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THIRD AMENDED AND RESTATED
MASTER COVENANT AGREEMENT
Dated as of
January 25, 1994
among
LA QUINTA INNS, INC.
and
THE BANKS LISTED HEREIN
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TABLE OF CONTENTS
Page
Section 1. Parties 1
Section 2. Background 1
Section 3. Definitions 1
Section 4. Business Covenants of La Quinta 12
4.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING PRACTICES,
CORPORATE EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 INSPECTION OF PROPERTIES AND BOOKS . . . . . . . . . . . . . . . . 12
4.3 RESTRICTED PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 MERGER AND SALE OF ASSETS. . . . . . . . . . . . . . . . . . . . . 13
4.5 SENIOR DEBT TO CAPITALIZATION RATIO. . . . . . . . . . . . . . . . 14
4.6 CONTINGENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 14
4.7 INCURRENCE AND RETENTION OF DEBT . . . . . . . . . . . . . . . . . 15
4.8 INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.9 NOTICE OF LITIGATION . . . . . . . . . . . . . . . . . . . . . . . 15
4.10 TOTAL DEBT RATIO . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.11 CASH FLOW RATIO. . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.12 FIXED CHARGE COVERAGE RATIO. . . . . . . . . . . . . . . . . . . . 16
4.13 CAPITAL EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . 16
4.14 OPERATING LEASES . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.15 LAND HELD FOR DEVELOPMENT AND LAND HELD FOR SALE . . . . . . . . . 17
4.16 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.17 ACCOUNTING CHANGES . . . . . . . . . . . . . . . . . . . . . . . . 17
4.18 AMENDMENT AND MODIFICATION OF SUBORDINATED DEBT DOCUMENTS. . . . . 18
4.19 LEASE-BACKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.20 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . 18
4.21 ERISA COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.22 BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.23 DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.24 BANK DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.25 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . . . . 20
Section 5. Information as to La Quinta 20
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY LA QUINTA. . . . . . . . 20
5.2 OFFICER'S CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . 22
Section 6. Default 23
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Section 7. Miscellaneous 23
7.1 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 AMENDMENT, WAIVER, CONSENTS AND APPROVALS. . . . . . . . . . . . . 25
7.3 NOTICE OF DEFAULT ON BANK DEBT . . . . . . . . . . . . . . . . . . 25
7.4 CONFLICTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.5 PAYMENT OF EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . 25
7.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.7 BINDING UPON SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . 25
7.8 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.9 TERMINATION AND EFFECTIVENESS OF THIS AGREEMENT. . . . . . . . . . 26
7.10 ADJUSTMENT OF PERCENTAGES. . . . . . . . . . . . . . . . . . . . . 26
7.11 EXCEPTIONS TO COVENANTS. . . . . . . . . . . . . . . . . . . . . . 26
7.12 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.13 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Exhibit A: Bank Debt
Exhibit B: Existing Investments
Exhibit C: Subsidiaries and Unincorporated Ventures Investments
Exhibit D: Existing Liens
Exhibit E: Guarantees and Contingent Obligations
Exhibit F: Confidentiality Agreement
Exhibit G: Significant Investments
Exhibit H: Investment Policy
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THIRD AMENDED AND RESTATED
LA QUINTA INNS, INC.
MASTER COVENANT AGREEMENT
SECTION 1. PARTIES.
This Third Amended and Restated Master Covenant Agreement ("Agreement") is
by and among La Quinta Inns, Inc., a Texas corporation ("La Quinta"),
NationsBank of Texas, N.A., The Frost National Bank, First Interstate Bank of
Texas, N.A., Citicorp USA, Inc., Texas Commerce Bank National Association
(successor to Texas Commerce Bank-San Antonio, N.A. through merger with and into
Texas Commerce Bank National Association), Bank of Scotland, Continental Bank
N.A., Bank One, Texas, N.A., and U.S. Bank of Washington, National Association,
and the other banks from time to time a party hereto pursuant to Section 7.13
(individually, a "Bank", collectively, the "Banks").
SECTION 2. BACKGROUND.
La Quinta and certain of the Banks are parties to a Second Amended and
Restated Master Covenant Agreement, dated as of June 15, 1993 (the "Prior Master
Covenant Agreement"), the effect of which is to incorporate the definitions,
provisions and covenants set forth therein into certain credit facilities that
La Quinta has with certain of the Banks.
La Quinta and the Banks desire to enter into this Agreement in order to
amend certain terms of, and restate in its entirety, the Prior Master Covenant
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, La Quinta and the Banks agree as
follows:
SECTION 3. DEFINITIONS.
For purposes hereof, the terms defined in this Section 3 shall have the
following meanings, and the singular shall include the plural, and vice versa,
unless otherwise specifically required by the context (capitalized terms used
herein and not otherwise defined herein shall have the meaning given to such
terms in the Credit Agreement hereinafter defined):
"ADJUSTED CASH FLOW" means, for any period, determined in accordance with
GAAP on a Parent Company basis, the sum of (i) Adjusted EBITDA, minus (ii)
federal and state income tax expense, minus (iii) Net Interest Expense, minus
(iv) Maintenance Capital Expenditures, minus (v) Restricted Payments, in each
case for the four consecutive fiscal quarters preceding the date of
determination, minus (vi) Current Maturities determined for the four consecutive
fiscal quarters succeeding the date of determination.
"ADJUSTED EBITDA" means, for any period, determined in accordance with GAAP
and computed on a Parent Company basis for La Quinta and its Subsidiaries, the
sum of (without duplication) (i) EBITDA, plus (ii) Net Cash Distributions.
"AFFILIATE" means, as applied to any Person, (i) any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person or (ii) any other Person that owns or controls 10% or more of any class
of equity securities of that Person or any of its Affiliates. For purposes of
this definition, "CONTROL" (including with correlative meanings, the terms
"CONTROLLING," "CONTROLLED BY," and UNDER COMMON CONTROL WITH"), as applied to
any Persons, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting securities or by contract or otherwise.
"AGREEMENT DATE" means the date of this Agreement.
"AUTHORIZED OFFICER" means any of the following officers of La Quinta:
President, Senior Vice President-Accounting & Administration, Senior Vice
President-Finance, Vice President & General Counsel or Vice President-Treasurer.
"BANK DEBT" means all obligations, indebtedness and liabilities, direct,
contingent or otherwise (including through participations), whether funded or
unfunded, of La Quinta to any Bank listed on Exhibit A attached hereto and made
a part hereof (or any Assignee a party hereto pursuant to Section 7.13), arising
under and otherwise in connection with the loans and/or credit facilities
briefly described in EXHIBIT A, as modified to indicate adjustments of
percentages (and related amounts) from time to time as provided for in Sections
5.1(A)(2), 5.1(B)(3), 7.10 and 7.13 hereof, and all interest accruing on all or
any part thereof and attorneys' fees incurred in the enforcement or the
collection of all or any part thereof.
"CAPITAL EXPENDITURES" means, expenditures for the purchase of tangible
assets of long-term use which are capitalized in accordance with GAAP.
"CAPITAL LEASES" mean all capital leases and subleases, as defined in the
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 13, dated November 1976, as amended.
"CAPITAL STOCK" means, with respect to any Person, any capital stock,
partnership or joint venture interests of such Person and shares, interests,
participations or other ownership interests (however designated) of any Person
and any rights (other than debt securities convertible into corporate stock),
warrants or options to purchase any of the foregoing.
"COMBINED" includes, with respect to financial statements and the
calculations of the covenants herein and the definitions related thereto, the
combined accounts of La Quinta and its Subsidiaries and Unincorporated Ventures
which are included in La Quinta's Annual Report
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to Shareholders and in La Quinta's Form 10-K filed with the S.E.C. (the
"COMBINED FINANCIAL STATEMENTS").
"CREDIT AGREEMENT" means that certain Credit Agreement, dated as of June
15, 1993, among La Quinta, the Banks and NationsBank of Texas, N.A., as
Administrative Lender, as amended, supplemented, modified or restated from time
to time.
"CURRENT MATURITIES" means, with respect to any Person, the principal
portion payable by such Person on Long Term Debt during the twelve-month period
immediately succeeding the date of determination.
"DEBT" of any Person means, at any date, without duplication, all
obligations, contingent or otherwise, (i) of such Person for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (ii) of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) representing the balance
deferred and unpaid of the purchase price of any property or services (other
than accounts payable or other obligations arising in the ordinary course of
business), if and to the extent any of the foregoing described in clauses (i),
(ii) and (iii) would appear as a liability on the balance sheet of such Person,
(iv) of such Person in respect of bankers' acceptances, letters of credit or
other similar instruments (or reimbursement obligations with respect thereto),
(v) of such Person under Capital Leases, (vi) all liabilities secured by a Lien
on any asset of such Person to the extent of the value of such asset, whether or
not such liability is an obligation of such Person, (vii) all liability of
others guaranteed by such Person (but only to the extent of such guarantees),
(viii) to the extent not otherwise included, obligations of such Person under
currency risk-hedging agreements and Interest Rate Agreements, (ix) the
liquidation preference and any mandatory redemption payment obligations (without
duplication) of such Person's Subsidiaries in respect of preferred stock issued
by any such Subsidiary, (x) in the case of such Person, the liquidation
preference and any mandatory redemption payment obligations (without
duplication) in respect of Disqualified Capital Stock and (xi) unfunded vested
benefits under any Plan to the extent in excess of minimum funding requirements
under Applicable Law. "Debt" shall exclude on a Parent Company basis, but shall
include on a Combined basis, (i) any obligation of an Unincorporated Venture of
such Person and (ii) any obligation of such Person arising solely by virtue of
such Person being a general partner or venturer of any Unincorporated Venture.
"DEFAULT" means any default with respect to any Bank Debt which would
permit the acceleration of such Bank Debt, whether or not there has been
satisfied any requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further condition, event
or act.
"DISQUALIFIED CAPITAL STOCK" means with respect to any Person any series or
class of Capital Stock of such Person which is or may be required to be
redeemed, in whole or in part, or may be put to such Person or any of its
Subsidiaries, in whole or in part, at the option of the holder thereof, on or
prior to the final maturity of the Senior Subordinated Notes, or is or may be
convertible or exchangeable into or exercisable for such Capital Stock on or
prior to the final
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maturity of the Senior Subordinated Notes; PROVIDED, that Capital Stock will not
be deemed to be Disqualified Capital Stock if it may only be so redeemed or put
solely in consideration of Qualified Capital Stock.
"EBIT" means, for any period, determined in accordance with GAAP and
computed on both a Parent Company basis and on a Combined basis, with respect to
La Quinta, its Subsidiaries and Unincorporated Ventures, as appropriate, the sum
of (i) Operating Income, plus (ii) nonrecurring, non-cash charges which decrease
Operating Income minus (iii) nonrecurring credits which are included in
Operating Income.
"EBITDA" means, for any period, determined in accordance with GAAP and
computed on both a Parent Company basis and on a Combined basis for La Quinta,
its Subsidiaries and Unincorporated Ventures, as appropriate, the sum of (i)
EBIT plus (ii) depreciation, amortization and non-cash fixed asset retirements.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT" means any default with respect to any Bank Debt which
would permit the acceleration of such Bank Debt, provided there has been
satisfied any requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further condition, event
or act.
"EXISTING INVESTMENTS" means those Investments described on EXHIBIT B
hereto.
"GAAP" means generally accepted accounting principles , set forth in the
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and/or in statements of the Financial Accounting
Standards Board, which are applicable in the circumstances as of the date in
question and which shall be applied by the independent accounting firm which
certifies La Quinta's Combined Financial Statements and Parent Company financial
statements, and the requisite that such principles be applied on a consistent
basis shall mean that the accounting principles observed in a current period are
comparable in all material respects to those applied in a preceding period,
other than as a result of changes required by modifications to GAAP. Unless
otherwise indicated herein, all accounting terms will be defined according to
GAAP. Notwithstanding the foregoing, all determinations and computations with
respect to financial covenants and ratios provided for in this Agreement shall
be made in accordance with GAAP as in effect on the date hereof.
"INTEREST EXPENSE" of any Person means, for any period, the aggregate
interest expense in respect of Debt (including amortization of original issue
discount and non-cash interest payments or accruals, and dividends on
Disqualified Capital Stock, but excluding amortization of Debt issuance costs)
of such Person and all commissions, discounts, other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and costs
associated with currency and Interest Rate Agreements, all in accordance with
GAAP; PROVIDED, that interest expense attributable to that portion of the Debt
of another Person that is a direct or indirect,
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contingent or primary, recourse obligation of such Person subsequent to the
Agreement Date shall be added thereto.
"INTEREST RATE AGREEMENTS" means any obligation of any Person under
interest rate exchange, collar, cap, swap or similar agreements providing
interest rate protection.
"INVESTMENT" means, in one or a series of related transactions, any direct
or indirect acquisition of all or substantially all assets of any Person, or any
direct or indirect purchase or other acquisition of, or beneficial interest in,
capital stock or other securities of any other Person, or any direct or indirect
loan, advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution or transfer of property, assets or value to, or investment
in, any other Person, including, without limitation the incurrence or sufferance
of Debt or the purchase of accounts receivable by any other Person that are not
current assets or do not arise in the ordinary course of business.
"INVESTMENT POLICY" shall mean that certain Amended and Restated La Quinta
Inns, Inc. Statement of Investment Policy as of October 1989 in effect on the
date of this Agreement as set forth as EXHIBIT H hereto.
"LAND HELD FOR DEVELOPMENT" means that certain land of La Quinta, its
Subsidiaries and Unincorporated Ventures which is held for the future
development of inns and related facilities and which is identified on the Parent
Company financial statements as "Land Held for Development."
"LAND HELD FOR SALE" means that certain land of La Quinta, its Subsidiaries
and Unincorporated Ventures which is held for sale and which is identified on
the Parent Company financial statements as "Land Held for Sale."
"LIEN" means, with respect to any property, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"LONG TERM DEBT" means any obligation which is due one year or more from
the date of creation thereof which under GAAP is shown as a liability, plus
(without duplication) amounts equal to the aggregate net rentals (after making
allowances for any interest, taxes or other expenses included therein) payable
more than one year from the date of creation thereof under Capital Leases.
"MAINTENANCE CAPITAL EXPENDITURES" means, computed on both a Parent Company
basis and a Combined basis, an amount equal to the product of room revenues (as
disclosed in the Parent Company financial statements and the Combined Financial
Statements) of La Quinta, its
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Subsidiaries and Unincorporated Ventures, as appropriate, multiplied by 5%,
calculated for the four consecutive fiscal quarters immediately preceding the
date of such determination.
"MATERIAL ADVERSE EFFECT" shall have the meaning given to such term in the
Credit Agreement.
"MATERIAL AMOUNT" shall have the meaning given to such term in the Credit
Agreement.
"MORTGAGE DEBT" means, with respect to any Person, Debt of such Person
which is secured, directly or indirectly, by a Lien on real property of such
Person, which Debt is incurred solely for the purpose of financing the
acquisition of such real property and incurred at the time of acquisition.
"NET CASH DISTRIBUTIONS" means, for any period for La Quinta and its
Subsidiaries on a Parent Company basis, the lesser of (i) equity of La Quinta in
the aggregate earnings and losses of Unincorporated Ventures and (ii) capital
distributions from Unincorporated Ventures to La Quinta and its Subsidiaries.
"NET CASH PROCEEDS" means the aggregate amount of cash received by La
Quinta on a Parent Company basis in respect of (i) any sale, lease or other
disposition of an asset, less the sum of (a) all fees, commissions and other
expenses incurred in connection with such sale, including the amount (estimated
in good faith by La Quinta) of income, franchise, sales and other applicable
taxes required to be paid by La Quinta in connection with such sale and (b) the
aggregate amount of cash so received which is used to retire any existing Debt
of La Quinta which is required to be repaid in connection with such sale, and
(ii) any payments received in respect of any notes receivable listed on EXHIBIT
B hereto.
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, as determined in accordance with
GAAP.
"NET INTEREST EXPENSE" means, with respect to any Person for any period,
the sum of (i) Interest Expense of such Persons for such period minus (ii)
interest income of such Person for such period.
"NET WORTH" means (i) on a Combined Basis, an amount equal to the sum of
(a) the Capital Stock and additional paid-in-capital plus retained earnings (or
minus accumulated deficit) of La Quinta and its Subsidiaries and (b) Partners'
Capital, less amounts attributable to the extent included, (1) to any write-up
in book value of assets resulting from a revaluation thereof subsequent to
December 31, 1992, (2) to Disqualified Capital Stock, and (3) to treasury stock,
all in accordance with GAAP and (ii) on a Parent Company Basis, an amount equal
to the Capital Stock and additional paid-in-capital plus retained earnings (or
minus accumulated deficit) of La Quinta and its Subsidiaries, less amounts
attributable to the extent included, (a) to any write-up in book value of assets
resulting from a revaluation thereof subsequent to December 31, 1992, (2) to
Disqualified Capital Stock, all in accordance with GAAP and (3) to treasury
stock.
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"OFFICER'S CERTIFICATE" means a certificate signed in the name of La Quinta
by an Authorized Officer.
"OPERATING INCOME" means, with respect to any Person for any period, the
operating income (loss) of such Person, as determined in accordance with GAAP.
"OPERATING LEASE" means any operating lease, as defined in the Financial
Accounting Standard Board Statement of Financial Accounting Standards No. 13,
dated November, 1976 or otherwise in accordance with GAAP.
"PARENT COMPANY" includes, with respect to financial statements and the
calculations of the covenants herein and the definitions related thereto, the
uncombined, consolidated financial statements of La Quinta and its Subsidiaries,
including equity method investments, as defined by GAAP, in Unincorporated
Ventures, and designated "La Quinta Inns, Inc. (Parent Company and Wholly-Owned
Subsidiaries)" on La Quinta's audit report.
"PARTNERS' CAPITAL" means the equity in the net assets of Unincorporated
Ventures of all the partners or venturers (other than La Quinta or a Subsidiary)
of such Unincorporated Ventures, or minority interest holders, as determined in
accordance with GAAP.
"PERMITTED COLLATERAL LIENS" shall mean only those Liens described in
clauses (i), (ii), (iii), (iv), (v), (ix), (x), (xi) and (xii) of the definition
of "Permitted Liens".
"PERMITTED INVESTMENT" means Investments in (i) wholly-owned Subsidiaries
(a) that are subject to the provisions of this Agreement, (b) that concurrently
therewith unconditionally guarantee the performance of La Quinta's obligations
under the Bank Debt and (c) that concurrently deliver to the Banks (1) an
opinion acceptable to the Banks with respect to the validity and enforceability
of such guarantee and (2) such other documents, such as corporate resolutions,
certificates of incumbency, by-laws and articles of incorporation, as the Banks
shall reasonably require, (ii) Investments in any Person other than a wholly-
owned Subsidiary in any one or a series of related transactions with a fair
market value not in excess of $15,000,000, (iii) Investments for the purpose of
satisfying La Quinta's or any Subsidiary's guarantee obligations with respect to
the Debt of any Person in which La Quinta or any Subsidiary owned any interest
and which obligation was in existence as of the Agreement Date, provided, that
any such Investment pursuant to this clause (iii) shall be deducted from the
amount described in clause (ii) of Section 4.3 hereof; (iv) Investments in
Subsidiaries and Unincorporated Ventures made in the ordinary course of
business, consistent with past practices for the purpose of providing for the
day to day operating requirements of such Subsidiary or Unincorporated Venture,
PROVIDED, that such Investments shall (a) not be used for acquisition or
conversion of any inns and (b) be evidenced by a note or other evidence of
indebtedness and (c) not at any time exceed $10,000,000 in aggregate principal
amount, (v) Investments permitted by Sections II.B., II.C. (provided that,
notwithstanding Section II.C.3. of the Investment Policy, Banks shall be
required to have at least $150,000,000 in capital and surplus), II.E. and II.H.
of the Investment Policy, (vi) loans or advances to employees as compensation
for services in the
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ordinary course of business not in excess of $2,000,000 aggregate principal
amount, (vii) Investments in the ordinary course of business, consistent with
past practice, in La Quinta Inns' National Advertising Fund, (viii) Investments
in notes payable by La Quinta Development Partners, L.P., a limited partnership
between La Quinta and AEW Partners, L.P., to the order of La Quinta in an
aggregate principal amount not in excess of $8,000,000 for the purpose of
refinancing three inns which are financed, as of the Agreement Date, by CIGNA
Investments, Inc., provided that La Quinta shall obtain and continue to hold a
perfected first Lien on (subject to Permitted Liens) such three inns, (ix)
Existing Investments, (x) Investments in Capital Stock of Subsidiaries and
Unincorporated Ventures listed on EXHIBIT C hereto for the purpose of acquiring
no less than 100% of the capital stock or partnership interests, as appropriate,
of such Subsidiaries and Unincorporated Ventures, (xi) Investments in notes
payable to La Quinta as a result of the sale of inns in an aggregate principal
amount not in excess of $10,000,000, provided that La Quinta shall obtain and
continue to hold a perfected first Lien (subject to Permitted Liens) in such
inns, and (xii) Investments in any Person if at the time of such Investment La
Quinta (a) designates such Investment as being pursuant to this clause (xii) and
(b) could make a Restricted Payment pursuant to Section 4.3 hereof and the
Investment is not in excess of the amount La Quinta could then pay as a
Restricted Payment. For purposes of the calculation of the amount of any
Investments permitted hereunder, Investments will be calculated at all times at
the amount of the original Investment with no reduction for write-offs or write-
downs. No Investment which is a Permitted Investment other than pursuant to
clause (ii) of the definition of "Permitted Investments" shall reduce the amount
of Investments permitted pursuant to such clause (ii).
"PERMITTED LIENS" shall mean, as applied to any Person:
(i) any Lien in favor of any Bank or a trustee on its behalf to
secure the Bank Debt;
(ii) (a) Liens on real estate for real estate taxes not yet
delinquent, (b) Liens created by lease agreements to secure the payments of
rental amounts and other sums not yet due thereunder, (c) Liens on leasehold
interests created by the lessor in favor of any mortgagee of the leased
premises, and (d) Liens for taxes, assessments, governmental charges, levies or
claims that are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on such
Person's books, but only so long as no foreclosure, restraint, sale or similar
proceedings have been commenced with respect thereto;
(iii) Liens of carriers, warehousemen, mechanics, laborers and
materialmen and other similar Liens incurred in the ordinary course of business
for sums not yet due or being contested in good faith, if such reserve or
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor;
(iv) Liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or similar legislation;
8
(v) Easements, rights-of-way, restrictions and other similar
encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person;
(vi) Liens created to secure the purchase price of fixed assets
acquired by such Person, which is incurred solely for the purpose of financing
the acquisition of such assets and incurred at the time of acquisition, so long
as each such Lien shall at all times be confined solely to the asset or assets
so acquired (and proceeds thereof), and refinancings thereof so long as any such
Lien remains solely on the asset or assets acquired and the amount of Debt
related thereto is not increased;
(vii) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (a) such Person shall have established adequate reserves for such
judgments or awards, (b) such judgments or awards shall be fully insured and the
insurer shall not have denied coverage, or (c) such judgments or awards shall
have been bonded to the satisfaction of the Banks;
(viii) Any Liens existing on the Agreement Date which are described on
EXHIBIT D hereto, and Liens resulting from the refinancing of the related Debt,
provided that the Debt secured thereby shall not be increased and the Liens
shall not cover additional assets of the Borrower;
(ix) any obligations or duties, affecting any property, to any
municipality or public authority with respect to any franchise, grant, license
or permit which do not materially impair the use of any material property for
the purposes for which such property is held by such Person;
(x) zoning laws or ordinances and municipal regulations which do not
materially impair the use of any material property for the purposes for which
such property is held by such Person;
(xi) Liens, minor irregularities in or deficiencies of title on any
property which do not materially impair the use of any material property for the
purposes for which such property is held by such Person; and
(xii) Liens otherwise permitted or contemplated by the Loan Papers.
"PERSON" means and includes an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, and a government or any
department, tribunal, agency or political subdivision thereof.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor to
all or any of the Pension Benefit Guaranty Corporation's functions under ERISA.
9
"PLAN" means any plan subject to Title IV of ERISA and maintained by La
Quinta or any Subsidiary, or any such plan to which La Quinta or any Subsidiary
or any Unincorporated Venture is required to contribute on behalf of all or any
of its employees; PROVIDED, HOWEVER, "Plan" shall not include those agreements
with former employees described on Schedule 7 of the Credit Agreement, the
obligations pursuant to which do not exceed $450,000 in aggregate amount.
"PURCHASE MONEY DEBT" means, with respect to any Person, Debt of such
Person which is secured, directly or indirectly, by a Lien on fixed assets of
such Person, which Debt is secured solely for the purpose of financing the
acquisition of such fixed assets and incurred at the time of acquisition.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of La Quinta that is not
Disqualified Capital Stock.
"REPORTABLE EVENT" shall have the meaning specified in Title IV of ERISA.
"RESTRICTED PAYMENT" means, with respect to La Quinta, (i) any dividend or
other distribution on shares of Capital Stock of La Quinta, (ii) any payment
(including, without limitation, the setting aside of assets or the deposit of
funds therefor) on account of the purchase, redemption or other acquisition or
retirement for value of (y) any shares of Capital Stock of La Quinta or (z) any
option, warrant or other right to acquire shares of such Capital Stock,
(iii) any payment or prepayment of principal, premium or penalty on any
Subordinated Debt or any defeasance, redemption, repurchase or other acquisition
or retirement for value, in whole or in part, of any Subordinated Debt of La
Quinta (including, without limitation, the setting aside of assets or the
deposit of funds therefor), (iv) any prepayment of interest on any Subordinated
Debt, and (v) a Permitted Investment pursuant to clause (xii) of the definition
of "Permitted Investments"; provided, however, that the term "Restricted
Payment" does not include (i) any dividend, distribution or other payment on
shares of Capital Stock of La Quinta solely in shares of Qualified Capital
Stock, or (ii) any defeasance, redemption, repurchase or other acquisition or
retirement for value, in whole or in part, of any Subordinated Debt of La Quinta
payable solely in shares of Qualified Capital Stock or Subordinated Debt of La
Quinta.
"S.E.C." means the United States Securities and Exchange Commission.
"SENIOR DEBT" means Total Debt of La Quinta, its Subsidiaries and
Unincorporated Ventures, as appropriate, other than (i) Subordinated Debt and
(ii) the aggregate face amount of Bond Letters of Credit outstanding.
"SENIOR DEBT TO CAPITALIZATION RATIO" means, at any time, determined in
accordance with GAAP and computed on both on a Parent Company basis and a
Combined basis with respect to La Quinta, its Subsidiaries and Unincorporated
Ventures, as appropriate, the ratio of (i) Senior Debt to (ii) the sum of (a)
Senior Debt, plus (b) Subordinated Debt, plus (c) Net Worth.
10
"SENIOR SECURED DEBT" means, at any time, determined in accordance with
GAAP and computed on both a Parent Company basis and a Combined basis, Senior
Debt of La Quinta, its Subsidiaries and Unincorporated Ventures (other than the
aggregate outstanding principal amounts of the Term Loan Notes and the Revolving
Credit Notes), as appropriate, which is secured, directly or indirectly, by a
Lien.
"SENIOR SUBORDINATED NOTE" shall have the meaning given to such term in the
Credit Agreement.
"SIGNIFICANT INVESTMENTS" means those investments of La Quinta in the joint
ventures or partnerships set forth on EXHIBIT G hereto.
"SUBORDINATED DEBT" means any debt, obligation or liability (whether
primary, contingent or otherwise) of La Quinta, a Subsidiary or an
Unincorporated Venture which by its terms is subordinate in right of payment to
the Bank Debt, provided that the Banks approve the terms thereof prior to or at
the time of the issuance thereof.
"SUBSIDIARY" with respect to any Person, means a corporation at least a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person,
by such Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person.
"SUBSIDIARY GUARANTY" shall have the meaning given to such term in the
Credit Agreement.
"TOTAL DEBT" means, with respect to any Person, determined on a Parent
Company or Combined basis, as appropriate, the sum, without duplication, of
(a) all Debt of such Person minus (b) all Debt of such Person of the type
described in (1) clauses (vi) and (vii) of the definition of "Debt" herein which
are set forth in EXHIBIT E hereto and (2) clauses (viii) and (ix) of the
definition of "Debt" herein, but excluding the aggregate face amount of all
outstanding Letters of Credit and Bond Letters of Credit (as each term is
defined in the Credit Agreement).
"TRIBUNAL" means any state, commonwealth, federal, foreign territorial, or
other court or governmental department, commission, board, bureau, agency or
instrumentality.
"UNINCORPORATED VENTURE" means any Person (other than a corporation) in
which La Quinta or a Subsidiary (i) has, directly or indirectly, an ownership
interest of at least 40% but less than 100% and (ii) exercises legal, financial
and operational control, and which is combined in La Quinta's Combined Financial
Statements.
"WEIGHTED AVERAGE LIFE OF MATURITY" means, as of the date of determination,
with respect to any security or instrument, the quotient obtained by dividing
(i) the sum of the products of the numbers of years from the date of
determination to the dates of each successive
11
scheduled principal payment of such debt instrument multiplied by the amount of
such principal payment by (ii) the sum of all such principal payments.
SECTION 4. BUSINESS COVENANTS OF LA QUINTA.
4.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING PRACTICES, CORPORATE
EXISTENCE. La Quinta covenants and agrees to, and will cause each Subsidiary
and Unincorporated Venture to:
(A) Maintain its material property in good condition and make all
necessary renewals, replacements, additions, betterments and improvements
thereto, consistent with sound business practice and as is customary in the case
of corporations or other entities of established reputation engaged in the same
or a similar business and similarly situated;
(B) Maintain, with financially sound and reputable insurers, or through
its own program of self-insurance, insurance with respect to its material
properties and business against such casualties and contingencies, of such
types, and in such amounts as is customary in the case of corporations or other
entities of established reputation engaged in the same or a similar business and
similarly situated;
(C) Keep books of record and accounts in which entries will be made of all
of its business transactions, and will reflect in it financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP;
(D) Do or cause to be done all things necessary to preserve and keep in
full force and effect its material rights;
(E) Do or cause to be done all things necessary to preserve and keep in
full force and effect its existence (except as may be specifically permitted by
this Agreement); and
(F) Cause to be paid and discharged all lawful taxes assessments and
governmental charges imposed from the income or profits of La Quinta, its
Subsidiaries and Unincorporated Ventures or upon any property belonging to La
Quinta, any Subsidiary or any Unincorporated Venture and (ii) all lawful claims,
whether for labor, materials, supplies, services or anything else, which have
become due and payable and which by law have or may become a Lien upon the
property of La Quinta or any of its Subsidiaries; or Unincorporated Ventures;
PROVIDED, HOWEVER, that La Quinta, its Subsidiaries and Unincorporated Ventures
shall not be required to cause to be paid or discharged any such tax assessment,
charge or claim so long as the amount, applicability or validity thereof shall
be contested in good faith by appropriate proceedings, and adequate book
reserves shall have been established to the extent required by GAAP with respect
thereto.
4.2 INSPECTION OF PROPERTIES AND BOOKS. La Quinta covenants and agrees
that it will permit, and will cause each Subsidiary and Unincorporated Venture
to permit, any Bank, upon
12
(i) reasonable request, if such request is prior to the occurrence of a Default
or an Event of Default or (ii) request, if such request is after the occurrence
of a Default or an Event of Default, to any Authorized Officer, to visit and
inspect any of the properties of, to examine the books of account and records of
La Quinta, any Subsidiary or Unincorporated Venture and to take extracts
therefrom and to discuss the affairs, finances or accounts of La Quinta, any
Subsidiary or Unincorporated Venture, and to be advised as to the same by the
officers of La Quinta, at all such times during normal business hours, in such
detail and through such agents and representatives as such Bank may reasonably
desire.
4.3 RESTRICTED PAYMENTS. La Quinta covenants and agrees that it will not,
directly or indirectly, make any Restricted Payment, if, after giving effect
thereto on a pro forma basis, (i) a breach of any covenant hereunder (or event
or condition that, after notice or lapse of time or both, would result in a
breach of any covenant hereunder) would occur and be continuing, or (ii) the
aggregate amount of all Restricted Payments made by La Quinta, including such
proposed Restricted Payment (if not made in cash, then the fair market value of
any property used therefor, as determined in good faith by the Board of
Directors), from and after the Agreement Date, shall exceed the greater of (a)
$15,000,000 or (b) an amount equal to the sum of (1) 50% of Net Income of La
Quinta and its Subsidiaries on a Combined Basis accrued from January 1, 1994 to
and including the last day of the first fiscal quarter ended immediately prior
to the date of each calculation (or, in the event Net Income is deficit, then
minus 100% of such deficit), minus 100% of the amount of any write-downs, write-
offs, other negative evaluations and other negative extraordinary charges not
otherwise reflected in Net Income during such period, minus (2) the aggregate
amount of Permitted Investments made pursuant to clause (xii) of the definition
of Permitted Investments, plus (3) the aggregate Net Cash Proceeds received by
La Quinta during each fiscal year from the issuance or sale during such same
fiscal year (other than to a Subsidiary or an Unincorporated Venture) of its
Qualified Capital Stock from and after the Agreement Date, less the aggregate
amount of such Net Cash Proceeds designated for additional Capital Expenditures
pursuant to Section 4.13 hereof.
4.4 MERGER AND SALE OF ASSETS. (A) La Quinta covenants and agrees that it
will not, and will cause each Subsidiary and Unincorporated Venture to not,
directly or indirectly sell, transfer or otherwise dispose of any of its assets
(whether now owned or hereafter acquired, and including any interest in a joint
venture or partnership) except (i) sales of inventory or equipment in the
ordinary course of business, (ii) sales or disposition of assets (including the
sale or disposition of any ownership interest in a joint venture or partnership
but excluding the sale of inns otherwise permitted to be sold or disposed of
pursuant to clause (iii) immediately succeeding), during any fiscal year in an
aggregate amount for La Quinta, its Subsidiaries and Unincorporated Ventures
combined not to exceed $10,000,000 (determined at the greater of book or fair
market value), (iii) for La Quinta, its Subsidiaries and Unincorporated
Ventures combined, sales of no more than six (6) inns during each fiscal year,
(iv) sales or dispositions by La Quinta, its Subsidiaries or Unincorporated
Ventures of assets (including interests in partnerships and joint ventures)
pursuant to buy-sell rights contained in written agreements in existence on the
date of this Agreement in respect of any Significant Investments, and
(v) Existing Investments; and
13
(B) La Quinta covenants and agrees that it will not, and will cause each
Subsidiary and Unincorporated Venture to not, merge into or consolidate with any
other Person; provided, however, if after giving effect to any such merger or
consolidation, (i) the business of La Quinta or any Subsidiary or Unincorporated
Venture, as appropriate, will not be materially changed and (ii) La Quinta or
any Subsidiary or Unincorporated Venture, as appropriate, will not be in default
in respect of any of the covenants contained in any material agreement,
including, without limitation, this Agreement, to which La Quinta or any
Subsidiary or Unincorporated Venture is a party or by which its property may be
bound,
(1) Any corporation, partnership or joint venture may merge or consolidate
with La Quinta, provided that La Quinta shall be the continuing and surviving
corporation,
(2) Any Subsidiary may merge with or consolidate with any corporation,
partnership or joint venture, provided that, unless such merger or consolidation
shall be with La Quinta, such Subsidiary shall be the continuing and surviving
corporation, and
(3) Any Unincorporated Venture may merge with or consolidate with any
corporation, partnership or joint venture, provided that, unless such merger or
consolidation shall be with La Quinta or a Subsidiary, such Unincorporated
Venture shall be the continuing and surviving person.
4.5 SENIOR DEBT TO CAPITALIZATION RATIO. La Quinta covenants and agrees
that the Senior Debt to Capitalization Ratio, on both a Parent Company basis and
a Combined basis, shall not be greater than (i) 0.55 to 1 at the end of any
fiscal quarter during the period from and including March 31, 1994 through and
including September 30, 1995 and (ii) .50 to 1 at the end of any fiscal quarter
thereafter.
4.6 CONTINGENT LIABILITIES. La Quinta covenants and agrees that it will
not, and will cause each Subsidiary and Unincorporated Venture to not,
guarantee, endorse, contingently agree to purchase, or otherwise become liable,
directly or indirectly, upon the obligation of or in connection with the
earnings, the assets, the stock, or the dividends of any other Person (other
than La Quinta or any Subsidiary), including obligations of La Quinta, each
Subsidiary and Unincorporated Venture arising solely by virtue of any of them
being a general partner or venturer of any Unincorporated Venture, except (i)
the obligations in respect of the written agreements described in Section
4.4(iv) hereof, (ii) the guarantees and other contingent obligations set forth
on EXHIBIT E hereto, (iii) endorsements in the ordinary course of business of
negotiable instruments for deposit or collection, (iv) guarantees of loans to
any employee; PROVIDED, THAT any such guaranty of an employee loan shall not
exceed the amount of $100,000 per employee, and the amount of such guaranties of
employee loans, together with the amount of Investments permitted pursuant to
clause (vi) of the definition of "Permitted Investments," shall not exceed, in
the aggregate, more than $2,000,000, and (v) guarantees and contingent
obligations incurred after the date of this Agreement not to exceed $1,000,000
in aggregate principal amount.
14
4.7 INCURRENCE AND RETENTION OF DEBT. La Quinta covenants and agrees that
it will not, and will cause each Subsidiary and Unincorporated Venture to not,
incur, create, assume, or suffer to exist any Debt (other than Debt existing on
the Agreement Date) unless, immediately prior to, and after the incurrence of,
such Debt, La Quinta, its Subsidiaries and Unincorporated Ventures are and will
be in compliance with all covenants hereunder.
4.8 INVESTMENTS. La Quinta will not, and will cause each Subsidiary and
Unincorporated Venture to not, make or permit to remain any Investment other
than a Permitted Investment.
4.9 NOTICE OF LITIGATION. La Quinta covenants and agrees that it will,
and will cause each Subsidiary and Unincorporated Venture to, promptly give
notice in writing to its Banks (i) of any litigation to which La Quinta, any
Subsidiary or Unincorporated Venture becomes a party, if (A) the amount in
controversy exceeds $500,000 and (B) La Quinta's insurance carrier does not
acknowledge coverage with respect to such litigation, and (ii) of all
proceedings before any governmental or regulatory agencies (A) affecting or
potentially affecting the business or property of La Quinta, any Subsidiary or
Unincorporated Venture in an amount in excess of $500,000 or (B) materially
affecting the ability of La Quinta, any Subsidiary or Unincorporated Venture to
perform their respective covenants and obligations hereunder or under any Bank
Debt.
4.10 TOTAL DEBT RATIO. La Quinta covenants and agrees that it will not
allow, on a Parent Company basis, the ratio of (i) Total Debt to Adjusted EBITDA
minus Maintenance Capital Expenditures, in each case for the four consecutive
fiscal quarters immediately preceding the date of determination, to be greater
than (a) 5.25 to 1 at the end of any fiscal quarter through and including
September 30, 1994, (b) 5.00 to 1 at the end of any fiscal quarter during the
period from and including December 31, 1994 through and including September 30,
1995 and (c) 4.50 to 1 at the end of any fiscal quarter thereafter. La Quinta
covenants and agrees that it will not allow, on a Combined basis, the ratio of
(i) Total Debt to (ii) EBITDA minus Maintenance Capital Expenditures, in each
case for the four consecutive fiscal quarters immediately preceding the date of
determination, to be greater than (a) 4.75 to 1 at the end of any fiscal quarter
through and including December 31, 1994 and (b) 4.50 to 1 at the end of any
fiscal quarter thereafter. For purposes of this Section 4.10, with respect to
assets not owned at all times during the four consecutive quarters immediately
preceding the date of determination of EBITDA, there shall be (i) included in
EBITDA (without duplication) the EBITDA of any assets acquired during any such
four consecutive fiscal quarters immediately preceding the date of determination
and (ii) excluded from EBITDA the EBITDA of any asset disposed of during any
such four consecutive fiscal quarters immediately preceding the date of
determination.
4.11 CASH FLOW RATIO. La Quinta covenants and agrees that it will not
allow, on both a Parent Company basis and a Combined basis, the ratio of
(i) (a) Adjusted EBITDA (on a Parent Company basis) or EBITDA (on a Combined
basis), plus (b) lease expense pursuant to Operating Leases, minus
(c) Maintenance Capital Expenditures to (ii) (a) Net Interest, plus (b) lease
expense pursuant to Operating Leases, plus (c) Current Maturities (provided that
there
15
shall be excluded from the determination of Current Maturities for the purpose
of this Section 4.11 and only for the fiscal quarters up to but not including
the fiscal quarter ending June 30, 1994 or any fiscal quarter thereafter
$65,878,000 of the Debt owed by La Quinta Motor Inns Limited Partnership to
AEtna Life Insurance Company), in each case other than Current Maturities
(which, with respect to Current Maturities, shall be for the four consecutive
fiscal quarters immediately succeeding the date of determination) for the four
consecutive fiscal quarters immediately preceding the date of determination, to
be less than (y) 1.35 to 1 at the end of any fiscal quarter prior to and
including September 30, 1995 and (z) 1.50 to 1 at the end of any fiscal quarter
thereafter.
4.12 FIXED CHARGE COVERAGE RATIO. La Quinta covenants and agrees that it
will not allow, on both a Parent Company basis and a Combined basis, the ratio
of EBIT to Net Interest Expense, in each case for the four consecutive fiscal
quarters immediately preceding the date of determination, to be less than
(i) 1.90 to 1 at the end of any fiscal quarter through and including
December 31, 1994, (ii) 2.25 to 1 at the end of any fiscal quarter during the
period from and including March 31, 1995 through and including December 31, 1995
and (iii) 2.50 to 1 at the end of any fiscal quarter thereafter.
4.13 CAPITAL EXPENDITURES. La Quinta covenants and agrees that it will not
make, and will not permit any of its Subsidiaries or Unincorporated Ventures
(excluding La Quinta Development Partners, L.P.), directly or indirectly, any
Capital Expenditures in an aggregate amount in excess of (i) for 1993, the sum
of (a) an amount equal to the product of inn revenues (as disclosed in the
Combined financial statements, but excluding revenues from La Quinta Development
Partners, L.P.) for 1992 multiplied by 5%, plus (b) $45,000,00 plus (c) Mortgage
Debt created in 1993, plus (d) Purchase Money Debt created in 1993, plus
(e) Subordinated Debt created in 1993, other than the Senior Subordinated Notes,
plus (f) Net Cash Proceeds received during 1993 from the disposition of assets
and the collection of notes receivable in existence on the Agreement Date, plus
(g) Net Cash Proceeds received during 1993 from the sale of Qualified Capital
Stock (provided that such proceeds are designated in writing to the Banks within
30 days from the date of any sale of such Qualified Capital Stock as an addition
to the Capital Expenditure limitation set forth in this Section 4.13), (ii) for
1994, the sum of (a) an amount equal to the product of inn revenues (as
disclosed in the Combined financial statements, but excluding revenues from La
Quinta Development Partners, L.P.) for 1993 multiplied by 5% plus
(b) $45,000,000 minus the amount that the aggregate amount of Capital
Expenditures made in 1993 exceeded the aggregate amount of Capital Expenditures
permitted to be made or accrued in 1993 pursuant to subclauses (a), (c), (d),
(e), (f) and (g) of clause (i) above, plus (c) Mortgage Debt created in 1994,
plus (d) Purchase Money Debt created in 1994, plus (e) Subordinated Debt created
in 1994, plus (f) Net Cash Proceeds received during 1994 from the disposition of
assets and the collection of notes receivable in existence on the Agreement
Date, plus (g) Net Cash Proceeds received during 1994 from the sale of Qualified
Capital Stock (provided that such proceeds are designated in writing to the
Banks within 30 days from the date of any sale of such Qualified Capital Stock
as an addition to the Capital Expenditure limitation set forth in this Section
4.13), plus (h) the unused portion of the Revolving Credit Commitment (as
defined in the Credit Agreement) as of December 31, 1993, and (iii) for each
fiscal year
16
thereafter, the sum of (a) an amount equal to the product of inn revenues (as
disclosed in the Combined financial statements, but excluding revenues from La
Quinta Development Partners, L.P.) for the immediately preceding fiscal year
multiplied by 5%, plus (b) 85% of Adjusted Cash Flow for the immediately
preceding fiscal year, plus (c) Mortgage Debt created in such year, plus (d)
Purchase Money Debt created in such year, plus (e) Subordinated Debt created in
such year, plus (f) Net Cash Proceeds received during such year, plus (g) Net
Cash Proceeds received during such year from the sale of Qualified Capital Stock
(provided that such proceeds are designated in writing by La Quinta to the Banks
within 30 days from the date of any sale of such Qualified Capital Stock as an
addition to Capital Expenditure limitation set forth in this Section 4.13), plus
(h) the unused portion of the Revolving Credit Commitment (as defined in the
Credit Agreement) as of the prior fiscal year-end; provided, however, there
shall not be included as Capital Expenditures for purposes of this Section 4.13
any assets of La Quinta Motor Inns Limited Partnership or of any Subsidiaries or
Unincorporated Ventures listed on EXHIBIT C hereto and acquired as permitted
pursuant to clause (x) of the definition of Permitted Investments.
4.14 OPERATING LEASES. La Quinta covenants and agrees that it will not,
make or accrue, and will not permit any of its Subsidiaries or Unincorporated
Ventures to make or accrue, directly or indirectly, payments with respect to
Operating Leases in the aggregate in any one fiscal year in excess of
$8,000,000.
4.15 LAND HELD FOR DEVELOPMENT AND LAND HELD FOR SALE. La Quinta covenants
and agrees that it will not allow Land Held for Development and Land Held for
Sale to exceed $10,000,000 in the aggregate at any time, calculated at all times
(i) with respect to Land Held for Development and Land Held for Sale as of the
date hereof, at current book value as of the date hereof with no reduction for
write-downs, write-offs or losses in disposition after the date hereof, and
(ii) with respect to Land Held for Development and Land Held for Sale which is
acquired after the date hereof, at original cost with no reduction for write-
downs, write-offs or losses in disposition.
4.16 LIENS. La Quinta covenants and agrees that it will not create, assume
or suffer to exist, or permit any Subsidiary or Unincorporated Venture to
create, assume or suffer to exist, any Lien on any asset now owned or hereafter
acquired by it except (i) Permitted Liens and (ii) other Liens, provided that
after giving effect to any such other Lien the ratio of (a) Senior Secured Debt
to (b) the sum of (1) Senior Debt, plus (2) Subordinated Debt, plus (3) Net
Worth does not exceed .50 to 1, incurred to secure Debt which has a Weighted
Average Life to Maturity of at least five years and which is in an amount at
least equal to 50% of the value of the property (such value to be determined by
the Banks using a common method of valuation for such property) subject to such
Lien.
4.17 ACCOUNTING CHANGES. La Quinta covenants and agrees that it will not,
and will not permit an of its Subsidiaries or Unincorporated Ventures to, make
any change in its accounting treatment or financial reporting practices, except
as permitted or required by GAAP
17
in effect from time to time. La Quinta will not change its fiscal year or the
calculation of its fiscal quarter ends.
4.18 AMENDMENT AND MODIFICATION OF SUBORDINATED DEBT DOCUMENTS. La Quinta
covenants and agrees that it will not, and it will not permit any Subsidiary or
Unincorporated Venture to, directly or indirectly, amend, modify, supplement,
waive compliance with, or assent to noncompliance with, any term, provision or
condition of any of the documents governing or evidencing the Subordinated Debt,
which (i) the Banks deem material (including, without limitation, relating to
events of default, acceleration rights, interest rates, tenor, maturity date,
subordination, covenants, prohibition against amending any documents related to
the Bank Debt and definitions with respect thereto (including, without
limitation, the definition of "Senior Debt")) or (ii) places any further
restrictions on La Quinta, its Subsidiaries or Unincorporated Ventures or
increases the obligations of La Quinta, its Subsidiaries or Unincorporated
Ventures thereunder or confers on the holders thereof any additional rights.
4.19 LEASE-BACKS. La Quinta covenants and agrees that it will not, and
will not permit any Subsidiary or Unincorporated Venture to, enter into any
arrangements, directly or indirectly, with any Person, whereby La Quinta, any
Subsidiary or Unincorporated Venture shall sell or transfer any property,
whether now owned or hereafter acquired, used or useful in its business, in
connection with the rental or lease of the property so sold or transferred.
4.20 ENVIRONMENTAL MATTERS. (a) La Quinta covenants and agrees that it
will not, and will not permit any of its Subsidiaries or Unincorporated Ventures
to, use, generate, manufacture, produce, store, release, discharge or dispose of
on, under or about any real property owned or leased by La Quinta or any of its
Subsidiaries or Unincorporated Ventures (such owned or leased real property, the
"PROPERTY"), or transport to or from the Property, any Hazardous Substance (as
defined below), or (to the extent within La Quinta's or such Subsidiary's or
Unincorporated Venture's control) permit any other Person to do so, where such
could reasonably be expected to have a Material Adverse Effect.
(b) La Quinta shall keep and maintain and shall cause each Subsidiary and
Unincorporated Venture to keep and maintain, the Property in compliance with any
Environmental Law (as defined below) where the failure to do so could reasonably
be expected to have a Material Adverse Effect.
(c) In the event that any investigation, site monitoring, containment,
cleanup, removal, restoration or other remedial work of any kind or nature (the
"REMEDIAL WORK") with respect to the Property is required to be performed by La
Quinta or any of its Subsidiaries or Unincorporated Ventures under any
applicable local, state or federal law or regulation, any judicial order, or by
any governmental entity because of, or in connection with, the current or future
presence, suspected presence, release or suspected release of a Hazardous
Substance in or into the air, soil, groundwater or surface water at, on, under
or within the Property (or any portion thereof), La Quinta or such Subsidiary or
Unincorporated Venture shall within thirty (30) days after written demand for
performance thereof by the Banks (or such shorter period of time
18
as may be required under any applicable law, regulation, order or agreement),
commence and thereafter diligently prosecute to completion, all such Remedial
Work.
(d) La Quinta will defend, indemnify and hold harmless the Banks, and
their respective employees, agents, officers and directors, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to the violation of, noncompliance with
or liability under any Environmental Law applicable to the operations of La
Quinta or any Subsidiary or Unincorporated Venture or the Property, or any
orders, requirements or demands of Tribunal related thereto, including, without
limitation, attorneys' and consultants' fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the extent that
any of the foregoing arise out of the gross negligence or willful misconduct of
the party seeking indemnification therefor. This indemnity shall continue in
full force and effect regardless of the termination of this Agreement.
(e) As used herein, (i) "ENVIRONMENTAL LAW" means any federal, state or
local law, statute, ordinance, or regulation now or hereafter in effect
pertaining to health, industrial hygiene, or the environmental conditions on,
under or about the Property, and (ii) the term "HAZARDOUS SUBSTANCE" means those
substances included within the definitions of "HAZARDOUS SUBSTANCES", "HAZARDOUS
MATERIALS", "TOXIC SUBSTANCES", or "SOLID WASTE" under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section Section 9601 ET SEQ., the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. Section Section 6901 ET SEQ. and the Hazardous Materials
Transportation Act, 49 U.S.C. Section Section 1801 ET SEQ., and in the
regulations promulgated pursuant to said laws, and such other substances,
materials and wastes which are or become regulated under applicable local, state
or federal law, or which are classified as hazardous or toxic under federal,
state, or local laws or regulations.
4.21 ERISA COMPLIANCE. La Quinta covenants and agrees that it shall, and
shall cause each Subsidiary and Unincorporated Venture to (i) at all times, make
prompt payment of all contributions required under all Plans and required to
meet the minimum funding standard set forth in ERISA with respect to its Plans,
(ii) after the discovery by an Authorized Officer, notify Banks immediately of
any fact, including, but not limited to, any Reportable Event arising in
connection with any of its Plans, which might constitute grounds for termination
thereof by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such Plan, together with a statement,
if requested by any Bank, as to the reason therefor and the action, if any,
proposed to be taken with respect thereto, and (iii) not permit any Plan to be
subject to any involuntary termination proceedings.
4.22 BUSINESS. La Quinta covenants and agrees that it will not, and will
not permit any Subsidiary or Unincorporated Venture to, engage in, directly or
through other Persons, any business other than the businesses now carried on and
other businesses directly related thereto.
4.23 Debt. La Quinta covenants and agrees that it will not, and will cause
each Subsidiary and Unincorporated Venture to not, (i) default, beyond any
notice, grace or cure
19
period, in any payment equal to or exceeding the aggregate amount of $1,000,000
of principal of or interest on any Debt with respect to which recourse may be
made against La Quinta or any Subsidiary or Unincorporated Venture beyond any
period of grace provided with respect thereto, or (ii) default, beyond any
notice, grace or cure period, in the performance of any other agreement, term,
covenant or condition contained in any agreement or instrument under or by which
any such Debt, the unpaid principal amount of which then equals or exceeds
$1,000,000 is created, evidenced or secured if the effect of such default is to
cause such Debt to become due before its stated maturity.
4.24 BANK DEBT. La Quinta covenants and agrees that it will not, and will
cause each Subsidiary to not, (i) default in any payment of principal of or
interest on any Bank Debt beyond any grace period with respect thereto, or (ii)
default, beyond any notice, grace or cure period, in the performance of any
other covenant or agreement contained in any Bank Debt or made by La Quinta
under or in connection with any Bank Debt, if the effect of such default is to
cause such Bank Debt to become due before its stated maturity.
4.25 TRANSACTIONS WITH AFFILIATES. La Quinta covenants and agrees that it
will not, and will not permit any Subsidiary or Unincorporated Venture to,
directly or indirectly, enter into any transaction (including, but not limited
to, the sale or exchange of property or the rendering of service) with any of
its Affiliates, other than in the ordinary course of business and upon fair and
reasonable terms no less favorable than La Quinta or any Subsidiary or
Unincorporated Venture could obtain or could become entitled to in an arm's-
length transaction with a Person which was not an Affiliate.
SECTION 5. INFORMATION AS TO LA QUINTA.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY LA QUINTA. La Quinta will
deliver to each Bank which has Bank Debt:
(A) As soon as practicable after the end of each of the first three
quarterly fiscal periods in each fiscal year of La Quinta, and in any
event within 45 days thereafter with respect to Combined financial
statements and within 60 days thereafter with respect to Parent
Company financial statements, duplicate copies of
(1) Combined and Parent Company balance sheets, statements of
earnings, shareholders' equity and cash flows for the portion of
the fiscal year ending with such quarter; all in reasonable
detail and accompanied by an Officer's Certificate certifying
that the aforementioned financial statements present fairly the
financial position of La Quinta (Combined and Parent Company) at
the end of such quarter and the results of operations and the
changes in financial position for the portion of the fiscal year
ending with such quarter, determined in accordance with GAAP;
20
(2) An Officer's Certificate certifying to the amount of Bank Debt
outstanding at the end of the fiscal quarter identified on an
EXHIBIT A attached thereto, which for the purpose of this
Agreement shall become EXHIBIT A hereto; and
(3) An Officer's Certificate (with calculations and a new EXHIBIT E
attached thereto) certifying (i) as to any increases or
reductions in interest in the Significant Investments, and (ii)
compliance with Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.10, 4.11,
4.12, 4.13, 4.14, 4.15 and 4.16.
(B) As soon as practicable after the end of each fiscal year of La Quinta,
and in any event within 120 days thereafter, duplicate copies of:
(1) Combined and Parent Company balance sheets, statements of
earnings, shareholders' equity and cash flows of La Quinta for
such year; all in reasonable detail, prepared on a basis
consistent with the financial statements delivered to all Banks
in prior periods and accompanied by an unqualified opinion and
report of KPMG Peat Marwick, or other independent certified
accountants of recognized standing selected by La Quinta and
reasonably consented to by Banks, which report with respect to
the Parent Company financial statements shall state that no
default under this Agreement and no condition or event which
after notice or lapse of time or both would constitute a default
under this Agreement has come to the knowledge of such
accountants or, if such is not the case, the details of such
default or such condition or event;
(2) Operating statements for such year and the preceding four years
with respect to all properties pledged to any Bank to secure Bank
Debt;
(3) An Officer's Certificate certifying to the amount of Bank Debt
outstanding at the last day of such year identified on an EXHIBIT
A attached thereto, which for the purpose of this Agreement shall
become EXHIBIT A hereto; and
(4) An Officer's Certificate (with calculations and a new EXHIBIT E
attached thereto) certifying (i) as to any increases or
reductions in interest in the Significant Investments, and (i)
compliance with Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.10, 4.11,
4.12, 4.13, 4.14, 4.15 and 4.16.
(C) As soon as practicable after La Quinta or any Subsidiary files with
the S.E.C. any of the following documents and in any event within 10
days thereafter, a copy of:
(1) Any final Registration Statement filed for the registration of
any securities under the Securities Act of 1933, as amended
(except a Registration
21
Statement on Form S-8 for the registration of stock to be issued
in connection with any Stock Plan);
(2) Each Annual and Periodic Report filed under Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended;
(3) Each definitive Proxy Statement filed pursuant to the Securities
Exchange Act of 1934, as amended; and
together with any other document filed with the S.E.C. or the New York
Stock Exchange, Inc., as may be requested by any Bank.
(D) Upon request by any Bank, copies of the following:
(1) Each annual report/return, as well as all schedules and
attachments required to be filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the
regulations promulgated thereunder, in connection with each of
its Plans for each Plan year; and
(2) Such additional information concerning any of its Plans as may be
reasonably requested.
(E) Notice to each Bank which has Bank Debt that any warranty or
representation made by La Quinta contained in any instrument or
document delivered pursuant to the Bank Debt shall have been incorrect
in any material respect when made not later than one business day
after the discovery or awareness thereof by an Authorized Officer.
(F) Promptly, notice to each Bank which has Bank Debt of the breach of any
covenant contained in Section 4.23 hereof.
(G) With reasonable promptness, such other data and information as from
time to time may be reasonably requested by any Bank.
5.2 OFFICER'S CERTIFICATE. Each set of financial statements delivered
pursuant to Subsection 5.1 (A) and (B) shall be accompanied by an Officer's
Certificate stating whether there exists on the date of such certificate any
condition or event which then constitutes, or which after notice or lapse of
time or both, would constitute, a breach of any covenant herein, and if any such
condition or event then exists, specifying the nature and period of existence
thereof and the action La Quinta is taking or proposes to take with respect
thereto.
22
SECTION 6. DEFAULT.
La Quinta hereby covenants, acknowledges and agrees that the failure of La
Quinta, any Subsidiary or Unincorporated Venture to perform or observe (i) any
covenant contained in Sections 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.10, 4.11, 4.12,
4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.23, 4.24 or 4.25 of this Agreement
or (ii) any covenant contained in Sections 4.1, 4.2, 4.9, 4.20, 4.21 or 4.22 of
this Agreement and such default continues for 10 days after either (A) the
failure to perform or observe any such covenant has become known to an
Authorized Officer or (B) written notice thereof shall have been given by any
Bank to La Quinta or (iii) any other covenant contained in this Agreement to be
performed or observed by it and such failure continues for a period of 30 days
after any Bank has given written notice specifying such failure to La Quinta,
shall be deemed, subject to the waiver provisions of Section 7.2 hereof, to be a
default or event of default (however designated) under any Bank Debt,
notwithstanding the specific enumeration of the specific defaults or events of
default with respect to such Bank Debt, and any Bank may perform all rights and
remedies granted such Bank under the Bank Debt owing to such as if a default or
event of default specifically enumerated in such Bank Debt had occurred. La
Quinta further acknowledges and agrees that the covenants set forth in this
Agreement and the effect of the failure to perform such covenants as set forth
in this Section 6 shall be deemed to be incorporated by reference in such Bank
Debt, MUTATIS MUTANDIS. The grace periods provided for in this Section 6 are in
lieu of and not in addition to any grace periods provided with respect to any
Bank Debt.
SECTION 7. MISCELLANEOUS.
7.1 NOTICE. All notices, requests, consents and demands shall be in
writing and shall be delivered by hand or overnight courier service, mailed or
sent by telecopy, to the respective addresses specified below, or, as to any
party, to such other address as may be designated by it in written notice to all
other parties. All notices, requests, consents and demands hereunder shall be
deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by telecopy, or if mailed, on the earlier of
actual receipt or three (3) days after being mailed by certified mail, return
receipt requested, postage prepaid, addressed as aforesaid.
La Quinta Inns, Inc.
112 E. Pecan Street
San Antonio, Texas 78205
Attention: Vice President - Treasurer
with a copy to:
La Quinta Inns, Inc.
112 E. Pecan Street
San Antonio, Texas 78205
Attention: Office of General Counsel
23
The Frost National Bank
100 West Houston Street
San Antonio, TX 78205
Attention: Suzanne Houser
Texas Commerce Bank National Association
1020 NE Loop 410
P.0. Box 47531 78265
San Antonio TX 78209
Attention: Dan M. Danelo
NationsBank of Texas, N.A.
NationsBank Plaza
901 Main Street, 67th Floor
Dallas, TX 75202
Attention: Douglas E. Hutt
First Interstate Bank of Texas, N.A.
700 N. St. Mary's
San Antonio, TX 78205
Attention: John R. Peloubet
Citicorp USA, Inc.
2001 Ross Avenue
1400 Trammel Crow Center
Dallas, TX 75201
Attention: Jim Babcock
Bank of Scotland
2660 Citicorp Center
Houston, Texas 77002
Attention: Janna Blanter
Continental Bank N.A.
231 South La Salle Street
Chicago, Illinois 60697
Attention: Peter Gates
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attention: Alan Miller
24
U.S. Bank of Washington, National Association
309 Southwest 6th Avenue
Portland, Oregon 97204
Attention: Blake R. Howells
7.2 AMENDMENT, WAIVER, CONSENTS AND APPROVALS. This Agreement may be
amended, and the observance of any provision of this Agreement may be waived and
consent or approval to any action described in this Agreement may be granted,
only with the written consent of La Quinta and Banks holding in aggregate at
least 66-2/3% in principal amount of the Bank Debt as of the last day of the
month preceding the month in which such written amendment, waiver, approval or
consent is requested; provided, however, that no such amendment, waiver,
approval or consent, without the written consent of all of the Banks, shall (i)
change this Section 7.2 or (ii) waive, modify or otherwise affect compliance
with Section 4.24 hereof. All Banks shall receive in writing the request for
any waivers, modifications, amendments, approvals or consents of any of the
provisions hereof.
7.3 NOTICE OF DEFAULT ON BANK DEBT. Each Bank agrees to give prompt
notice to each other Bank of (i) any default in the payment of principal of or
interest on any Bank Debt beyond any period of grace with respect thereto, (ii)
any default in the performance of any other agreement, term, covenant or
condition contained in any Bank Debt beyond any period of grace provided with
respect thereto and (iii) any default in the performance of any covenant of La
Quinta set forth in this Agreement. Each Bank agrees to simultaneously deliver
to each other Bank a copy of any notice delivered to La Quinta pursuant to
Section 6 hereof. Each Bank shall use its best efforts to deliver the notices
provided for in this Section 7.3; however, no Bank shall have any liability to
any other Bank for failing to comply with this Section 7.3.
7.4 CONFLICTS. In the event of any conflict between the terms of this
Agreement and the terms of any Bank Debt with respect to the subject matter
contained herein, the terms and provisions of this Agreement shall control and
prevail.
7.5 PAYMENT OF EXPENSES. La Quinta will pay all reasonable expenses of
the Banks, including, without limitation, the reasonable fees, expenses and
disbursement of counsel, incurred in connection with the transactions
contemplated by this Agreement.
7.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and the laws of the United
States.
7.7 BINDING UPON SUCCESSORS. This Agreement shall be binding upon La
Quinta so long as any Bank Debt is outstanding, and each of the Banks and their
respective successors and assigns, and shall inure to the benefit of La Quinta
and the Banks and successors and assigns of the Banks, except that La Quinta
shall not have the right to assign any of its rights or obligations hereunder
without the written consent of all the Banks.
25
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, but in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart. It is not necessary that
each Bank execute the same counterpart, so long as counterparts are executed by
La Quinta and each Bank.
7.9 TERMINATION AND EFFECTIVENESS OF THIS AGREEMENT. This Agreement shall
remain in full force and effect so long as there is any Bank Debt outstanding.
At such time as there is no longer any Bank Debt outstanding, this Agreement
shall terminate and be of no further force and effect. This Agreement shall be
effective upon the execution hereof by the Banks required to amend the Prior
Master Covenant Agreement pursuant to Section 7.2 thereof.
7.10 ADJUSTMENT OF PERCENTAGES. The percentages of each Bank set forth on
EXHIBIT A hereto shall be automatically adjusted subsequent to the date of this
Agreement as a result of (i) any payment or prepayment of any Bank Debt, (ii)
any renewals, extensions, or refinancings of Bank Debt among the Banks or (iii)
participations in Bank Debt sold by one Bank to another Bank or any purchase or
assumption of Bank Debt between or among Banks or (iv) assignments of Bank Debt
pursuant to Section 7.13 hereof; otherwise, there shall be no adjustments to the
percentages set forth on EXHIBIT A. Further, except as set forth in
Section 7.13 hereof, no other Person may become a party to this Agreement
without the prior written consent of the Banks.
7.11 EXCEPTIONS TO COVENANTS. La Quinta shall not be deemed to be
permitted to take any action or fail to take any action which is permitted as an
exception to any of the covenants contained herein or which is within the
permissible limits of any of the covenants contained herein if such action or
omission would result in the breach of any other covenant contained herein.
7.12 CONFIDENTIALITY. Each Bank agrees (on behalf of itself and each of
its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by La Quinta pursuant to this Agreement which is identified by La
Quinta as being confidential at the time the same is delivered to the Banks,
provided that nothing herein shall limit the disclosure of any such information
(i) to the extent required by statute, rule, regulation or judicial process,
(ii) to counsel for any of the Banks, (iii) to bank examiners, auditors or
accountants of any Bank, (iv) any other Bank, (v) in connection with any
litigation to which any one or more of the Banks is a party, provided, further,
that unless specifically prohibited by applicable laws or court order, each Bank
agrees, prior to disclosure thereof, to notify La Quinta of any request for
disclosure of any such non-public information (x) by any governmental agency or
representative thereof (other than any such request in connection with an
examination of the financial condition of La Quinta or any Subsidiary or
Unincorporated Venture or (y) pursuant to legal process, or (vi) to any
participant (or prospective participant) of any Bank Debt so long as such
participant (or prospective participant) first executes and delivers to the
respective Bank an agreement (a "CONFIDENTIALITY AGREEMENT") in substantially
the form of EXHIBIT F hereto; and
26
provided finally that in no event shall any Bank be obligated or required to
return any materials furnished by the Company. The obligations of each Bank
under this Section 7.12 shall supersede and replace the obligations of such Bank
under any confidentiality letter in respect of any Bank Debt initially signed
and delivered by such Bank to La Quinta prior to the date hereof.
7.13 ASSIGNMENT. Each Bank may assign to one or more financial
institutions or funds organized under the laws of the United States, or any
state thereof, or under the laws of any other country that is a member of the
Organization for Economic Cooperation and Development, or a political
subdivision of any such country, which is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its business
(each, an "Assignee") its rights and obligations under the Bank Debt owned by
such Bank and its rights under this Agreement subject, to the extent applicable,
to the terms and provisions of Section 9.6 of the Credit Agreement. Upon the
effectiveness of such assignment, (i) the assignee Bank shall be party hereto
and, to the extent that rights hereunder have been assigned to it, have the
rights of a Bank hereunder and (ii) the assigning Bank shall, to the extent that
rights hereunder have been assigned by it, relinquish such rights under this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of January 25, 1994
LA QUINTA INNS, INC.
By: /s/ Michael A. Depatie
--------------------------------
Its: Senior Vice President
The following Subsidiaries of La Quinta
hereby acknowledge and agree to the covenants
and restrictions set forth herein by signing
below:
LA QUINTA REALTY CORP.
By: /s/ John F. Schmutz
--------------------------------
Its: Vice President
27
LA QUINTA PLAZA, INC.
By: /s/ Michael A. Depatie
--------------------------------
Its: Vice President
LA QUINTA FINANCIAL CORPORATION
By: /s/ Michael A. Depatie
--------------------------------
Its: President
LA QUINTA INVESTMENTS, INC.
By: /s/ Michael A. Depatie
---------------------------------
Its: Vice President
LQI ACQUISITION CORP.
By: /s/ Roland Bliss
--------------------------------
Its: President
LQM OPERATING PARTNERS, L.P.
By: LA QUINTA REALTY CORP.
By: /s/ John F. Schmutz
-----------------------------
Its: Vice President
28
LA QUINTA MOTOR INNS, LIMITED PARTNERSHIP
By: LA QUINTA REALTY CORP.
By: /s/ John F. Schmutz
--------------------------------
Its: Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/Douglas E. Hutt
-------------------------------
Its: Senior Vice President
THE FROST NATIONAL BANK
By: /s/ Suzanne Houser
-------------------------------
Its: Vice President
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/ John R. Peloubet
--------------------------------
Its: Vice President
CITICORP USA, INC.
By: /s/ Barbara A. Cohen
--------------------------------
Its: Vice President
29
TEXAS COMMERCE BANK NATIONAL ASSOCIATION (successor to
Texas Commerce Bank-San Antonio, N.A. through merger
with and into Texas Commerce Bank National Association)
By: /s/ Dan M. Danelo
--------------------------------
Its:________________________________
BANK OF SCOTLAND
By: /s/ Catherine M. Oniffrey
--------------------------------
Its: Vice President
CONTINENTAL BANK N.A.
By: /s/ Mary Jo Hoch
--------------------------------
Its: Vice President
BANK ONE, TEXAS, N.A.
By: /s/ Alan L. Miller
--------------------------------
Its: Vice President
U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION
By: /s/ Blake R. Howells
--------------------------------
Its: Vice President
30
EXHIBIT A
LA QUINTA INNS, INC.
MASTER COVENANT AGREEMENT
SCHEDULE OF BANK DEBT
DECEMBER 31, 1993
DOLLARS IN THOUSANDS
FIRST NATIONS TEXAS CITIBANK BANK OF BANK U. S.
INTERSTATE BANK COMMERCE FROST CITICORP SCOTLAND ONE CONTINENTAL NATIONAL TOTAL
---------- ------- -------- ----- -------- -------- ---- ----------- -------- -----
PRE-EXISTING CREDIT FACILITIES
IRB BONDS
- ---------
578 North Little Rock, AR $ 1,303 $ 1,303
579 Gretna. LA 2,106 2,106
580 New Orleans (Veterans), LA 1,731 1,731
592 Monroe, LA 1,864 1,864
721 New Orleans (Bullard), LA 2,507 2,507
MORTGAGES
- ---------
901 Denver-Central, CO $ 1,257 1,257
902 Casper, WY 1,476 1,476
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
TOTAL PRE-EXISTING CREDIT
FACILITIES $ 9,511 $ 2,733 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 12,244
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
CURRENT CREDIT FACILITIES
LETTERS OF CREDIT
557 Aurora, CO $ 203 $ 742 $ 311 $ 311 $ 609 $ 311 $ 271 $ 311 $ 203 $ 3,273
561 Kalamazoo, MI 149 543 228 228 445 228 198 228 149 2,394
562 Schaumburg, IL 267 978 410 410 802 410 357 410 267 4,311
563 Texarkana, TX 180 659 276 276 541 276 240 276 180 2,905
565 Savannah, GA 194 708 297 297 581 297 258 297 194 3,120
568 Bossier City, LA 92 336 141 141 276 141 123 141 92 1,483
569 Eagle Pass, TX 167 610 256 256 501 256 223 256 167 2,690
570 San Bernadino, CA 417 1,525 640 640 1,251 640 556 640 417 6,726
574 Baton Rouge, LA 203 742 311 311 609 311 271 311 203 3,273
576 Nacogdoches, TX 169 618 259 259 507 259 225 259 169 2,726
583 Virginia Beach 190 696 292 292 571 292 254 292 190 3,069
584 Oakbrook Terrace, IL 238 870 365 365 714 365 317 365 238 3,836
596 El Paso, TX 133 487 204 204 400 204 178 204 133 2,148
4625 Stockton, CA 244 893 375 375 733 375 326 375 244 3,938
633 Hampton, VA 256 934 392 392 767 392 341 392 256 4,121
634 Elk Grove, IL 256 934 392 392 767 392 341 392 256 4,121
636 Wheatridge, CO 168 615 258 258 504 258 224 258 168 2,711
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
TOTAL LETTERS OF CREDIT $ 3,526 $12,891 $ 5,406 $ 5,406 $10,577 $ 5,406 $4,701 $ 5,406 $ 3,526 $ 56,845
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
REVOLVING CREDIT COMMITMENT $ 2,481 $ 9,071 $ 3,804 $ 3,804 $ 7,443 $ 3,804 $3,308 $ 3,804 $ 2,481 $ 40,000
TERM LOAN COMMITMENT 8,993 32,883 13,790 13,790 26,980 13,790 11,991 13,790 8,993 145,000
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
TOTAL CURRENT CREDIT FACILITIES $11,474 $41,954 $17,594 $17,594 $34,423 $17,594 $15,299 $17,594 $11,474 $185,000
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
GRAND TOTAL $24,511 $57,578 $23,000 $23,000 $45,000 $23,000 $20,000 $23,000 $15,000 $254,089
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
EXHIBIT B
LA QUINTA INNS, INC.
EXISTING INVESTMENTS
NOVEMBER 30, 1993
AMOUNT
------
(Dollars in thousands)
INVESTMENTS; AT COST:
State of Israel Bonds $ 160
Cash Surrender Value of Life Policies 246
SERP Restricted Cash 738
Hotel Industry Switch 75
Harlingen Industrial Revenue Bond 1,245
------
TOTAL $2,464
------
------
LAND HELD FOR FUTURE DEVELOPMENT; AT CURRENT VALUE:
Bexar County $1,470
------
------
LAND HELD FOR SALE; AT CURRENT VALUE:
San Antonio $ 368
Houston 368
Arlington 365
Maitland 603
Mesquite 337
Greensboro 344
St. Louis 397
Ft. Lauderdale 618
------
TOTAL $3,400
------
------
EXHIBIT B
LA QUINTA INNS, INC.
EXISTING INVESTMENTS
NOVEMBER 30, 1993
(CON'T)
NOTES RECEIVABLE:
LA QUINTA INNS, INC. COMBINED
DEBTOR CREDITOR AMOUNT COLLATERAL
James Hu/S.A. Main Ave Motel, Ltd San Antonio Main Ave., Ltd. $ 2,448,517 First lien on real estate
Jai Ambay, Inc. La Quinta Inns, Inc. 755,397 First lien on real estate
R & Y La Belle La Quinta Inns, Inc. 53,000 Second lien on real estate
Willow Tree #4 La Quinta Inns, Inc. 976,980 Third lien on real estate
Jer-Wei Inc. La Quinta Inns, Inc. 1,720,689 First lien on real estate
Katy Hospitality Co. La Quinta Inns, Inc. 2,144,118 First lien on real estate
Great Southeastern Restaurants, Inc. La Qunita Inns, Inc. 195,000 Unsecured
Great Southeastern Restaurants, Inc. La Quinta Development Partners, L.P. 65,000 Unsecured
Great Southeastern Restaurants, Inc. LQM Operating Partners, L.P. 80,000 Unsecured
Ranjit Hans--Ishmer-Amar Holdings La Quinta Inns, Inc. 11,201 Unsecured
Sunbelt Motor Inn Ventures La Quinta Inns, Inc. 1,330,000 First lien on real estate
THISCO La Quinta Inns, Inc. 70,000 Unsecured
Miscellaneous debtors La Quinta Inns, Inc. 642,818 Unsecured
Sportsplex of America La Quinta Inns, Inc. 400,300 Unsecured
Wytex La Quinta Inns, Inc. 105,746 Unsecured
Shoney's La Quinta Development Partners, L.P. 157,636 Unsecured
I 20 South Collins, Ltd. La Qunita Inns, Inc. 300,000 First lien on real estate
Anthony Koutsoukos La Qunita Inns, Inc. 5,000 Unsecured
-----------
$11,461,402
-----------
-----------
EXHIBIT C
LA QUINTA INNS, INC.
SUBSIDIARIES & UNINCORPORATED
VENTURE INVESTMENTS
JANUARY 25, 1994
LQ
DATE OF INITIAL NUMBER OF OWNERSHIP
NAME AGREEMENT INNS %
---- --------------- -------- ---
La Quinta-Houston I.H. 10, Ltd. 1972 1 50
La Quinta-San Antonio South Joint Venture 1969 1 50
La Quinta Austin Motor Hotel, Ltd. 1970 1 66.667
La Quinta-Dallas Central Expressway, Ltd. 1970 1 62.96
LQ Motor Inn Venture-Austin No. 530 1975 1 50
La Quinta-Wichita, Kansas, No. 532, Ltd. 1976 1 50
LQ-Baton Rouge Joint Venture 1982 1 80
LQ-West Bank Joint Venture 1982 1 60
La Quinta Development Partners, L.P. 1990 37 40
San Antonio Main Avenue Motel, Ltd. 1967 N/A 66.67
LQ-LNL Joint Venture 1981 2 100
LQ-CIGNA I 1987 4 1
LQ-CIGNA II 1987 5 1
La Quinta Realty Corporation 1986 N/A 100
La Quinta Financial Corporation 1983 N/A 100
La Quinta Plaza, Inc. 1987 N/A 100
La Quinta Investments, Inc. 1993 N/A 100
LQI Acquisition Corporation 1993 N/A 100
LQI Merger Corporation 1993 N/A 100
LQM Operating Partners, L.P. 1986 N/A 100
LQ-Big Apple Joint Venture 1993 3 100
LQ-East Irvine Joint Venture 1985 1 100
La Quinta Motor Inns Limited Partnership 1986 31 100
---
TOTAL 91
---
---
Exhibit D
Existing Liens
La Qunita Inns, Inc. and Unicorporated Joint Ventures
November 30, 1993
PROPERTY
OWNERSHIP NO. LOCATION BALANCE DESCRIPTION
- ---------------------------- -------- ------------------------------------ ---------- -----------
La Quinta Inns, Inc. 518 Denver-South $651,434 Mortgage
La Quinta Inns, Inc. 519 Dallas-D/FW-Irving 398,460 Mortgage
La Quinta Investments, Inc. 520 Denver-Airport 496,811 Mortgage
La Quinta Inns, Inc. 523 San Antonio-Lackland 3,188,662 Mortgage
La Quinta Inns, Inc. 524 Dallas-Regal Row 3,052,923 Mortgage
La Quinta Inns, Inc. 531 Houston-Intercontinental Airport 947,308 Mortgage
La Quinta - Wichita, Kansas. 532 Wichita-Town East Square 543,416 Mortgage
No. 532, LTD.
La Quinta Inns, Inc. 534 Indianapolis-Airport 1,646,065 Mortgage
La Quinta Inns, Inc. 537 Beaumont 857,852 Mortgage
La Quinta Inns, Inc. 549 Columbus-Fort Benning 1,141,974 Mortgage
La Quinta Inns, Inc. 551 Jacksonville-Orange Park 1,221,484 Mortgage
La Quinta Inns, Inc. 552 Dallas-Grand Prairie (Six Flags) 1,343,024 Mortgage
La Quinta Inns, Inc. 553 Champaign-Market Place Mall 1,897,310 Mortgage
La Quinta Inns, Inc. 556 San Antonio-Windsor Park 2,019,701 Mortgage
La Quinta Inns, Inc. 559 Nashville-South 1,973,060 Mortgage
La Quinta Inns, Inc. 560 Lexington 1,118,053 Mortgage
La Quinta Inns, Inc. 575 Memphis-Airport 1,676,893 Mortgage
La Quinta Inns, Inc. 588 Sulphur/Lake Charles 3,170,000 IRB
La Quinta Inns, Inc. 599 Houston-La Porte 1,770,000 IRB
La Quinta Inns, Inc. 626 Birmingham 1,705,000 IRB
La Quinta Inns, Inc. 627 Pittsburgh-International Airport 2,055,000 IRB
La Quinta Inns, Inc. 628 Albuquerque-North 3,170,786 Mortgage
La Quinta Inns, Inc. 629 Charlotte-Airport 2,942,952 Mortgage
La Quinta Inns, Inc. 630 Colorado Springs 2,357,742 Mortgage
La Quinta Inns, Inc. 637 Jacksonville-North 318,336 Mortgage
La Quinta Inns, Inc. 637 Jacksonville-North 1,543,137 Mortgage
La Quinta Inns, Inc. 637 Jacksonville-North 520,158 Mortgage
La Quinta Inns, Inc. 639 Amarillo-Medical Center 2,482,829 Mortgage
La Quinta Inns, Inc. 643 San Diego-Vista 2,937,433 Mortgage
La Quinta Inns, Inc. 645 Atlanta-Peachtree Industrial 201,821 Mortgage
La Quinta Inns, Inc. 645 Atlanta-Peachtree Industrial 2,444,744 Mortgage
La Quinta Inns, Inc. 646 Bakersfield 3,496,944 Mortgage
La Quinta Inns, Inc. 658 Deerfield Beach 3,077,310 Mortgage
La Quinta Inns, Inc. 666 Maitland (held for sale) 2,729 Mortgage
La Quinta Inns, Inc. 688 Tampa-Clearwater Airport 3,806,145 Mortgage
La Quinta Inns, Inc. 803 Salt Lake City-Midvale 2,083,879 Mortgage
La Quinta Development 4536 Las Vegas 881,023 Mortgage
Partners. L. P.
La Quinta Development 4541 Orange County-Costa Mesa 3,934,910 Mortgage
Partners. L. P.
Page 1
Exhibit D
Existing Liens
La Qunita Inns, Inc. and Unicorporated Joint Ventures
November 30, 1993
PROPERTY
OWNERSHIP NO. LOCATION BALANCE DESCRIPTION
- ---------------------------- -------- ------------------------------------ ---------- -----------
La Quinta Development 4545 Reno-Airport 1,187,500 Mortgage
Partners. L. P.
La Quinta Development 4554 Dallas-D/FW-Euless 1,534,190 Mortgage
Partners. L. P.
La Quinta Development 4564 Tuscaloosa 1,811,034 Mortgage
Partners. L. P.
La Quinta Development 4566 Phoenix-Tempe Sky Harbor Airport 1,567,871 Mortgage
Partners. L. P.
La Quinta Development 4640 San Antonio-Toepperwein 2,622,708 Mortgage
Partners. L. P.
La Quinta Development 4642 Orlando-Airport 2,867,494 Mortgage
Partners. L. P.
La Quinta Development 4905 Round Rock 1,764,122 Mortgage
Partners. L. P.
La Quinta Inns, Inc. 9050 Prudential Note 14,298,019 Mortgage
La Quinta Inns, Inc. 9050 Prudential Note 1,406,286 Mortgage
La Quinta Inns, Inc. 9050 Prudential Note 28,536,216 Mortgage
-------------
Total $126,672,746
-------------
-------------
Page 2
EXHIBIT E
LA QUINTA INNS, INC.
GUARANTEES AND CONTINGENT OBLIGATIONS
NOVEMBER 30, 1993
Long Term Debt With Amount Advanced at
Partnership or Entity Recourse To La Quinta November 30
- --------------------- --------------------- ------------------
LQ Motor Inn Venture- Austin No. 530 $ -- $ 460,000
La Quinta-Wichita Kansas, No. 532, Ltd. 543,416 --
LQ-Baton Rouge Joint Venture 3,200,000 3,695,000
LQ-West Bank Joint Venture 2,106,440 --
LQ-CIGNA I 2,402,987
La Quinta Development Partners, L. P.:
La Quinta Inns, Inc. Guarantees 17,307,699 --
La Quinta Inns, Inc. General Partner Obligations 4,381,023 --
-----------
$29,941,565 $4,155,000
-----------
-----------
EXHIBIT F
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and Address
of Prospective Participant]
Re: Amended and Restated Master Covenant Agreement dated as of January 25,
1994, between La Quinta Inns, Inc. ("La Quinta"), and the banks
named therein (the "Banks").
Dear ______________:
As a Bank party to the above-referenced Amended and Restated Master
Covenant Agreement (the "COVENANT AGREEMENT"), we have agreed with La Quinta
("LA QUINTA") pursuant to Section 7.12 of the Covenant Agreement to use
reasonable precautions to keep confidential, except as otherwise provided
therein, all non-public information identified by La Quinta as being
confidential at the time the same is delivered to us pursuant to the Covenant
Agreement.
As provided in said Section 7.12, we are permitted to provide you, as a
prospective holder of a participation in the Bank Debt (as defined in the
Covenant Agreement), with certain of such non-public information subject to the
execution and delivery by you, prior to receiving such non-public information,
of a Confidentiality Agreement in this form. Such information will not be made
available to you until your execution and return to us of this Confidentiality
Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf of
yourself and each of your affiliates, directors, officers, employees and
representatives) that (A) such information will not be used by you except in
connection with the proposed participation mentioned above and (B) you shall use
reasonable precautions, in accordance with your customary procedures for
handling confidential information and in accordance with safe and sound banking
practices, to keep such information confidential, provided that nothing herein
shall limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to your counsel or to
counsel for any of the Banks, (iii) to bank examiners, auditors or accountants
of any Bank, (iv) to any other Bank, (v) in connection with any litigation to
which you or any one or more of the Banks are a party; provided, further, that,
unless specifically prohibited by applicable law or court order, you agree,
prior to disclosure thereof, to notify La Quinta of any request for disclosure
of any such non-public information (x) by any governmental agency or
representative thereof (other than any such request in connection with an
examination of your financial condition by such governmental agency) or (y)
pursuant to legal process; and provided,
[Date]
Page 2
finally, that in no event shall you be obligated to return any materials
furnished to you pursuant to this Confidentiality Agreement.
Would you please indicate your agreement to the foregoing by signing at the
place provided below the enclosed copy of this Confidentiality Agreement.
Very truly yours,
__________________________________
By:_______________________________
Title:____________________________
THE FOREGOING IS AGREED TO AS
OF THE DATE OF THIS LETTER.
[INSERT NAME OF PROSPECTIVE PARTICIPANT]
By:_______________________________
Title:____________________________
EXHIBIT G
LA QUINTA INNS, INC.
SIGNIFICANT INVESTMENTS
STATE OF
INCORPORATION OR PERCENTAGE OF
NAME ORGANIZATION OWNERSHIP
---- ---------------- -------------
La Quinta-Houston I.H. 10, Ltd. Texas 50
La Quinta San Antonio-South Joint Venture Texas 50
La Quinta Austin Motor Hotel, Ltd. Texas 50
La Quinta-Dallas Central Expressway, Ltd. Texas 62.963
LQ Motor Inn Venture-Austin No. 530* Texas 50
La Quinta-Wichita, Kansas, No. 532, Ltd. Texas 50
LQ-Baton Rouge Joint Venture* Texas 80
LQ-West Bank Joint Venture* Texas 60
LQ-CIGNA I* Texas 1
LQ-CIGNA II* Texas 1
La Quinta Motor Inns Limited Partnership Delaware 100
La Quinta Development Partners, L.P.* Delaware 40
<FN>
*Indicates Joint Venture Agreements with a buy/sell provision.
EXHIBIT H
ID#3232B
INVESTMENT POLICY
- -------------------------------------------------------------------------------
RESOLVED: That the Company's Amended and Restated Investment Policy shall read
as follows:
AMENDED AND RESTATED
LA QUINTA MOTOR INNS, INC.
STATEMENT OF INVESTMENT POLICY
AS OF OCTOBER 1989
I. INVESTMENT OBJECTIVES
A. To assure safety of principal through minimization of default risk.
B. To retain liquidity to meet projected cash needs.
C. To realize the best available yield, while assuming a minimum of market
risk.
II. APPROVED INVESTMENTS AND RELATED RESTRICTIONS
A. Investments, loans and advances to the Company's subsidiaries or
unincorporated ventures and pursuant to any management or operating
agreement to which the Company is a party.
B. Investments with maturities of less than one year in direct or indirect
obligations of the United States of America.
Approved agencies include the following:
Student Loan Marketing Association
Federal National Mortgage Association
Farm Credit Agency
Federal Home Loan Bank
Federal Home Loan Mortgage Corporation
World Bank
Farm Credit Agency
Federal Home Loan Bank
Federal Home Loan Mortgage Corporation
World Bank
C. Domestic bank financial obligations
1. Investments shall not exceed $20,000,000 per bank or bank holding
company,
2. Maturities shall be less than one year,
3. Bank shall have a capital and surplus in excess of $50,000,000 and
4. At the time of purchase, the publicly outstanding debt of a bank or
bank holding company shall be rated A- or higher by Standard and
Poor's Corporation or the short term bank deposits shall be rated a
minimum of P-1 by Moody's Investors Service, Inc.
5. An investment in a FDIC All Insured Certificate of Deposit program
of a bank holding company which meets or exceeds these guidelines is
allowed even though some of the participating banks may not meet all
the guidelines.
D. Permitted exceptions for domestic bank financial obligations
1. Funds held by a bank acting as a trustee in connection with any
Industrial Development Bond, other financing or required reserve may
be invested in the trustee's own financial obligations. Investments
shall not exceed $3,000,000 per bank or bank holding company and
maturities shall be less than one year.
2. A maximum of $6,000,000 may be invested in financial obligations of
Frost National Bank of San Antonio for the purpose of more efficient
management of daily cash requirements including daylight overdrafts.
Maturities shall be less than one year.
E. Commercial Paper
1. At the time of purchase, Commercial Paper shall carry one of the
following minimum ratings:
Standard and Poor's Corporation A-1
Moody's Investors Service, Inc. P-1
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2. Investment shall not exceed $7,500,000 per lender or affiliated
persons of such lender, taken together.
F. Investments may be purchased through the following brokerage companies
with a safekeeping limit of $12,500,000 per company:
Merrill Lynch
Goldman Sachs
Salomon Brothers
First Boston
Investments exceeding $12,500,000 through any one brokerage firm shall
be delivered for safekeeping to a bank designated by the Company.
G. Securities which are exempt from federal taxation and are general
obligation bonds backed by the taxing authority of the issuer; provided,
however, that
1. The total aggregate amount of any such securities held by the
Company shall not at any time exceed 2% of the average adjusted tax
basis of total assets of the Company (each August the Tax Department
will provide the Treasury Department the maximum investment allowed
for the current year) and that
2. If the securities are rated by Standard and Poor's Corporation and
Moody's Investors Service, they shall be rated at least "A" by both
agencies. If they are rated by only one agency, that rating shall
be at least "A". No non-rated securities will be purchased.
H. Registered Investment Company Shares
1. Redeemable securities issued by diversified, open-end management
investment companies which are organized under the laws of the
United States of America or its constituent states and which are
registered with the Securities and Exchange Commission pursuant to
the Investment Company Act of 1940.
2. Said investment companies' prospectuses shall reflect (i) investment
objectives consistent with the objectives set forth above; and (ii)
a portfolio made up of high quality, fixed income instruments.
3. Investments are limited to the following approved investment
companies:
a. Fidelity Money Market Trust
Fidelity Investments
Boston, Massachusetts
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b. Institutional Liquid Assets (ILA)
Goldman, Sachs & Co.
Chicago, Illinois
c. Prudential Institutional Liquidity Portfolio Series
Prudential Mutual Fund Services
New Brunswick, NJ
d. USAA Money Market Funds
USAA
San Antonio, TX
e. Merrill Lynch Ready Assets
Merrill Lynch
Princeton, New Jersey
I. Any investment specifically authorized by the Executive Committee up to
an aggregate at any one time of $4,000,000.
J. Any other investments specifically authorized by the Board of Directors.
and be it further,
RESOLVED: That the President, Executive Vice President-Chief Operating Officer,
Senior Vice President-Finance, Senior Vice President-Administration and
Treasurer, and Senior Vide President-Development Programs and General Counsel
("Authorized Officers"), of this Company is, and each of them hereby is,
authorized, subject to restrictions in the Company's Investment Policy, to
establish and maintain one or more accounts with such investment companies,
banks, broker-dealers or like depositories which they, in their sole discretion,
believe necessary and appropriate for the purpose of purchasing, investing in,
or otherwise acquiring, possessing, selling, transferring, exchanging or
otherwise disposing of, and generally dealing in any and all forms of securities
as prescribed by the Company's Investment Policy; and be it further,
RESOLVED: That to assure that an individual does not direct an investment
company, bank, broker-dealer or other depository to wire or otherwise transfer
funds to a personal or non-Company account, upon opening accounts with such
investment companies, banks, broker-dealers or other depositories, instructions
will be given requiring such persons to only wire or transfer funds to a
designated Company account, which designation shall be made by any two
Authorized Officers; and be it further,
RESOLVED: That accounts shall not be opened for the purpose of trading or
otherwise dealing with securities on margin, effecting short sales or trading in
commodity futures contracts and related options; and be it further,
-4-
RESOLVED: That any two Authorized Officers may appoint in writing any other
person or persons to, with the exception of establishing accounts, do any things
which any of the said officers is hereby empowered to do, and to take all action
necessary or desirable in connection with accounts with investment companies,
banks, broker-dealers and other depositories; and be it further,
RESOLVED: That, subject to restrictions set forth in the Company's Investment
Policy and limitations with respect to accounts, the fullest authority at all
times with respect to any commitment or transaction deemed by any of the
Authorized Officers, or other persons appointed by said Authorized Officers, to
be proper is hereby conferred - including, without limitation, authority to
give written or oral instructions to investment companies, banks,
broker-dealers or other depositories with respect to any of said transactions;
to enter and carry out any contract, arrangement, or transaction in connection
with any such account; to pay in cash or by checks and/or drafts drawn upon
the funds of the Company such sums as may be necessary in connection with any
such account; to deliver securities to, and deposit funds with said investment
companies, banks, broker-dealers or other depositories; to endorse, on behalf
of the Company, any securities in order to pass title thereto; to sign for the
Company all documents in connection with any such account, and to agree to any
conditions to control any such account; and be it further,
RESOLVED: That the establishment and maintenance by the Company of one or more
accounts with such investment companies, banks, broker-dealer or other
depositories prior to the date of which these resolutions shall continue to be
effective, and the opening of such accounts is hereby ratified and confirmed in
all respects; and be it further,
RESOLVED: That such investment companies, banks, broker-dealers or other
depositories may deal with any and all of the persons holding the offices of the
Authorized Officers as though they were dealing with the Corporation directly;
and be it further,
FURTHER RESOLVED: That the Secretary of the Company is hereby directed to
certify and deliver under seal of the Corporation to such investment companies,
banks, broker-dealers or other depositories:
(a) a true copy of these resolutions, including the Investment Policy;
(b) specimen signatures of each and every person designated to provide
instructions to such investment companies, banks, broker-dealers or
other depositories;
-5-
(c) a certificate that the Company is duly organized and existing, that its
charter and By-Laws authorize it to effect the transactions contemplated
by the Investment Policy and these resolutions, and that no limitation
has been otherwise imposed upon such authority;
and be it further,
RESOLVED: That such investment companies, banks, broker-dealers or other
depositories may rely upon any certification given in accordance with these
resolutions until written notice of a change in, or the recission of such
authority is provided (transmitted by mail, wire or otherwise); and be it
further,
RESOLVED: That, in the event of any change in the office or powers of persons
hereby authorized, the Secretary or any Assistant Secretary shall certify such
changes to such investment companies, banks, broker-dealers or other
depositories in writing in the manner hereinabove provided, which notification,
when received, shall be adequate both to terminate the authorization of the
persons theretofore authorized, and to authorize the persons thereby
substituted.
-6-