EXHIBIT 10(a)
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FOURTH AMENDED AND RESTATED
MASTER COVENANT AGREEMENT
Dated as of
April 21, 1995
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 11
4.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING PRACTICES,
CORPORATE EXISTENCE. . . . . . . . . . . . . . . . . . . . . 11
4.2 INSPECTION OF PROPERTIES AND BOOKS . . . . . . . . . . . . . 11
4.3 RESTRICTED PAYMENTS. . . . . . . . . . . . . . . . . . . . . 12
4.4 MERGER AND SALE OF ASSETS. . . . . . . . . . . . . . . . . . 12
4.5 SENIOR DEBT TO CAPITALIZATION RATIO. . . . . . . . . . . . . 13
4.6 CONTINGENT LIABILITIES . . . . . . . . . . . . . . . . . . . 13
4.7 INCURRENCE AND RETENTION OF DEBT . . . . . . . . . . . . . . 13
4.8 INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 14
4.9 NOTICE OF LITIGATION . . . . . . . . . . . . . . . . . . . . 14
4.10 TOTAL DEBT RATIO . . . . . . . . . . . . . . . . . . . . . . 14
4.11 CASH FLOW RATIO. . . . . . . . . . . . . . . . . . . . . . . 14
4.12 SENIOR DEBT RATIO. . . . . . . . . . . . . . . . . . . . . . 14
4.13 OPERATING LEASES . . . . . . . . . . . . . . . . . . . . . . 15
4.14 LAND HELD FOR DEVELOPMENT AND LAND HELD FOR SALE . . . . . . 15
4.15 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.16 ACCOUNTING CHANGES . . . . . . . . . . . . . . . . . . . . . 15
4.17 AMENDMENT AND MODIFICATION OF SUBORDINATED DEBT DOCUMENTS. . 15
4.18 LEASE-BACKS. . . . . . . . . . . . . . . . . . . . . . . . . 15
4.19 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . 16
4.20 ERISA COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . 17
4.21 BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.22 DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.23 BANK DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.24 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . 17
4.25 DEBT OF INVESTMENTS, LQ-I AND LQ-II. . . . . . . . . . . . . 18
4.26 LIENS OF INVESTMENTS, LQ-I AND LQ-II . . . . . . . . . . . . 18
Section 5. Information as to La Quinta 18
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY LA QUINTA. . . . . 18
5.2 OFFICER'S CERTIFICATE. . . . . . . . . . . . . . . . . . . . 20
Section 6. Default 21
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Section 7. Miscellaneous 21
7.1 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.2 AMENDMENT, WAIVER, CONSENTS AND APPROVALS. . . . . . . . . . 23
7.3 NOTICE OF DEFAULT ON BANK DEBT . . . . . . . . . . . . . . . 23
7.4 CONFLICTS. . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.5 PAYMENT OF EXPENSES. . . . . . . . . . . . . . . . . . . . . 23
7.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . 23
7.7 BINDING UPON SUCCESSORS. . . . . . . . . . . . . . . . . . . 23
7.8 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 24
7.9 TERMINATION AND EFFECTIVENESS OF THIS AGREEMENT. . . . . . . 24
7.10 ADJUSTMENT OF PERCENTAGES. . . . . . . . . . . . . . . . . . 24
7.11 EXCEPTIONS TO COVENANTS. . . . . . . . . . . . . . . . . . . 24
7.12 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . 24
7.13 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.14 ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . 25
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 - Previously filed as an exhibit to
exhibit 10(x) to the Registrant's Registration Statement
on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.
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FOURTH AMENDED AND RESTATED
LA QUINTA INNS, INC.
MASTER COVENANT AGREEMENT
SECTION 1. PARTIES.
This Fourth 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, Bank of Scotland, Bank of America Illinois, 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 Third Amended and
Restated Master Covenant Agreement, dated as of January 25, 1994 (said
Third Amended and Restated Master Covenant Agreement, as amended, the
"Prior Master Covenant Agreement"), the effect of which is to incorporate
the definitions, provisions and covenants set forth therein into certain
credit facilities that La Quinta has with certain 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):
"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 (i) 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 (a) 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 (b) up to an additional $40,000,000 in aggregate principal amount of
unsecured Debt owed by La Quinta to one or more Banks, and (ii) all
interest accruing on all or any part thereof and attorneys' fees incurred
in the enforcement or the collection of all or any part thereof.
"CAPITAL LEASES" mean all capital leases and subleases, as defined in
the Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 13, dated November 1976, as amended.
"CAPITAL STOCK" means, with respect to any Person, any capital stock,
partnership or joint venture interests of such Person and shares,
interests, participations or other ownership interests (however designated)
of any Person and any rights (other than debt securities convertible into
corporate stock), warrants or options to purchase any of the foregoing.
"COMBINED" includes, with respect to financial statements and the
calculations of the covenants herein and the definitions related thereto,
the combined accounts of La Quinta and its Subsidiaries and Unincorporated
Ventures which are included in La Quinta's Annual Report to Shareholders
and in La Quinta's Form 10-K filed with the S.E.C. (the "COMBINED FINANCIAL
STATEMENTS").
"CREDIT AGREEMENT" means that certain Amended and Restated Credit
Agreement, dated as of January 25, 1994, among La Quinta, the lenders a
party thereto and NationsBank of Texas, N.A., as Administrative Lender, as
amended, supplemented, modified or restated from time to time.
"CURRENT MATURITIES" means, with respect to any Person, the principal
portion payable by such Person on Long Term Debt during the twelve-month
period immediately succeeding the date of determination.
"DEBT" of any Person means, at any date, without duplication, all
obligations, contingent or otherwise, (i) of such Person for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof), (ii) of such Person
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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) in
the case of such Person, unfunded vested benefits under any Plan.
"DEFAULT" means any default with respect to any Bank Debt which would
permit the acceleration of such Bank Debt, whether or not there has been
satisfied any requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further condition,
event or act.
"DISQUALIFIED CAPITAL STOCK" means with respect to any Person any
series or class of Capital Stock of such Person which is or may be required
to be redeemed, in whole or in part, or may be put to such Person or any of
its Subsidiaries, in whole or in part, at the option of the holder thereof,
on or prior to the final maturity of the Senior Subordinated Notes, or is
or may be convertible or exchangeable into or exercisable for such Capital
Stock on or prior to the final maturity of the Senior Subordinated Notes;
PROVIDED, that Capital Stock will not be deemed to be Disqualified Capital
Stock if it may only be so redeemed or put solely in consideration of
Qualified Capital Stock.
"DOMESTIC SUBSIDIARY" means any Subsidiary of La Quinta organized
under the laws of any state within the United States.
"EBITDA" means, for any period, determined in accordance with GAAP
with respect to La Quinta, its Subsidiaries and Unincorporated Ventures,
the sum of (i) Operating Income, plus (ii) nonrecurring, non-cash charges
which decrease Operating Income, plus (iii) depreciation, amortization and
non-cash fixed asset retirements, minus (iv) nonrecurring credits which are
included in Operating Income.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT" means any default with respect to any Bank Debt
which would permit the acceleration of such Bank Debt, provided there has
been satisfied any requirement in
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connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act.
"EXISTING INVESTMENTS" means those Investments described on EXHIBIT B
hereto.
"FOREIGN SUBSIDIARY" means any Subsidiary which is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles , set forth in
the Opinions of the Accounting Principles Board of the American Institute
of Certified Public Accountants and/or in statements of the Financial
Accounting Standards Board, which are applicable in the circumstances as of
the date in question and which shall be applied by the independent
accounting firm which certifies La Quinta's Combined Financial Statements
and Parent Company financial statements, and the requisite that such
principles be applied on a consistent basis shall mean that the accounting
principles observed in a current period are comparable in all material
respects to those applied in a preceding period, other than as a result of
changes required by modifications to GAAP. Unless otherwise indicated
herein, all accounting terms will be defined according to GAAP.
Notwithstanding the foregoing, all determinations and computations with
respect to financial covenants and ratios provided for in this Agreement
shall be made in accordance with GAAP as in effect on the date hereof.
"INTEREST EXPENSE" of any Person means, for any period, the aggregate
interest expense in respect of Debt (including amortization of original
issue discount and non-cash interest payments or accruals, and dividends on
Disqualified Capital Stock, but excluding amortization of Debt issuance
costs) of such Person and all commissions, discounts, other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing and costs associated with currency and Interest Rate Agreements,
all in accordance with GAAP; PROVIDED, that interest expense attributable
to that portion of the Debt of another Person that is a direct or indirect,
contingent or primary, recourse obligation of such Person subsequent to the
Agreement Date shall be added thereto.
"INTEREST RATE 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.
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"INVESTMENTS" shall mean La Quinta Investments, Inc., a Delaware
corporation and wholly-owned Subsidiary of La Quinta.
"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
Combined 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 Combined 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.
"LQ-I" shall mean LQ-INVESTMENTS I, a Texas general partnership
between La Quinta and Investments.
"LQ-II" shall mean LQ-INVESTMENTS II, a Texas general partnership
between La Quinta and Investments.
"MAINTENANCE CAPITAL EXPENDITURES" means an amount equal to the
product of room revenues (as disclosed in La Quinta's Form 10-K and 8-Q) of
La Quinta, its Subsidiaries and Unincorporated Ventures multiplied by 5%,
calculated for the four consecutive fiscal quarters immediately preceding
the date of such determination.
"MATERIAL ADVERSE EFFECT" 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.
"NET CASH PROCEEDS" means the aggregate amount of cash received by La
Quinta in respect of (i) any sale, lease or other disposition of an asset,
less the sum of (a) all fees,
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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 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
(i) treasury stock and (ii) amounts attributable to the extent included,
(1) to any write-up in book value of assets resulting from a revaluation
thereof subsequent to December 31, 1992, and (2) to Disqualified Capital
Stock, all in accordance with GAAP.
"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".
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"PERMITTED INVESTMENT" means Investments in (i) wholly-owned Domestic
Subsidiaries (a) that are subject to the provisions of this Agreement,
(b) that concurrently therewith unconditionally guarantee the performance
of La Quinta's obligations under the Bank Debt and (c) that concurrently
deliver to the Banks (1) an opinion acceptable to the Banks with respect to
the validity and enforceability of such guarantee and (2) such other
documents, such as corporate resolutions, certificates of incumbency, by-
laws and articles of incorporation, as the Banks shall reasonably require,
(ii) Investments in any Person other than a wholly-owned Subsidiary in any
one or a series of related transactions with a fair market value not in
excess of $15,000,000 in the aggregate for all Investments in all such
Persons, (iii) Investments for the purpose of satisfying La Quinta's or any
Subsidiary's guarantee obligations with respect to the Debt of any Person
in which La Quinta or any Subsidiary owned any interest and which
obligation was in existence as of the Agreement Date, 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 ordinary course
of business not in excess of $2,000,000 aggregate principal amount,
(vii) Investments in the ordinary course of business, consistent with past
practice, in La Quinta Inns' National Advertising Fund, (viii) Existing
Investments, (ix) Investments in Capital Stock of Subsidiaries and
Unincorporated Ventures listed on EXHIBIT C hereto for the purpose of
acquiring no less than 100% of the capital stock or partnership interests,
as appropriate, of such Subsidiaries and Unincorporated Ventures,
(x) Investments in notes payable to La Quinta as a result of the sale of
inns in an aggregate principal amount not in excess of $10,000,000,
provided that La Quinta shall obtain and continue to hold a perfected first
Lien (subject to Permitted Liens) in such inns, (xi) Investments in wholly-
owned Foreign Subsidiaries (a) that are subject to the provisions of this
Agreement and (b) not to exceed in aggregate amount $1,000,000 for all
Investments in all Foreign Subsidiaries, and (xii) Investments in any
Person (other than a Foreign Subsidiary) 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:
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(i) any Lien in favor of any Bank or a trustee on its behalf to
secure the Bank Debt;
(ii) (a) Liens on real estate for real estate taxes not yet
delinquent, (b) Liens created by lease agreements to secure the payments of
rental amounts and other sums not yet due thereunder, (c) Liens on
leasehold interests created by the lessor in favor of any mortgagee of the
leased premises, and (d) Liens for taxes, assessments, governmental
charges, levies or claims that are being diligently contested in good faith
by appropriate proceedings and for which adequate reserves shall have been
set aside on such Person's books, but only so long as no foreclosure,
restraint, sale or similar proceedings have been commenced with respect
thereto;
(iii) Liens of carriers, warehousemen, mechanics, laborers and
materialmen and other similar Liens incurred in the ordinary course of
business for sums not yet due or being contested in good faith, if such
reserve or appropriate provision, if any, as shall be required by GAAP
shall have been made therefor;
(iv) Liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or similar legislation;
(v) Easements, rights-of-way, restrictions and other similar
encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person;
(vi) Liens created to secure the purchase price of fixed assets
acquired by such Person, which is incurred solely for the purpose of
financing the acquisition of such assets and incurred at the time of
acquisition, so long as 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;
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(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.
"PLAN" means any plan subject to Title IV of ERISA and maintained by
La Quinta or any Subsidiary, or any such plan to which La Quinta or any
Subsidiary or any Unincorporated Venture is required to contribute on
behalf of all or any of its employees; PROVIDED, HOWEVER, "Plan" shall not
include those agreements with former employees described on Schedule 7 of
the Credit Agreement, the obligations pursuant to which do not exceed
$450,000 in aggregate amount.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of La Quinta that is
not Disqualified Capital Stock.
"REPORTABLE EVENT" 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.
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"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 with respect to La Quinta, its Subsidiaries and
Unincorporated Ventures, the ratio of (i) Senior Debt to (ii) the sum of
(a) Senior Debt, plus (b) Subordinated Debt, plus (c) Net Worth.
"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) a corporation at
least a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such Person, by such Person and one or more Subsidiaries of such
Person or by one or more Subsidiaries of such Person or (b) a partnership,
joint venture or similar entity in which 100% of the ownership, capital or
interest profits is at the time, directly or indirectly, owned by such
Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person.
"SUBSIDIARY GUARANTY" shall have the meaning given to such term in the
Credit Agreement.
"TOTAL DEBT" means, with respect to any Person, the sum, without
duplication, of (a) all Debt of such Person minus (b) 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.
"TRIBUNAL" means any state, commonwealth, federal, foreign
territorial, or other court or governmental department, commission, board,
bureau, agency or instrumentality.
"UNINCORPORATED VENTURE" means those Persons designated as
"Unincorporated Ventures" on EXHIBIT C hereto.
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SECTION 4. BUSINESS COVENANTS OF LA QUINTA.
4.1 MAINTENANCE OF PROPERTY, INSURANCE, ACCOUNTING PRACTICES,
CORPORATE EXISTENCE. La Quinta covenants and agrees to, and will cause
each Subsidiary and Unincorporated Venture to:
(A) Maintain its material property in good condition and make all
necessary renewals, replacements, additions, betterments and improvements
thereto, consistent with sound business practice and as is customary in the
case of corporations or other entities of established reputation engaged in
the same or a similar business and similarly situated;
(B) Maintain, with financially sound and reputable insurers, or
through its own program of self-insurance, insurance with respect to its
material properties and business against such casualties and contingencies,
of such types, and in such amounts as is customary in the case of
corporations or other entities of established reputation engaged in the
same or a similar business and similarly situated;
(C) Keep books of record and accounts in which entries will be made
of all of its business transactions, and will reflect in it financial
statements adequate accruals and appropriations to reserves, all in
accordance with GAAP;
(D) Do or cause to be done all things necessary to preserve and keep
in full force and effect its material rights;
(E) Do or cause to be done all things necessary to preserve and keep
in full force and effect its existence (except as may be specifically
permitted by this Agreement); and
(F) Cause to be paid and discharged (i) all lawful taxes assessments
and governmental charges imposed from the income or profits of La Quinta,
its Subsidiaries and Unincorporated Ventures or upon any property belonging
to La Quinta, any Subsidiary or any Unincorporated Venture and (ii) all
lawful claims, whether for labor, materials, supplies, services or anything
else, which have become due and payable and which by law have or may become
a Lien upon the property of La Quinta or any of its Subsidiaries; or
Unincorporated Ventures; PROVIDED, HOWEVER, that La Quinta, its
Subsidiaries and Unincorporated Ventures shall not be required to cause to
be paid or discharged any such tax assessment, charge or claim so long as
the amount, applicability or validity thereof shall be contested in good
faith by appropriate proceedings, and adequate book reserves shall have
been established to the extent required by GAAP with respect thereto.
4.2 INSPECTION OF PROPERTIES AND BOOKS. La Quinta covenants and
agrees that it will permit, and will cause each Subsidiary and
Unincorporated Venture to permit, any Bank, upon (i) reasonable request, if
such request is prior to the occurrence of a Default or an Event of Default
or (ii) request, if such request is after the occurrence of a Default or an
Event of Default, to any Authorized Officer, to visit and inspect any of
the properties of, to examine the
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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 sum of (a) $15,000,000 plus (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 (xi) 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.
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
(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,
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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 shall not be greater
than (i) 0.525 to 1 at the end of the fiscal quarters ending June 30, 1995
and 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.
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,
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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 the ratio of (i) Total Debt to (ii) EBITDA, in each case for the
four consecutive fiscal quarters immediately preceding the date of
determination, to be greater than 4.25 to 1 at the end of any fiscal
quarter. 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 the ratio of (i) (a) EBITDA, plus (b) lease expense pursuant to
Operating Leases, minus (c) Maintenance Capital Expenditures to
(ii) (a) Net Interest, plus (b) lease expense pursuant to Operating Leases,
plus (c) Current Maturities, in each case other than Current Maturities
(which, with respect to Current Maturities, shall be for the four
consecutive fiscal quarters immediately succeeding the date of
determination) for the four consecutive fiscal quarters immediately
preceding the date of determination, to be less than 1.50 to 1 at the end
of any fiscal quarter.
4.12 SENIOR DEBT RATIO. La Quinta covenants and agrees that it will
not allow the ratio of (i) Senior Debt to (ii) EBITDA, in each case for the
four consecutive fiscal quarters immediately preceding the date of
determination, to be greater than 3.0 to 1 at the end of any fiscal
quarter. For purposes of this Section 4.12, 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
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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.
4.13 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 $10,000,000.
4.14 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.
4.15 LIENS. La Quinta covenants and agrees that it will not create,
assume or suffer to exist, or permit any Subsidiary or Unincorporated
Venture to create, assume or suffer to exist, any Lien on any asset now
owned or hereafter acquired by it except Permitted Liens.
4.16 ACCOUNTING CHANGES. La Quinta covenants and agrees that it will
not, and will not permit an of its Subsidiaries or Unincorporated Ventures
to, make any change in its accounting treatment or financial reporting
practices, except as permitted or required by GAAP in effect from time to
time. La Quinta will not change its fiscal year or the calculation of its
fiscal quarter ends.
4.17 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.
4.18 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.
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4.19 ENVIRONMENTAL MATTERS.
(a) La Quinta covenants and agrees that it will not, and will not
permit any of its Subsidiaries or Unincorporated Ventures to, use,
generate, manufacture, produce, store, release, discharge or dispose of on,
under or about any real property owned or leased by La Quinta or any of its
Subsidiaries or Unincorporated Ventures (such owned or leased real
property, the "PROPERTY"), or transport to or from the Property, any
Hazardous Substance (as defined below), or (to the extent within La
Quinta's or such Subsidiary's or Unincorporated Venture's control) permit
any other Person to do so, where such could reasonably be expected to have
a Material Adverse Effect.
(b) La Quinta shall keep and maintain and shall cause each Subsidiary
and Unincorporated Venture to keep and maintain, the Property in compliance
with any Environmental Law (as defined below) where the failure to do so
could reasonably be expected to have a Material Adverse Effect.
(c) In the event that any investigation, site monitoring,
containment, cleanup, removal, restoration or other remedial work of any
kind or nature (the "REMEDIAL WORK") with respect to the Property is
required to be performed by La Quinta or any of its Subsidiaries or
Unincorporated Ventures under any applicable local, state or federal law or
regulation, any judicial order, or by any governmental entity because of,
or in connection with, the current or future presence, suspected presence,
release or suspected release of a Hazardous Substance in or into the air,
soil, groundwater or surface water at, on, under or within the Property (or
any portion thereof), La Quinta or such Subsidiary or Unincorporated
Venture shall within thirty (30) days after written demand for performance
thereof by the Banks (or such shorter period of time as may be required
under any applicable law, regulation, order or agreement), commence and
thereafter diligently prosecute to completion, all such Remedial Work.
(d) La Quinta will defend, indemnify and hold harmless the Banks, and
their respective employees, agents, officers and directors, from and
against any claims, demands, 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
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SUBSTANCES", "HAZARDOUS MATERIALS", "TOXIC SUBSTANCES", or "SOLID WASTE"
under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Sections 9601 ET SEQ., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901 ET SEQ. and the
Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 ET SEQ., and in
the regulations promulgated pursuant to said laws, and such other
substances, materials and wastes which are or become regulated under
applicable local, state or federal law, or which are classified as
hazardous or toxic under federal, state, or local laws or regulations.
4.20 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.
4.21 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.
4.22 DEBT. La Quinta covenants and agrees that it will not, and will
cause each Subsidiary and Unincorporated Venture to not, (i) default,
beyond any notice, grace or cure period, in any payment equal to or
exceeding the aggregate amount of $1,000,000 of principal of or interest on
any Debt with respect to which recourse may be made against La Quinta or
any Subsidiary or Unincorporated Venture beyond any period of grace
provided with respect thereto, or (ii) default, beyond any notice, grace or
cure period, in the performance of any other agreement, term, covenant or
condition contained in any agreement or instrument under or by 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.
4.23 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.
24 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
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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.
4.25 DEBT OF INVESTMENTS, LQ-I AND LQ-II. La Quinta covenants and
agrees that it will not permit Investments, LQ-I or LQ-II to create, incur,
assume, become or be liable in any manner in respect of, or suffer to
exist, any Debt, except (i) trade payables incurred and paid in the
ordinary course of business, and (ii) contingent liabilities resulting from
the endorsement of negotiable instruments for collection in the ordinary
course of business.
4.26 LIENS OF INVESTMENTS, LQ-I AND LQ-II. La Quinta covenants and
agrees that it will not permit Investments, LQ-I or LQ-II, to create or
suffer to exist any Lien upon any of its assets, except (i) Tax,
mechanics', materialmen's, warehousemen's, laborer's and landlord and other
similar Liens relating to amounts that are not yet due and payable, or that
are being contested in good faith by appropriate proceeding, for which
adequate reserves have been established, and (ii) Liens incurred in the
ordinary course of business in connection with worker's compensation,
unemployment insurance or similar legislation. La Quinta covenants and
agrees that it shall not, and shall not permit Investments, LQ-I or LQ-II
to, hereafter agree with any Person (other than Administrative Lender) not
to grant a Lien on any of its assets or not to permit the pledge any of its
equity interest.
SECTION 5. INFORMATION AS TO LA QUINTA.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS BY LA QUINTA. La Quinta
will deliver to each Bank which has Bank Debt:
(A) As soon as practicable after the end of each of the first
three quarterly fiscal periods in each fiscal year of La Quinta,
and in any event within 45 days thereafter, duplicate copies of
(1) Combined balance sheets, statements of earnings,
shareholders' equity and cash flows for the portion of the
fiscal year ending with such quarter; all in reasonable
detail and accompanied by an Officer's Certificate
certifying that the aforementioned financial statements
present fairly the financial position of La Quinta (Combined
Company) at the end of such quarter and the results of
operations and the changes in financial position for the
portion of the fiscal year ending with such quarter,
determined in accordance with GAAP;
(2) An Officer's Certificate certifying to the amount of Bank
Debt outstanding at the end of the fiscal quarter identified on
an EXHIBIT A attached thereto, which for the purpose of this
Agreement shall become EXHIBIT A hereto; and
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(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 and 4.14.
(B) As soon as practicable after the end of each fiscal year of
La Quinta, and in any event within 120 days thereafter, duplicate
copies of:
(1) Combined balance sheets, statements of earnings,
shareholders' equity and cash flows of La Quinta for such
year; all in reasonable detail, prepared on a basis
consistent with the financial statements delivered to all
Banks in prior periods and accompanied by an unqualified
opinion and report of KPMG Peat Marwick, or other
independent certified accountants of recognized standing
selected by La Quinta and reasonably consented to by Banks,
which report shall state that no default under this
Agreement and no condition or event which after notice or
lapse of time or both would constitute a default under this
Agreement has come to the knowledge of such accountants or,
if such is not the case, the details of such default or such
condition or event;
(2) Operating statements for such year and the
preceding two years with respect to all properties pledged
to any Bank to secure Bank Debt;
(3) An Officer's Certificate certifying to the amount of Bank
Debt outstanding at the last day of such year identified on an
EXHIBIT A attached thereto, which for the purpose of this
Agreement shall become EXHIBIT A hereto; and
(4) An Officer's Certificate (with calculations and a new
EXHIBIT E attached thereto) certifying (i) as to any increases
or reductions in interest in the Significant Investments, and
(ii) compliance with Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.10,
4.11, 4.12, 4.13 and 4.14.
(C) As soon as practicable after La Quinta or any Subsidiary
files with the S.E.C. any of the following documents and in any
event within 10 days thereafter, a copy of:
(1) Any final Registration Statement filed for the
registration of any securities under the Securities Act of
1933, as amended (except a Registration Statement on Form S-
8 for the registration of stock to be issued in connection
with any Stock Plan);
(2) Each Annual and Periodic Report filed under
Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended;
-19-
(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 4.22 hereof.
(G) With reasonable promptness, such other data and information
as from time to time may be reasonably requested by any Bank.
(H) Notwithstanding anything in this Section 5.1 to the
contrary, (i) if the terms of any Subordinated Debt of La Quinta
requires delivery of Parent Company financial statements and
(ii) any Bank shall request delivery of Parent Company financial
statements, La Quinta shall also deliver to such Bank the
financial statements required to be delivered pursuant to
(1) Section 5.1(A) on a Parent Company basis within 60 days after
the end of the first three quarterly fiscal periods of La Quinta
and (2) Section 5.1(B) on a Parent Company basis within 120 days
after the end of each fiscal year of La Quinta.
5.2 OFFICER'S CERTIFICATE. Each set of financial statements
delivered pursuant to Subsection 5.1 (A) and (B) shall be accompanied by an
Officer's Certificate stating whether there exists on the date of such
certificate any condition or event which then constitutes, or which after
notice or lapse of time or both, would constitute, a breach of any covenant
herein, and if any such condition or event then exists, specifying the
nature and period of existence thereof and the action La Quinta is taking
or proposes to take with respect thereto.
-20-
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, 4.22, 4.23 or
4.24, 4.25 or 4.26 of this Agreement or (ii) any covenant contained in
Sections 4.1, 4.2, 4.9, 4.19, 4.20 or 4.21 failure to perform or observe
any such covenant has become known to an Authorized Officer or (B) written
notice thereof shall have been given by any Bank to La Quinta or (iii) any
other covenant contained in this Agreement to be performed or observed by
it and such failure continues for a period of 30 days after any Bank has
given written notice specifying such failure to La Quinta, shall be deemed,
subject to the waiver provisions of Section 7.2 hereof, to be a default or
event of default (however designated) under any Bank Debt, notwithstanding
the specific enumeration of the specific defaults or events of default with
respect to such Bank Debt, and any Bank may perform all rights and remedies
granted such Bank under the Bank Debt owing to such as if a default or
event of default specifically enumerated in such Bank Debt had occurred.
La Quinta further acknowledges and agrees that the covenants set forth in
this Agreement and the effect of the failure to perform such covenants as
set forth in this Section 6 shall be deemed to be incorporated by reference
in such Bank Debt, MUTATIS MUTANDIS. The grace periods provided for in
this Section 6 are in lieu of and not in addition to any grace periods
provided with respect to any Bank Debt.
SECTION 7. MISCELLANEOUS.
7.1 NOTICE. All notices, requests, consents and demands shall be in
writing and shall be delivered by hand or overnight courier service, mailed
or sent by telecopy, to the respective addresses specified below, or, as to
any party, to such other address as may be designated by it in written
notice to all other parties. All notices, requests, consents and demands
hereunder shall be deemed to have been given on the date of receipt if
delivered by hand or overnight courier service or sent by telecopy, or if
mailed, on the earlier of actual receipt or three (3) days after being
mailed by certified mail, return receipt requested, postage prepaid,
addressed as aforesaid.
La Quinta Inns, Inc.
112 East Pecan Street
San Antonio, Texas 78205
Attention: Vice President - Treasurer
with a copy to:
La Quinta Inns, Inc.
112 East Pecan Street
San Antonio, Texas 78205
Attention: Office of General Counsel
-21-
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: Charles T. Bridgeman
Citicorp USA, Inc.
2001 Ross Avenue
1400 Trammel Crow Center
Dallas, TX 75201
Attention: Shafique Janmohamed
Bank of Scotland
2660 Citicorp Center
Houston, Texas 77002
Attention: Janna Blanter
Bank of America Illinois
333 Clay Street, Suite 4550
Houston, Texas 77002
Attention: W. Thomas Barnett
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attention: Alan Miller
-22-
U.S. Bank of Washington, National Association
555 Southwest Oak Street, Suite 400
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 4.23 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.
-23-
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, but in making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart. It is
not necessary that each Bank execute the same counterpart, so long as
counterparts are executed by La Quinta and each Bank.
7.9 TERMINATION AND EFFECTIVENESS OF THIS AGREEMENT. This Agreement
shall remain in full force and effect so long as there is any Bank Debt
outstanding. At such time as there is no longer any Bank Debt outstanding,
this Agreement shall terminate and be of no further force and effect. This
Agreement shall be effective upon the execution hereof by the Banks
required to amend the Prior Master Covenant Agreement pursuant to
Section 7.2 thereof.
7.10 ADJUSTMENT OF PERCENTAGES. The percentages of each Bank set
forth on EXHIBIT A hereto shall be automatically adjusted subsequent to the
date of this Agreement as a result of (i) any payment or prepayment of any
Bank Debt, (ii) any renewals, extensions, or refinancings of Bank Debt
among the Banks, (iii) participations in Bank Debt sold by one Bank to
another Bank or any purchase or assumption of Bank Debt between or among
Banks, (iv) assignments of Bank Debt pursuant to Section 7.13 hereof or
(v) any additional unsecured Debt incurred by La Quinta to one or more
Banks not to exceed $40,000,000 in aggregate principal amount; 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
-24-
as such participant (or prospective participant) first executes and delivers
to the respective Bank an agreement (a "CONFIDENTIALITY AGREEMENT") in
substantially the form of EXHIBIT F hereto; and provided finally that in no
event shall any Bank be obligated or required to return any materials
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.
7.14 ACCOUNTING TERMS. All accounting terms used herein and not
otherwise defined herein shall be construed in accordance with GAAP, and
all financial computations and determinations shall be made on a Combined
basis.
=========================================================================
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
=========================================================================
-25-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of April 21, 1995
LA QUINTA INNS, INC.
By: /s/ DEWEY W. CHAMBERS
--------------------------------
Dewey W. Chambers, Vice
President-Treasurer
The following Subsidiaries of La Quinta
hereby acknowledge and agree to the covenants
and restrictions set forth herein by signing
below:
LA QUINTA REALTY CORP.
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
LA QUINTA PLAZA, INC.
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
LA QUINTA FINANCIAL CORPORATION
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
-26-
LA QUINTA INVESTMENTS, INC.
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
LQI ACQUISITION CORPORATION
By:
--------------------------------
Its:
-------------------------------
LQM OPERATING PARTNERS, L.P.
By: La Quinta Realty Corp., its General Partner
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
LA QUINTA MOTOR INNS, LIMITED PARTNERSHIP
By: La Quinta Realty Corp., its General Partner
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
-27-
LA QUINTA INVESTMENTS, INC.
By:
--------------------------------
John F. Schmutz, Vice President
LQI ACQUISITION CORPORATION
By: /s/ ROLAND B. BLISS
--------------------------------
Its: Roland B. Bliss, President & Treasurer
-------------------------------
LQM OPERATING PARTNERS, L.P.
By: La Quinta Realty Corp., its General Partner
By:
--------------------------------
John F. Schmutz, Vice President
LA QUINTA MOTOR INNS, LIMITED PARTNERSHIP
By: La Quinta Realty Corp., its General Partner
By:
--------------------------------
John F. Schmutz, Vice President
-27-
LQM OPERATING PARTNERS, L.P.
By: La Quinta Realty Corp., its General Partner
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
LQ-BIG APPLE JOINT VENTURE
By: La Quinta Inns, Inc., its Partner
By: /s/ DEWEY W. CHAMBERS
--------------------------------
Dewey W. Chambers,
Vice President-Treasurer
By: La Quinta Investments, Inc., its Partner
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
LQ-LNL LIMITED PARTNERSHIP
By: La Quinta Inns, Inc., its Managing General Partner
By: /s/ DEWEY W. CHAMBERS
--------------------------------
Dewey W. Chambers,
Vice President-Treasurer
-28-
LQ-EAST IRVINE JOINT VENTURE
By: La Quinta Inns, Inc., its Partner
By: /s/ DEWEY W. CHAMBERS
--------------------------------
Dewey W. Chambers,
Vice President-Treasurer
By: La Quinta Investments, Inc., its Partner
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
LQ-INVESTMENTS I
By: La Quinta Inns, Inc., its Managing General Partner
By: /s/ DEWEY W. CHAMBERS
--------------------------------
Dewey W. Chambers,
Vice President-Treasurer
By: La Quinta Investments, Inc., a General Partner
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
-29-
LQ-INVESTMENTS II
By: La Quinta Inns, Inc., its Managing General Partner
By: /s/ DEWEY W. CHAMBERS
--------------------------------
Dewey W. Chambers,
Vice President-Treasurer
By: La Quinta Investments, Inc., a General Partner
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
LA QUINTA INNS OF LUBBOCK, INC.
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
LA QUINTA INNS OF PUERTO RICO, INC.
By: /s/ JOHN F. SCHMUTZ
--------------------------------
John F. Schmutz, Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ DOUGLAS E. HUTT
--------------------------------
Douglas E. Hutt
Senior Vice President
-30-
THE FROST NATIONAL BANK
By: /s/ Suzanne Houser
--------------------------------
Its: Vice President
--------------------------------
-31-
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/ Charles T. Bridgeman
--------------------------------
Its: Vice President
--------------------------------
-32-
CITICORP USA, INC.
By: /s/ BARBARA A. COHEN
--------------------------------
Barbara A. Cohen
Its: Vice President
-33-
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ DAN M. DANELO
--------------------------------
Dan M. Danelo
Its: Sr. Vice President
-34-
BANK OF SCOTLAND
By: /s/ ELIZABETH WILSON
--------------------------------
Elizabeth Wilson
Its: Vice President and Branch Manager
-35-
BANK OF AMERICA ILLINOIS
By: /s/ W. THOMAS BARNETT
--------------------------------
W. Thomas Barnett
Its: Vice President
-36-
BANK ONE, TEXAS, N.A.
By: /s/ Alan L. Miller
--------------------------------
Its: Vice President
-37-
U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION
By: /s/ BLAKE R. HOWELLS
--------------------------------
Blake R. Howells
Its: Vice President
-38-
EXHIBIT A
LA QUINTA INNS, INC.
MASTER COVENANT AGREEMENT
SCHEDULE OF BANK DEBT
MARCH 31, 1995
DOLLARS IN THOUSANDS
FIRST NATIONS TEXAS CITIBANK BANK OF BANK CONTINENTAL U.S. BANK OF
INTERSTATE BANK COMMERCE FROST CITICORP SCOTLAND ONE BANK WASHINGTON TOTAL
---------- ---- -------- ----- ------- -------- --- ---- ---------- -----
PRE-EXISTING CREDIT
FACILITIES
IRB Bonds
578 North Little Rock,
AR $ 888 $ 888
579 Gretna, LA 1,580 1,580
580 New Orleans
(Veterans), LA 1,298 1,298
592 Monroe, LA 1,360 1,360
721 New Orleans
(Bullard), LA 1,929 1,929
------- ------- ------- ------- ------- ------- ------- ------- ------- --------
TOTAL PRE-EXISTING
CREDIT FACILITIES $ 7,055 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 7,055
======= ======= ======= ======= ======= ======= ======= ======= ======= ========
CURRENT CREDIT
FACILITIES
LETTERS OF CREDIT
557 Aurora, CO $ 190 $ 696 $ 292 $ 292 $ 571 $ 292 $ 254 $ 292 $ 190 $ 3,069
561 Kalamazoo, MI 139 508 213 213 417 213 185 213 139 2,240
562 Schaumburg, IL 248 908 381 381 745 381 331 381 248 4,005
563 Texarkana, TX 168 612 257 257 503 257 223 257 168 2,700
565 Savannah, GA 181 661 277 277 543 277 241 277 181 2,916
568 Bossier City, LA 41 151 63 63 124 63 55 63 41 665
569 Eagle Pass, TX 151 552 232 232 453 232 201 232 151 2,434
570 San Bernardino, CA 401 1,467 615 615 1,204 615 535 615 401 6,470
574 Baton Rouge, LA 186 679 285 285 557 285 247 285 186 2,992
576 Nacogdoches, TX 163 595 250 250 488 250 217 250 163 2,624
583 Virginia Beach 181 661 277 277 543 277 241 277 181 2,916
584 Oakbrook Terrace, IL 222 812 341 341 666 341 296 341 222 3,580
588 Sulphur 183 669 281 281 549 281 244 281 183 2,951
596 El Paso, TX 119 435 182 182 357 182 159 182 119 1,918
625 Stockton, CA 222 812 341 341 666 341 296 341 222 3,580
633 Hampton, VA 236 865 363 363 709 363 315 363 236 3,812
634 Elk Grove, IL 236 865 363 363 709 363 315 363 236 3,812
636 Wheatridge, CO 152 557 234 234 457 234 203 234 152 2,455
------- ------- ------- ------- ------- ------- ------- ------- ------- --------
TOTAL LETTERS OF CREDIT $ 3,420 $12,504 $ 5,244 $ 5,244 $10,259 $ 5,244 $ 4,560 $ 5,244 $ 3,420 $ 55,139
======= ======= ======= ======= ======= ======= ======= ======= ======= ========
REVOLVING CREDIT
COMMITMENT $ 2,791 $10,205 $ 4,280 $ 4,280 $ 8,373 $ 4,280 $ 3,721 $ 4,280 $ 2,791 $ 45,000
TERM LOAN COMMITMENT 11,412 41,727 17,499 17,499 34,237 17,499 15,216 17,499 11,412 184,000
------- ------- ------- ------- ------- ------- ------- ------- ------- --------
TOTAL CURRENT CREDIT
FACILITIES $14,203 $51,932 $21,779 $21,779 $42,610 $21,779 $18,937 $21,779 $14,203 $229,000
======= ======= ======= ======= ======= ======= ======= ======= ======= ========
GRAND TOTAL $24,678 $64,436 $27,023 $27,023 $52,869 $27,023 $23,497 $27,023 $17,623 $291,194
======= ======= ======= ======= ======= ======= ======= ======= ======= ========
EXHIBIT B
LA QUINTA INNS, INC.
EXISTING INVESTMENTS
FEBRUARY 28, 1995
AMOUNT
-------
(DOLLARS IN THOUSANDS)
INVESTMENTS; AT COST:
State of Israel Bonds $ 140
Hotel Industry Switch 75
------
TOTAL $ 215
------
------
LAND HELD FOR FUTURE DEVELOPMENT; AT CURRENT VALUE:
Bexar County $1,324
------
------
LAND HELD FOR SALE; AT CURRENT VALUE:
Ft. Worth $ 365
Maitland 603
Mesquite 337
Greensboro 344
St. Louis 397
Ft. Lauderdale 618
------
TOTAL $2,664
------
------
EXHIBIT B
LA QUINTA INNS, INC.
EXISTING INVESTMENTS
FEBRUARY 28, 1995
(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. $2,411,892 First lien on real estate
Jai Ambay, Inc. La Quinta Inns, Inc. 736,230 First lien on real estate
Willow Tree #4 La Quinta Inns, Inc. 929,058 Third lien on real estate
Jer-Wei Inc. La Quinta Inns, Inc. 1,659,506 First lien on real estate
Katy Hospitality Co. La Quinta Inns, Inc. 2,081,658 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
THISCO La Quinta Inns, Inc. 70,000 Unsecured
Miscellaneous debtors La Quinta Inns, Inc. 559,128 Unsecured
Sportsplex of America/SportsAmerica La Quinta Inns, Inc. 399,465 Unsecured
Wytex La Quinta Inns, Inc. 232,006 Unsecured
Shoney's La Quinta Development Partners, L.P. 102,445 Unsecured
I 20 South Collins, Ltd. La Qunita Inns, Inc. 275,000 First lien on real estate
H & W Moline Restaurant, Inc. La Qunita Inns, Inc. 25,657 Unsecured
Wytex La Quinta Development Partners, L.P. 39,954 Unsecured
Wytex LQM Operating Partners, L.P. 59,804 Unsecured
Anthony Koutsoukos La Quinta Inns, Inc. 5,000 Unsecured
-----------
$9,938,004
============
EXHIBIT C
LA QUINTA INNS, INC.
SUBSIDIARIES & UNINCORPORATED
VENTURE INVESTMENTS
MARCH 31, 1995
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 64.81
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 1 100
LQ-West Bank Joint Venture 1982 1 60
LQ-Denver Peoria St., LTD 1972 1 100
La Quinta Development Partners, L.P. 1990 43 40
San Antonio Main Avenue Motel, Ltd. 1967 N/A 66.67
LQ-LNL Joint Venture 1981 2 100
LQ Investments I 1987 4 100
LQ Investments II 1987 5 100
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
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
La Quinta Inns of Lubbock, Inc. 1995 1 100
La Quinta Inns of Puerto Rico, Inc. 1994 N/A 100
---
TOTAL 99
===
EXHIBIT D
EXISTING LIENS
LA QUINTA INNS, INC. AND UNINCORPORATED JOINT VENTURES
MARCH 31, 1995
PROPERTY
OWNERSHIP NO. LOCATION BALANCE DESCRIPTION
- --------------------------- --- ------------------------ ------------ -----------
La Quinta Inns, Inc. 518 Denver-South $ 525,469 Mortgage
La Quinta Inns, Inc. 519 Dallas-D/FW-Irving 194,621 Mortgage
La Quinta Inns, Inc. 520 Denver-Airport 391,265 Mortgage
La Quinta Investments, Inc. 523 San Antonio-Lackland 2,784,485 Mortgage
La Quinta Inns, Inc. 524 Dallas-Regal Row 2,665,931 Mortgage
La Quinta - Wichita, Kansas 532 Wichita-Town East Square 406,797 Mortgage
No. 532, LTD.
La Quinta Inns, Inc. 534 Indianapolis-Airport 1,538,090 Mortgage
La Quinta Inns, Inc. 549 Columbus-Fort Benning 952,884 Mortgage
La Quinta Inns, Inc. 559 Nashville-South 1,582,416 Mortgage
La Quinta Inns, Inc. 560 Lexington 896,768 Mortgage
La Quinta Inns, Inc. 575 Memphis-Airport 1,344,918 Mortgage
La Quinta Inns, Inc. 599 Houston-La Porte 1,190,000 IRB
La Quinta Inns, Inc. 626 Birmingham 1,135,000 IRB
La Quinta Inns, Inc. 627 Pittsburgh-International 1,385,000 IRB
Airport
La Quinta Inns, Inc. 628 Albuquerque-North 2,762,751 Mortgage
La Quinta Inns, Inc. 629 Charlotte-Airport 2,564,280 Mortgage
La Quinta Inns, Inc. 630 Colorado Springs 2,054,361 Mortgage
La Quinta Inns, Inc. 637 Jacksonville-North 279,146 Mortgage
La Quinta Inns, Inc. 637 Jacksonville-North 1,353,162 Mortgage
La Quinta Inns, Inc. 637 Jacksonville-North 456,121 Mortgage
La Quinta Inns, Inc. 639 Amarillo-Medical Center 2,186,218 Mortgage
La Quinta Inns, Inc. 643 San Diego-Vista 2,586,513 Mortgage
La Quinta Inns, Inc. 645 Atlanta-Peachtree Industrial 176,974 Mortgage
La Quinta Inns, Inc. 645 Atlanta-Peachtree Industrial 2,143,772 Mortgage
La Quinta Inns, Inc. 646 Bakersfield 3,079,183 Mortgage
La Quinta Inns, Inc. 658 Deerfield Beach 2,709,680 Mortgage
La Quinta Inns, Inc. 688 Tampa-Clearwater Airport 3,706,841 Mortgage
La Quinta Inns, Inc. 803 Salt Lake City-Midvale 2,048,954 Mortgage
La Quinta Development 4541 Orange County-Costa Mesa 3,436,128 Mortgage
Partners, L.P.
La Quinta Development 4545 Reno-Airport 975,000 Mortgage
Partners. L.P.
La Quinta Development 4564 Tuscaloosa 1,452,499 Mortgage
Partners. L.P.
La Quinta Development 4566 Phoenix-Tempe Sky 1,257,469 Mortgage
Partners. L.P. Harbor Airport
La Quinta Development 4640 San Antonio-Toepperwein 2,309,387 Mortgage
Partners. L.P.
La Quinta Development 4642 Orlando-Airport 2,524,929 Mortgage
Partners. L.P.
La Quinta Inns, Inc. 9050 Prudential Note 14,018,353 Mortgage
La Quinta Inns, Inc. 9050 Prudential Note 1,059,205 Mortgage
La Quinta Inns, Inc. 9050 Prudential Note 28,058,135 Mortgage
-----------
Total 100,192,705
-----------
-----------
EXHIBIT E
LA QUINTA INNS, INC.
GUARANTEES AND CONTINGENT OBLIGATIONS
MARCH 31, 1995
LONG TERM DEBT
WITH RECOURSE
PARTNERSHIP OR ENTITY TO LA QUINTA
- --------------------- --------------
La Quinta-Wichita Kansas, No. 532, Ltd. $ 406,797
LQ-West Bank Joint Venture 1,579,835
La Quinta Development Partners, L.P.:
- - La Quinta Inns, Inc. Guarantees 11,955,413
- - La Quinta Inns, Inc. General Partner Obligations 3,500,000
-----------
$17,442,045
===========
EXHIBIT F
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and Address
of Prospective Participant]
Re: Fourth Amended and Restated Master Covenant Agreement dated as of
April 21, 1995, 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 PERCENTAGE OF
NAME OR 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 66.67
La Quinta-Dallas Central Expressway, Ltd. Texas 64.81
LQ Motor Inn Venture-Austin No. 530* Texas 50
La Quinta-Wichita, Kansas, No. 532, Ltd. Texas 50
LQ-West Bank Joint Venture* Texas 60
La Quinta Development Partners, L.P.* Delaware 40
*Indicates Joint Venture Agreements with a buy/sell provision.