is evidenced by the
Original Term Note.
"TERMINATION DATE" means April 14, 1995.
"TERMINATION EVENT" means (a) "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder (other than a
"Reportable Event" not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation under such regulations), or (b) the
withdrawal of Borrower or any of its ERISA Affiliates from a Pension Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent to
terminate a Pension Plan or the treatment of a Pension Plan amendment as a
termination under Section 4041 of ERISA, or (d) the institution of
proceedings to terminate a Pension Plan by the Pension Benefit Guaranty
Corporation, or (e) any other event or condition which might constitute
grounds under ERISA for the termination of, or the appointment of a trustee
to administer, any Pension Plan.
"TITLE COMPANY" means First American Title Insurance Company or any
other title insurance company satisfactory to Co-Agents.
"TITLE INSURANCE POLICY" means, with respect to any Project, the title
insurance policy issued by the Title Company in connection with the closing
of the transactions contemplated by the Original Credit Agreement, together
with all endorsements thereto, including the endorsements referred to in
Section 2.1, insuring that Borrower owns fee simple
-----------
17
<PAGE>
title (or the leasehold estate, if applicable) to the Project and that the
Deed of Trust is a valid first lien thereon.
"TRANSFER" means (a) the sale, transfer, conveyance, hypothecation
(except as permitted by Section 6.7(b) hereof or Section 6.04(b) of the
-------------- ---------------
Deeds of Trust) or encumbrance of any Project or any portion thereof,
whether voluntary, involuntary, by operation of law or otherwise, to any
Person; or (b) the execution of any contracts (or similar instrument) to
convey all or a portion of any Project to any Person; (c) the lease of all
or substantially all of any Project to any Person; excepting, however, the
leasing of rooms, suites, public facilities or other rentable area in the
ordinary course of business; (d) the execution of any contracts (or any
similar instrument) to convey all or a portion of any Project to any
Person, or the lease of all or substantially all of any Project to any
Person; (e) the transfer, assignment, conveyance, hypothecation or
encumbrance, whether voluntary, involuntary, by operation of law or
otherwise, of any general partnership interest in Borrower to any Person
(other than an Affiliate); or (f) the transfer, assignment, conveyance,
hypothecation or encumbrance, whether voluntary, involuntary, by operation
of law or otherwise, of any stock in the General Partner to any Person
(other than an Affiliate).
"UNFUNDED LIABILITIES" means, with respect to any Pension Plan, the
excess of the actuarial present value of the Pension Plan's benefit
commitments over the current value of the Pension Plan's assets allocable
to such vested benefits. The terms "actuarial present value" and "benefit
commitments" have the meaning specified in Section 4062(b)(1)(A) of ERISA.
"UNIFORM SYSTEM" means the Uniform System of Accounts for Hotels,
Seventh Revised Edition, 1977, as published by the Hotel Association of New
York City, Inc., and as revised from time to time.
"USNB" means United States National Bank of Oregon, a national banking
association.
"WITHDRAWAL AMOUNT" means the greater of (a) the Established Release
Price for the Project to be withdrawn pursuant to Section 4.1 or (b) the
-----------
amount by which the Term Loans would have to be prepaid in order for the
aggregate Cash Flow Amount, computed after deleting the Cash Flow Amount of
the Project to be withdrawn, to equal one hundred sixty percent (160%) of
Debt Service, computed after deducting such prepayment from the outstanding
principal balance of the Term Loans.
18
<PAGE>
ARTICLE II
CONDITIONS TO AGREEMENT
-----------------------
2.1 CONDITIONS PRECEDENT. This Agreement and the rights, duties,
--------------------
obligations and agreements of the parties hereunder, including, without
limitation, the agreement by the Lenders to modify the Maturity Date to April
14, 1996, shall be of no force or effect unless the following conditions have
been satisfied on or before the Termination Date:
(a) Borrower shall execute, acknowledge, where necessary, and deliver
(or cause to be executed, acknowledged, where necessary, and
delivered), all in form and content satisfactory to Lenders, the
following documents (collectively, the "AMENDMENT DOCUMENTS"):
(i) this Agreement;
(ii) the Revolving Notes;
(iii) the Term Notes;
(iv) an amendment to each of the Deeds of Trust, as required by
Lenders, in recordable form, providing among other things, that each
such Deed of Trust shall secure Borrower's obligations under this
Agreement, the Term Notes, the Revolving Notes and other Loan
Documents, as modified as of the date hereof (collectively, the "DEED
OF TRUST AMENDMENTS");
(v) a reaffirmation of the Environmental Indemnity, executed by
Borrower and General Partner;
(vi) a Consent and Acknowledgement executed by First National
Bank of Omaha ("FNBO"), in recordable form, under the terms of which
FNBO shall, among other things, consent to the Deed of Trust Amendment
relating to that certain Deed of Trust recorded April 13, 1987, in
Book 3081, Page 313 of the Official Records of Douglas County, State
of Nebraska;
(vii) such other documentation as any Lender may reasonably
require.
(b) OPINION OF BORROWER'S COUNSEL. Co-Agents and Lenders shall
receive a favorable opinion from Borrower's counsel with respect to the
following:
(i) Borrower is a duly organized and validly existing limited
partnership under the laws of the State of Delaware;
19
<PAGE>
(ii) Each partnership or corporation which is a general partner
of Borrower is duly organized, validly existing and in good standing
under the laws of the State of its formation, is in good standing and
is qualified to do business in all jurisdictions in which the
character of property it owns or the nature of its business makes
which qualification necessary; has the authority to enter into and
perform the Partnership Agreement; and has taken all steps necessary
to authorize it to enter into and perform the Partnership Agreement
(including, in the case of a corporation, any necessary by-law or
resolution of its board of directors);
(iii) Borrower has the power and authority to execute and
deliver, and perform its obligations under, the Loan Documents, as
amended, restated or otherwise modified by the Amendment Documents,
and all necessary actions have been taken so that the Loan Documents,
as amended and restated or otherwise modified by the Amendment
Documents, are valid, binding and enforceable upon Borrower in
accordance with their terms, except as such enforcement is affected by
bankruptcy, insolvency, moratorium, or other laws affecting creditors'
rights generally;
(iv) The Loan Documents, as amended and restated or otherwise
modified by the Amendment Documents, do not violate the Partnership
Agreement or violate in any material respect any law, or to such
counsel's actual knowledge, based upon reasonable inquiry of Borrower
and each Person which is a general partner of Borrower, any other
agreement or court order to which Borrower or any of Borrower's
general partners is a party or by which it or they are bound,
including, but not limited to, any disclosure requirements under the
Securities Act of 1933, as amended, and all rules and regulations
promulgated thereunder;
(v) To such actual counsel's knowledge, based upon reasonable
inquiry of Borrower and each Person which is a general partner of
Borrower, there is no action, suit or proceeding pending or threatened
against or affecting Borrower, any of Borrower's general partners or
any Project (or any material portion thereof) in any court of law or
in equity, or before or by any instrumentality which involves or is
reasonably expected to involve a money claim in excess of $500,000;
(vi) The amounts received or to be received by Lenders under the
Term Notes, the Revolving Notes or any other Loan Documents, as
amended and restated or otherwise modified by the Amendment Documents,
will not constitute usurious or otherwise unlawful interest; and
20
<PAGE>
(vii) Such other matters as any Lender may require.
(c) PARTNERSHIP DOCUMENTS. Lenders shall receive and approve any and
partnership agreements, fictitious business name statements and statements
of partnership or certificates of limited partnership, as applicable, and
any amendments thereto, creating Borrower and each general partner of
Borrower that is a partnership, certified as true, complete and correct by
the general partners of each such partnership.
(d) CORPORATE AUTHORIZATIONS. For any general partner of Borrower
that is a corporation, Lenders shall receive and approve such corporation's
articles, bylaws and good standing certificates and duly certified
resolutions from the board of directors of such partner evidencing approval
of this Agreement and the other Amendment Documents and the transactions
contemplated hereby and thereby, authorization to execute the Amendment
Documents, and indicating the officers of such corporation who are
authorized to sign the Amendment Documents, together with duly certified
incumbency certificates with the specimen signatures of such officers.
(e) ENDORSEMENTS TO TITLE POLICIES. Lenders shall receive and approve
such endorsements to its Title Policies as may be required by Co-Agents
insuring the continued priority and validity of the lien of each Deed of
Trust against the subject Project, notwithstanding this Agreement, the
amendment to such Deed of Trust or the assignment by Canadian Imperial of
its beneficial interest thereunder to CIBC as herein described.
(f) UNIFORM COMMERCIAL CODE SEARCH. Lenders shall receive an updated
search of the records of the filing offices of the secretaries of state of
each state and county in which a Project is situated, as well as all other
states and counties as may be required by Co-Agents, showing all financing
statements filed against Borrower, Borrower's general partner(s) or the
Projects.
(g) ESTOPPEL CERTIFICATES. Lenders shall receive and approve estoppel
certificates from such parties as any Lender may reasonably require
including, without limitation, an estoppel certificate from RL with respect
to Borrower's obligations under the Management Agreement and to the
operation and management by RL of the Projects.
(h) VALUE OF PROJECTS. Lenders shall have determined, based upon (i)
appraisals in form and substance satisfactory to Lenders by Hospitality
Valuation Services, (ii) all regulatory requirements applicable to Co-
Agents and each Lender, including, without limitation, Title XI of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 (12
U.S.C. 3331 et. seq.), and (iii) the internal
21
<PAGE>
procedures and regulations of each Co-Agent and each Lender relating to the
valuation of real estate collateral, that the sum of the Term Loan
Commitments and Revolving Loan Commitments does not exceed sixty-five
percent (65%) of the value of the Projects.
(i) EVENTS OF DEFAULT. No Event of Default or potential Event of
Default shall have occurred and be continuing or shall have existed
subsequent to January 10, 1995.
(j) MATERIAL ADVERSE CHANGE. Since December 31, 1994, no material
adverse change (as reasonably determined by Lenders in good faith) shall
have occurred in the financial condition, business, operations or prospects
of Borrower or General Partner.
(k) FINANCIAL CONDITION CERTIFICATE. Lenders shall have received an
executed Financial Condition Certificate.
(l) NO INJUNCTION. No injunction or restraining order shall have been
issued with respect to this Agreement or the transactions contemplated
herein.
(m) COMPLIANCE WITH LOAN DOCUMENTS. Lenders shall have received from
Borrower adequate assurance or, if Borrower cannot provide such assurance,
Lenders shall have confirmed that Borrower is in compliance with its
obligations under the Loan Documents and the Environmental Indemnity.
(n) FEE LETTER. Borrower shall have paid to Co-Agents all fees and
expenses described in the fee letter of even date herewith from Borrower to
Co-Agents.
2.2 CONDITIONS TO ALL LOANS. The obligations of Lenders to make
-----------------------
Loans on each Funding Date are subject to the following further conditions
precedent:
(a) USNB shall have received before that Funding Date, in accordance
with the provisions of Section 3.1(b), an originally executed Notice of
--------------
Borrowing, in each case signed by an Authorized Representative of Borrower
in a writing delivered to USNB.
(b) As of that Funding Date:
(i) The representations and warranties contained herein and in
the other Loan Documents shall be true, correct and complete in all
material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date,
in which case such representations and
22
<PAGE>
warranties shall have been true, correct and complete in all material
respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such
Notice of Borrowing that would constitute an Event of Default or a
Potential Event of Default;
(iii) Borrower shall have performed in all material respects all
agreements and satisfied all conditions which this Agreement provides
shall be performed or satisfied by it on or before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender
from making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date shall
not violate any law including, without limitation, Regulation G,
Regulation T, Regulation U or Regulation X of the Board of Governors
of the Federal Reserve System; and
(vi) There shall not be pending or, to the knowledge of Borrower,
threatened, any action, suit, proceeding, governmental investigation
or arbitration against or affecting Borrower or any property of
Borrower that has not been disclosed by Borrower in writing prior to
the making of the last preceding Loans, and there shall have occurred
no development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in
either event, in the opinion of either Co-Agent or of Requisite
Lenders, would be expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or
otherwise) or prospects of Borrower or the ability of Borrower to
perform, or of Co-Agents or Lenders to enforce, the Obligations; and
no injunction or other restraining order shall have been issued and no
hearing to cause an injunction or other restraining order to be issued
shall be pending or noticed with respect to any action, suit or
proceeding seeking to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated by this Agreement or the making of Loans
hereunder.
23
<PAGE>
ARTICLE III
AMOUNTS AND TERMS OF LOANS
--------------------------
3.1 COMMITMENTS; LOANS.
------------------
(a) COMMITMENTS. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of
Borrower herein set forth, each Lender hereby severally agrees to make
and/or maintain the Loans described in this Section 3.1(a).
--------------
(i) Term Loans. The parties hereto hereby acknowledge and
----------
agree, that as of the date hereof, each Lender has advanced to
Borrower an amount equal to its Pro Rata Share of the Term Loans. The
amount of each Lender's Pro Rata Share of the Terms Loans is set forth
opposite its name on Exhibit F annexed hereto, and the interest of
---------
each Lender in the Term Loans is, to the extent necessary, hereby
reallocated to reflect such Lender's Pro Rata Share of the Term Loans.
In the event that as of the date hereof, the amount advanced by any
Lender with respect to the Term Loans is less than such Lender's Pro
Rata Share of the outstanding principal balance of the Term Loans,
such Lender shall promptly pay to USNB an amount equal to the amount
of such deficiency. Any amount received by USNB pursuant to the
preceding sentence shall be distributed to one or more Lenders which
have advanced amounts with respect to the Term Loans in excess of such
Lenders' Pro Rata share of the Term Loans.
(ii) Revolving Loans. Each Lender severally agrees, subject to
---------------
the limitations set forth below with respect to the maximum amount of
Revolving Loans permitted to be outstanding from time to time, to
maintain or to lend to Borrower from time to time during the period
from the Effective Date to but excluding the Maturity Date an
aggregate amount not exceeding its Pro Rata Share of the aggregate
Revolving Loan Commitments to be used for the purposes identified in
Section 3.10. Each Lender's commitment to make Revolving Loans to
------------
Borrower pursuant to this Section 3.1(a)(ii) is herein called its
------------------
"REVOLVING LOAN COMMITMENT" and such commitments of all Lenders in the
aggregate are herein called the "REVOLVING LOAN COMMITMENTS". The
amount of each Lender's Revolving Loan Commitment is set forth
opposite its name on Exhibit F annexed hereto, and the interest of
---------
each Lender in the Revolving Loan Commitments is, to the extent
necessary, hereby reallocated to reflect such amount. In the event
that as of the date hereof, the amount advanced by any Lender with
respect to the Revolving Loans is less than such Lender's Pro Rata
Share of the outstanding principal
24
<PAGE>
balance of the Revolving Loans, such Lender shall promptly pay to USNB
an amount equal to the amount of such deficiency. Any amount received
by USNB pursuant to the preceding sentence shall be distributed to one
or more Lenders which have advanced amounts with respect to the
Revolving Loans in excess of such Lenders' Pro Rata share of the
Revolving Loans. The aggregate original amount of the Revolving Loan
Commitments is $14,130,000; provided that the amount of the Revolving
--------
Loan Commitments shall be reduced from time to time by the amount of
any reductions thereto made pursuant to Sections 3.3(a)(ii) and
-------------------
3.3(a)(iii). Each Lender's Revolving Loan Commitment shall expire on
-----------
the Maturity Date, and all Revolving Loans and all other amounts owed
hereunder with respect to the Revolving Loans and the Revolving Loan
Commitments shall be paid in full no later than that date. Amounts
borrowed under this Section 3.1(a)(ii) may be repaid and reborrowed to
------------------
but excluding the Maturity Date.
(b) BORROWING MECHANICS. Revolving Loans made on any Funding Date
shall be in an aggregate minimum amount of $100,000 and integral multiples
of $100,000 in excess of that amount; provided that Revolving Loans made on
--------
any Funding Date as Eurodollar Rate Loans with a particular Interest Period
shall be in an aggregate minimum amount of $500,000 and integral multiples
of $500,000 in excess of that amount. Whenever Borrower desires that
Lenders make Revolving Loans it shall deliver to USNB a Notice of Borrowing
no later than 10:00 A.M. (Portland, Oregon time) at least three Business
Days in advance of the proposed Funding Date (in the case of a Eurodollar
Rate Loan), or by 10:00 A.M. (Portland, Oregon time) on the proposed
Funding Date (in the case of a Base Rate Loan). The Notice of Borrowing
shall specify (i) the proposed Funding Date (which shall be a Business
Day), (ii) the amount and type of Loans requested, (iii) whether such Loans
shall be Base Rate Loans or Eurodollar Rate Loans, and (iv) in the case of
any Loans requested to be made as Eurodollar Rate Loans, the initial
Interest Period requested therefor. Term Loans and Revolving Loans may be
continued as or converted into Base Rate Loans and Eurodollar Rate Loans in
the manner provided in Section 3.2(d). In lieu of delivering the above-
--------------
described Notice of Borrowing, Borrower may give USNB telephonic notice by
the required time of any proposed borrowing under this Section 3.1(e);
--------------
provided that such notice shall be promptly con firmed in writing by
--------
delivery of a Notice of Borrowing to USNB on or before the applicable
Funding Date.
Neither Co-Agents nor any Lender shall incur any liability to Borrower
in acting upon any telephonic notice referred to above that USNB believes
in good faith to have been given by a duly authorized officer or other
person authorized to borrow on behalf of Borrower or for otherwise
25
<PAGE>
acting in good faith under this Section 3.1(b), and upon funding of Loans
--------------
by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Borrower shall have effected Loans hereunder.
A Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice
in lieu thereof) shall be irrevocable on and after the related Interest
Rate Determination Date, and Borrower shall be bound to make a borrowing in
accordance therewith.
(c) DISBURSEMENT OF FUNDS. All Loans under this Agreement shall be
made by Lenders simultaneously and proportionately to their respective Pro
Rata Shares of the Commitments for the particular type of Loans requested,
it being understood that no Lender shall be responsible for any default by
any other Lender in that other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender to make the particular
type of Loan requested be increased or decreased as a result of a default
by any other Lender in that other Lender's obligation to make a Loan
requested hereunder. Promptly after receipt by USNB of a Notice of
Borrowing pursuant to Section 3.1(b) (or telephonic notice in lieu
--------------
thereof), USNB shall notify each Lender of the proposed borrowing no later
than 2:00 P.M. (Portland, Oregon time) on the date of such receipt. Each
Lender shall make the amount of its Loan available to USNB, in same day
funds, at the office of USNB located at 555 S.W. Oak Street, Portland,
Oregon 97204, not later than 12:00 Noon (Portland, Oregon time) on the
applicable Funding Date. Upon satisfaction or waiver of the conditions
precedent specified in this Agreement, USNB shall make the proceeds of such
Loans available to Borrower on the applicable Funding Date by causing an
amount of same day funds equal to the proceeds of all such Loans received
by USNB from Lenders to be credited to the account of Borrower at the
office of USNB specified in the preceding sentence.
Unless USNB shall have been notified by any Lender prior to the
Funding Date for any Loans that such Lender does not intend to make
available to USNB the amount of such Lender's Loan requested on such
Funding Date, USNB may assume that such Lender has made such amount
available to USNB on such Funding Date and USNB may, in its sole
discretion, but shall not be obligated to, make available to Borrower a
corresponding amount on such Funding Date. If such corresponding amount is
not in fact made available to USNB by such Lender, USNB shall be entitled
to recover such corresponding amount on demand from such Lender together
with interest thereon, for each day from such Funding Date until the date
such amount is paid to USNB, at the Federal Funds Effective Rate for three
Business Days and thereafter at the Base Rate. If such Lender does not pay
such corresponding amount forthwith upon USNB's demand
26
<PAGE>
therefor, USNB shall promptly notify Borrower and Borrower shall
immediately pay such corresponding amount to USNB together with interest
thereon, for each day from such Funding Date until the date such amount is
paid to USNB, at the rate payable under this Agreement for Base Rate Loans.
Nothing in this Section 3.1(c) shall be deemed to relieve any Lender from
--------------
its obligation to fulfill its Commitments hereunder or to prejudice any
rights that Borrower may have against any Lender as a result of any default
by such Lender hereunder.
(d) NOTES. Borrower shall execute and deliver to each Lender (or to
USNB for that Lender) on the Effective Date (i) a Term Note substantially
in the form of Exhibit H annexed hereto to evidence that Lender's Term
---------
Loan, in the principal amount of that Lender's Term Loan Commitment and
with other appropriate insertions, and (ii) a Revolving Note substantially
in the form of Exhibit G annexed hereto to evidence that Lender's Revolving
---------
Loans, in the principal amount of that Lender's Revolving Loan Commitment
and with other appropriate insertions.
(e) SCHEDULED PAYMENTS OF TERM LOANS. Borrower shall make principal
payments on the Term Loans in installments on the dates and in the amounts
set forth below:
<TABLE>
<CAPTION>
Scheduled Repayment
Date of Term Loans
------ ----------------------
<S> <C>
May 1, 1995 $123,576.00
June 1, 1995 $124,503.00
July 1, 1995 $125,437.00
August 1, 1995 $126,378.00
September 1, 1995 $127,325.00
October 1, 1995 $128,280.00
November 1, 1995 $129,242.00
December 1, 1995 $130,212.00
January 1, 1996 $131,188.00
February 1, 1996 $132,172.00
March 1, 1996 $133,164.00
April 1, 1996 $134,162.00
April 14, 1996 Any Remaining Principal Balance;
</TABLE>
provided that the scheduled installments of principal of the Term Loans set
--------
forth above shall be reduced in connection with any voluntary or mandatory
prepayments of the Term Loans in accordance with Section 3.3(a)(iv).
------------------
27
<PAGE>
(f) REAFFIRMATION OF OBLIGATIONS. Borrower reaffirms all of its
obligations under the Loan Documents and the Environmental Indemnity, and
Borrower acknowledges that it has no claims, offsets or defenses with
respect to the payment of any sum due under any Note, any other Loan
Document or the Environmental Indemnity.
3.2 INTEREST ON THE LOANS.
---------------------
(a) RATE OF INTEREST. Subject to the provisions of Sections 3.4 and
------------
3.5, each Term Loan and each Revolving Loan shall bear interest on the
---
unpaid principal amount thereof from the date made through maturity
(whether by acceleration or otherwise) at a rate determined by reference to
the Base Rate or the Adjusted Eurodollar Rate, as the case may be. The
basis for determining the interest rate with respect to any Loan may be
changed from time to time pursuant to Section 3.2(d). If on any day a Loan
--------------
is outstanding with respect to which notice has not been delivered to USNB
in accordance with the terms of this Agreement specifying the applicable
basis for determining the rate of interest, then for that day that Loan
shall bear interest determined by reference to the Base Rate.
Subject to the provisions of Sections 3.2(e) and 3.5, the Loans shall
--------------- ---
bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus
----
1.25% per annum; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus 2.25% per annum.
----
(b) INTEREST PERIODS. In connection with each Eurodollar Rate Loan,
Borrower may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period
(each an "INTEREST PERIOD") to be applicable to such Loan, which Interest
Period shall be, at Borrower's option, either a one, two, three or six
month period; provided that:
--------
(i) the initial Interest Period for any Eurodollar Rate Loan
shall commence on the Funding Date of such Loan, in the case of a Loan
initially made as a Eurodollar Rate Loan, or on the date specified in
the applicable Notice of Conversion/Continuation, in the case of a
Loan converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conversion/Continuation, each successive Interest Period
shall commence on the day on which the next preceding Interest Period
expires;
28
<PAGE>
(iii) if an Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
--------
otherwise expire on a day that is not a Business Day but is a day of
the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this Section 3.2(b), end on
--------------
the last Business Day of a calendar month;
(v) no Interest Period with respect to any Loan shall extend
beyond the Maturity Date;
(vi) no Interest Period shall extend beyond a date on which
Borrower is required to make a scheduled payment of principal of the
Term Loans unless the aggregate principal amount of Term Loans that
are Base Rate Loans plus the aggregate principal amount of Term Loans
----
that are Eurodollar Rate Loans with Interest Periods expiring on or
before such date equals or exceeds the principal amount required to be
paid on the Term Loans on such date;
(vii) there shall be no more than six (6) Interest Periods
relating to Eurodollar Rate Loans outstanding at any time; and
(viii) in the event Borrower fails to specify an Interest Period
for any Eurodollar Rate Loan in the applicable Notice of Borrowing or
Notice of Conversion/Continuation, Borrower shall be deemed to have
selected an Interest Period of one month.
(c) INTEREST PAYMENTS. Subject to the provisions of Section 3.2(e),
--------------
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to
the extent accrued on the amount being prepaid) and at maturity (including
final maturity).
(d) CONVERSION OR CONTINUATION. Subject to the provisions of Section
-------
3.3, Borrower shall have the option (i) to convert at any time all or any
---
part of its outstanding Term Loans or Revolving Loans equal to $500,000 and
integral multiples of $500,000 in excess of that amount from Loans bearing
interest at a rate determined by reference to one basis to Loans bearing
interest at a rate determined by
29
<PAGE>
reference to an alternative basis or (ii) upon the expiration of any
Interest Period applicable to a Eurodollar Rate Loan, to continue all or
any portion of such Loan equal to $500,000 and integral multiples of
$500,000 in excess of that amount as a Eurodollar Rate Loan, as the case
may be; provided, however, that a Eurodollar Rate Loan may only be
--------- -------
converted into a Loan bearing interest at a rate determined by reference to
an alternative basis on the expiration date of an Interest Period
applicable thereto .
Borrower shall deliver a Notice of Conversion/Continuation to USNB no
later than 10:00 A.M. (Portland, Oregon time) at least one Business Day in
advance of the proposed conversion/continuation date (in the case of a
conversion to a Base Rate Loan), and at least three Business Days in
advance of the proposed conversion/continuation date (in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan). A Notice of
Conversion/Continuation shall specify (i) the proposed
conversion/continuation date (which shall be a Business Day), (ii) the
amount of the Loan to be converted/continued, (iii) the nature of the
proposed conversion/continuation, (iv) in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan, the requested Interest Period, and
(v) in the case of a conversion to, or a continuation of, a Eurodollar Rate
Loan, that no Potential Event of Default or Event of Default has occurred
and is continuing. In lieu of delivering the above-described Notice of
Conversion/Continuation, Borrower may give USNB telephonic notice by the
required time of any proposed conversion/continuation under this Section
-------
3.2(d); provided that such notice shall be promptly confirmed in writing by
------ --------
delivery of a Notice of Conversion/Continuation to USNB on or before the
proposed conversion/continuation date.
Neither Co-Agents nor any Lender shall incur any liability to Borrower
in acting upon any telephonic notice referred to above that USNB believes
in good faith to have been given by a duly authorized officer or other
person authorized to act on behalf of Borrower or for otherwise acting in
good faith under this Section 3.2(d), and upon conversion or continuation
--------------
of the applicable basis for determining the interest rate with respect to
any Loans in accordance with this Agreement pursuant to any such telephonic
notice Borrower shall have effected a conversion or continuation, as the
case may be, hereunder.
A Notice of Conversion/Continuation for conversion to, or continuation
of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be
irrevocable on and after the related Interest Rate Determination Date, and
Borrower shall be bound to effect a conversion or continuation in
accordance therewith.
30
<PAGE>
(e) DEFAULT RATE. Upon the occurrence and during the continuation of
any Event of Default, the outstanding principal amount of all Loans and, to
the extent permitted by applicable law, any interest payments thereon not
paid when due and any fees and other amounts then due and payable
hereunder, shall thereafter bear interest (including post-petition interest
in any proceeding under the Bankruptcy Code or other applicable bankruptcy
laws) payable upon demand at a rate that is 2.75% per annum in excess of
the interest rate otherwise payable under this Agreement with respect to
the applicable Loans (or, in the case of any such fees and other amounts,
at a rate which is 2.75% per annum in excess of the interest rate otherwise
payable under this Agreement for Base Rate Loans; provided that, in the
--------
case of Eurodollar Rate Loans, upon the expiration of the Interest Period
in effect at the time any such increase in interest rate is effective such
Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall
thereafter bear interest payable upon demand at a rate which is 2.75% per
annum in excess of the interest rate otherwise payable under this Agreement
for Base Rate Loans. Payment or acceptance of the increased rates of
interest provided for in this Section 3.2(e) is not a permitted alternative
--------------
to timely payment and shall not constitute a waiver of any Event of Default
or otherwise prejudice or limit any rights or remedies of Co-Agents or any
Lender.
(f) COMPUTATION OF INTEREST. Interest on the Loans shall be computed
(i) in the case of Base Rate Loans, on the basis of a 365-day or 366-day
year, as the case may be, and (ii) in the case of Eurodollar Rate Loans, on
the basis of a 360-day year, in each case for the actual number of days
elapsed in the period during which it accrues. In computing interest on any
Loan, the date of the making of such Loan or the first day of an Interest
Period applicable to such Loan or, with respect to a Base Rate Loan being
converted from a Eurodollar Rate Loan, the date of conversion of such
Eurodollar Rate Loan to such Base Rate Loan shall be included, and the date
of payment of such Loan or the expiration date of an Interest Period
applicable to such Loan or, with respect to a Base Rate Loan being
converted to a Eurodollar Rate Loan, the date of conversion of such Base
Rate Loan to such Eurodollar Rate Loan shall be excluded; provided that if
--------
a Loan is repaid on the same day on which it is made, one day's interest
shall be paid on that Loan.
3.3 PREPAYMENTS AND REDUCTIONS IN COMMITMENTS; GENERAL PROVISIONS
-------------------------------------------------------------
REGARDING PAYMENTS.
------------------
(a) PREPAYMENTS AND REDUCTIONS IN COMMITMENTS.
(i) Voluntary Prepayments. Borrower may, upon not less than
---------------------
three Business Days' prior written or telephonic notice confirmed in
writing to USNB (which
31
<PAGE>
notice USNB will promptly transmit by telegram, telex or telephone to
each Lender), at any time and from time to time prepay any Loans in
whole or in part on any Business Day in an aggregate minimum amount of
$1,000,000 and integral multiples of $500,000 in excess of that
amount; provided, however, that a Eurodollar Rate Loan may only be
-------- -------
prepaid on the expiration of the Interest Period applicable thereto.
Notice of prepayment having been given as aforesaid, the principal
amount of the Loans specified in such notice shall become due and
payable on the prepayment date specified therein. Any such voluntary
prepayment shall be applied as specified in Section 3.3(a)(iv).
------------------
(ii) Voluntary Reductions of Revolving Loan Commitments.
--------------------------------------------------
Borrower may, upon not less than three Business Days' prior written or
telephonic notice confirmed in writing to USNB (which notice USNB will
promptly transmit by telegram, telex or telephone to each Lender), at
any time following repayment in full of the Term Loans and from time
to time thereafter, terminate in whole or permanently reduce in part,
without premium or penalty, the Revolving Loan Commitments in an
amount up to the amount by which the Revolving Loan Commitments exceed
the aggregate outstanding principal amount of Revolving Loans at the
time of such proposed termination or reduction plus the Set Aside
Amount; provided that any such partial reduction of the Revolving Loan
--------
Commitments shall be in an aggregate minimum amount of $1,000,000 and
integral multiples of $500,000 in excess of that amount. Borrower's
notice to USNB shall designate the date (which shall be a Business
Day) of such termination or reduction and the amount of any partial
reduction, and such termination or reduction of the Revolving Loan
Commitments shall be effective on the date specified in Borrower's
notice and shall reduce the Revolving Loan Commitment of each Lender
proportionately to its Pro Rata Share. Notwithstanding anything to the
contrary in this Agreement, the Set Aside Amount shall only be
disbursed to Borrower for the payment of the cost of repair and
restoration of one or more of the Projects pursuant to, and subject to
the conditions contained in, Sections 1.05 and 1.14 of the Deeds of
------------- ----
Trust.
(iii) Prepayments Due to Reductions or Restrictions of Revolving
----------------------------------------------------------
Loan Commitments. Borrower shall from time to time prepay the
----------------
Revolving Loans to the extent necessary so that the aggregate
outstanding principal amount of the Revolving Loans shall not at any
time exceed the Revolving Loan Commitments then in effect. Any such
mandatory prepayments shall be applied as specified in Section
-------
3.3(a)(iv).
----------
32
<PAGE>
(iv) Application of Prepayments.
--------------------------
(A) Application of Voluntary Prepayments by Type of Loans
-----------------------------------------------------
and Order of Maturity. Any voluntary prepayments pursuant to Section
--------------------- -------
3.3(a)(i) shall be applied first to repay outstanding Term Loans to
---------
the full extent thereof, and second to repay outstanding Revolving
Loans to the full extent thereof. Any voluntary prepayments of the
Term Loans pursuant to Section 3.3(a)(i) shall be applied to reduce
-----------------
the scheduled installments of principal of the Term Loans set forth in
Section 3.1(e) in inverse order of maturity.
--------------
(B) Application of Prepayments to Base Rate Loans and
-------------------------------------------------
Eurodollar Rate Loans. Considering Term Loans and Revolving Loans
---------------------
being prepaid separately, any prepayment shall be applied first to
Base Rate Loans to the full extent thereof before application to
Eurodollar Rate Loans, in each case in a manner which minimizes the
amount of any payments required to be made by Borrower pursuant to
Section 3.4(d).
--------------
(b) GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Borrower of
--------------------------
principal, interest, fees and other Obligations hereunder and under
the Notes shall be made in same day funds and without defense, setoff
or counterclaim, free of any restriction or condition, and delivered
to USNB not later than 10:00 A.M. (Portland, Oregon time) on the date
due, with respect to the Revolving Loans, at its office located at 555
S.W. Oak Street, Portland, Oregon 97204, with respect to the Terms
Loans, at its office located at 501 S.E. Hawthorne Boulevard,
Portland, Oregon 97214, for the account of Lenders; funds received by
USNB after that time on such due date shall be deemed to have been
paid by Borrower on the next succeeding Business Day. Borrower hereby
authorizes USNB to charge its accounts with USNB in order to cause
timely payment to be made to USNB of all principal, interest, fees and
expenses due hereunder (subject to sufficient funds being available in
its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. All
-------------------------------------------------
payments in respect of the principal amount of any Loan shall include
payment of accrued interest on the principal amount being repaid or
prepaid, and all such payments shall be applied to the payment of
interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
-------------------------
payments shall be apportioned among all out-
33
<PAGE>
standing Loans to which such payments relate, in each case
proportionately to Lenders' respective Pro Rata Shares. USNB shall
promptly distribute to each Lender, in same day funds, by 12:00 Noon
(Portland, Oregon time) on the date of receipt thereof, at its primary
address set forth below its name on the appropriate signature page
hereof or at such other address as such Lender may request, its Pro
Rata Share of all such payments received by USNB. Notwithstanding the
foregoing provisions of this Section 3.3(b)(iii), if, pursuant to the
-------------------
provisions of Section 3.4(c), any Notice of Conversion/Continuation is
--------------
withdrawn as to any Affected Lender or if any Affected Lender makes
Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate
Loans, USNB shall give effect thereto in apportioning payments
received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business
Day, such payment shall be made on the next succeeding Business Day
and such extension of time shall be included in the computation of the
payment of interest hereunder or of the commitment fees hereunder, as
the case may be.
3.4 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:
(a) DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 11:00 A.M. (London, England time) on each Interest Rate Determination
Date, USNB shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate
that shall apply to the Eurodollar Rate Loans for which an interest rate is
then being determined for the applicable Interest Period and shall promptly
give notice thereof (in writing or by telephone confirmed in writing) to
Borrower and each Lender.
(b) INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event
that USNB shall have determined (which determination shall be final and
conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by
reason of circumstances affecting the interbank Eurodollar market adequate
and fair means do not exist for ascertaining the interest rate applicable
to such Loans on the basis provided for in the definition of Adjusted
Eurodollar Rate, USNB shall on such date give notice (by telecopy or by
telephone confirmed in
34
<PAGE>
writing) to Borrower, the other Co-Agent and each Lender of such
determination, whereupon (i) no Loans may be made as, or converted to,
Eurodollar Rate Loans until such time as USNB notifies Borrower and Lenders
that the circumstances giving rise to such notice no longer exist and (ii)
any Notice of Borrowing or Notice of Conversion/Continuation given by
Borrower with respect to the Loans in respect of which such determination
was made shall be deemed to be rescinded by Borrower.
(c) ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the
event that on any date any Lender shall have determined (which
determination shall be final and conclusive and binding upon all parties
hereto but shall be made only after consultation with Borrower and Co-
Agents) that the making, maintaining or continuation of its Eurodollar Rate
Loans (i) has become unlawful as a result of compliance by such Lender in
good faith with any law, treaty, governmental rule, regulation, guideline
or order (or would conflict with any such treaty, governmental rule,
regulation, guideline or order not having the force of law even though the
failure to comply therewith would not be unlawful) or (ii) has become
impracticable, or would cause such Lender material hardship, as a result of
contingencies occurring after the date of this Agreement which materially
and adversely affect the interbank Eurodollar market or the position of
such Lender in that market, then, and in any such event, such Lender shall
be an "AFFECTED LENDER" and it shall on that day give notice (by telecopy
or by telephone confirmed in writing) to Borrower and Co-Agents of such
determination (which notice the Co-Agents shall promptly transmit to each
other Lender). Thereafter (A) the obligation of the Affected Lender to make
Loans as, or to convert Loans to, Eurodollar Rate Loans, as the case may
be, shall be suspended until such notice shall be withdrawn by the Affected
Lender, (B) to the extent such determination by the Affected Lender relates
to a Eurodollar Rate Loan then being requested by Borrower pursuant to a
Notice of Borrowing or a Notice of Conversion/Continuation, the Affected
Lender shall make such Loan as (or convert such Loan to, as the case may
be) a Base Rate Loan, (C) the Affected Lender's obligation to maintain its
outstanding Eurodollar Rate Loans (the "AFFECTED LOANS") shall be
terminated at the earlier to occur of the expiration of the Interest Period
then in effect with respect to the Affected Loans or when required by law,
and (D) the Affected Loans shall automatically convert into Base Rate Loans
on the date of such termination. Notwithstanding the foregoing, to the
extent a determination by an Affected Lender as described above relates to
a Eurodollar Rate Loan then being requested by Borrower pursuant to a
Notice of Borrowing or a Notice of Conversion/Continuation, Borrower shall
have the option, subject to the provisions of Section 3.4(d), to rescind
--------------
such Notice of Borrowing or Notice of Conversion/Continuation as to all
Lenders by giving notice (by
35
<PAGE>
telecopy or by telephone confirmed in writing) to Co-Agents of such
rescission on the date on which the Affected Lender gives notice of its
determination as described above (which notice of rescission Co-Agents
shall promptly transmit to each other Lender). Except as provided in the
immediately preceding sentence, nothing in this Section 3.4(c) shall affect
--------------
the obligation of any Lender other than an Affected Lender to make or
maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms of this Agreement.
(d) COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST
PERIODS. Borrower shall compensate each Lender, upon written request by
that Lender (which request shall set forth the basis for requesting such
amounts), for all reasonable losses, expenses and liabilities (including,
without limitation, any interest paid by that Lender to lenders of funds
borrowed by it to make or carry its Eurodollar Rate Loans and any loss,
expense or liability sustained by that Lender in connection with the
liquidation or re-employment of such funds) which that Lender may sustain:
(i) if for any reason (other than a default by that Lender) a borrowing of
any Eurodollar Rate Loan does not occur on a date specified therefor in a
Notice of Borrowing or a telephonic request for borrowing, or a conversion
to or continuation of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Conversion/Continuation or a telephonic
request for conversion or continuation, (ii) if any prepayment or
conversion of any of its Eurodollar Rate Loans occurs on a date that is not
the last day of an Interest Period applicable to that Loan, (iii) if any
prepayment of any of its Eurodollar Rate Loans is not made on any date
specified in a notice of prepayment given by Borrower, or (iv) as a
consequence of any other default by Borrower to repay its Eurodollar Rate
Loans when required by the terms of this Agreement.
(e) BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its
branch offices or the office of an Affiliate of that Lender.
(f) ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS.
Calculation of all amounts payable to a Lender under this Section 3.4 and
-----------
under Section 3.5(a) shall be made as though that Lender had actually
--------------
funded each of its relevant Eurodollar Rate Loans through the purchase of a
Eurodollar deposit bearing interest at the rate obtained pursuant to clause
(a) of the definition of Adjusted Eurodollar Rate in an amount equal to the
amount of such Eurodollar Rate Loan and having a maturity comparable to the
relevant Interest Period and through the transfer of such Eurodollar
deposit from an offshore office of that Lender to a domestic office of that
Lender in the United States of America; provided, however,
-------- -------
36
<PAGE>
that each Lender may fund each of its Eurodollar Rate Loans in any manner
it sees fit and the foregoing assumptions shall be utilized only for the
purposes of calculating amounts payable under this Section 3.4 and under
-----------
Section 3.5(a).
--------------
(g) EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of
Default, (i) Borrower may not elect to have a Loan be made or maintained
as, or converted to, a Eurodollar Rate Loan after the expiration of any
Interest Period then in effect for that Loan and (ii) subject to the
provisions of Section 3.4(d), any Notice of Borrowing or Notice of
--------------
Conversion/Continuation given by Borrower with respect to a requested
borrowing or conversion/continuation that has not yet occurred shall be
deemed to be rescinded by Borrower.
3.5 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
----------------------------------------
(a) COMPENSATION FOR INCREASED COSTS AND TAXES. In the event that any
Lender shall determine (which determination shall, absent manifest error,
be final and conclusive and binding upon all parties hereto) that any law,
treaty or governmental rule, regulation or order, or any change therein or
in the interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or
order), or any determination of a court or governmental authority, in each
case that becomes effective after the date hereof, or compliance by such
Lender with any guideline, request or directive issued or made after the
date hereof by any central bank or other governmental or quasi-governmental
authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to
any additional Tax (other than any Tax on the overall net income of
such Lender) with respect to this Agreement or any of the Loans or any
of its obligations hereunder, or changes the basis of taxation of
payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder
(except for changes in the rate of Tax on the overall net income of
such Lender or its applicable lending office);
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC insurance or
similar requirement against assets held by, or deposits or other
liabilities in or for the account of, or advances or loans by, or
other credit extended by, or any other acquisition of funds by, any
office of such Lender
37
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(other than any such reserve or other requirements with respect to
Eurodollar Rate Loans that are reflected in the definition of; or
(iii) imposes any other condition on or affecting such Lender (or
its applicable lending office) or its obligations hereunder, the
interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such
Lender of agreeing to make, making or maintaining Loans hereunder or to
reduce any amount received or receivable by such Lender (or its applicable
lending office) with respect thereto; then, in any such case, Borrower
shall promptly pay to such Lender, upon demand, such additional amount or
amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Lender in its sole discretion
shall determine) as may be necessary to compensate such Lender on an after-
tax basis for any such increased cost or reduction in amounts received or
receivable hereunder. Such Lender shall deliver to Borrower a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to such Lender under this Section 3.5(a), which
--------------
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
(b) WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by Borrower
-----------------------------
under this Agreement and the other Loan Documents shall be paid free
and clear of and (except to the extent required by law) without any
deduction or withholding on account of any Tax imposed, levied,
collected, withheld or assessed by or within the United States of
America or any political subdivision in or of the United States of
America or any other jurisdiction from or to which a payment is made
by or on behalf of Borrower or by any federation or organization of
which the United States of America or any such jurisdiction is a
member at the time of payment.
(ii) Grossing-up of Payments. If Borrower or any other Person is
-----------------------
required by law to make any deduction or withholding on account of any
such Tax from any sum paid or payable by Borrower to any Co-Agent or
any Lender under any of the Loan Documents:
(A) Borrower shall notify Co-Agents of any such requirement
or any change in any such requirement as soon as Borrower becomes
aware of it (which notice Co-Agents shall promptly transmit to each
other Lender);
(B) Borrower shall pay any such Tax before the date on
which penalties attach thereto, such payment to
38
<PAGE>
be made (if the liability to pay is imposed on Borrower) for its own
account or (if that liability is imposed on any Co-Agent or any
Lender, as the case may be) on behalf of and in the name of such Co-
Agent or such Lender;
(C) the sum payable by Borrower in respect of which the
relevant deduction, withholding or payment is required shall be
increased to the extent necessary to ensure that, after the making of
that deduction, withholding or payment, such Co-Agent or such Lender,
as the case may be, receives on the due date and retains (free from
any liability in respect of any such deduction, withholding or
payment) a net sum equal to what it would have received and so
retained had no such deduction, withholding or payment been required
or made; and
(D) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30
days after the due date of payment of any Tax which it is required by
clause (b) above to pay, Borrower shall deliver to the applicable Co-
Agent or Lender evidence satisfactory to the other affected parties of
such deduction, withholding or payment and of the remittance thereof
to the relevant taxing or other authority.
(iii) U.S. Tax Certificates. Each Lender that is organized under
---------------------
the laws of any jurisdiction other than the United States or any state
or other political subdivision thereof shall deliver to Co-Agents for
transmission to Borrower, on or prior to the Effective Date (in the
case of each Lender listed on the signature pages hereof) or on the
date of the Assignment and Acceptance pursuant to which it becomes a
Lender (in the case of each other Lender), and, provided such Lender
is able to so do, at such other times as may be necessary in the
determination of Borrower or any Co-Agent (each in the reasonable
exercise of its discretion), such certificates, documents or other
evidence, properly completed and duly executed by such Lender
(including, without limitation, Internal Revenue Service Form 1001 or
Form 4224 or any other certificate or statement of exemption required
by Treasury Regulations Section 1.1441-4(a) or Section 1.1441-6(c) or
any successor thereto) to establish that such Lender is not subject to
deduction or withholding of United States federal income tax under
Section 1441 or 1442 of the Internal Revenue Code or otherwise (or
under any comparable provisions of any successor statute) with respect
to any payments to such Lender of principal, interest, fees or other
amounts payable under any of the Loan Documents. If following the
delivery by a Lender of such certificates, documents
39
<PAGE>
or other evidence on the Effective Date or on the date of an
Assignment or Acceptance (as applicable), due to a change in law or
any other circumstance, such Lender is no longer able to establish
such Lender is not subject to deduction or withholding of United
States federal income tax as provided in the preceding sentence, all
payments thereafter to such Lender shall be calculated in accordance
with the provisions of Section 3.5(b)(ii).
------------------
(c) CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined
that the adoption, effectiveness, phase-in or applicability of any law,
rule or regulation (or any provision thereof) regarding capital adequacy,
or any change therein or 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 any Lender
(or its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law) of any
such governmental authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of, or
with reference to, such Lender's Loans or Commitments or other obligations
hereunder to a level below that which such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness,
phase-in, applicability, change or compliance (taking into consideration
the policies of such Lender or such controlling corporation with regard to
capital adequacy), then from time to time, within five Business Days after
demand by such Lender (with a copy of such demand to Co-Agents), Borrower
shall pay to such Lender such additional amount or amounts as will
compensate such Lender or such controlling corporation on an after-tax
basis for such reduction. Each Lender, upon determining in good faith that
any additional amounts will be payable pursuant to this Section 3.5(c),
--------------
will give prompt written notice thereof to Borrower, which notice shall set
forth the basis of the calculation of such additional amounts, although the
failure to give any such notice shall not release or diminish any of
Borrower's obligations to pay additional amounts under this Section 3.5(c).
--------------
3.6 [Intentionally Omitted].
3.7 SECURITY. Payment of the Notes are and shall remain secured
--------
by the following:
(a) the Deeds of Trust;
(b) the Assignments of Agreements;
(c) the Assignment of Management Agreement;
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<PAGE>
(d) the Assignments of Personal Property Leases;
(e) the Assignment of Purchase Agreements;
(f) the Fixture Filings; and
(g) the Financing Statements.
3.8 REIMBURSEMENT OF EXPENSES. It is agreed that if the
-------------------------
transactions contemplated hereby do not close on or before the Termination Date
for any reason other than a default by Co-Agents or Lenders hereunder, Co-Agents
shall be entitled to reimbursement for any and all expenses, charges, costs and
fees incurred or payable by Co-Agents in connection with this Agreement or the
Original Credit Agreement and accruing prior to the Termination Date (including,
without limitation, fees of any consultants, attorneys' fees, printing,
photostating and duplicating expenses and air freight charges), in full,
immediately upon demand therefor, as liquidated damages.
3.9 STANDBY FEE. In addition to all other amounts due hereunder,
-----------
Borrower shall pay USNB for distribution to each Lender in proportion to that
Lender's ratable share of the Revolving Loan Commitments, for each day as to
which the outstanding Revolving Loans are less than the aggregate Revolving Loan
Commitments, an amount equal to one quarter of one percent (0.25%) per annum
(computed on the basis of a 360-day year and the actual number of days elapsed)
times the difference between the aggregate Revolving Loan Commitments and the
aggregate amount of all outstanding Revolving Loans (the "STANDBY FEE"). The
Standby Fee shall be payable quarterly on June 30, September 30, December 31,
and March 31 of each year.
3.10 USE OF PROCEEDS. The proceeds of the Revolving Loans shall be
---------------
used for general partnership purposes to the extent such purposes do not cause a
breach of any of the covenants set forth in Article VI hereof.
ARTICLE IV
WITHDRAWALS FROM BORROWING BASE
-------------------------------
4.1 WITHDRAWALS FROM BORROWING BASE. Borrower shall be entitled
-------------------------------
to withdraw a Project from the Borrowing Base upon the satisfaction of all of
the following conditions:
(a) At least thirty (30) days prior to the withdrawal, Co-
Agents shall have received a Request for Deletion duly executed by Borrower
and such financial information as Co-Agents shall reasonably request in
order to calculate the Withdrawal Amount;
41
<PAGE>
(b) There shall be no Event of Default or Potential Event of
Default hereunder or under any of the Loan Documents other than Events of
Defaults or Potential Events of Default relating solely to the Project
being withdrawn;
(c) Borrower shall have prepaid the Term Loans or, if the Terms
Loans shall have been repaid in full, Borrower shall have prepaid the
Revolving Notes or permanently reduced the Revolving Loan Commitments, in
each instance by an amount equal to the Withdrawal Amount and shall have
paid all accrued, but unpaid, interest on the amount prepaid and all other
sums then due and payable under the Loan Documents;
(d) Borrower shall have delivered to Co-Agents such documents as
Co-Agents may require to reflect the withdrawal of the applicable Project
from the Borrowing Base; and
(e) Co-Agents shall have received such other documents or
information as Co-Agents may reasonably require.
4.2 REDUCTION OF COMMITMENT AMOUNT UPON WITHDRAWALS. Upon the
-----------------------------------------------
occurrence of any withdrawal pursuant to Section 4.1, the Term Loan Commitments
-----------
or the Revolving Loan Commitments, as determined in accordance with Section
-------
4.1(c), shall be permanently reduced by an amount equal to the Withdrawal
- ------
Amount.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 CONSIDERATION. As an inducement to Lenders to execute this
-------------
Agreement, to maintain all outstanding Loans and to make new Revolving Loans,
Borrower represents and warrants to Co-Agents and each Lender that the following
statements set forth in this Article V are true, correct and complete as of the
date hereof.
5.2 ORGANIZATION, POWERS AND GOOD STANDING.
--------------------------------------
(a) ORGANIZATION AND POWERS. Borrower is a partnership, duly
organized and validly existing under the laws of the State of Delaware.
Borrower and the General Partner have all requisite partnership or
corporate, as applicable, power and authority and rights to own and operate
their respective properties, to carry on their respective businesses as now
conducted and as proposed to be conducted, and to enter into and perform
this Agreement and the other Loan Documents. The address of the Borrower's
chief executive office and principal place of business is 4001 Main Street,
Vancouver, Washington 98663.
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<PAGE>
(b) GOOD STANDING. Borrower has made all filings and is in good
standing in the state of its formation and in each other jurisdiction in
which the character of the property it owns or the nature of the business
it transacts makes such filings necessary or where the failure to make such
filings could have a materially adverse effect on the business, operations,
assets or condition (financial or otherwise) of Borrower.
(c) NONFOREIGN STATUS. Borrower is not a "foreign corporation,"
"foreign partnership," "foreign trust," or "foreign estate," as those terms
are defined in the Internal Revenue Code and the regulations promulgated
thereunder. Borrower's U.S. employer identification number is as set forth
in the Certificate of Nonforeign Status.
5.3 AUTHORIZATION OF LOAN DOCUMENTS.
-------------------------------
(a) AUTHORIZATION. The execution, delivery and performance of
the Loan Documents by Borrower is within Borrower's powers and has been
duly authorized by all necessary action by Borrower and by the General
Partner.
(b) NO CONFLICT. The execution, delivery and performance of the
Loan Documents by Borrower will not violate (i) Borrower's Partnership
Agreement; (ii) any material legal requirement affecting Borrower or the
General Partner, or any of their respective properties, or (iii) any
material agreement to which Borrower or the General Partner is bound or to
which either is a party and will not result in or require the creation
(except as provided in or contemplated by this Agreement) of any lien upon
any of such properties.
(c) GOVERNMENTAL AND PRIVATE APPROVALS. Borrower possesses all
governmental or regulatory orders, consents, permits, authorizations and
approvals (and the same are in full force and effect) required for the use,
occupancy and operation of the Projects except where the failure to possess
the same would not have a materially adverse effect on the use, occupancy
or operation of any Project. Borrower is not required to obtain any
additional governmental or regulatory actions, filings or registrations
with respect to any Project or any approvals, authorizations or consents of
any trustee or holder of any Indebtedness or other obligation of Borrower
or the General Partner except where the failure to do so would not have a
materially adverse effect on the due execution, delivery and performance by
Borrower of the Loan Documents.
(d) BINDING OBLIGATIONS. This Agreement and the other Loan
Documents have been duly executed by the parties named as signatories
thereon and are legally valid and binding obligations of said parties,
enforceable against said parties in accordance with their terms, except as
enforceability may
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<PAGE>
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general
principles of equity.
5.4 NO MATERIAL DEFAULTS. There exists no material violation of
--------------------
or material default by Borrower or the General Partner, and to the best
knowledge of Borrower, no Potential Event of Default, with respect to (a) the
terms of any instrument evidencing or securing any Indebtedness secured by any
Project (b) any lease or other agreement affecting any Project to which Borrower
or the General Partner is a party or is bound, (c) any license, permit, statute,
ordinance, law, judgment, order, writ, injunction, decree, rule or regulation of
any governmental authority, or any determination or award of any arbitrator to
which Borrower or the General may be bound, or (d) any mortgage, instrument,
agreement or document by which Borrower or the General Partner, or any of their
properties, is bound: (A) which involves any Loan Document, (B) which involves
any Project and is not adequately covered by insurance, (C) which might
materially and adversely affect the ability of Borrower or the General Partner
to perform their respective obligations under any of the Loan Documents or the
ability of Borrower or the General Partner to perform their respective
obligations under any other material instrument, agreement or document to which
they are a party, (D) which might adversely affect the priority of the liens
created by this Agreement or any of the Loan Documents or (E) which could
materially and adversely affect the Reappraised Value of any Project.
5.5 LITIGATION; ADVERSE FACTS. There is no action, suit,
-------------------------
investigation, proceeding or arbitration (whether or not purportedly on behalf
of Borrower or the General Partner), at law or in equity or before or by any
foreign or domestic court or other governmental entity (a "Legal Action"),
pending or, to the knowledge of Borrower, threatened against or affecting
Borrower or the General Partner, or any of their respective assets which could
reasonably be expected to result in any material adverse change in the business,
operations, assets (including any Project or condition (financial or otherwise)
of Borrower or the General Partner, or would materially and adversely affect
Borrower's or the General Partner's ability to perform their respective
obligations under the Loan Documents. There is no basis known to Borrower for
any such action, suit or proceeding. Neither Borrower nor the General Partner is
(a) in violation of any applicable law which violation materially and adversely
affects or may materially and adversely affect the business, operations, assets
(including any Project) or condition (financial or otherwise) of Borrower or the
General Partner, (b) subject to, or in default with respect to, any other legal
requirement that would have a materially adverse effect on the business,
operations, assets (including any Project) or condition (financial or otherwise)
of Borrower or the General Partner, or (c) in default with respect to any
material agreement to which Borrower or the General Partner is a party or to
which either is bound. There is no Legal Action pending or, to the
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<PAGE>
knowledge of Borrower, threatened against or affecting Borrower or the General
Partner questioning the validity or the enforceability of this Agreement or any
of the other Loan Documents.
5.6 TITLE TO PROPERTIES; LIENS. Borrower has good, sufficient and
--------------------------
legal title to all properties and assets reflected in its most recent balance
sheet delivered to Co-Agents, except for assets disposed of in the ordinary
course of business since the date of such balance sheet. All of Borrower's
properties are free and clear of liens, except as disclosed in writing to Co-
Agents. Borrower is the sole owner of, and has good and marketable title to, the
fee interest (or leasehold, as applicable) in each Project, all other real
property described in the applicable Deed of Trust free from any adverse lien,
security interest or encumbrance of any kind whatsoever, excepting only (a)
liens and security interests in favor of Co-Agents, and (b) other matters which
have been approved in writing by Co-Agents.
5.7 DISCLOSURE. There is no fact known to Borrower which materially
----------
and adversely affects the business, operations, assets or condition (financial
or otherwise) of Borrower or the General Partner which has not been disclosed in
this Agreement or in other documents, certificates and written statements
furnished to Co-Agents in connection herewith.
5.8 PAYMENT OF TAXES. All tax returns and reports of Borrower and
----------------
the General Partner required to be filed by them have been timely filed, and all
taxes, assessments, fees and other governmental charges upon Borrower and the
General Partner, and upon their respective properties, assets, income and
franchises which are due and payable have been paid when due and payable.
Borrower knows of no proposed tax assessment against it or the General Partner
that would be material to the condition (financial or otherwise) of Borrower or
the General Partner and neither Borrower nor the General Partner has contracted
with any government entity in connection with taxes.
5.9 SECURITIES ACTIVITIES. Neither Borrower nor the General
---------------------
Partner is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying any
Margin Stock and not more than twenty-five percent (25%) of the value of
Borrower's or the General Partner's assets consists of such Margin Stock. No
part of the proceeds of the Term Loans or Revolving Loans will be used to
purchase or carry any Margin Stock or to extend credit to others for that
purpose or for any other purpose that violates the provisions of Regulations U
or X of said Board of Governors.
5.10 GOVERNMENT REGULATIONS. Neither Borrower nor the General
----------------------
Partner is subject to regulation under the Investment Company Act of 1940, the
Federal Power Act, the Public Utility Holding Company Act of 1935, the
Interstate Commerce Act or to any
45
<PAGE>
federal or state statute or regulation limiting its ability in incur
indebtedness for money borrowed.
5.11 RIGHTS TO PROJECT AGREEMENTS, PERMITS AND LICENSES. Borrower
--------------------------------------------------
is the true owner of all rights in and to all existing agreements, permits and
licenses relating to the Projects, is the true owner of all existing agreements,
permits and licenses relating to its assets and Borrower will be the true owner
of all rights in and to all future agreements, permits and licenses relating to
such Projects and assets. Borrower's interest in all such agreements, permits
and licenses is not subject to any present claim (other than under the Loan
Documents), set-off or deduction other than in the ordinary course of business.
5.12 UTILITIES AND ACCESS. Telephone services, gas, electric
--------------------
power, storm sewers, sanitary sewer, potable water facilities and all other
utilities and services necessary for the use, operation and maintenance of each
Project are available to such Project, are adequate to serve such Project and
are not subject to any conditions limiting the use of such utilities, other than
normal charges to the utility supplier. All streets and easements necessary for
the operation and maintenance of each Project are available to the boundaries of
such Project.
5.13 COMPLIANCE WITH LAWS. Each Project, and the uses to which
--------------------
such Project is and will be put, comply fully with all applicable laws and
restrictive covenants.
5.14 FINANCIAL CONDITION. The financial statements and all
-------------------
financial data delivered to Co-Agents in connection with the transactions
contemplated by this Agreement and/or relating to Borrower or the General
Partner are true, correct and complete in all material respects. Such financial
statements comply with the requirements of Section 6.2 and fairly present the
-----------
financial position of the parties who are the subject thereof as of the date
thereof. No material adverse change has occurred in such financial position,
and, except for the Commitments, no borrowings have been made by Borrower which
are secured by, or might give rise to, a lien or claim against any Project, the
proceeds of the Term Loans or Revolving Loans or other assets of Borrower.
5.15 PERSONAL PROPERTY. Borrower is now and shall continue to be
-----------------
the sole owner or lessee of the Collateral free from any adverse lien, security
interest or adverse claim of any kind whatsoever, except for liens or security
interests in favor of Co-Agents and Subordinate Lenders.
5.16 NO CONDEMNATION. No condemnation proceedings or moratorium is
---------------
pending or, to Borrower's knowledge, threatened against any Project which would
impair the use, occupancy or full operation of such Project in any manner
whatsoever.
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5.17 HAZARDOUS MATERIALS. To the best knowledge of Borrower, after
-------------------
due investigation, none of the Projects contains (a) asbestos in any form which
is or could become friable, except as disclosed in the O&M Report; (b) urea
formaldehyde foam insulation; (c) transformers or other equipment which contain
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty (50) parts per million; (d) any other chemical, material, or substance
exposure to which is prohibited, limited or regulated by any Governmental
Authority or may or could pose a hazard to the health and safety of the
occupants of such Project or the owners of property adjacent to such Project.
Neither Borrower nor any of its agents has stored or caused to be stored upon or
in any Project any of the equipment or substances described in subsections (a)
through (d) of this Section 5.17, nor, to the best of Borrower's knowledge,
------------
based upon due investigation, have any of Borrower's predecessors-in-interest
stored or caused to be stored any such substance upon or in any Project.
Borrower agrees to submit, if requested by Co-Agents, a report, satisfactory to
Co-Agents in its sole and absolute discretion, prepared by a consultant approved
by Co-Agents, certifying as to any Project that such Project is not now being
used nor has it been used in the past for any activities involving, directly or
indirectly, the use, generation, treatment, storage or disposal of any hazardous
or toxic chemical, material, substance or wastes. Borrower hereby grants to Co-
Agents, its agents, employees, consultants and contractors the right to enter
upon each Project and to perform such tests and investigations as Co-Agents
shall deem necessary or advisable with respect to any such substances described
in this Section 5.17.
------------
5.18 GROUND LEASES. With respect to any Project that is subject to
-------------
a Ground Lease, to Borrower's best knowledge: (a) said Ground Lease has not been
modified, changed, altered or amended in any material respect except as
otherwise disclosed to Co-Agents, and said Ground Lease is in full force and
effect; and (b) no party to said Ground Lease is in default in any material
respect thereunder and no event has occurred which, with the giving of notice
or passage of time, or both, would constitute such a default.
5.19 TENANT LEASES. To Borrower's best knowledge, all Tenant
-------------
Leases are in full force and affect and no Affiliate is a Tenant under any
Tenant Lease.
5.20 MAJOR PERSONAL PROPERTY LEASES. To Borrower's best knowledge:
------------------------------
(a) no existing Major Personal Property Lease has been modified, changed,
altered or amended in any material respect except as otherwise disclosed to Co-
Agents, and each existing Major Personal Property Lease is in full force and
effect; and (b) no party to any existing Major Personal Property Lease is in
default in any material respect thereunder and no event has occurred which, with
the giving of notice or passage of time, or both, would con stitute such a
default.
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5.21 MANAGEMENT AGREEMENT. The Management Agreement is in full force
--------------------
and effect, has not been amended except as otherwise disclosed in writing to Co-
Agents and no party is in default in any material respect thereunder and no
event has occurred which, with the giving of notice or passage of time, or both,
would constitute such a default.
5.22 EMPLOYEE BENEFIT PLANS. Borrower has no employees, is not
----------------------
subject to the provisions of ERISA and has no ERISA Affiliates.
5.23 LIQUOR LICENSES. Borrower has made all necessary arrangements
---------------
to acquire, on or before the recording of the Deeds of Trust, all liquor
licenses necessary for the on-sale and off-sale of alcoholic beverages from and
in each Project.
5.24 OTHER LOAN DOCUMENTS. All of the representations and
--------------------
warranties of Borrower and the General Partner contained in the other Loan
Documents are true and correct in all material respects.
ARTICLE VI
COVENANTS OF BORROWER
---------------------
6.1 CONSIDERATION. As an inducement to Lenders to execute this
-------------
Agreement, to maintain all outstanding Loans and to make new Revolving Loans,
Borrower hereby makes each of the covenants set forth in this Article VI.
Borrower covenants and agrees that, so long as any of the Revolving Loan
Commitments or the Term Loan Commitments shall be in effect and until payment in
full of all amounts due under the Notes and all other Loan Documents, unless the
Requisite Lenders shall otherwise give their prior written consent, Borrower
shall perform all covenants in this Article VI.
6.2 FINANCIAL STATEMENTS AND OTHER REPORTS. Borrower will
--------------------------------------
maintain a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with the Uniform System. Borrower will deliver to each Lender:
(a) As soon as practicable and in any event within thirty (30)
days after the end of each fiscal month, (i) balance sheets of Borrower as
at the end of such period and the related statements of income of Borrower,
for such fiscal month and for the year-to-date, setting forth in each case
in comparative form the figures for the corresponding periods of the
previous year, (ii) a schedule of the average daily occupancy rate for that
month and the year-to-date for each Project, setting forth in each case in
comparative form the figures for corresponding periods of the previous
year, and (iii) a schedule of average daily room rates for each Project
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for that month and the year-to- date, setting forth in each case in
comparative form the figures for the corresponding period of the previous
year, all of which shall be prepared in reasonable detail and shall fairly
present the financial condition of Borrower as at the dates indicated and
the results of its operations for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments.
(b) As soon as practicable, and in any event within one hundred
twenty (120) days after the end of each fiscal year of Borrower, balance
sheets of Borrower as at the end of such year and the related statements of
income and cash flow of Borrower, for such fiscal year, setting forth in
each case, in comparative form the figures for the previous year, all in
reasonable detail and prepared in accordance with the Uniform System,
consistently applied, and accompanied by a report thereon of Arthur
Andersen & Co. or other independent certified public accountants of
recognized national standing selected by Borrower and satisfactory to the
Requisite Lenders, which report shall be unqualified as to going concern
and scope of audit and shall state that such financial statements present
fairly the financial position of Borrower, as at the dates indicated and
the results of its operations and cash flows for the periods indicated in
conformity with accounting principles applied on a basis consistent with
prior years (except as otherwise stated therein).
(c) Together with each delivery of financial statements of
Borrower pursuant to subsection (b) above, a duly executed Compliance
Certificate.
(d) Promptly upon their becoming available, copies of (i) all
financial statements, reports, notices, and proxy statements sent or made
available generally by Borrower or its constituent partners to their
respective security holders, (ii) all regular and periodic reports and all
registration statements filed by Borrower or its constituent partners with
any securities exchange or with the Securities and Exchange Commission or
any governmental authority succeeding to any of its functions, and (iii) all
press releases and other statements made available generally by Borrower or
its constituent partners to the public concerning material developments
relating to or affecting the Project or the business of Borrower or its
constituent partners.
(e) Promptly upon receipt thereof, copies of all reports
submitted to Borrower by independent public accountants in connection with
each annual and, to the extent undertaken, interim or special audit of the
financial statements of Borrower made by such accountants.
49
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(f) Promptly upon the General Partner obtaining knowledge (i) of
any condition or event which constitutes an Event of Default or Potential
Event of Default hereunder, (ii) that any Person has given any notice to
Borrower or taken any other action with respect to a claimed default or
event or condition of the type referred to in Sections 7.1(a)(iii), (iv),
---------------------------
(vi), (xi) or (xii), (xv) or (xvi) or of a material adverse change in the
----------------------------------
business operations, properties, assets or condition (financial or
otherwise) of Borrower, a certificate specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken by such Person and the nature of such claimed default, Event of
Default, Potential Event of Default, event or condition, and what action
Borrower, has taken, is taking and proposes to take with respect thereto.
(g) Promptly upon the General Partner obtaining knowledge of (i)
the institution of, or threat of, any action, suit, proceeding, governmental
investigation or arbitration which is not covered by insurance and which is
instituted by or against Borrower or the General Partner or any of their
respective property, in an amount in excess of Five Hundred Thousand Dollars
($500,000) and which has not been previously disclosed by Borrower to
Lenders, or (ii) any material development in any such action, suit,
proceeding, governmental investigation or arbitration, which, in either
case, if adversely determined, might materially and adversely affect the
business, operations, properties, assets or condition (financial or
otherwise) of Borrower or the General Partner, a certificate describing the
same, together with such other information as may be reasonably available
to it to enable Lenders and their counsel to evaluate such matters.
(h) If Borrower hereafter becomes subject to the provisions of
ERISA or has ERISA Affiliates, promptly upon becoming aware of the
occurrence of any (i) Termination Event, or (ii) "prohibited transaction,"
as such term is defined in Section 4975 of the Internal Revenue Code, in
connection with any Pension Plan or any trust created thereunder, a written
notice specifying the nature thereof, what action Borrower has taken, is
taking or proposes to take with respect thereto, and, when known, any
action taken or threatened by the Internal Revenue Service or the Pension
Benefit Guaranty Corporation with respect thereto.
(i) If Borrower hereafter becomes subject to the provisions of
ERISA or has ERISA Affiliates, with reasonable promptness copies of (i) all
notices received by Borrower or its ERISA Affiliates (if any) of the Pension
Benefit Guaranty Corporation's intent to terminate any Pension Plan or to
have a trustee appointed to administer any Pension Plan; (ii) each Schedule
B (Actuarial Information) to the annual report (Form 5500 Series) filed by
Borrower or any of its ERISA Affiliates
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with the Internal Revenue Service with respect to each Pension Plan; and
(iii) all notices received by Borrower or any of its ERISA Affiliates from a
Multiemployer Plan sponsor concerning the imposition or amount of withdrawal
liability pursuant to Section 4202 of ERISA in excess of Five Hundred
Thousand Dollars ($500,000).
(j) Promptly after any Lender's request, copies of all annual
operating reports, budgets, financial statements and other documents and
reports submitted to Borrower pursuant to the Management Agreement and not
previously delivered to Lenders.
(k) With reasonable promptness, such other information and data
with respect to Borrower, as, from time to time, may be reasonably requested
by any Lender.
6.3 EXISTENCE, ETC. Borrower will at all times preserve and keep,
--------------
in full force and effect, its respective partnership existence and rights
material to its business.
6.4 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. Borrower will
----------------------------------------------
pay all taxes, assessments and other governmental charges imposed upon it or any
of its properties or assets or in respect of any of its franchises, business,
income or property before any penalty or interest accrues thereon, and all
claims (including, without limitation, claims for labor, services, materials
and supplies) for sums which have become due and payable and which by law have
or may become a lien upon any of its properties or assets, prior to the time
when any penalty or fine shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if
Borrower complies with Section 1.08(d) of the Deeds of Trust.
---------------
6.5 MAINTENANCE OF PROPERTIES; INSURANCE. Borrower will maintain
------------------------------------
or cause to be maintained in good repair, working order and condition all
material properties used or useful in the business of Borrower and from time to
time will make or cause to be made all appropriate repairs, renewals and
replacements thereof. Borrower will maintain or cause to be maintained
continuously in effect until repayment of the Notes in full, policies of
insurance in form and amounts and issued by companies, associations or
organizations reasonably satisfactory to Co-Agents and covering such casualties,
risks, perils, liabilities and other hazards reasonably required by Co-Agents.
All required insurance policies covering any Project shall expressly protect or
recognize Co-Agents' interest as required by Co-Agents; shall contain an
endorsement or agreement by the insurer that any loss shall be payable in
accordance with the terms of such policy notwithstanding any act or negligence
of Borrower or any party holding under Borrower which might otherwise result in
forfeiture of said insurance; and shall contain the agreement of the insurer
waiving all rights of setoff,
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counterclaim or deductions against Borrower. All original policies, copies
certified as true, complete and correct by Borrower, or certificates evidencing
such insurance policies, and endorsements and renewals thereof shall be
delivered to and retained by Co-Agents unless Requisite Lenders waive this
requirement in writing; provided that, in all instances, Borrower shall provide
Co-Agents access to such policies and shall cooperate with Co-Agents in the
review of any such policies. Until repayment of the Notes in full, Borrower
shall also provide, or cause to be provided, from time to time at the written
request of Co-Agents, but not more often than once annually, satisfactory
evidence of the insurable value of all Projects.
6.6 INSPECTION. Borrower will permit any authorized
----------
representatives designated by any Lender to visit and inspect any of the
Projects, including the financial and accounting records of said Project, and to
make copies and take extracts therefrom, and to discuss the affairs, finances
and accounts of said Project with the Manager of said Project (and its
employees) and the independent public accountants, all upon reasonable notice
and at such reasonable times during normal business hours and as often as may
be reasonably requested.
6.7 NO ENCUMBRANCES.
---------------
(a) Borrower will not permit any lien, levy, attachment or
restraint to be made or filed against any Project, or any portion thereof
or interest therein, or permit any receiver, trustee or assignee for the
benefit of creditors to be appointed to take possession of any of
Borrower's assets, any Project or any portion of any of the foregoing;
excepting, however, any lien claims filed or asserted against any Project
and concerning which Borrower is in full compliance with the provisions of
Section 1.19 of the Deeds of Trust. Except as provided in Section 6.7(b),
------------ --------------
Borrower will not encumber any Project or any portion thereof or any
personal property owned by it and used in connection with the use,
occupancy or operation of any Project in any way, including any
Collateral, without the prior written consent of the Co-Agents.
(b) Borrower may encumber each Project with one or more
additional mortgages or deeds of trust as security for indebtedness (the
"Subordinate Indebtedness") to be evidenced by one or more promissory
notes, provided all of the following conditions are satisfied: (A) the
Subordinate Lender shall be a life insurance company, bank or other
financial institution whose financial condition is acceptable to Co-Agents,
in its reasonable discretion, and who is otherwise reasonably acceptable
to Co-Agents; (B) Co-Agents shall have approved all documents and
instruments evidencing or securing the Subordinate Indebtedness (which
documents shall require the Subordinate Lender to send copies of all
notices to Co-Agents); (C) the
52
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lien of the deed of trust or mortgage securing the Subordinate Indebtedness
shall be expressly subordinate to the lien of the Deeds of Trust and, at
the request of Co-Agents, Borrower and the Subordinate Lender shall enter
into a subordination agreement, in form and substance satisfactory to Co-
Agents; (D) the aggregate Cash Flow Amount from all Projects shall be at
least one hundred sixty percent (160%) of Debt Service (including in such
calculation of Debt Service the proposed Subordinate Indebtedness); and (E)
Borrower shall agree in writing (x) to deliver to Co-Agents copies of all
notices given by Borrower to, or received by Borrower from the Subordinate
Lender, within five (5) days after Borrower's receipt or transmittal
thereof and (y) not to modify, amend or alter the terms and provisions of
any document or instrument evidencing or securing the Subordinate
Indebtedness without Co-Agents' prior written consent. The proceeds of the
Subordinate Indebtedness may be used for any lawful partnership purpose.
6.8 COMPLIANCE WITH LAWS. Borrower will comply, in all material
--------------------
respects, with all laws, rules, regulations and requirements of governmental
authorities having jurisdiction over any Project (including, without limitation,
all laws, rules, regulations and requirements of governmental authorities
relating to the equipment or substances described in subsections 5.17(a) through
5.17(d)) and will furnish Co-Agents with reports of any official searches for
violation of any requirements established by such governmental authorities.
Borrower will comply, and will require all Tenants to comply with all
restrictive covenants and all obligations created by private contracts and
leases which affect ownership, construction, equipping, fixturing, use or
operation of any Project.
6.9 COMPLIANCE WITH LOAN DOCUMENTS. Borrower will comply with all
------------------------------
conditions of this Agreement and all other Loan Documents.
6.10 [Intentionally Omitted.]
6.11 TRADE NAMES. Borrower will immediately notify Co-Agents in
-----------
writing of any change in the legal, trade or fictitious business names used by
Borrower, RL or the General Partner, and will, upon Co-Agents' request, execute
or caused to be executed any additional financing statements and other
certificates necessary to reflect the change in trade names or fictitious
business names.
6.12 AMENDMENT TO DOCUMENTS, MAJOR PERSONAL PROPERTY LEASES.
------------------------------------------------------
(a) Borrower will not execute any material amendment to the
Management Agreement, any Ground Lease or any Major Personal Property Lease
without the prior written consent of the Requisite Lenders.
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(b) Borrower will not, without the prior written consent of the
Requisite Lenders, enter into any Major Personal Property Lease which
prohibits an assignment of said Lease to Co-Agents or requires the lessor's
consent thereto. Borrower will not, without the prior written consent of
the Requisite Lenders, enter into any Personal Property Lease for any
Project which would cause the annual amount of all rental and other
payments under all Personal Property Leases for that Project to exceed Five
Hundred Thousand Dollars ($500,000), in the aggregate.
6.13 AMENDMENTS TO PARTNERSHIP AGREEMENT. Borrower will not allow
-----------------------------------
any material amendments to be made in the terms of Borrower's Partnership
Agreement (other than amendments made solely for the purpose of adding
additional limited partners in Borrower) without the prior written consent of
the Requisite Lenders.
6.14 RESTRICTED PAYMENTS. At any time when an Event of Default
-------------------
exists hereunder or under any of the Loan Documents, Borrower will not, directly
or indirectly, declare, order, pay, make or set apart any sum for any of the
following: (a) amounts due under any other Indebtedness; (b) payments to any
Affiliates, including, without limitation, repayment of loans by Affiliates or
payments to RL pursuant to the Management Agreement (except as provided in the
Assignment of Management Agreement); or (c) distributions or other payments to
partners in Borrower, including, without limitation, repayment of loans made by
a partner in Borrower or any accrued interest thereon, return of capital
contributions or distributions upon termination, liquidation or dissolution of
Borrower.
6.15 RESTRICTION ON FUNDAMENTAL CHANGES. Borrower will not
----------------------------------
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or transfer in one transaction or a series of transactions, all or
any substantial part of its business, property or fixed assets outside of the
ordinary course of business, whether now owned or hereafter acquired, except as
otherwise permitted by Section 4.1 hereof.
-----------
6.16 ERISA. If Borrower hereafter becomes subject to the
-----
provisions of ERISA or has ERISA Affiliates, Borrower will not, and will not
permit any of its ERISA Affiliates to:
(a) engage in any transaction in connection with which Borrower
or any of its ERISA Affiliates could be subject to either a civil penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section
4975 of the Internal Revenue Code in excess of Five Hundred Thousand Dollars
($500,000);
(b) fail to make full payment when due of all amounts which,
under the provisions of any Pension Plan,
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<PAGE>
Borrower or any of its ERISA Affiliates is required to pay as contributions
thereto, or permit to exist any accumulated funding deficiency, whether or
not waived, with respect to any Pension Plan;
(c) permit any Unfunded Liability to exist; or
(d) fail to make any payments in excess of Five Hundred Thousand
Dollars ($500,000), in the aggregate, to any Multiemployer Plan that
Borrower or any of its ERISA Affiliates may be required to make under any
agreement relating to such Multiemployer Plan, or any law pertaining
thereto.
As used in this Section 6.16, the term "accumulated funding
------------
deficiency" has the meaning specified in Section 302 of ERISA and Section 412 of
the Internal Revenue Code and the term "accrued benefit" has the meaning
specified in Section 3 of ERISA.
6.17 O&M REPORT. Borrower will comply, in all material respects,
----------
with the requirements and recommendations set forth in the O&M Report,
including, without limitation, causing all work, testing and monitoring required
or recommended therein to be duly performed at the times and in the manner set
forth therein and in compliance with the time schedules and budgets submitted to
and approved by USNB and Canadian Imperial pursuant to Exhibit F to the Original
Credit Agreement. Borrower will deliver to Co-Agents, promptly upon receipt
thereof, copies of all reports, notices, tests and other correspondence arising
out of or based upon the O&M Report.
6.18 FURTHER ASSURANCES. At any time or from time to time upon the
------------------
request of any Lender, Borrower will, at its expense, promptly execute,
acknowledge, and deliver such further documents and do such other acts and
things as shall be necessary or advisable, in such Lender's judgment, in order
to effect fully the purposes of this Agreement or of any of the other Loan
Documents. Borrower will pay all fees and expenses (including reasonable
attorneys' fees) incurred by any Co-Agent and any Lender in connection
therewith.
6.19 PROTECTION OF LIENS. Borrower will maintain the lien created
-------------------
by the Deeds of Trust as a first lien upon each Project (including, without
limitation, the Collateral relating thereto), subject to no additional liens or
encumbrances other than title exceptions set forth in the Title Insurance Policy
and the liens and encumbrances of Subordinate Indebtedness.
6.20 PAYMENT OF INDEBTEDNESS. Subject to Section 6.14, Borrower
----------------------- ------------
will (a) duly and punctually pay or cause to be paid all principal of and
interest on any Indebtedness of Borrower, (b) comply with and perform all
conditions, terms and obligations of the notes or other instruments or
agreements evidencing or securing such Indebtedness, (c) promptly inform Lenders
of any default, or
55
<PAGE>
anticipated default, under any such note, agreement, or instrument, (d) forward
to Lenders a copy of any notice of default or notice of any event that might
result in default under any such note, agreement or instrument and (e) duly and
punctually pay or cause to be paid all other expenses and costs of every kind
and nature incurred by or on behalf of Borrower prior to the Maturity Date with
respect to the operation, maintenance and management of the Projects.
6.21 OTHER INDEBTEDNESS. Borrower will not create, incur, assume,
------------------
guarantee, permit to exist, or otherwise become directly or indirectly liable
for any Indebtedness, except Permitted Indebtedness. Borrower will not
dispose, with or without recourse, of any accounts or notes receivable or any
sums due or to become due.
6.22 LOANS AND INVESTMENTS. Borrower will not lend money, make
---------------------
investments, or extend credit, other than in the ordinary course of its business
as presently conducted.
6.23 REGULATIONS G, T AND U. Borrower will not use the proceeds of
----------------------
any Loan, directly or indirectly, to purchase or carry any margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System) or extend credit to others for such purpose.
6.24 FF&E RESERVES; CAPITAL IMPROVEMENTS, ETC.. Borrower will
-----------------------------------------
deposit, or cause RL to deposit, into the FF&E Reserve the amounts required to
be reserved pursuant to the Management Agreement. Borrower will use monies
deposited into the FF&E Reserve, and any interest accrued thereon, only for
Capital Improvements. Borrower will not undertake, or cause to be undertaken,
any Capital Improvements, the costs of which, if undertaken prior to December
31, 1995, will exceed $8,700,000, or if undertaken after December 31, 1995, will
exceed the amount then on deposit in the FF&E Reserve, Borrower will not
undertake, or cause to be undertaken, any Capital Expansions, without the prior
written consent of Requisite Lenders.
6.25 DELIVERY OF LEASES, LICENSES, ETC. Borrower will, from time
----------------------------------
to time after a request by Co-Agents, which requests shall not be unreasonably
made, deliver to Co-Agents certified copies of all leases (including, without
limitation, any Major Personal Property Leases), licenses (including, without
limitation, liquor licenses), permits and approvals necessary for the operation,
use and occupancy of each Project not previously delivered to Co-Agents and, at
the request of Co-Agents, Borrower will execute an assignment, in form and
substance satisfactory to Co-Agents, of any such leases, licenses, permits and
approvals not previously assigned to Co-Agents, which assignment shall be in
substantially the same form and substance as the previous assignments of leases,
licenses, permits, and approvals pursuant to this Agreement.
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<PAGE>
6.26 LEASES. Borrower will not enter into any Tenant Lease with an
------
Affiliate or which is outside of the ordinary course of its business.
6.27 ENVIRONMENTAL MATTERS.
---------------------
(a) Borrower agrees to submit from time to time, if requested by Co-
Agents a report, satisfactory to Co-Agents, certifying that no Project (or
any portion thereof) is being used or has been used at any time since
January 1, 1990, for any Environmental Activities except for any
Environmental Activities conducted in the normal course of business at the
applicable Project and in full compliance with all applicable federal,
state and local laws (whether under common law, statute, rule, regulation
or otherwise), permits, licenses, ordinances and other requirements of
governmental authorities relating to the protection of human health or the
environment or to any Hazardous Material or Hazardous Activities
(including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. (S)(S) 9601 et seq.), as
-- ---
heretofore or hereafter amended from time to time, and the applicable
provisions of state law pertaining to public health and safety, water, air
and land (collectively "ENVIRONMENTAL LAWS"). Each Co-Agent reserves the
right, in its sole and absolute discretion, to retain, at Borrower's
expense, an independent professional consultant to review any report
prepared by Borrower. Each Co-Agent further reserves the right, in its sole
and absolute discretion, to retain an independent professional consultant
to conduct its own investigation of the Projects (or any of them) for
Hazardous Materials. Borrower agrees to bear all costs and expenses
incurred in retaining a consultant to conduct such an investigation of the
Projects (or any of them), provided such an investigation shall be
conducted because either Co-Agent reasonably believes that there may be
Hazardous Material present in, on or under the Project or Projects to be
investigated at levels which would require removal or remediation under any
Environmental Laws, or provided such an investigation, in fact, discloses
the presence of Hazardous Material in, on or under the Project investigated
not previously disclosed to Co-Agents at a level which requires removal or
remediation under any Environmental Laws. In all other cases, the costs and
expenses incurred in retaining a consultant to conduct an investigation of
the Projects (or any of them) shall be borne by Co-Agents. Borrower hereby
grants to each Co-Agent, and each of their respective agents, employees,
consultants and contractors the right to enter upon the Projects (or any of
them) and to perform such tests as are reasonably necessary to conduct any
such review and/or investigation.
(b) Upon the discovery by Borrower of any event or situation which
would render any of the representations or
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warranties contained in Section 5.17 inaccurate in any respect if made at
------------
the time of such discovery, Borrower shall promptly notify each Co-Agent of
such event or situation and, within thirty (30) days after such discovery,
submit to each Co-Agent a preliminary written environmental plan setting
forth a general description of such event or situation and the action, if
any, that Borrower proposes to take with respect thereto. Within ninety
(90) days after such discovery, Borrower shall submit to each Co-Agent a
final written environmental report, setting forth a detailed description of
such event or situation and the action that Borrower proposes to take with
respect thereto, including, without limitation, any proposed corrective
work, the estimated cost and time of completion, the name of the contractor
and a copy of the construction contract, if any, and such additional data,
instruments, documents, agreements or other materials or information as
either Co-Agent may reasonably request. The plan shall be subject to each
Co-Agent's written approval, which approval may be granted or withheld in
each Co-Agent's reasonable discretion. Each Co-Agent shall notify Borrower
in writing of its approval or disapproval of the final plan within fifteen
(15) days after receipt thereof by such Co-Agent. If either Co-Agent
disapproves the plan, such Co-Agent's notice to Borrower of such
disapproval shall include a brief explanation of the reasons therefor.
Within thirty (30) days after receipt of such notice of disapproval,
Borrower shall submit to each Co-Agent a revised final written
environmental plan that remedies the defects identified by either Co-Agent
as reasons for such Co-Agent's disapproval of the initial final plan. If
Borrower fails to submit a revised plan to either Co-Agent within said
thirty (30) day period, or if such revised plan is so submitted and either
Co-Agent, in the exercise of its reasonable discretion, disapproves said
plan, such failure or disapproval shall, at either Co-Agent's option and
upon notice to Borrower, constitute an "Event of Default" hereunder, in
which event Lenders' obligation to make Revolving Loans shall abate and
each Co-Agent shall have all of the rights and remedies available to it
under Section 7.2. If either Co-Agent does not notify Borrower of its
-----------
approval or disapproval of the final plan or any revisions thereof within
fifteen (15) days after receipt thereof, the plan or revision shall be
deemed approved by such Co-Agent. Once any such plan is approved in writing
or deemed approved by each Co-Agent, Borrower shall promptly commence all
action necessary to implement such plan and to comply with any requirements
and conditions imposed by any governmental agency or authority, and shall
diligently and continuously pursue such action to completion in strict
accordance with the terms thereof.
58
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ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
---------------------------
7.1 EVENTS OF DEFAULT.
-----------------
(a) Upon written notice to Borrower from any Lender or Co-Agent
(except for the occurrence of any of the events described in subsections
7.1(a)(iii) through (vi) in which event no notice shall be required), the
occurrence of any one or more of the following shall constitute a default
under this Agreement:
(i) the failure to pay any monies due under the Notes (or
any of them) or any other Loan Document when due;
(ii) the failure to comply with any of the covenants made by
Borrower in this Agreement or in any of the other Loan Documents that
are not specifically described in other clauses of this Sections 7.1;
------------
(iii) the commencement by any constituent partner of Borrower
of any action or proceeding which seeks as one of its remedies the
dissolution of Borrower;
(iv) if any governmental authority, or any court at the
instance thereof, shall take possession of all or a substantial part
of the property of, or assume control over, the affairs or operations
of, or a receiver or trustee shall be appointed over all or a
substantial part of, or a writ or order of attachment or garnishment
shall be issued or made against all or a substantial part of the
property of Borrower or the General Partner;
(v) if Borrower or the General Partner shall admit in
writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors; or Borrower or the General
Partner shall apply for or consent to the appointment of any receiver,
trustee or similar officer for Borrower or the General Partner, as the
case may be, or for all or any substantial part of their respective
property; or Borrower or the General Partner shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debts,
dissolution, liquidation, or similar proceedings relating to Borrower
or the General Partner, as the case may be, under the laws of any
jurisdiction;
(vi) if a receiver, trustee or similar officer shall be
appointed for Borrower or the General Partner for all or any
substantial part of their respective
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property without the application or consent of Borrower or the General
Partner, as the case may be, and such appointment shall continue
undischarged for a period of sixty (60) days (whether or not
consecutive); or any bankruptcy, insolvency, reorganization,
arrangements, readjustment of debt, dissolution, liquidation or
similar proceedings shall be instituted (by petition, application or
otherwise) against Borrower or the General Partner, as the case may
be, and shall remain undismissed for a period of sixty (60) days
(whether or not consecutive);
(vii) if (A) any written representation or warranty made by
or with respect to Borrower or the General Partner in any of the Loan
Documents at the date hereof shall be materially false or materially
misleading in any respect or (B) Borrower shall fail to disclose in
any Compliance Certificate or Notice of Borrowing any change in facts
which makes any written representation or warranty by or with respect
to Borrower or the General Partner materially false or materially
misleading in any respect on the date of said Certificate or Request;
(viii) (A) if an "Event of Termination" under the Management
Agreement shall occur and Borrower shall be the defaulting party, (B)
if an "Event of Termination" under the Management Agreement shall
occur and RL shall be the defaulting party, and such "Event of
Termination" shall remain unremedied for a period of thirty (30) days,
or (C) if RL or its permitted successor or assign under the Loan
Documents shall terminate the Management Agreement or otherwise no
longer be the manager of any Project which, at such time, is subject
to any lien securing the Obligations;
(ix) any uninsured money judgment in excess of Two Hundred
Thousand Dollars ($200,000) shall be rendered against Borrower or its
assets or any, writ or warrant of attachment, or similar process,
shall be entered or filed against Borrower or any of its assets and
such money judgment, writ, warrant or process shall remain
undischarged, unvacated, unbonded or unstayed for a period of forty-
five (45) days or in any event later than five (5) days prior to the
date of any proposed sale thereunder;
(x) the failure to procure or maintain the insurance
policies required by Co-Agents;
(xi) a trustee shall be appointed by an appropriate United
States district court to administer any Pension Plan or the Pension
Benefit Guaranty Corporation (or any successor thereto) shall
institute
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proceedings to terminate any Pension Plan or to appoint a trustee to
administer any Pension Plan;
(xii) (A) Borrower or any of its ERISA Affiliates as employer
under a Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plan and the plan sponsor of such
Multiemployer Plan shall have notified such withdrawing employer that
such employer has incurred a withdrawal liability in an annual amount
exceeding Five Hundred Thousand Dollars ($500,000); or (B) any Pension
Plan maintained by the Borrower or any of its ERISA Affiliates shall
be terminated within the meaning of Title IV of ERISA, or a trustee
shall be appointed by an appropriate United States district court to
administer any Pension Plan, or the Public Benefit Guaranty
Corporation shall institute proceedings to terminate any Pension Plan
or to appoint a trustee to administer any Pension Plan if as of the
date thereof the Borrower's liability or any such ERISA Affiliate's
liability (after giving effect to the tax consequences thereof) to the
Public Benefit Guaranty Corporation for unfunded guaranteed vested
benefits under the Pension Plans exceeds the then current value of
assets accumulated in such Pension Plan by more than Five Hundred
Thousand Dollars ($500,000) (or in the case of a termination involving
the Borrower or any of its ERISA Affiliates as a "substantial
employer" (as defined in Section 4001(a)(2) of ERISA) the withdrawing
employer's proportionate share of such excess shall exceed such
amount);
(xiii) a Transfer of any Project without the prior written
consent of Co-Agents or without first complying with the provisions of
clauses (a) through (d), inclusive, of Section 4.1;
-----------
(xiv) a Transfer of any general partnership interest in
Borrower or any stock in the General Partner without the prior written
consent of Co-Agents;
(xv) a default by Borrower under (A) any Subordinate
Indebtedness or (B) any other Indebtedness of Borrower in an amount
in excess of Five Hundred Thousand Dollars ($500,000) which is
recourse to the credit of Borrower, if the effect of such default is
to cause the holder (or holders) of such Indebtedness to declare such
Indebtedness to be due prior to its stated maturity;
(xvi) a default by Borrower under the terms of any Ground
Lease and the expiration of all applicable notice and cure periods
given to Borrower thereunder; provided, however, said default shall be
deemed cured if Borrower shall withdraw the Project subject to the
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Ground Lease pursuant to Section 4.1 or, prior to Co-Agents' exercise
-----------
of any of its rights and remedies under any of the Loan Documents,
Borrower shall cure said default and shall deliver to Co-Agents
satisfactory evidence that the lessor under said Ground Lease has
accepted such cure and has acknowledged that the Ground Lease is in
full force and effect without default; or
(xvii) a final determination by a trial or appellate court
that Borrower, Red Lion or any partner therein has violated any state
or federal securities laws, rules, regulations or ordinances in
connection with the offering for sale or sale of limited partnership
interests in Red Lion and Co-Agents, in their reasonable discretion,
shall determine that the plaintiff in such case comprises part of a
larger class of plaintiffs which may have standing to bring similar
causes of action which may result in liability (in the aggregate) in
excess of Five Hundred Thousand Dollars ($500,000).
(b) Except for defaults involving the breach of an obligation to
pay money to Co-Agents, and those defaults described in Sections
--------
7.1(a)(iv), 7.1 (a) (v), 7.1 (a) (vi), 7.1(a)(ix), 7.1 (a) (xiii),
------------------------------------------------------------------
7.1(a)(xiv), 7.1(a)(xvi) and 7.1(a)(xvii), any default is curable and shall
------------------------------------------
be deemed" cured, if:
(i) within five (5) Business Days of Borrower's receipt of
a notice of default from any Lender or Co-Agent, Borrower gives Co-
Agents notice (which notice shall be forwarded by Co-Agents to each
Lender) of its intent to cure said default; and
(ii) Borrower commences to cure said default within ten
(10) Business Days of receipt of notice of default from a Lender or
Co-Agent; and
(iii) Borrower, in fact, cures said default within such time
as Requisite Lenders, in their sole but reasonable discretion, deem to
be a reasonable time.
7.2 REMEDIES. Notwithstanding any provision to the contrary in
--------
any of the other Loan Documents, upon the happening of any Event of Default
under this Agreement or under any of the other Loan Documents, then Lenders
shall, at their option, have the remedies provided in the Loan Document breached
by Borrower and the following remedies: Co-Agents or the Requisite Lenders may,
at their option, declare the outstanding indebtedness under the Notes to be
immediately due and payable without presentment, demand, protest or notice of
any kind (provided that with respect to any Event of Default described in
Section 7.1(a)(iv), Section 7.1(a)(v) or Section 7.1(a)(vi), the outstanding
- ------------------ ----------------- ------------------
indebtedness under the Notes shall automatically become due and payable); Co-
Agents may, at
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<PAGE>
their option, apply any of Borrower's funds in their possession to the
outstanding indebtedness under the Notes, in such order as Co-Agents shall
elect, whether or not such indebtedness is then due; and Co-Agents may exercise
all rights and remedies available to them under any or all of the Loan
Documents, including, without limitation, to the extent permitted by law, the
right to sell all or any part of the real property and personal property
collateral separately or together as one parcel or package or security in
accordance with the provisions of the Deeds of Trust. If at any time after
acceleration of the outstanding indebtedness under the Notes, Borrower shall pay
all arrears of interest and all payments on account of principal of the Loans
which shall have become due otherwise than by acceleration (with interest on
principal and, to the extent permitted by law, on overdue interest, at the rates
specified in this Agreement) and all Events of Default and Potential Events of
Default (other than nonpayment of principal of and accrued interest on the Loans
due and payable solely by virtue of acceleration) shall be remedied, then by
written notice to Borrower, Requisite Lenders may elect, in their sole
discretion, to rescind and annul the acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Potential Event of
Default or impair any right or remedy consequent thereon. The provisions of the
preceding sentence are intended merely to bind Lenders to a decision which may
be made at the election of Requisite Lenders; they are not intended to benefit
Borrower and do not give Borrower the right to require Lenders to rescind or
annul any acceleration hereunder, even if the conditions set forth herein are
met.
ARTICLE VIII
CO-AGENTS
---------
8.1 APPOINTMENT. Each of USNB and CIBC is hereby appointed Co-
-----------
Agent hereunder and under the other Loan Documents and each Lender hereby
authorizes each Co-Agent to act as its agent in accordance with the terms of
this Agreement and the other Loan Documents. Each Co-Agent agrees to act upon
the express conditions contained in this Agreement and the other Loan Documents,
as applicable. The provisions of this Article VIII are solely for the benefit
of Co-Agents and Lenders, and Borrower shall have no rights as a third party
beneficiary of any of the provisions thereof. In performing its functions and
duties under this Agreement, each Co-Agent shall act solely as an agent of
Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Borrower.
8.2 POWERS; GENERAL IMMUNITY.
------------------------
(a) DUTIES SPECIFIED. Each Lender irrevocably authorizes each Co-
Agent to take such action on such Lender's
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behalf and to exercise such powers hereunder and under the other Loan
Documents as are specifically delegated to each Co-Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto. Each Co-Agent shall have only those duties and responsibilities
that are expressly specified in this Agreement and the other Loan Documents
and it may perform such duties by or through its agents or employees.
Neither Co-Agent shall have, by reason of this Agreement or any of the
other Loan Documents, a fiduciary relationship in respect of any Lender;
and nothing in this Agreement or any of the other Loan Documents, expressed
or implied, is intended to or shall be so construed as to impose upon
either Co-Agent any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.
(b) NO RESPONSIBILITY FOR CERTAIN MATTERS. Neither Co-Agent shall be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement
or any other Loan Document or for any representations, warranties, recitals
or statements made herein or therein or made in any written or oral
statement or in any financial or other statements, instruments, reports or
certificates or any other documents furnished or made by either Co-Agent to
Lenders or by or on behalf of Borrower to either Co-Agent or any Lender in
connection with the Loan Documents and the transactions contemplated
thereby or for the financial condition or business affairs of Borrower or
any other Person liable for the payment of any Obligations, nor shall
either Co-Agent be required to ascertain or inquire as to the performance
or observance of any of the terms, conditions, provisions, covenants or
agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or as to the existence or possible existence of any
Event of Default or Potential Event of Default. Anything contained in this
Agreement to the contrary notwithstanding, neither Co-Agent shall have any
liability arising from confirmations of the amount of outstanding Loans.
(c) EXCULPATORY PROVISIONS. Neither Co-Agent nor any of their
respective officers, directors, employees or agents shall be liable to
Lenders for any action taken or omitted by either Co-Agent hereunder or in
connection herewith except to the extent caused by such Co-Agent's gross
negligence or willful misconduct, as finally determined by a court of
competent jurisdiction. If either Co-Agent shall request instructions from
Lenders with respect to any act or action (including the failure to take an
action) in connection with this Agreement or any of the other Loan
Documents, such Co-Agent shall be entitled to refrain from such act or
taking such action unless and until such Co-Agent shall have
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<PAGE>
received instructions from Requisite Lenders. Without prejudice to the
generality of the foregoing, (i) each Co-Agent shall be entitled to rely,
and shall be fully protected in relying, upon any communication, instrument
or document believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, and shall be entitled to
rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Borrower), accountants, experts and
other professional advisors selected by it; and (ii) no Lender shall have
any right of action whatsoever against either Co-Agent as a result of
either Co-Agent acting or (where so instructed) refraining from acting
under this Agreement or any of the other Loan Documents in accordance with
the instructions of Requisite Lenders. Each Co-Agent shall be entitled to
refrain from exercising any power, discretion or authority vested in it
under this Agreement or any of the other Loan Documents unless and until it
has obtained the instructions of Requisite Lenders.
(d) EACH CO-AGENT ENTITLED TO ACT AS LENDER. The agency hereby
created shall in no way impair or affect any of the rights and powers of,
or impose any duties or obligations upon, either Co-Agent in its individual
capacity as a Lender hereunder. With respect to its participation in the
Loans, each Co-Agent shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not performing the
duties and functions delegated to it hereunder, and the term "Lender" or
"Lenders" or any similar term shall, unless the context clearly otherwise
indicates, include each Co-Agent in its individual capacity. Each Co-Agent
and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of banking, trust, financial advisory or other business
with Borrower or any of its Affiliates as if it were not performing the
duties specified herein, and may accept fees and other consideration from
Borrower for services in connection with this Agreement and otherwise
without having to account for the same to Lenders.
8.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR
-----------------------------------------------------
APPRAISAL OF CREDITWORTHINESS. Each Lender represents and warrants that it has
- -----------------------------
made its own independent investigation of the financial condition and affairs of
Borrower in connection with the making and/or maintaining of the Loans hereunder
and that it has made and shall continue to make its own appraisal of the
creditworthiness of Borrower. Neither Co-Agent shall have any duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before the making of the Loans or at any time or times
thereafter, and neither Co-Agent shall have any responsibility
65
<PAGE>
with respect to the accuracy of or the completeness of any information provided
to Lenders.
8.4 RIGHT TO INDEMNITY. Each Lender, in proportion to its Pro
------------------
Rata Share, severally agrees to indemnify each Co-Agent, to the extent that such
Co-Agent shall not have been reimbursed by Borrower, for and against any and all
actual liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including, without limitation, counsel fees and
disbursements) or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against such Co-Agent in performing its
duties hereunder or under the other Loan Documents or otherwise in its capacity
as Co-Agent in any way relating to or arising out of this Agreement or the other
Loan Documents; provided 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 such Co-Agent's gross negligence
or willful misconduct, as finally determined by a court of competent
jurisdiction. If any indemnity furnished to either Co-Agent for any purpose
shall, in the opinion of such Co-Agent, be insufficient or become impaired, such
Co-Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished.
8.5 PAYEE OF NOTE TREATED AS OWNER. Each Co-Agent may deem and
------------------------------
treat the payee of any Note as the owner thereof for all purposes hereof unless
and until a written notice of the assignment or transfer thereof shall have been
filed with each Co-Agent. Any request, authority or consent of any person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee or assignee of that Note or of any Note or Notes
issued in exchange therefor.
8.6 SUCCESSOR CO-AGENTS. Either Co-Agent may resign at any time
-------------------
by giving 30 days' prior written notice thereof to Lenders and Borrower, and
either Co-Agent may be removed at any time with or without cause by an
instrument or concurrent instruments in writing delivered to Borrower and each
Co-Agent and signed by Requisite Lenders. Upon any such notice of resignation
or any such removal by or of USNB or CIBC, USNB or CIBC, as applicable, shall
thereafter be the exclusive Co-Agent, so long as USNB or CIBC, as applicable,
has not have previously resigned or been removed as Co-Agent. If both USNB and
CIBC shall resign or be removed as Co-Agent, Requisite Lenders shall have the
right, upon five Business Days' notice to Borrower, to appoint a successor Co-
Agent which shall be a Lender. Upon the acceptance of any appointment as Co-
Agent hereunder by a successor Co-Agent, that successor Co-Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Co-Agent and the
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<PAGE>
retiring or removed Co-Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Co-Agent's resignation or
removal hereunder as Co-Agent, the provisions of this Article VIII shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Co-Agent under this Agreement.
8.7 DELIVERY OF DOCUMENTS. Co-Agents shall as soon as reasonably
---------------------
practicable distribute to each Lender at its primary address set forth on the
appropriate counterpart signature page hereof, or at such other address as a
Lender may request in writing, (i) all documents to which such Lender is a party
or of which such Lender is a beneficiary, (ii) all other documents or
information which Co-Agents are required to send to Lenders pursuant to the
terms of this Agreement, and (iii) other information or documents received by
Co-Agents at the request of any Lender. In addition, within fifteen (15)
Business Days after receipt of a request in writing from a Lender for written
information or documents provided by or prepared by Borrower, either Co-Agent
shall deliver such written information or documents to such requesting Lender if
such Co-Agent has possession of such written information or documents in its
capacity as a Co-Agent or as a Lender.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOAN.
--------------------------------------
(a) Each Lender shall have the right at any time to (i) sell, assign,
transfer or negotiate to any Eligible Assignee, or (ii) sell participations
to any Person in, all or any part of any Loan or Loans made by it or its
Commitments or any other interest herein or in any other Obligations owed
to it; provided that no such assignment or participation shall, without the
--------
consent of Borrower, require Borrower to file a registration statement with
the Securities and Exchange Commission or apply to qualify such assignment
or participation of the Loans or the other Obligations under the securities
laws of any state. Except as otherwise provided in this Section 9.1, no
-----------
Lender shall, as between Borrower and such Lender, be relieved of any of
its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or any granting of participations in, all or any part of
the Loans, the Commitments or the other Obligations owed to such Lender.
(b) (i) Each Loan, Commitment or other Obligation may (A) be
assigned in any amount (of a constant and not a varying percentage) to
another Lender, or to an Affiliate of the assigning Lender or
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<PAGE>
another Lender, with the giving of notice to Borrower and Co-Agents or
(B) be assigned in any amount (of a constant and not a varying
percentage) to any other Eligible Assignee with the giving of notice
to Borrower and Co-Agents and with the consent of each Co-Agent (which
consent shall not be unreasonably withheld). To the extent of any such
assignment in accordance with either clause (A) or (B) above, the
assigning Lender shall be relieved of its obligations with respect to
its Loans, Commitments or other Obligations or the portion thereof so
assigned. The parties to each such assignment shall execute and
deliver to USNB, for its acceptance, an Assignment and Acceptance,
together with such certificates, documents or other evidence, if any,
with respect to United States federal income tax withholding matters
as the assignee under such Assignment and Acceptance or USNB may
require. Upon such execution, delivery and acceptance, from and after
the effective date specified in such Assignment and Acceptance, (y)
the assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of a Lender hereunder and (z) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a
party hereto). The Commitments hereunder shall be modified to reflect
the Commitment of such assignee and any remaining Commitment of such
assigning Lender.
(ii) Upon their receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an
Eligible Assignee, together with any certificates, documents or other
evidence with respect to United States federal income tax withholding
matters that such assignee may be required to deliver, Co-Agents
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit B hereto and if Co-Agents have
---------
consented to the assignment evidenced thereby (to the extent such
consent is required pursuant to Section 9.1(b)(i)), (A) accept such
-----------------
Assignment and Acceptance by executing a counterpart thereof as
provided therein (which acceptance shall evidence any required consent
of Co-Agents to such assignment) and (C) give prompt notice thereof to
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<PAGE>
Borrower. USNB shall maintain a copy of each Assignment and Acceptance
delivered to and accepted by it as provided in this Section 9.1(b)(ii).
------------------
(c) The holder of any participation, other than an Affiliate of the
Lender granting such participation, shall not be entitled to require such
Lender to take or omit to take any action hereunder except action directly
affecting (i) the extension of the regularly scheduled maturity of any
portion of the principal amount of or interest on any Loan allocated to
such participation or (ii) a reduction of the principal amount of or the
rate of interest payable on any Loan allocated to such participation, and
all amounts payable by Borrower hereunder shall be determined as if such
Lender had not sold such participation. Borrower hereby acknowledges and
agrees that any participation will give rise to a direct obligation of
Borrower to the participant and the participant shall, for purposes of
Sections 3.4(d), 3.5, 9.4 and 9.5, be considered to be a "Lender"; provided
---------------------------------
that no participant shall be entitled to receive any greater amount
pursuant to Section 3.4(d) or 3.5 than the transferor Lender would have
---------------------
been entitled to receive in respect of the amount of the participation
effected by such transferor Lender to such participant had no such
participation occurred.
(d) Each Lender may furnish any information concerning Borrower and
its Affiliates in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and
participants).
9.2 EXPENSES. Whether or not the transactions contemplated hereby
--------
shall be consummated, Borrower agrees to pay promptly (i) all the actual and
reasonable costs and expenses of preparation of this Agreement and the other
Loan Documents; (ii) all the costs of furnishing all opinions by counsel for
Borrower (including without limitation any opinions requested by Lenders as to
any legal matters arising hereunder) and of Borrower's performance of and
compliance with all agreements and conditions on its part to be performed or
complied with under this Agreement and the other Loan Documents including,
without limitation, with respect to confirming compliance with environmental and
insurance requirements; (iii) the reasonable fees, expenses and disbursements of
counsel to Co-Agents (including allocated costs of internal counsel) in
connection with the negotiation, preparation, execution and administration of
the Loan Documents and the Loans and any consents, amendments, waivers or other
modifications hereto or thereto and any other documents or matters requested by
Borrower; (iv) all title insurance premiums and charges, escrow fees, costs of
surveys, premiums of hazard insurance policies and surety bonds, appraisal fees
and expenses, and costs of any market or feasibility studies; (v) all fees and
expenses related to any syndication,
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assignment or participation of all or any part of the Loans; (vi) all other
actual and reasonable costs and expenses incurred by either Co-Agent in
connection with the negotiation, preparation and execution of the Loan Documents
and the transactions contemplated hereby and thereby; and (vii) after the
occurrence of an Event of Default, all costs and expenses, including reasonable
attorneys' fees (including allocated costs of internal counsel) and costs of
settlement, incurred by Co-Agents and Lenders in enforcing any Obligations of or
in collecting any payments due from Borrower hereunder or under the other Loan
Documents by reason of such Event of Default or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings.
9.3 INDEMNITY. In addition to the payment of expenses pursuant
---------
to Section 9.2, whether or not the transactions contemplated hereby shall be
-----------
consummated, Borrower agrees to defend, indemnify, pay and hold harmless Co-
Agents and Lenders and any holder of any of the Notes, and the officers,
directors, employees, agents and affiliates of Agent, Lenders and such holders
(collectively called the "INDEMNITEES") from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including without limitation the reasonable fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened by any Person, whether or not any
such Indemnitee shall be designated as a party or a potential party thereto),
whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including without
limitation securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby
(including without limitation Lenders' agreement to make or maintain the Loans
hereunder or the use or intended use of the proceeds of any of the Loans) or the
statements contained in the Commitment Letter (collectively called the
"INDEMNIFIED LIABILITIES"); provided that Borrower shall not have any obligation
--------
to any Indemnitee hereunder with respect to any Indemnified Liabilities to the
extent such Indemnified Liabilities arise solely from the gross negligence or
willful misconduct of that Indemnitee as determined by a final judgment of a
court of competent jurisdiction. Borrower shall not settle any claim with
respect to any Indemnified Liability without the prior written consent of all
affected Indemnitees. Upon receiving knowledge of any suit, claim or demand
asserted by a third party that an Indemnitee believes constitutes an
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Indemnified Liability, such Indemnitee shall give Borrower notice of the matter
and an opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel satisfactory to such Indemnitee; provided that if such Indemnitee
--------
reasonably believes that retention of separate counsel is necessary to avoid a
conflict of interest, such Indemnitee may retain, at Borrower's sole cost and
expense, separate counsel to defend the matter. The obligations of Borrower
under this Section 9.3 shall survive the closing and repayment of the Loans. To
-----------
the extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in this Section 9.3 may be unenforceable because it is violative of any
-----------
law or public policy, Borrower shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
9.4 SET OFF. In addition to any rights now or hereafter granted
-------
under applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, each Lender and each subsequent holder of
the Notes is hereby authorized by Borrower at any time or from time to time,
with the prior written consent of Co-Agents but without notice to Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and to apply any and all deposits (general or special, including,
but not limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured but not including trust accounts) and any other
indebtedness at any time held or owing by such Lender or subsequent holder to or
for the credit or the account of Borrower or against and on account of the
obligations and liabilities of Borrower to such Lender or subsequent holder
under this Agreement, the Notes and other Loan Documents, including, but not
limited to, all claims of any nature or description arising out of or connected
with this Agreement, the Notes and other Loan Documents, irrespective of whether
or not (a) such Lender or such subsequent holder shall have made any demand
hereunder or (b) such Lender or such subsequent holder shall have declared the
principal of and interest on the Notes and other amounts due hereunder to be due
and payable as permitted by Article VII and although said obligations and
liabilities, or any of them, may be contingent or unmatured.
9.5 AMENDMENTS AND WAIVERS. No amendment, modification,
----------------------
termination or waiver of any provision of this Agreement or the Loan Documents,
or consent to any departure by Borrower therefrom, shall in any event be
effective without the written concurrence of Requisite Lenders; provided that
--------
any amendment, modification, termination or waiver of or with respect to: the
amount of the Commitments or the principal amount of the Loans; each Lender's
Pro Rata Share; the definition of "Requisite Lenders"; any provision expressly
requiring the approval or concurrence of all Lenders; the scheduled final
maturity dates of the Loans; the dates and amounts of any scheduled payments
(but
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not prepayments) of principal of the Loans; the dates on which interest or any
fees are payable; decreases in the interest rates borne by the Loans or in the
amount of any fees payable hereunder; the maximum duration of Interest Periods;
and the provisions contained in Sections 7.1(a) and 9.5 shall be effective only
-----------------------
if evidenced by a writing signed by or on behalf of all Lenders. In addition,
(i) any amendment, modification, termination or waiver of any of the provisions
contained in Article II shall be effective only if evidenced by a writing signed
by or on behalf of each Co-Agent and Requisite Lenders, (ii) no amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the holder of that Note, and (iii)
no amendment, modification, termination or waiver of any provision of Article
VIII or of any other provision of this Agreement expressly requiring the
approval or concurrence of Co-Agents shall be effective without the written
concurrence of each Co-Agent. Each Co-Agent may, but shall have no obligation
to, with the concurrence of any Lender, execute amendments, modifications,
waivers or consents on behalf of that Lender. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on Borrower in any case shall entitle
Borrower to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 9.5 shall be binding upon each holder
-----------
of the Notes at the time outstanding, each future holder of the Notes and, if
signed by Borrower, on Borrower.
9.6 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be
-------------------------
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of an Event of Default or Potential Event of Default
if such action is taken or condition exists.
9.7 TIME IS OF THE ESSENCE. Time is of the essence of this
----------------------
Agreement.
9.8 NOTICES. All notices, requests, demands and consents to be
-------
made hereunder to the parties hereto shall be in writing and shall be delivered
by personal service (including, without limitation, courier or express service),
facsimile transmission, or by registered mail, postage prepaid, return receipt
requested, to the addresses shown below or such other addresses which the
parties may provide to one another in accordance herewith. Such notices,
requests, demands and consents, if sent by mail or delivered personally or by
facsimile transmission, shall be effective upon the date of receipt or of
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refusal to accept delivery by the authorized representative of the party at the
designated address.
To Co-Agents: United States National Bank of Oregon
111 S.W. Fifth Avenue
Tower 7
Portland, Oregon 97204
Attention: David A. Castricano,
Commercial Real Estate Division
United States National Bank of Oregon
111 S.W. Fifth Avenue
Tower 4
Portland, Oregon 97204
Attention: Glenn Jacobs,
Oregon Corporate Banking Division
CIBC Inc.
300 South Grand Avenue, Suite 2700
Los Angeles, California 90071
Attention: Paul J. Chakmak
and
CIBC Inc.
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
Attention: Kelli Jones
(Funding Notices Only)
With copies to: O'Melveny & Myers
610 Newport Center Drive
Suite 1700
Newport Beach, California 92660-6429
Attention: Patricia Frobes, Esq.
and
O'Melveny & Myers
1999 Avenue of the Stars
Los Angeles, California 90067-6035
Attention: Warren R. Loui, Esq.
To Borrower: Red Lion Inns Operating L.P.
c/o Red Lion Properties, Inc.
4001 Main Street
Vancouver, Washington 98663
Attention: Chief Financial Officer
73
<PAGE>
With a copy to: Stoel Rives Boley Jones & Grey
900 S.W. Fifth Avenue, Suite 2300
Portland, Oregon 97204-1268
Attention: Thomas R. Nicolai, Esq.
To Lenders: As set forth on the Signature Page hereof.
9.9 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
------------------------------------------------------
failure or delay on the part of Co-Agents, Lenders or any holder of the Notes
(or either of them) in the exercise of any power, right or privilege hereunder
or under the Notes (or either of them) shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under this Agreement or the Notes
are cumulative to and not exclusive of, any rights or remedies otherwise
available.
9.10 SEVERABILITY. In case any provision in or obligation under
------------
this Agreement or the Notes (or either of them) shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
9.11 HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
9.12 APPLICABLE LAW. Borrower, Co-Agents and Lenders agree that
--------------
their rights and obligations under this Agreement, the Notes and under the other
Loan Documents shall be governed by and construed and interpreted in accordance
with the internal law of the State of Oregon without giving effect to any
contrary conflict-of-law rules and principles of such State. The parties further
agree and stipulate that the State of Oregon has a substantial relationship to
the parties and to the underlying transactions evidenced by the Loan Documents.
Notwithstanding the foregoing, the parties agree that:
(a) The procedures governing the enforcement by Lenders of
foreclosure and provisional remedies against Borrower, including by way of
illustration but not limitation, actions for foreclosure, replevin, for
claim and delivery of property, for injunctive relief or for the
appointment of a receiver shall be governed by the laws of the State in
which the applicable real property is located; and
74
<PAGE>
(b) Lenders shall comply with applicable law in the State in
which the applicable real property is located to the extent required in
connection with the foreclosure of the security interest and liens created
hereby and under the other Loan Documents.
Nothing contained in this Section 9.12 shall be construed to provide
------------
that the substantive law of the State in which the applicable real property is
located shall apply to the parties' rights and obligations hereunder or under
the other Loan Documents, which are and shall continue to be governed by the
substantive law of the State of Oregon. In addition, the fact that portions of
the Loan Documents may include provisions drafted to conform to the law of other
jurisdictions is not intended nor shall it be deemed in any way to derogate the
parties' choice of law set forth in this Section 9.12. The parties further
------------
agree that Lenders may enforce their rights under the Loan Documents, including
but not limited to, its rights to sue Borrower, to collect any outstanding
indebtedness or to obtain a judgment for any deficiency following foreclosure,
in accordance with Oregon law.
9.13 SUCCESSORS AND ASSIGNS; SUBSEQUENT HOLDERS OF NOTES. This
---------------------------------------------------
Agreement shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and assigns of Co-Agents and Lenders. The terms and provisions
of this Agreement shall inure to the benefit of any assignee or transferee of
the Notes, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon Lenders shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
hereof. Borrower may not assign any of its rights hereunder without the written
consent of Lenders, which may be withheld or granted in each Lender's sole
discretion.
9.14 NONRECOURSE. Notwithstanding anything to the contrary
-----------
contained herein or in any of the other Loan Documents, Lenders agree that
neither Borrower nor the constituent partners of Borrower (the "Nonrecourse
Parties") shall be personally liable for the payment of any sums now or
hereafter owing Lenders under the terms of the Loan Documents including, without
limitation, the indebtedness evidenced by the Notes, except as set forth in this
Section 9.14. If an Event of Default should occur hereunder or under the other
- ------------
Loan Documents, each Lender agrees that its rights, as to the Nonrecourse
Parties, shall be limited to proceeding against the security for the
Indebtedness evidenced by the Notes, against any guarantor of the Term Notes or
the Revolving Notes (including, without limitation, any Nonrecourse Party) or
against any party other than the Nonrecourse Parties and that it shall have no
right to proceed directly against the Nonrecourse Parties for the satisfaction
of any monetary obligation of or enforcement of any monetary claim
75
<PAGE>
against maker or for any deficiency judgment remaining after foreclosure of any
real or personal property securing the obligation owed to Lenders hereunder or
under the other Loan Documents. It is expressly understood and agreed that
nothing contained in this Section 9.14 shall in any manner or way constitute or
------------
be deemed a release of the debt evidenced by the Notes or otherwise affect or
impair the enforceability against Borrower of the liens of the Deeds of Trust,
the liens of any assignments executed in connection with the Obligations or the
rights and security interests created by the Deeds of Trust or any other
instrument or agreement evidencing, securing or related to the indebtedness
evidenced by the Notes. Nothing in this Section 9.14 shall: (a) preclude Co-
------------
Agents or any Lender from foreclosing the liens of the Deeds of Trust or from
enforcing any of its rights or remedies in law or in equity against Borrower or
its assets (including, without limitation, any or all of the Collateral) except
as stated in this Section 9.14; (b) impair, in any manner, any right, remedy or
------------
recourse Co-Agents or any Lender may have against any party executing a guaranty
(including, without limitation, any Nonrecourse Party); (c) impair, in any
manner, any right, remedy or recourse Co-Agents or any Lender may have against
the Nonrecourse Parties for fraud or for fraudulent misapplication of insurance
proceeds or condemnation awards; (d) impair, in any manner, any right, remedy
or recourse Co-Agents or any Lender may have against the Nonrecourse Parties for
indemnification pursuant to this Agreement or the other Loan Documents arising
out of the existence or alleged existence of hazardous waste at one or more of
the Projects; (e) impair, in any manner, any right, remedy or recourse Co-Agents
or any Lender may have against the Nonrecourse Parties for Borrower's failure to
procure or maintain policies of insurance required by Co-Agents; or (f) impair,
in any manner, any right, remedy or recourse Co-Agents or any Lender may have
against the Nonrecourse Parties pursuant to the Indemnification Agreement or the
Environmental Indemnity.
9.15 AUTHORITY TO FILE NOTICES. Borrower hereby irrevocably
-------------------------
appoints Co-Agents as its attorney-in-fact, with full power of substitution, to
file for record, at the Borrower's cost and expense and in Borrowers name, any
notices that Co-Agents consider necessary or desirable to protect the security
for the Obligations.
9.16 PAYMENTS UNDER THE NOTES. All payments of principal and
------------------------
interest on the Notes shall be made to Lenders, c/o USNB in immediately
available funds and, with respect to the Term Notes, shall be delivered not
later than 10:00 A.M. Portland, Oregon time, on the dates such payments are to
be made. Any payment on the Term Notes received after 10:00 A.M. shall be
deemed received by Lenders on the next Business Day.
9.17 RATABLE SHARING. Lenders and each subsequent holder by
---------------
acceptance of a Note hereby agree among themselves that
76
<PAGE>
if any of them shall, whether by voluntary payment, by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, fees and other
amounts then due and owing to that Lender or holder hereunder or under the other
Loan Documents (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender or
holder) which is greater than the proportion received by any other Lender or
holder of the Notes in respect of the Aggregate Amounts Due to such other Lender
or holder, then the Lender or holder of the Notes receiving such proportionately
greater payment shall (i) notify Co-Agents and each other Lender of the receipt
of such payment and (ii) apply a portion of such payment to purchase
participations (which it shall be deemed to have purchased from each seller of a
participation simultaneously upon the receipt by such seller of its portion of
such payment) in the Aggregate Amounts Due to the other Lenders and holders so
that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders
and holders of the Notes in proportion to the Aggregate Amounts Due to them;
provided that if all or part of such proportionately greater payment received by
- --------
such purchasing Lender or holder is thereafter recovered from such Lender or
holder upon the bankruptcy or reorganization of Borrower or otherwise, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender or holder ratably to
the extent of such recovery, but without interest. Borrower expressly consents
to the foregoing arrangement and agrees that any holder of a participation so
purchased may exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by Borrower to that holder
with respect thereto as fully as if that holder were owed the amount of the
participation held by that holder.
9.18 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
----------------------------------------------------------
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
9.19 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT
--------------------
HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY
77
<PAGE>
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER
RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to
be all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including without
limitation contract claims, tort claims, breach of duty claims and all other
common law and statutory claims. Each party hereto acknowledges that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the
event of litigation, this Agreement may be filed as a written consent to a trial
by the court.
9.20 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST BORROWER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF OREGON, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT BORROWER ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH OBLIGATION.
Borrower designates and appoints Thomas R. Nicolai, and such other Persons as
may hereafter be selected by Borrower irrevocably agreeing in writing to so
serve, as its agent to receive on its behalf service of all process in any such
proceedings in any such court, such service being hereby acknowledged by
Borrower to be effective and binding service in every respect. A copy of any
such process so served shall be mailed by registered mail to Borrower at its
address provided in Section 9.8; provided that, unless otherwise provided by
----------- --------
applicable law, any failure to mail such copy shall not affect the validity of
service of such process. If any agent appointed by Borrower refuses to accept
service, Borrower hereby agrees that service of process sufficient for personal
jurisdiction in any action against Borrower in the State of Oregon may be made
by registered or certified mail, return receipt requested, to Borrower at its
address provided in Section 9.8, and Borrower hereby acknowledges that such
-----------
service shall be effective and binding in every respect. Nothing herein shall
78
<PAGE>
affect the right to serve process in any other manner permitted by law or shall
limit the right of any Lender to bring proceedings against Borrower in the
courts of any other jurisdiction.
9.21 NO WAIVER. No Loan shall constitute a waiver of any
---------
conditions to Lenders' obligation to make further disbursements nor, in the
event Borrower is unable to satisfy any such conditions, shall any such waiver
have the effect of precluding Lenders from thereafter declaring such inability
to constitute a default under this Agreement.
9.22 INCORPORATION OF EXHIBITS. The exhibits hereto are hereby
-------------------------
incorporated into this Agreement and made a part hereof.
9.23 DISCLAIMER BY LENDERS. Borrower is not and shall not be an
---------------------
agent of Lenders for any purpose. Neither Co-Agents nor Lenders are a joint
venture partner with Borrower or with the constituent partners in Borrower in
any manner whatsoever. Approvals granted by Co-Agents or Lenders for any
matters covered under this Agreement shall be narrowly construed to cover only
the parties and facts identified in any written approval or, if not in writing,
such approvals shall be solely for the benefit of Borrower.
9.24 INCONSISTENCIES WITH LOAN DOCUMENTS. In the event of any
-----------------------------------
inconsistencies between the terms of this Agreement and the terms of any of the
other Loan Documents or the Commitment, the terms of this Agreement shall
govern and prevail.
9.25 COUNTERPARTS. This Agreement may be executed in any number
------------
of counterparts each of which shall be deemed an origi nal, but all such
counterparts together shall constitute but one agreement.
9.26 ATTORNEYS' FEES. For the purpose of this Agreement and the
---------------
other Loan Documents, the term "attorneys' fees" or "attorneys' fees and
expenses" shall mean the fees and expenses of counsel to the parties hereto,
which may include printing, photostating, duplicating and other expenses, air
freight charges, and fees billed for law clerks, paralegals, librarians and
others not admitted to the Bar but performing services under the supervision of
an attorney. The term "attorneys' fees" or "attorneys' fees and costs" shall
also include, without limitation, all such fees and expenses incurred with
respect to trials, interpleaders, hearings, appeals, bankruptcy or any judicial
proceedings, and whether or not any action or proceeding is brought with respect
to the matter for which said fees and expenses were incurred.
9.27 INTERPRETATION. Where this Agreement grants either Co-
--------------
Agents, Lenders or Borrower a right of consent or
79
<PAGE>
approval, and provides that the right is to be exercised in that party's sole,
absolute, final or unfettered discretion or judgment, or language of similar
import, then the party's judgment or discretion on that matter shall be final,
provided that the party shall act in good faith and not arbitrarily. In all
other cases where this Agreement requires the consent or approval of Co-Agents,
Lenders or Borrower, such consent or approval shall not be unreasonably withheld
or delayed.
9.28 CONFIDENTIALITY. Co-Agents and Lenders agree that they shall
---------------
maintain confidentiality with regard to nonpublic information concerning
Borrower obtained from Borrower, provided that Co-Agents shall not be precluded
from making disclosure regarding such information: (a) to each Co-Agent's and
each Lender's and its respective counsel, accountants and other professional
advisors, (b) in response to a subpoena or order of a court or governmental
agency, (c) to any entity participating or considering participating in all or
any part of the Notes and Loan Documents, or (d) as required by law or
applicable regulation.
9.29 EFFECTIVENESS. This Agreement and all other Loan Documents
-------------
shall be deemed made and effective only when they are executed by all parties
thereto and delivered to Lenders in Oregon.
Under Oregon law, most agreements, promises and commitments made by us
----------------------------------------------------------------------
after October 3, 1989, concerning loans and other credit extensions which are
- -----------------------------------------------------------------------------
not for personal, family or household purposes or secured solely by the
- -----------------------------------------------------------------------
borrower's residence must be in writing, express consideration and be signed by
- -------------------------------------------------------------------------------
us to be enforceable.
- ---------------------
80
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
BORROWER:
--------
RED LION INNS OPERATING L.P.,
a Delaware limited partnership
By: Red Lion Properties, Inc.,
a Delaware corporation
Its sole General Partner
By: /S/ Anupam Narayan
-------------------------
Its:
CO-AGENTS:
---------
UNITED STATES NATIONAL BANK OF OREGON,
a national banking association, as a Co-Agent and as a Lender
By: /S/ Glenn Jacobs
------------------------------
Its:
CIBC INC.,
a Delaware corporation, as a Co-Agent and as a Lender
By: /S/ Paul J. Chakmak
------------------------------
Its:
S-1
<PAGE>
LENDERS:
-------
THE BANK OF TOKYO, LTD.,
Portland Branch
By: /S/ Hiroki Nakazawa
---------------------------
Hiroki Nakazawa
Notice Address:
Bank of Tokyo, Ltd.
1211 S.W. Fifth Avenue, Suite 2300
Portland, Oregon 97204
Attention: Hiroki Nakazawa
S-2
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS............................................. 2
1.1 Certain Defined Terms....................................... 2
ARTICLE II CONDITIONS TO AGREEMENT................................. 19
2.1 Conditions Precedent........................................ 19
2.2 Conditions to All Loans..................................... 22
ARTICLE III AMOUNTS AND TERMS OF LOANS.............................. 24
3.1 Commitments; Loans.......................................... 24
3.2 Interest on the Loans....................................... 28
3.3 Prepayments and Reductions in Commitments; General
Provisions Regarding Payments............................... 31
3.4 Special Provisions Governing Eurodollar Rate
Loans....................................................... 34
3.5 Increased Costs; Taxes; Capital Adequacy.................... 37
3.6 [Intentionally Omitted]..................................... 40
3.7 Security.................................................... 40
3.8 Reimbursement of Expenses................................... 41
3.9 Standby Fee................................................. 41
3.10 Use of Proceeds............................................. 41
ARTICLE IV WITHDRAWALS FROM BORROWING BASE......................... 41
4.1 Withdrawals from Borrowing Base............................. 41
4.2 Reduction of Commitment Amount Upon Withdrawals............. 42
ARTICLE V REPRESENTATIONS AND WARRANTIES.......................... 42
5.1 Consideration............................................... 42
5.2 Organization, Powers and Good Standing...................... 42
5.3 Authorization of Loan Documents............................. 43
5.4 No Material Defaults........................................ 44
5.5 Litigation; Adverse Facts................................... 44
5.6 Title to Properties; Liens.................................. 45
5.7 Disclosure.................................................. 45
5.8 Payment of Taxes............................................ 45
5.9 Securities Activities....................................... 45
5.10 Government Regulations...................................... 45
5.11 Rights to Project Agreements, Permits and
Licenses.................................................... 46
5.12 Utilities and Access........................................ 46
5.13 Compliance with Laws........................................ 46
5.14 Financial Condition......................................... 46
5.15 Personal Property........................................... 46
5.16 No Condemnation............................................. 46
5.17 Hazardous Materials......................................... 47
5.18 Ground Leases............................................... 47
5.19 Tenant Leases............................................... 47
5.20 Major Personal Property
Leases...................................................... 47
5.21 Management Agreement........................................ 48
</TABLE>
i
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<TABLE>
<S> <C> <C> <C>
5.22 Employee Benefit Plans....................................... 48
5.23 Liquor Licenses.............................................. 48
5.24 Other Loan Documents......................................... 48
ARTICLE VI COVENANTS OF BORROWER.................................... 48
6.1 Consideration................................................ 48
6.2 Financial Statements and Other Reports....................... 48
6.3 Existence, etc............................................... 51
6.4 Payment of Taxes and Claims; Tax Consolidation............... 51
6.5 Maintenance of Property Insurance............................ 51
6.6 Inspection................................................... 52
6.7 No Encumbrances.............................................. 52
6.8 Compliance with Laws......................................... 53
6.9 Compliance with Loan Documents............................... 53
6.10 [Intentionally Omitted.]..................................... 53
6.11 Trade Names.................................................. 53
6.12 Amendment to Documents, Major Personal Property
Leases....................................................... 53
6.13 Amendments to Partnership Agreement......................... 54
6.14 Restricted Payments.......................................... 54
6.15 Restriction on Fundamental Changes........................... 54
6.16 ERISA........................................................ 54
6.17 O&M Report................................................... 55
6.18 Further Assurances........................................... 55
6.19 Protection of Liens.......................................... 55
6.20 Payment of Indebtedness...................................... 55
6.21 Other Indebtedness........................................... 56
6.22 Loans and Investments........................................ 56
6.23 Regulations G, T and U....................................... 56
6.24 FF&E Reserves; Capital Improvements, etc..................... 56
6.25 Delivery of Leases, Licenses, etc............................ 56
6.26 Leases....................................................... 57
6.27 Environmental Matters........................................ 57
ARTICLE VII EVENTS OF DEFAULT; REMEDIES.............................. 59
7.1 Events of Default............................................ 59
7.2 Remedies..................................................... 62
ARTICLE VIII CO-AGENTS................................................ 63
8.1 Appointment.................................................. 63
8.2 Powers; General Immunity..................................... 63
8.3 Representations and Warranties; No Responsibility
For Appraisal of Creditworthiness............................ 65
8.4 Right to Indemnity........................................... 66
8.5 Payee of Note Treated as Owner............................... 66
8.6 Successor Co-Agents.......................................... 66
8.7 Delivery of Documents........................................ 67
ARTICLE IX MISCELLANEOUS............................................ 67
9.1 Assignments and Participations in Loan....................... 67
9.2 Expenses..................................................... 69
9.3 Indemnity.................................................... 70
9.4 Set Off...................................................... 71
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C> <C>
9.5 Amendments and Waivers....................................... 71
9.6 Independence of Covenants.................................... 72
9.7 Time is of the Essence....................................... 72
9.8 Notices...................................................... 72
9.9 Failure or Indulgence Not Waiver; Remedies Cumulative........ 74
9.10 Severability................................................. 74
9.11 Headings..................................................... 74
9.12 Applicable Law............................................... 74
9.13 Successors and Assigns; Subsequent Holders of
Notes........................................................ 75
9.14 Nonrecourse.................................................. 75
9.15 Authority to File Notices.................................... 76
9.16 Payments Under the Notes..................................... 76
9.17 Ratable Sharing.............................................. 76
9.18 Obligations Several; Independent Nature of
Lenders' Rights.............................................. 77
9.19 Waiver of Jury Trial......................................... 77
9.20 Consent to Jurisdiction
and Service of Process....................................... 78
9.21 No Waiver.................................................... 79
9.22 Incorporation of Exhibits.................................... 79
9.23 Disclaimer by Lenders........................................ 79
9.24 Inconsistencies with Loan Documents.......................... 79
9.25 Counterparts................................................. 79
9.26 Attorneys' Fees.............................................. 79
9.27 Interpretation............................................... 79
9.28 Confidentiality.............................................. 80
9.29 Effectiveness................................................ 80
EXHIBIT A LIST OF PROJECTS........................................ A-1
EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE....................... B-1
EXHIBIT C COMPLIANCE CERTIFICATE.................................. C-1
EXHIBIT D FORM OF NOTICE OF BORROWING............................. D-1
EXHIBIT E FORM OF NOTICE OF CONVERSION/CONTINUATION............... E-1
EXHIBIT F INITIAL PRO RATA SHARES................................. F-1
EXHIBIT G FORM OF FORM OF REVOLVING NOTE.......................... G-1
EXHIBIT H FORM OF TERM NOTE....................................... H-1
EXHIBIT I FORM OF FINANCIAL CONDITION CERTIFICATE................. I-1
</TABLE>
iii
<PAGE>
EXHIBIT A
LIST OF PROJECTS
<TABLE>
<CAPTION>
BORROWING RELEASE
BASE VALUE PERCENTAGE
---------- ----------
<S> <C> <C> <C>
1. Bellevue Center Red Lion $ 8,700,000 4.0%
(Bellevue, Washington)
2. Boise Riverside Red Lion Inn 25,300,000 11.7%
(Boise, Idaho)
3. Colorado Springs Red Lion 25,500,000 11.8%
Inn (Colorado Springs,
Colorado)
4. Lloyd Center Red Lion Inn 47,300,000 21.8%
(Portland, Oregon)
5. Omaha Red Lion Inn 26,500,000 12.3%
(Omaha, Nebraska)
6. Portland Center Red Lion 19,000,000 8.8%
Inn (Portland, Oregon)
7. Sacramento Red Lion Inn 33,600,000 15.5%
(Sacramento, California)
8. Springfield/Eugene Red 9,600,000 4.4%
Lion Inn (Springfield,
Oregon)
9. Spokane Red Lion Inn 11,900,000 5.5%
(Spokane, Washington)
10. Yakima Valley Red Lion 9,200,000 4.2%
(Yakima, Washington)
</TABLE>
A-1
<PAGE>
EXHIBIT B
FORM OF ASSIGNMENT AND ACCEPTANCE
This ASSIGNMENT AND ACCEPTANCE (this "AGREEMENT") is dated as of
____________, 199_ and entered into by and between ____________________
("ASSIGNOR") and _____________________ ("ASSIGNEE").
PRELIMINARY STATEMENTS
A. Assignor has entered into an Amended and Restated Credit
Agreement dated as of April 14, 1995 (said Amended and Restated Credit
Agreement, as amended to the date hereof and as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined) with RED LION INNS OPERATING L.P., a Delaware
limited partnership ("BORROWER"), the other financial institutions listed
therein as Lenders ("LENDERS"), and UNITED STATES NATIONAL BANK OF OREGON, a
national banking association ("USNB"), and CIBC INC., a Delaware corporation
("CIBC"), as Co-Agents ("CO-AGENTS").
[B. Assignor has made a Term Loan to Borrower pursuant to Section
3.1(a)(i) of the Credit Agreement.]
[C. Assignor has a Revolving Loan Commitment under the Credit
Agreement pursuant to which Assignor [has made and] may be required to make
Revolving Loans to Borrower pursuant to Section 3.1(a)(ii) of the Credit
Agreement.]
D. Assignor desires to assign to Assignee its rights and obligations
as a Lender under the Credit Agreement and the other Loan Documents with respect
to [a portion of] Assignor's Term Loan and Assignor's Revolving Loan Commitment
[and outstanding Revolving Loans], and Assignee has agreed to assume the
obligations of Assignor under the Loan Documents to the extent of the rights and
obligations so assigned.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto hereby agree as
follows:
SECTION 1. ASSIGNMENT AND ASSUMPTION.
-------------------------
(a) Assignor hereby assigns to Assignee, [effective upon the receipt
of the consideration set forth in Section 1(c),] without recourse,
representation or warranty (except as expressly set forth herein), an undivided
_____% interest (the
B-1
<PAGE>
"PERCENTAGE") in all of Assignor's rights and obligations as a Lender arising
under the Credit Agreement and the other Loan Documents relating to Assignor's
Term Loan [Commitment] and Assignor's Revolving Loan Commitment [and outstanding
Revolving Loans].
(b) Assignee hereby assumes from Assignor, and Assignor is hereby
expressly and absolutely released from, the Percentage of all of Assignor's
obligations arising under the Loan Documents relating to Assignor's Term Loan
[Commitment] and Assignor's Revolving Loan Commitment [and outstanding Revolving
Loans], including without limitation all such obligations with respect to any
Revolving Loans to be made pursuant to the Credit Agreement.
[(c) Assignor hereby represents and warrants that as of the
effective date of this Agreement the unpaid principal amount, accrued but
unpaid interest and accrued but unpaid fees with respect to the Percentage of
Assignor's rights under the Credit Agreement relating to Assignor's Term Loan
and Assignor's Revolving Loan Commitment [and outstanding Revolving Loans] are
as set forth on Annex I attached hereto. In consideration of Assignor's
-------
assignment, Assignee hereby agrees to pay to Assignor, on the effective date of
this Agreement, the amount of $_________________ in immediately available funds
by wire transfer to Assignor's office at
____________________________________________________________________.]
[(d)] Assignor and Assignee hereby agree that Annex [II] attached
----------
hereto sets forth the amount of the Term Loan, the Revolving Loan Commitment[,
the outstanding Revolving Loans] and the Pro Rata Share of Assignee after giving
effect to the assignment and assumption described above.
[(e)] Assignor and Assignee hereby agree that, upon giving effect to
the assignment and assumption described above, Assignee shall be a party to the
Credit Agreement and shall have all of the rights and obligations under the Loan
Documents of, and shall be deemed to have made all of the covenants and
agreements contained in the Loan Documents made by, a Lender having the Term
Loan, Revolving Loan Commitment[, outstanding Revolving Loans] and Pro Rata
Share of Assignee as reflected on Annex [II] attached hereto. Assignee hereby
----------
acknowledges and agrees that the agreement set forth in this subsection 1[(e)]
is expressly made for the benefit of Borrower, Agent, Assignor and the other
Lenders and their respective successors and permitted assigns.
[(f)] Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the assignment by
Assignor and the assumption by Assignee of the Percentage of Assignor's rights
and obligations with respect to Assignor's Term Loan and Assignor's Revolving
B-2
<PAGE>
Loan Commitment [and outstanding Revolving Loans] and all rights and obligations
under the Loan Documents with respect thereto, (ii) any other assignments by
Assignor of a portion of its rights and obligations with respect to Assignor's
Term Loan and Assignor's Revolving Loan Commitment [and outstanding Revolving
Loans] shall have no effect on the Term Loan, Revolving Loan Commitment[,
outstanding Revolving Loans] and Pro Rata Share of Assignee set forth on Annex
-----
[II] attached hereto, and (iii) from and after the effective date of this
- ----
Agreement, Agent shall make all payments under the Credit Agreement in respect
of the Percentage interest assigned hereby (including without limitation all
payments of principal and accrued but unpaid interest and commitment fees with
respect thereto) to Assignee, whether such amounts (in the case of such interest
and fees) have accrued prior to the effective date of this Agreement or
subsequent thereto.
SECTION 2. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
--------------------------------------------------
(a) Assignor represents and warrants that it is the legal and
beneficial owner of the Percentage interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim.
(b) Assignor shall not be responsible to Assignee for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Loan Documents or for any representations, warranties,
recitals or statements made therein or made in any written or oral statement or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Assignor to Assignee or by or on behalf
of Borrower to Assignor or Assignee in connection with the Loan Documents and
the transactions contemplated thereby or for the financial condition or business
affairs of Borrower or any other Person liable for the payment of any
Obligations, nor shall Assignor be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or as to the existence or possible existence of any Event
of Default or Potential Event of Default.
(c) Assignee represents and warrants that it is an Eligible Assignee;
that it has experience and expertise in the making of loans such as the Loans;
that it has acquired its Percentage interest for its own account and not with
any present intention of selling all or any portion of such interest; and that
it has received, reviewed and approved copies of all Loan Documents.
(d) Assignee represents and warrants that it has made its own
independent investigation of the financial condition and
B-3
<PAGE>
affairs of Borrower in connection with the assignment evidenced by this
Agreement and that it has made and shall continue to make its own appraisal of
the creditworthiness of Borrower. Assignor shall not have any duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any credit or other information with respect thereto, whether coming into
its possession before the making of the initial Loans or at any time or times
thereafter, and Assignor shall not have any responsibility with respect to the
accuracy of or the completeness of any information provided to Assignee.
(e) Each party to this Agreement represents and warrants to the other
party hereto that it has full power and authority to enter into this Agreement
and to perform its obligations hereunder in accordance with the provisions
hereof, that this Agreement has been duly authorized, executed and delivered by
such party and that this Agreement constitutes a legal, valid and binding
obligation of such party, enforceable against such party in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity.
SECTION 3. MISCELLANEOUS.
-------------
(a) Each party to this Agreement hereby agrees from time to time,
upon request of the other party hereto, to take such additional actions and to
execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Agreement.
(b) Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated, except by an instrument in writing signed by
the party against whom enforcement of such change, waiver, discharge or
termination is sought.
(c) Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, telecopied, telexed or sent by United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telecopy or telex, or four
Business Days after depositing it in the United States mail, registered or
certified, with postage prepaid and properly addressed. For the purposes hereof,
the address of each party hereto shall be as set forth under such party's name
on the signature page hereof or, as to either party, such other address as shall
be designated by such party in a written notice delivered to the other party
hereto.
B-4
<PAGE>
(d) In case any provision in or obligation under this Agreement shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(e) THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF OREGON, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
(f) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(h) This Agreement shall become effective upon (i) the execution of a
counterpart hereof by each of Assignor and Assignee, (ii) the execution of a
counterpart hereof by USNB as evidence of its acceptance hereof in accordance
with Section 9.1(b)(ii) of the Credit Agreement, and (iii) the receipt by
Assignor, Assignee and USNB of originals or telecopies of such counterparts and
authorization of delivery thereof.
B-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
[NAME OF ASSIGNOR]
By: __________________________
Title: _______________________
Notice Address:
___________________________
___________________________
___________________________
___________________________
[NAME OF ASSIGNEE]
By: __________________________
Title: _______________________
Notice Address:
___________________________
___________________________
___________________________
___________________________
Accepted in accordance with
Section 9.1(b)(ii) of the
Credit Agreement
UNITED STATES NATIONAL BANK
OF OREGON, as Co-Agent
By: ____________________________
Title:__________________________
S-1
<PAGE>
[ANNEX I
AMOUNTS OUTSTANDING
Outstanding Principal Amount:
Term Loan: $_________
Revolving Loans: $_________
Total: $_________
Accrued But Unpaid Interest: $_________
Accrued But Unpaid Fees: $_________
Total Principal, Interest and Fees: $_________]
<PAGE>
ANNEX [II]
ASSIGNEE'S TERM LOAN,
REVOLVING LOAN COMMITMENT[,
OUTSTANDING REVOLVING LOANS] AND
PRO RATA SHARE AFTER ASSIGNMENT
Term Loan: $_________
Revolving Loan Commitment: $_________
[Outstanding Revolving Loans: $_________]
Pro Rata Share ____%
<PAGE>
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1) The undersigned is the __________ of Red Lion Properties, Inc., a
Delaware corporation, the general partner in Red Lion Inns Operating L.P.,
a Delaware limited partnership ("Borrower");
(2) The undersigned has reviewed the terms of the Amended and
Restated Credit Agreement dated as of April 14, 1995 among Borrower, the
financial institutions listed therein as Lenders, United States National
Bank of Oregon and CIBC Inc. (the "Credit Agreement"), and has made, or has
caused to be made under the undersigned's supervision, a detailed review of
the transactions and conditions of Borrower, during the accounting period
covered by the attached financial statements;
(3) The examinations described in paragraph (2) did not disclose, and
the undersigned has no knowledge of, the existence of any condition or
event which constitutes an Event of Default or Potential Event of Default
during or at the end of the accounting period covered by the attached
financial statements or as of the date of this Certificate, except as set
forth below; and
(4) All of the representations and warranties contained in Article V
are true, correct and complete and Borrower is not in default under any
covenant set forth in Article VI of the Credit Agreement as of the date of
this Certificate, except as set forth below.
Describe below (or in a separate attachment to this Certificate) the
exceptions, if any, to paragraphs (3) and (4) by listing, in detail, the nature
of the condition or event, the period during which it has existed and the action
which Borrower has taken, is taking, or proposes to take with respect to each
such condition or event:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
C-1
<PAGE>
The foregoing certifications, together with the financial statements
delivered with this Certificate in support hereof, are made and delivered this
_______ day of ________________, 19___ pursuant to Section 6.2(c) of the Credit
Agreement.
RED LION INNS OPERATING L.P.,
a Delaware limited partnership
BY: RED LION PROPERTIES, INC.,
a Delaware corporation,
Its Sole General Partner
By: __________________________
Its: __________________________
C-2
<PAGE>
EXHIBIT D
FORM OF NOTICE OF BORROWING
Pursuant to that certain Amended and Restated Credit Agreement dated
as of April 14, 1995, as amended to the date hereof (said Amended and Restated
Credit Agreement, as so amended, being the "CREDIT AGREEMENT", the terms defined
therein and not otherwise defined herein being used herein as therein defined),
by and among RED LION INNS OPERATING L.P., a Delaware limited partnership
("BORROWER"), the financial institutions listed therein as Lenders ("LENDERS"),
and UNITED STATES NATIONAL BANK OF OREGON, a national banking association
("USNB"), and CIBC INC., a Delaware corporation ("CIBC"), as Co-Agents ("CO-
AGENTS"), this represents Borrower's request to borrow on _____________, 199_
from USNB and CIBC, in accordance with their applicable Pro Rata Shares,
$______________ in Revolving Loans as [Base] [Eurodollar] Rate Loans. [The
initial Interest Period for such Loans is requested to be a _________ [month]
period.] The proceeds of such Loans are to be deposited in Borrower's account
at USNB.
The undersigned Authorized Representative of Borrower, to the best of
his or her knowledge, and Borrower certify that:
(i) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true, correct and complete in
all material respects on and as of the date hereof to the same extent as
though made on and as of the date hereof, except to the extent such
representations and warranties specifically relate to an earlier date, in
which case such representations and warranties were true, correct and
complete in all material respects on and as of such earlier date;
(ii) No event has occurred and is continuing or would result from
the consummation of the borrowing contemplated hereby that would constitute
an Event of Default or a Potential Event of Default; and
(iii) Borrower has performed in all material respects all agreements
and satisfied all conditions which the Credit Agreement provides shall be
performed or satisfied by it on or before the date hereof.
DATED: _________________ RED LION INNS OPERATING L.P.,
a Delaware limited partnership
BY: RED LION PROPERTIES, INC.,
a Delaware corporation,
Its Sole General Partner
By: _________________________
Its: _________________________
D-1
<PAGE>
EXHIBIT E
FORM OF NOTICE OF CONVERSION/CONTINUATION
Pursuant to that certain Amended and Restated Credit Agreement dated
as of April 14, 1995, as amended to the date hereof (said Amended and Restated
Credit Agreement, as so amended, being the "CREDIT AGREEMENT", the terms defined
therein and not otherwise defined herein being used herein as therein defined),
by and among RED LIONS INNS OPERATING L.P., a Delaware limited partnership
("BORROWER"), the financial institutions listed therein as Lenders, and UNITED
STATES NATIONAL BANK OF OREGON, a national banking association, and CIBC INC., a
Delaware corporation, as Co-Agents, this represents Borrower's request to
[SELECT A OR B WITH APPROPRIATE INSERTIONS AND DELETIONS: [A: convert
$_________ in principal amount of presently outstanding [Term] [Revolving] Loans
that are [Base] [Eurodollar] Rate Loans [with a final Interest Payment Date of
____________, 199_] to [Base] [Eurodollar] Rate Loans on ____________, 199_.
[The initial Interest Period for such [Eurodollar] Rate Loans is requested to be
a _________ [month] period.]] [B: continue as [Eurodollar] Rate Loans
$_________ in principal amount of presently outstanding [Term] [Revolving] Loans
with a final Interest Payment Date of ____________, 199_. The Interest Period
for such [Eurodollar] Rate Loans commencing on such final Interest Payment Date
is requested to be a ________ [month] period.]]
[FOR CONVERSIONS TO OR CONTINUATIONS OF EURODOLLAR RATE LOANS ONLY:
The undersigned Authorized Representative of Borrower, to the best of his or her
knowledge, and Borrower certify that no Event of Default or Potential Event of
Default has occurred and is continuing under the Credit Agreement.]
DATED: _________________ RED LION INNS OPERATING L.P.,
a Delaware limited partnership
BY: RED LION PROPERTIES, INC.,
a Delaware corporation,
Its Sole General Partner
By: _________________________
Its: _________________________
E-1
<PAGE>
EXHIBIT F
INITIAL PRO RATA SHARES
<TABLE>
<CAPTION>
Term Loan Pro Rata Share Revolving Loan Pro Rata Share Pro Rata Share
Lender Commitment (re: Term Loans) Commitment (re: Rev. Loans) (Overall)
- ---------- ---------- ---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
USNB $45,991,930 45.0973% $7,065,000 50% 45.6939%
CIBC 45,991,930 45.0973% 7,065,000 50% 45.6939%
Bank of 10,000,000 9.8054% -0- -0- 8.6122%
Tokyo
------------ -------- ---------- ---------- --------
TOTAL $101,983,860 100% $14,130,000 100% 100%
</TABLE>
F-1
<PAGE>
EXHIBIT G
SECURED PROMISSORY NOTE
-----------------------
(REVOLVING)
$___________________ APRIL 14, 1995
1. PRINCIPAL.
---------
For value received, in installments as herein provided, RED LION INNS
OPERATING L.P., a Delaware limited partnership ("Maker"), promises to pay to the
order of ______________________ ______________________, a______________________
("HOLDER"), the principal sum of ______________________________________________
Dollars ($____________________) or so much thereof as shall from time to time be
disbursed hereunder, together with accrued interest from the date of
disbursement hereunder on the outstanding principal at the rate set forth in
Paragraph 4 below. As used herein, the term "HOLDER" shall mean Holder and any
subsequent holder of this Note, whichever is applicable from time to time.
2. PAYMENTS OF PRINCIPAL AND INTEREST.
-----------------------------------
A. Commencing on May 1, 1995 and continuing on the first day of each
month thereafter until April 14, 1996 (the "MATURITY DATE"), interest shall be
due and payable monthly in arrears, on the first day of each month.
B. The outstanding principal balance hereof, together with all unpaid
interest accrued thereon, and all other amounts payable by Maker under the terms
of the Loan Documents (as hereinafter defined) shall be due and payable in full
on the Maturity Date.
C. If the Maturity Date or the date for payment of any installment of
principal or interest should fall on a day that is not a Business Day (as
defined in the Credit Agreement referred to below) the payment that would
otherwise be due thereon shall instead be due on the next-succeeding Business
Day, and such extension of time shall be included in computing any interest with
respect to such payment.
D. This Note is one of Maker's "Revolving Notes" in the aggregate
principal amount of $14,130,000.00 and is issued pursuant to and entitled to the
benefits of that certain Amended and Restated Credit Agreement, dated as of
April 14, 1995, by and among Maker, the financial institutions listed therein as
Lenders, and United States National Bank of Oregon, a national banking
association ("USNB"), and CIBC Inc., a Delaware corporation
G-1
<PAGE>
("CIBC"), as Co-Agents (such Credit Agreement as it may be amended, supplemented
or otherwise modified from time to time, being the "CREDIT AGREEMENT"). All
payments of principal and interest in respect of this Note shall be made in
lawful money of the United States of America in same day funds at the office of
USNB located at 555 S.W. Oak Street, Portland, Oregon 97204, or at such other
place as shall be designated in writing for such purpose in accordance with the
terms of the Credit Agreement.
3. PREPAYMENT.
-----------
This Note may be prepaid in full or in part, at any time without
premium, except that Maker shall indemnify, defend and hold Holder harmless from
and against any and all loss resulting from a payment of a Eurodollar Rate Loan
(as defined in the Credit Agreement) on a date which is not the last day of the
applicable Interest Period (as defined in the Credit Agreement), as specified in
subsection 3.4(d) of the Credit Agreement. Subject to the terms and conditions
of the Credit Agreement, Maker shall have the right to reborrow any amounts so
prepaid.
4. INTEREST.
---------
Maker agrees to pay interest on the outstanding principal balance
hereof at the rates and at the times which shall be determined in accordance
with the Credit Agreement.
5. APPLICATION OF PAYMENTS.
-----------------------
Payments received by Holder pursuant to the terms hereof shall be applied
in the following manner: first, to the payment of all expenses, charges, costs
and fees incurred by or payable to Holder and for which Maker is obligated
pursuant to the terms of the Loan Documents (as defined in the Credit
Agreement); second, to the payment of all interest accrued to the date of such
payment; and third, to the payment of principal. Notwithstanding anything to
the contrary contained herein, after the occurrence and during the continuation
of an Event of Default, all amounts received by Holder from any party shall be
applied in such order as Holder, in its sole discretion, may elect.
6. SECURITY.
---------
This Note is issued pursuant to the Credit Agreement, and is secured
inter alia by the Deeds of Trust (as defined in the Credit Agreement) and the
- ----------
other Loan Documents.
7. ACCELERATION BY REASON OF TRANSFER.
-----------------------------------
The Deeds of Trust contain limitations on the right of Maker to
transfer the property encumbered thereby (the "PROPERTY"), and, in the event of
certain transfers of the Property without the prior written consent of
Co-Agents, the Co-Agents have
G-2
<PAGE>
the absolute right at their option, without demand or notice, to declare all or
certain portions of the sums secured by the Deeds of Trust immediately due and
payable.
8. EVENT OF DEFAULT.
-----------------
The occurrence of any of the following shall be deemed to be an event
of default ("EVENT OF DEFAULT") hereunder:
(a) default in the payment of principal or interest when due pursuant
to the terms hereof; or
(b) the occurrence of an Event of Default under the Loan Documents or
under any deed of trust, security agreement, lease assignment, guaranty or
other agreement (including any amendment, modification or extension
thereof) now or hereafter securing this Note.
9. REMEDIES.
---------
Upon the occurrence of an Event of Default and without demand or
notice, the entire balance of principal together with all accrued interest
thereon may become or may be declared to be due and payable in the manner, upon
the conditions and with the effect provided in the Credit Agreement. Upon the
occurrence of an Event of Default (and so long as such Event of Default shall
continue), the entire balance of principal together with all accrued interest
thereon shall bear interest at a per annum rate set forth in subsection 3.2(e)
of the Credit Agreement. No delay or omission in the exercise of any right
under this Note or under any of the Loan Documents shall operate as a waiver of
such right. The application of this default rate shall not be interpreted or
deemed to extend any cure period set forth in any Loan Document or otherwise
limit any remedies hereunder or thereunder.
10. WAIVER.
-------
Maker hereby waives diligence, presentment, protest and demand, notice
of protest, dishonor and nonpayment of this Note and expressly agrees that,
without in any way affecting the liability of Maker hereunder, Holder may
extend any maturity date or the time for payment of any installment due
hereunder, accept additional security, release any party liable hereunder and
release any security now or hereafter securing this Note. Maker further waives,
to the full extent permitted by law, the right to plead any and all statutes of
limitations as a defense to any demand on this Note, or on any deed of trust,
security agreement, lease assignment, guaranty or other agreement now or
hereafter securing this Note.
G-3
<PAGE>
11. ATTORNEYS' FEES.
----------------
If this Note is not paid when due or if any Event of Default occurs,
Maker promises to pay all costs of enforcement and collection, including but not
limited to, Holder's reasonable attorneys' fees, whether or not any action or
proceeding is brought to enforce the provisions hereof.
12. SEVERABILITY.
-------------
Every provision of this Note is intended to be severable. In the event
any term or provision hereof is declared by a court of competent jurisdiction,
to be illegal or invalid for any reason whatsoever, such illegality or
invalidity shall not affect the balance of the terms and provisions hereof,
which terms and provisions shall remain binding and enforceable.
13. INTEREST RATE LIMITATION.
-------------------------
It is the intent of Maker and Holder in the execution of this Note and
all other instruments securing this Note that the loan evidenced hereby be
exempt from the restrictions of the usury laws of the State of Oregon. In the
event that, for any reason, it should be determined that the Oregon usury law is
applicable to the Loan, Holder and Maker stipulate and agree that none of the
terms and provisions contained herein or in any of the Loan Documents shall ever
be construed to create a contract for the use, forbearance or detention of money
requiring payment of interest at a rate in excess of the maximum interest rate
permitted to be charged by the laws of the State of Oregon. In such event, if
any Holder of this Note shall collect monies which are deemed to constitute
interest which would otherwise increase the effective interest rate on this Note
to a rate in excess of the maximum rate permitted to be charged by the laws of
the State of Oregon, all such sums deemed to constitute interest in excess of
such maximum rate shall, at the option of Holder, be credited to the payment of
the sums due hereunder or returned to Maker.
14. NUMBER AND GENDER.
------------------
In this Note the singular shall include the plural and the masculine
shall include the feminine and neuter gender, and vice versa, if the context so
requires.
15. HEADINGS.
---------
Headings at the beginning of each numbered Paragraph of this Note are
intended solely for convenience and are not to be deemed or construed to be a
part of this Note.
G-4
<PAGE>
16. CHOICE OF LAW.
--------------
Maker, and Holder by its acceptance of this Note, agree that their
rights and obligations under this Note and under the other Loan Documents shall
be governed by and construed and interpreted in accordance with the internal
law of the State of Oregon without giving effect to any contrary conflict-of-law
rules and principles of such state. The parties further agree and stipulate that
the State of Oregon has a substantial relationship to the parties and to the
underlying transactions evidenced by this Note and the other Loan Documents.
Notwithstanding the foregoing, the parties agree that:
(a) The procedures governing the enforcement of foreclosure and
provisional remedies against Maker, including by way of illustration but
not limitation, actions for foreclosure, replevin, for claim and delivery
of property, for injunctive relief or for the appointment of a receiver
shall be governed by the laws of the State in which the applicable real
property is located; and
(b) Applicable law in the State in which the applicable real property
is located will be followed to the extent required in connection with the
foreclosure of the security interests and liens created hereby and under
the other Loan Documents.
Nothing contained in this Paragraph 16 shall be construed to provide
that the substantive law of the States in which the real properties are located
shall apply to the parties' rights and obligations hereunder or under the other
Loan Documents, which are and shall continue to be governed by the substantive
law of the State of Oregon. In addition, the fact that portion of the Loan
Document may include provision to conform to the law of other jurisdictions is
intended nor shall it be deemed in any way to derogate the parties' choice of
law set forth in this Paragraph 16. The parties further agree that Holder may
enforce its rights under the Loan Documents, including but not limited to, its
rights to sue Maker, to collect any outstanding indebtedness or to obtain a
judgment for any deficiency following foreclosure, in accordance with Oregon
law.
17. NONRECOURSE.
------------
Notwithstanding anything to the contrary contained herein or in any of
the other Loan Documents, Holder, by its acceptance of this Note, agrees that
neither Maker nor any of its constituent partners (the "NONRECOURSE PARTIES")
shall be personally liable for the payment of any sums now or hereafter owing
Holder under the terms of this Note, except as set forth below in this Paragraph
17. If an Event of Default should occur hereunder or under the other Loan
Documents, Holder agrees that its rights, as to the Nonrecourse Parties, shall
be limited to proceeding against the
G-5
<PAGE>
security for the indebtedness evidenced by this Note against any guarantor of
this Note (including, without limitation, any Nonrecourse Party) or against any
party other than the Nonrecourse Parties and that it shall have no right to
proceed directly against the Nonrecourse Parties for the satisfaction of any
monetary obligation of or enforcement of any monetary claim against Maker or for
any deficiency judgment remaining after foreclosure of any real or personal
property securing the obligations of Maker hereunder or under the other Loan
Documents. It is expressly understood and agreed, however, that nothing
contained in this Paragraph 17 shall in any manner or way constitute or be
deemed a release of the debt evidenced by this Note or otherwise affect or
impair the enforceability against Maker of the liens of the Deeds of Trust, the
liens of any assignments executed pursuant to the Credit Agreement or the other
Loan Documents or the rights and security interests created by the Deeds of
Trust or any other instrument or agreement evidencing, securing or related to
the indebtedness evidenced by this Note. Nothing in this Paragraph 17 shall:
(a) preclude foreclosure of the liens of the Deeds of Trust or from the
enforcement against Maker or its assets (including, without limitation, any or
all of the Collateral (as defined in the Credit Agreement)) of any rights or
remedies in law or in equity, pursuant to the Credit Agreement or the other Loan
Documents except as stated in this Paragraph 17; (b) impair, in any manner, any
right, remedy or recourse against any party executing a guaranty (including,
without limitation, any Nonrecourse Party); (c) impair, in any manner, any
right, remedy or recourse against the Nonrecourse Parties for fraud or for
fraudulent misapplication of insurance proceeds or condemnation awards; (d)
impair, in any manner, any right, remedy or recourse against the Nonrecourse
Parties for indemnification pursuant to the Loan Documents arising out of the
existence or alleged existence of hazardous waste at one or more of the
Projects; or (e) impair, in any manner, any right, remedy or recourse against
the Nonrecourse Parties for Maker's failure to procure or maintain policies of
insurance required by Holder.
18. ATTORNEYS' FEES.
---------------
As used herein, the terms "attorneys' fees" or "attorneys' fees and
expenses" shall have the meaning given such terms in Section 9.26 of the Credit
Agreement.
G-6
<PAGE>
IN WITNESS WHEREOF, Maker has caused this Note to be duly executed and
delivered as of the date first above written.
RED LION INNS OPERATING L.P.,
a Delaware limited partnership
BY: RED LION PROPERTIES, INC.,
a Delaware corporation,
its sole general partner
By: __________________________
Its: __________________________
G-7
<PAGE>
TRANSACTIONS
ON
REVOLVING NOTE
--------------
AMOUNT OF OUTSTANDING
TYPE OF AMOUNT OF PRINCIPAL PRINCIPAL
LOAN MADE LOAN MADE MATURITY PAID BALANCE NOTATION
DATE THIS DATE THIS DATE OF LOAN THIS DATE THIS DATE MADE BY
- ---- --------- --------- ------- --------- --------- --------
G-8
<PAGE>
EXHIBIT H
SECURED PROMISSORY NOTE
-----------------------
(TERM)
$___________________ APRIL 14, 1995
1. PRINCIPAL.
---------
For value received, in installments as herein provided, RED LION INNS
OPERATING L.P., a Delaware limited partnership ("Maker"), promises to pay to the
order of _______________________, a ____________________________,("HOLDER"), the
principal sum of __________________________________________ Dollars
($_______________) or so much thereof as shall from time to time be disbursed
hereunder, together with accrued interest from the date of disbursement
hereunder on the outstanding principal at the rate set forth in Paragraph 4
below. As used herein, the term "HOLDER" shall mean Holder and any subsequent
holder of this Note, whichever is applicable from time to time.
2. PAYMENTS OF PRINCIPAL AND INTEREST.
-----------------------------------
A. Commencing on May 1, 1995 and continuing on the first day of each
month thereafter until April 14, 1996 (the "MATURITY DATE"), interest shall be
due and payable monthly in arrears, on the first day of each month.
B. Payments of principal shall be due and payable in monthly
installments of the "INSTALLMENT AMOUNT" commencing on May 1, 1995 and
continuing on the first day of each month thereafter until the Maturity Date, at
which time all outstanding principal, together with all unpaid interest accrued
thereon, and all other amounts payable by Maker under the terms of the Loan
Documents (as hereinafter defined) shall be due and payable in full. As used
herein, the "INSTALLMENT AMOUNT" shall mean, as of the first day of any month,
the amount set forth in subsection 3.1(e) of the Credit Agreement (as
hereinafter defined) for such date multiplied by a ___% [Holder's Pro Rata Share
of Term Loans].
C. If the Maturity Date or the date for payment of any installment of
principal or interest should fall on a day that is not a Business Day (as
defined in the Credit Agreement) the payment that would otherwise be due thereon
shall instead be due on the next-succeeding Business Day, and such extension of
time shall be included in computing any interest with respect to such payment.
H-1
<PAGE>
D. This Note is one of Maker's "Term Notes" in the aggregate
principal amount of $101,983,860.00 and is issued pursuant to and entitled to
the benefits of that certain Amended and Restated Credit Agreement, dated as of
April 14, 1995, by and among Maker, the financial institutions listed therein as
Lenders, and United States National Bank of Oregon, a national banking
association ("USNB"), and CIBC Inc., a Delaware corporation ("CIBC"), as Co-
Agents (such Credit Agreement as it may be amended, supplemented or otherwise
modified from time to time, being the "CREDIT AGREEMENT"). All payments of
principal and interest in respect of this Note shall be made in lawful money of
the United States of America in same day funds at the office of USNB located at
501 S.E. Hawthorne Blvd., Portland, Oregon 97214, or at such other place as
shall be designated in writing for such purpose in accordance with the terms of
the Credit Agreement.
3. PREPAYMENT.
-----------
This Note may be prepaid in full or in part, at any time without
premium, except that Maker shall indemnify, defend and hold Holder harmless from
and against any and all loss resulting from a payment of a Eurodollar Rate Loan
(as defined in the Credit Agreement) on a date which is not the last day of the
applicable Interest Period (as defined in the Credit Agreement), as specified in
subsection 3.4(d) of the Credit Agreement. In no event shall Maker have the
right to reborrow any amounts so prepaid.
4. INTEREST.
---------
Maker agrees to pay interest on the outstanding principal balance
hereof at the rates and at the times which shall be determined in accordance
with the Credit Agreement.
5. APPLICATION OF PAYMENTS.
-----------------------
Payments received by Holder pursuant to the terms hereof shall be applied
in the following manner: first, to the payment of all expenses, charges, costs
and fees incurred by or payable to Holder and for which Maker is obligated
pursuant to the terms of the Loan Documents (as defined in the Credit
Agreement); second, to the payment of all interest accrued to the date of such
payment; and third, to the payment of principal. Notwithstanding anything to
the contrary contained herein, after the occurrence and during the continuation
of an Event of Default, all amounts received by Holder from any party shall be
applied in such order as Holder, in its sole discretion, may elect.
6. SECURITY.
---------
This Note is issued pursuant to the Credit Agreement, evidences a term
loan from Holder to Maker in the original principal amount set forth above, and
is secured inter alia by the
----------
H-2
<PAGE>
Deeds of Trust (as defined in the Credit Agreement) and the other Loan
Documents.
7. ACCELERATION BY REASON OF TRANSFER.
-----------------------------------
The Deeds of Trust contain limitations on the right of Maker to
transfer the property encumbered thereby (the "PROPERTY"), and, in the event of
certain transfers of the Property without the prior written consent of Co-
Agents, the Co-Agents have the absolute right at their option, without demand or
notice, to declare all or certain portions of the sums secured by the Deeds of
Trust immediately due and payable.
8. EVENT OF DEFAULT.
-----------------
The occurrence of any of the following shall be deemed to be an event
of default ("EVENT OF DEFAULT") hereunder:
(a) default in the payment of principal or interest when due pursuant
to the terms hereof; or
(b) the occurrence of an Event of Default under the Loan Documents or
under any deed of trust, security agreement, lease assignment, guaranty or
other agreement (including any amendment, modification or extension
thereof) now or hereafter securing this Note.
9. REMEDIES.
---------
Upon the occurrence of an Event of Default and without demand or
notice, the entire balance of principal together with all accrued interest
thereon may become or may be declared to be due and payable in the manner, upon
the conditions and with the effect provided in the Credit Agreement. Upon the
occurrence of an Event of Default (and so long as such Event of Default shall
continue), the entire balance of principal together with all accrued interest
thereon shall bear interest at a per annum rate set forth in subsection 3.2(e)
of the Credit Agreement. No delay or omission in the exercise of any right
under this Note or under any of the Loan Documents shall operate as a waiver of
such right. The application of this default rate shall not be interpreted or
deemed to extend any cure period set forth in any Loan Document or otherwise
limit any remedies hereunder or thereunder.
10. WAIVER.
-------
Maker hereby waives diligence, presentment, protest and demand, notice
of protest, dishonor and nonpayment of this Note and expressly agrees that,
without in any way affecting the liability of Maker hereunder, Holder may
extend any maturity date or the time for payment of any installment due
hereunder, accept additional security, release any party liable hereunder and
release any security now or hereafter securing this Note. Maker further
H-3
<PAGE>
waives, to the full extent permitted by law, the right to plead any and all
statutes of limitations as a defense to any demand on this Note, or on any deed
of trust, security agreement, lease assignment, guaranty or other agreement now
or hereafter securing this Note.
11. ATTORNEYS' FEES.
----------------
If this Note is not paid when due or if any Event of Default occurs,
Maker promises to pay all costs of enforcement and collection, including but not
limited to, Holder's reasonable attorneys' fees, whether or not any action or
proceeding is brought to enforce the provisions hereof.
12. SEVERABILITY.
-------------
Every provision of this Note is intended to be severable. In the event
any term or provision hereof is declared by a court of competent jurisdiction,
to be illegal or invalid for any reason whatsoever, such illegality or
invalidity shall not affect the balance of the terms and provisions hereof,
which terms and provisions shall remain binding and enforceable.
13. INTEREST RATE LIMITATION.
-------------------------
It is the intent of Maker and Holder in the execution of this Note and
all other instruments securing this Note that the loan evidenced hereby be
exempt from the restrictions of the usury laws of the State of Oregon. In the
event that, for any reason, it should be determined that the Oregon usury law is
applicable to the Loan, Holder and Maker stipulate and agree that none of the
terms and provisions contained herein or in any of the Loan Documents shall ever
be construed to create a contract for the use, forbearance or detention of money
requiring payment of interest at a rate in excess of the maximum interest rate
permitted to be charged by the laws of the State of Oregon. In such event, if
any Holder of this Note shall collect monies which are deemed to constitute
interest which would otherwise increase the effective interest rate on this Note
to a rate in excess of the maximum rate permitted to be charged by the laws of
the State of Oregon, all such sums deemed to constitute interest in excess of
such maximum rate shall, at the option of Holder, be credited to the payment of
the sums due hereunder or returned to Maker.
14. NUMBER AND GENDER.
------------------
In this Note the singular shall include the plural and the masculine
shall include the feminine and neuter gender, and vice versa, if the context so
requires.
H-4
<PAGE>
15. HEADINGS.
---------
Headings at the beginning of each numbered Paragraph of this Note are
intended solely for convenience and are not to be deemed or construed to be a
part of this Note.
16. CHOICE OF LAW.
--------------
Maker, and Holder by its acceptance of this Note, agree that their
rights and obligations under this Note and under the other Loan Documents shall
be governed by and construed and interpreted in accordance with the internal
law of the State of Oregon without giving effect to any contrary conflict-of-law
rules and principles of such state. The parties further agree and stipulate that
the State of Oregon has a substantial relationship to the parties and to the
underlying transactions evidenced by this Note and the other Loan Documents.
Notwithstanding the foregoing, the parties agree that:
(a) The procedures governing the enforcement of foreclosure and
provisional remedies against Maker, including by way of illustration but
not limitation, actions for foreclosure, replevin, for claim and delivery
of property, for injunctive relief or for the appointment of a receiver
shall be governed by the laws of the State in which the applicable real
property is located; and
(b) Applicable law in the State in which the applicable real property
is located will be followed to the extent required in connection with the
foreclosure of the security interests and liens created hereby and under
the other Loan Documents.
Nothing contained in this Paragraph 16 shall be construed to provide
that the substantive law of the States in which the real properties are located
shall apply to the parties' rights and obligations hereunder or under the other
Loan Documents, which are and shall continue to be governed by the substantive
law of the State of Oregon. In addition, the fact that portion of the Loan
Document may include provision to conform to the law of other jurisdictions is
intended nor shall it be deemed in any way to derogate the parties' choice of
law set forth in this Paragraph 16. The parties further agree that Holder may
enforce its rights under the Loan Documents, including but not limited to, its
rights to sue Maker, to collect any outstanding indebtedness or to obtain a
judgment for any deficiency following foreclosure, in accordance with Oregon
law.
17. NONRECOURSE.
------------
Notwithstanding anything to the contrary contained herein or in any of
the other Loan Documents, Holder, by its acceptance of this Note, agrees that
neither Maker nor any of its constituent
H-5
<PAGE>
partners (the "NONRECOURSE PARTIES") shall be personally liable for the payment
of any sums now or hereafter owing Holder under the terms of this Note, except
as set forth below in this Paragraph 17. If an Event of Default should occur
hereunder or under the other Loan Documents, Holder agrees that its rights, as
to the Nonrecourse Parties, shall be limited to proceeding against the security
for the indebtedness evidenced by this Note against any guarantor of this Note
(including, without limitation, any Nonrecourse Party) or against any party
other than the Nonrecourse Parties and that it shall have no right to proceed
directly against the Nonrecourse Parties for the satisfaction of any monetary
obligation of or enforcement of any monetary claim against Maker or for any
deficiency judgment remaining after foreclosure of any real or personal property
securing the obligations of Maker hereunder or under the other Loan Documents.
It is expressly understood and agreed, however, that nothing contained in this
Paragraph 17 shall in any manner or way constitute or be deemed a release of the
debt evidenced by this Note or otherwise affect or impair the enforceability
against Maker of the liens of the Deeds of Trust, the liens of any assignments
executed pursuant to the Credit Agreement or the other Loan Documents or the
rights and security interests created by the Deeds of Trust or any other
instrument or agreement evidencing, securing or related to the indebtedness
evidenced by this Note. Nothing in this Paragraph 17 shall: (a) preclude
foreclosure of the liens of the Deeds of Trust or from the enforcement against
Maker or its assets (including, without limitation, any or all of the Collateral
(as defined in the Credit Agreement)) of any rights or remedies in law or in
equity, pursuant to the Credit Agreement or the other Loan Documents except as
stated in this Paragraph 17; (b) impair, in any manner, any right, remedy or
recourse against any party executing a guaranty (including, without limitation,
any Nonrecourse Party); (c) impair, in any manner, any right, remedy or recourse
against the Nonrecourse Parties for fraud or for fraudulent misapplication of
insurance proceeds or condemnation awards; (d) impair, in any manner, any right,
remedy or recourse against the Nonrecourse Parties for indemnification pursuant
to the Loan Documents arising out of the existence or alleged existence of
hazardous waste at one or more of the Projects; or (e) impair, in any manner,
any right, remedy or recourse against the Nonrecourse Parties for Maker's
failure to procure or maintain policies of insurance required by Holder.
18. ATTORNEYS' FEES.
---------------
As used herein, the terms "attorneys' fees" or "attorneys' fees and
expenses" shall have the meaning given such terms in Section 9.26 of the Credit
Agreement.
H-6
<PAGE>
IN WITNESS WHEREOF, Maker has caused this Note to be duly executed and
delivered as of the date first above written.
RED LION INNS OPERATING L.P.,
a Delaware limited partnership
BY: RED LION PROPERTIES, INC.,
a Delaware corporation,
its sole general partner
By: __________________________
Its: __________________________
<PAGE>
EXHIBIT I
FORM OF FINANCIAL CONDITION CERTIFICATE
I-1
<PAGE>
FINANCIAL CONDITION CERTIFICATE
This FINANCIAL CONDITION CERTIFICATE (this "CERTIFICATE") is delivered
in connection with that certain Amended and Restated Credit Agreement, dated as
of April 14, 1995 (the "CREDIT AGREEMENT"), by and among Red Lion Inns Operating
L.P., a Delaware limited partnership ("BORROWER"), the financial institutions
referred to therein as Lenders ("LENDERS"), and United States National Bank of
Oregon, a national banking association ("USNB"), and CIBC Inc., a Delaware
corporation ("CIBC"), as Co-Agents ("CO-AGENTS"). Capitalized terms used herein
without definition have the same meanings as in the Credit Agreement.
A. I am, and at all pertinent times mentioned herein have been, the
duly qualified and acting Vice President of Red Lion Properties, Inc., a
Delaware corporation ("RED LION"), managing general partner of Borrower. In
such capacity I have participated actively in the management of Borrower's
financial affairs and am familiar with its financial statements. I have,
together with other officers of Red Lion, acted on behalf of Borrower in
connection with the negotiation of the Credit Agreement and I am familiar with
the terms and conditions thereof.
B. I have carefully reviewed the contents of this Certificate, and I
have conferred with counsel for Borrower for the purpose of discussing the
meaning of its contents.
C. I have reviewed financial statements of Borrower for the year
ending December 31, 1994 (the "FINANCIAL STATEMENTS") and such other financial
information and projections as I have deemed necessary to render the statements
set forth below.
Based on the foregoing, I have reached the following conclusions as of
the date hereof:
1. Borrower is not now, nor will the incurrence or continuation of
the Obligations under the Credit Agreement render Borrower "insolvent" as
defined in this paragraph 1. The recipients of this Certificate and I have
agreed that, in this context, "insolvent" means that the present fair value
of assets is less than the amount that will be required to pay the probable
liability on existing debts as they become absolute and matured. We have
also agreed that the term "debts" includes any legal liability, whether
matured or unmatured, liquidated or unliquidated, absolute, fixed or
contingent.
<PAGE>
2. By the incurrence or continuation of the Obligations under the
Credit Agreement, Borrower will not incur debts beyond its ability to pay
as such debts mature.
3. The incurrence or continuation of the Obligations under the Credit
Agreement will not leave Borrower with property remaining in its hands
constituting "unreasonably small capital." In reaching this conclusion, I
understand that "unreasonably small capital" depends upon the nature of the
particular business or businesses conducted or to be conducted, and I have
reached my conclusion based on the needs and anticipated needs for capital
of the businesses conducted or anticipated to be conducted by Borrower in
light of the Financial Statements and available credit capacity.
4. To the best of my knowledge, Borrower has not executed the Credit
Agreement or any documents mentioned therein, or made any transfer or
incurred any obligations thereunder, with actual intent to hinder, delay or
defraud either present or future creditors.
The conclusions set forth above are based on data available on the
date hereof. Any projections reviewed for the purpose of drawing such
conclusions are based on assumptions currently believed to be reasonable but any
of which could vary from actual results. I understand that Co-Agents and Lenders
are relying on the truth and accuracy of the foregoing in connection with the
extension or continuation of credit to Borrower pursuant to the Credit
Agreement.
I represent the foregoing information to be, to the best of my
knowledge and belief, true and correct and execute this Certificate this 14th
day of April, 1995.
RED LION INNS OPERATING L.P.,
a Delaware limited partnership
By: Red Lion Properties, Inc.,
a Delaware corporation,
general partner
By: _________________________
Anupam Narayan
Vice President
2
<PAGE>
EXHIBIT 10.9
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"AMENDMENT") is made as of July 17, 1995, by and among RED LION INNS OPERATING
L.P., a Delaware limited partnership ("BORROWER"), UNITED STATES NATIONAL BANK
OF OREGON, a national banking association ("USNB"), CIBC INC., a Delaware
corporation ("CIBC"), THE BANK OF TOKYO, LTD., PORTLAND BRANCH ("BANK OF
TOKYO"), and WELLS FARGO REALTY ADVISORS FUNDING, INCORPORATED, a Colorado
corporation ("WELLS FARGO").
R E C I T A L S:
---------------
A. Pursuant to that certain Credit Agreement, dated as of April 6,
1987, as amended by that certain First Amendment to Credit Agreement, dated as
of January 1, 1990, (as so amended the "ORIGINAL CREDIT AGREEMENT"), by and
among Borrower, USNB and Canadian Imperial Bank of Commerce, an extranational
banking association ("CANADIAN IMPERIAL"), USNB and Canadian Imperial agreed to
lend, and Borrower agreed to borrow, a term loan (the "ORIGINAL TERM LOAN") in
the maximum principal amount of One Hundred Twenty Million Dollars
($120,000,000.00), of which One Hundred Five Million Eight Hundred Seventy
Thousand Dollars ($105,870,000) was disbursed to Borrower, and one or more
revolving loans (collectively, the "ORIGINAL REVOLVING LOAN"), in an aggregate
principal amount not to exceed Fourteen Million One Hundred Thirty Thousand
Dollars ($14,130,000.00) on the terms and conditions and for the purposes set
forth therein.
B. Borrower, USNB and CIBC, as "CO-AGENTS" and as "LENDERS", and
Bank of Tokyo, as a "LENDER", are parties to that certain Amended and Restated
Credit Agreement dated as of April 14, 1995 (the "CREDIT AGREEMENT"). Pursuant
to the Credit Agreement, the parties thereto amended and restated their
respective obligations under the Original Credit Agreement. Initially
capitalized terms not otherwise defined herein shall have the respective
meanings given such terms in the Credit Agreement.
C. Concurrently herewith, Wells Fargo has executed an Assignment and
Acceptance with each of USNB and CIBC, pursuant to the terms of which USNB and
CIBC have assigned to Wells Fargo a portion of each of their respective
interests in the Term Loan. As a result of the execution of the foregoing,
Wells Fargo is a "LENDER" under the Credit Agreement.
D. The parties hereto wish to amend the Credit Agreement on the
terms, and subject to the conditions, set forth herein.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants and agreements contained herein,
1
<PAGE>
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follow:
1. AMENDMENT TO CREDIT AGREEMENT.
-----------------------------
(A) The definitions set forth in Article I of the Credit
Agreement for the following terms are hereby amended to read as follows:
"'REVOLVING NOTES' means the promissory notes of Borrower issued
pursuant to Section 2.1, any promissory notes issued in substitution
-----------
therefor and any other promissory notes of Borrower issued pursuant to
the terms hereof (including, without limitation, those issued pursuant
to Section 9.1(b)(i) of this Agreement), each of which shall be
-----------------
substantially in the form of Exhibit G annexed hereto, as each of the
---------
foregoing may be amended, supplemented or otherwise modified from time
to time, which promissory notes evidence the same Indebtedness that is
evidenced by the Original Revolving Note."
"'TERM NOTES' means the promissory notes of Borrower issued
pursuant to Section 2.1, any promissory notes issued in substitution
-----------
therefor and any other promissory notes of Borrower issued pursuant to
the terms hereof (including, without limitation, those issued pursuant
to Section 9.1(b)(i) of this Agreement), each of which shall be
-----------------
substantially in the form of Exhibit H annexed hereto, as each of the
---------
foregoing may be amended, supplemented or otherwise modified from time
to time, which promissory notes evidence the same Indebtedness that is
evidenced by the Original Term Note."
(B) The following is hereby added to the Credit Agreement
following Section 8.7:
"8.8 POST-FORECLOSURE PLAN.
In the event all or any portion of any Project or Collateral
is acquired by Co-Agents as a result of a foreclosure or the
acceptance of a deed or assignment in lieu of foreclosure, or is
retained in satisfaction of all or any part of Borrower's Obligations,
title to any such Project or Collateral or any portion thereof shall
be held in the name of Co-Agents or one or more nominees or
subsidiaries of Co-Agents, as agent for the ratable benefit of Co-
Agents and Lenders. Co-
2
<PAGE>
Agents shall prepare a recommended course of action for such Projects
or Collateral (the "POST-FORECLOSURE PLAN"), which shall be subject to
the approval of Requisite Lenders. In the event that Requisite
Lenders do not approve such Post-Foreclosure Plan, any Lender shall be
permitted to submit an alternative Post-Foreclosure Plan to Co-Agents,
and Co-Agents shall submit any and all such additional Post-
Foreclosure Plans to Lenders for evaluation and the approval of
Requisite Lenders. In accordance with the approved Post-Foreclosure
Plan, Co-Agents shall cause to be managed, operated, repaired,
administered, completed, constructed, restored or otherwise cause the
Projects or Collateral acquired to be dealt with and shall cause to be
administered all transactions relating thereto, including, without
limitation, employing a manager and other agents, including agents for
the sale of such Projects or Collateral, and the collecting of
revenues and other sums from such Projects and Collateral and paying
the expenses of such Projects and Collateral. Any material actions
taken by Co-Agents with respect to such Projects or Collateral, which
are not provided for in the approved Post-Foreclosure Plan or
reasonably incidental thereto, shall require the consent of Requisite
Lenders by way of supplements to such Plan. Upon demand therefor from
time to time, each Lender will contribute its share (based on its Pro
Rata Share) of all reasonable costs and expenses incurred by Co-Agents
pursuant to any Post-Foreclosure Plan in connection with the
operation, management, maintenance or sale of any Projects or
Collateral. In addition, Co-Agents shall cause to be delivered to
each of the Lenders monthly, an income and expense statement for such
Projects and Collateral, and each of the Lenders shall promptly
contribute its Pro Rata Share of any operating losses for such
Projects or Collateral, and such other expenses and operating reserves
as Co-Agents shall deem reasonably necessary pursuant to and in
accordance with the Post-Foreclosure Plan. To the extent there is net
operating income from such Projects or Collateral, Co-Agents shall, in
accordance with the Post-Foreclosure Plan, determine the amount and
timing of distributions to Lenders. All such distributions shall be
made to Lenders in accordance with their respective Pro Rata Shares.
Lenders acknowledge that if title to any Project or Collateral is
obtained by Co-Agents or their nominee, such Projects and Collateral
will not be
3
<PAGE>
held as a permanent investment, but will be liquidated as soon as
practicable and all proceeds of such liquidation may first be applied
toward reasonable costs and expenses incurred by Co-Agents with
respect to such Projects or Collateral and any remaining proceeds
shall be distributed to Lenders in accordance with their Pro Rata
Shares. Co-Agents shall undertake to sell such Projects or Collateral
at such price and upon such terms and conditions as Requisite Lenders
shall reasonably determine to be most advantageous. Any purchase
money mortgage or deed of trust taken in connection with the
disposition of any such Project or Collateral in accordance with the
immediately preceding sentence shall name Co-Agents as agents for
Lenders, as the beneficiary or mortgagee. In such case, Co-Agents and
Lenders shall enter an agreement with respect to such purchase money
mortgage defining the rights of Lenders in the same Pro Rata Shares
provided hereunder which agreement shall be in all material respects
similar to this Article VIII."
(C) The last sentence of Section 9.1(b)(i) of the Credit
Agreement is hereby amended to read as follows:
"The Commitments hereunder shall be modified to reflect the Commitment
of such assignee and any remaining Commitment of such assigning Lender
and, if any such assignment occurs after the issuance of the Notes
hereunder, new Notes shall, upon surrender of the assigning Lender's
Notes, be issued to the assignee and to the assigning Lender pursuant
to Section 3.1(d) as necessary to reflect the new Commitments of the
--------------
assignee and the assigning Lender. Borrower hereby agrees to execute
new Notes to reflect the terms of this subsection 9.1(b)(i) promptly
--------------------
upon request by or on behalf of Co-Agents or any Lender, subject to
the terms of this subsection 9.1(b)(i)."
(D) The following is hereby added to Exhibit B to the Credit
Agreement following Section 1(f) thereof:
"To evidence the assignment by Assignor to Assignee of the Percentage
of Assignor's rights and obligations with respect to Assignor's Term
Loan and Assignor's Revolving Loan Commitment, concurrently herewith,
Co-Agents shall cause Borrower to execute a Term Note and a Revolving
Note in favor of Assignee in a principal amount equal to the
Percentage so assigned and Borrower shall be obligated pursuant to
Section 9.1(b)(i)
-----------------
4
<PAGE>
of the Agreement to execute and deliver such Note(s) promptly upon
such request. Co-Agents shall also request and Borrower shall be
obligated pursuant to Section 9.1(b)(i) of the Agreement to execute
-----------------
and deliver to Assignor a new Term Note in an amount equal to
Assignor's Term Loan less the Percentage assigned to Assignee, and a
new Revolving Note in a principal amount equal to Assignor's Revolving
Loan Commitment less the Percentage assigned to Assignee.
Concurrently with the delivery of such new Notes to Assignor, Assignor
shall deliver to Borrower the Term Note and the Revolving Note
previously executed by Borrower in favor of Assignor."
2. REPRESENTATIONS AND WARRANTIES.
------------------------------
Borrower hereby represents and warrants to each Lender that:
(A) Borrower, each constituent general partner of Borrower, and
each constituent general partner of said general partners have full power
and authority to execute, deliver and perform their respective obligations
under this Amendment and the other Amendment Documents (as hereinafter
defined), and this Amendment and the other Amendment Documents are valid
and binding obligations of and enforceable against the Borrower and each
constituent general partner of Borrower (and each constituent general
partner of said general partners) in accordance with their respective
terms; and
(B) There is no Event of Default under any of the Amendment
Documents, the Credit Agreement or any of the other Loan Documents and no
event exists which, with the giving of notice or the passage of time, or
both, would give rise to an Event of Default under any of the Amendment
Documents or any of the Loan Documents.
3. REAFFIRMATION OF OBLIGATIONS.
----------------------------
Borrower hereby ratifies, acknowledges and reaffirms its obligations
under the Credit Agreement, the Notes all other Loan Documents and the
Indemnification Agreement, as such documents have been amended hereby, and
agrees that any such reference made in the Credit Agreement, the Notes or in any
of the other Loan Documents, or the Indemnification Agreement to any Loan
Document, or the Indemnification Agreement shall be deemed a reference to the
applicable document as amended by this Amendment or pursuant to the terms
hereof.
5
<PAGE>
4. CLOSING CONDITIONS.
------------------
This Amendment shall become effective upon satisfaction of each of the
following:
(A) Borrower shall execute, acknowledge, where necessary, and
deliver (or cause to be executed, acknowledged, where necessary, and
delivered) all in form and content satisfactory to the Lenders the
following documents (collectively, the "AMENDMENT DOCUMENTS"):
(I) this Amendment;
(II) an amendment to each of the Deeds of Trust, as required
by the Lenders, in recordable form, providing, among other things,
that each such Deed of Trust shall secure Borrower's obligations under
the Credit Agreement, the Notes and the other Loan Documents all as
modified by this Amendment (collectively, the "DEEDS OF TRUST
AMENDMENTS");
(III) such other documentation as Co-Agents may reasonably
require.
(B) ENDORSEMENT TO TITLE POLICIES; UCC FILINGS. Lenders shall
------------------------------------------
receive and approve such endorsements to the Title Policies as may be
required by the Lenders insuring the continued priority and validity of the
lien of each Deed of Trust against the subject Project notwithstanding this
Amendment or the amendment to such Deed of Trust as herein described. Such
endorsements may include, if requested by a Lender and to the extent
commercially available, an endorsement insuring the valid assignment of an
interest under any of the Notes to a Lender who is the valid assignee of
such interest, which endorsements shall be issued at the cost of the
requesting Lender. As a post-closing matter (and not as a condition to the
effectiveness of this Amendment), Co-Agents shall, upon the request of a
Lender following the effective date hereof, cause UCC amendments to be
filed or recorded, as appropriate, to name the Lenders as of the date of
such filing or recording as Secured Parties under the existing UCC filings
with respect to the Credit Agreement. Following such filing or recording,
Co-Agents shall cause new UCC searches to be obtained to reflect the
priority of each UCC in favor of the Lenders under the Credit Agreement.
5. AMENDMENT TO LOAN DOCUMENTS.
---------------------------
Upon the execution and delivery of this Amendment and the recordation
of the Deeds of Trust Amendments in the real estate records of the counties in
which the applicable Projects are located, the parties hereto agree that the
Credit Agreement,
6
<PAGE>
the Deeds of Trust (other than the Omaha Deed of Trust) and the other Loan
Documents shall be amended in the manner and to the extent set forth herein and
in the other Amendment Documents.
6. EFFECT OF LOAN DOCUMENTS.
------------------------
Except as specifically amended pursuant to the terms of this Amendment
and the other Amendment Documents, the terms, covenants, conditions and
provisions of the Credit Agreement, the Deeds of Trust and the other Loan
Documents shall remain unmodified and in full force and effect.
7. GOVERNING LAW.
-------------
The parties agree that their rights and obligations under this
Amendment and under the other Amendment Documents shall be governed by and
construed and interpreted in accordance with the internal laws of the State of
Oregon without giving effect to any contrary conflict-of-law rules and
principles of such State. The parties further agree and stipulate that the
State of Oregon has a substantial relationship to the parties and to the
underlying transactions evidenced by the Loan Documents as amended by the
Amendment Documents. Notwithstanding the foregoing, the parties agree that:
(A) The procedures governing the enforcement by Lenders of
foreclosure and provisional remedies against Borrower, including by way of
illustration but not limitation, actions for foreclosure, replevin, for
claim and delivery of property, for injunctive relief or for the
appointment of a receiver shall be governed by the laws of the State in
which the applicable real property is located; and
(B) Lenders shall comply with applicable law in the State in
which the applicable real property is located to the extent required in
connection with the foreclosure of the security interest and liens created
under the other Loan Documents, as amended by the Amendment Documents.
Nothing contained in this Section 7 shall be construed to provide that
the substantive law of the State in which the applicable real property is
located shall apply to the parties' rights and obligations hereunder or under
the other Loan Documents, as amended by the Amendment Documents, which are and
shall continue to be governed by the substantive law of the State of Oregon. In
addition, the fact that portions of the Loan Documents and the Amendment
Documents may include provisions drafted to conform to the law of other
jurisdiction is not intended nor shall it be deemed in any way to derogate the
parties' choice of law set forth in this Section 7. The parties further agree
that Lenders may enforce their rights under the Loan Documents and the Amendment
Documents, including, but
7
<PAGE>
not limited to, their rights to sue Borrower, to collect any outstanding
indebtedness or to obtain a judgment for any deficiency following foreclosure,
in accordance with Oregon law.
8. ASSIGNMENT PROHIBITED.
---------------------
Borrower shall not assign any of its rights under this Amendment and
any attempt to do so, whether, voluntary, involuntary, by operation of law or
otherwise, shall be null and void.
9. COUNTERPARTS.
------------
This Amendment may be executed in any number of counterparts each of
which shall be deemed an original, but all such counterparts together shall
constitute but one agreement. Any number of signature pages may be detached from
counterparts and attached to a single copy of this Agreement to form physically
one document.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE
SIGNED BY US TO BE ENFORCEABLE.
[SIGNATURES ON FOLLOWING PAGE]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the date first above written.
RED LION INNS OPERATING L.P.,
a Delaware limited partnership
By: Red Lion Properties, Inc.
a Delaware corporation,
its sole general partner
By: /S/ Beth A. Ugoretz
-------------------------------
Its: Senior Vice President
--------------------------
UNITED STATES NATIONAL BANK OF OREGON,
a national banking association, as a "Co-
Agent" and a "Lender"
By: /S/ Glenn Jacobs
-----------------------------------
Its: Vice President
------------------------------
CIBC INC.,
a Delaware corporation, as a "Co-Agent" and
a "Lender"
By: /S/ Paul Mohme
-----------------------------------
Its: Assistant Vice President
------------------------------
THE BANK OF TOKYO, LTD.,
Portland Branch, as a "Lender"
By: /S/ Hiroki Nakazawa
------------------------------------
Its: Vice President
------------------------------
WELLS FARGO REALTY ADVISORS FUNDING,
INCORPORATED, a Colorado corporation, as a
"Lender"
By: Wells Fargo Real Estate Group,
a California corporation,
as Agent
By: /S/
------------------------------
Its: Vice President
------------------------
By: /S/
-------------------------------
Its: Assistant Secretary
--------------------------
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 229
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 229
<PP&E> 240,135
<DEPRECIATION> (74,306)
<TOTAL-ASSETS> 166,267
<CURRENT-LIABILITIES> 29,094
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 18,234
<TOTAL-LIABILITY-AND-EQUITY> 166,267
<SALES> 39,142
<TOTAL-REVENUES> 39,142
<CGS> 0
<TOTAL-COSTS> 23,043
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,310
<INCOME-PRETAX> 4,789
<INCOME-TAX> 272
<INCOME-CONTINUING> 4,517
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,517
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
