UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____.
Commission file number 1-14045
LASALLE HOTEL PROPERTIES
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(Exact name of registrant as specified in its charter)
Maryland 36-4219376
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(State or other jurisdic- (IRS Employer Identification No.)
tion of incorporation or
organization)
4800 Montgomery Lane, Suite M25, Bethesda, Maryland 20814
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 301/941-1500
Securities Registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Class on which registered
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Common Shares of New York Stock Exchange, Inc.
Beneficial Interest
($.01 par value)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 or Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive or
proxy information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ ]
As of March 21, 2001, there were 18,250,024 shares of the Registrant's
Common Shares issued and outstanding. The aggregate market value of the
Registrant's Common Shares held by non-affiliates of the Registrant
(17,698,214 shares) at March 21, 2001 was approximately $281.6 million. The
aggregate market value was calculated by using the closing price of the
stock as of that date on the New York Stock Exchange.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its 2001 Annual Meeting of
Shareholders to be held on May 16, 2001 are incorporated by reference in
Part III of this report.
<PAGE>
LASALLE HOTEL PROPERTIES
INDEX
FORM 10-K
REPORT
ITEM NO. PAGE
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PART I
1. Business. . . . . . . . . . . . . . . . . . . . . . . 4
2. Properties. . . . . . . . . . . . . . . . . . . . . . 10
3. Legal Proceedings . . . . . . . . . . . . . . . . . . 17
4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . . . . 17
PART II
5. Market for Registrant's Common Shares and
Related Shareholder Matters . . . . . . . . . . . . . 17
6. Selected Financial Data . . . . . . . . . . . . . . . 19
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 22
7A. Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . . . . . . . . 32
8. Consolidated Financial Statements and
Supplementary Data. . . . . . . . . . . . . . . . . . 32
9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure. . . . . . . . 33
PART III
10. Trustees and Executive Officers of the Registrant . . 33
11. Executive Compensation. . . . . . . . . . . . . . . . 33
12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . 33
13. Certain Relationships and Related Transactions. . . . 33
PART IV
14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . . . . 34
<PAGE>
The "Company" means LaSalle Hotel Properties, a Maryland real estate
investment trust, and one or more of its subsidiaries (including LaSalle
Hotel Operating Partnership, L.P.), and the predecessor thereof or, as the
context may require, LaSalle Hotel Properties only or LaSalle Hotel
Operating Partnership, L.P. only.
INFORMATION CONTAINED IN THIS FINANCIAL REPORT CONTAINS "FORWARD-
LOOKING STATEMENTS" RELATING TO, WITHOUT LIMITATION, FUTURE ECONOMIC
PERFORMANCE, PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS AND
PROJECTIONS OF REVENUE AND OTHER FINANCIAL ITEMS, WHICH CAN BE IDENTIFIED
BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD,"
"EXPECT," "ANTICIPATE," "ESTIMATE" OR "FACTORS THAT MAY INFLUENCE RESULTS
AND ACCURACY OF FORWARD LOOKING STATEMENTS" AND ELSEWHERE IDENTIFY
IMPORTANT FACTORS WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS,
INCLUDING CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENTS.
PART I
ITEM 1. BUSINESS (dollars in thousands)
GENERAL
The Company was organized as a Maryland real estate investment trust
on January 15, 1998 to own hotel properties and to continue and expand the
hotel investment activities of Jones Lang LaSalle Incorporated (formerly
LaSalle Partners Incorporated) and certain of its affiliates (collectively
"JLL"). From its inception through December 31, 2000, JLL acted as an
external advisor providing management, acquisition, advisory and
administration services pursuant to an Advisory Agreement and Employee
Lease Agreement (collectively the "Advisory Agreement"). Effective
January 1, 2001, the Company terminated the Advisory Agreement and
relationship with LaSalle Hotel Advisors, Inc. (the "Advisor"), a wholly
owned subsidiary of JLL and became self-managed. As of January 1, 2001,
all of the management and staff of the Advisor have become employees of the
Company. As of December 31, 2000, the Company owned interests in 13 hotels
with approximately 5,300 guest rooms (the "Hotels") located in eleven
states. All of the Hotels are leased under participating leases
("Participating Leases") which provide for rent equal to the greater of
base rent ("Base Rent") or participating rent ("Participating Rent") which
is based on fixed percentages of gross hotel revenues. All of the Hotels
are managed by independent hotel operators ("Hotel Operators"). The Company
is a real estate investment trust ("REIT") as defined in the Internal
Revenue Code of 1986, as amended (the "Code").
Substantially all of the Company's assets are held by, and all of its
operations are conducted through LaSalle Hotel Operating Partnership, L.P.
(the "Operating Partnership"). The Company is the sole general partner
with an approximate 91.6% ownership at December 31, 2000. At December 31,
2000, continuing investors held, in the aggregate, 1,539,147 Units or an
8.4% limited partnership interest in the Operating Partnership. The
outstanding Units are redeemable at the option of the holder for a like
number of Common Shares of the Company, or, at the option of the Company,
for the cash equivalent thereof. On January 1, 2001, JLL and its
affiliates redeemed 964,334 Units resulting in only 574,813 Units or 3.1%
of the Operating Partnership not held by LHO.
The hotel industry is highly competitive. Each of the Company's
Hotels is located in a developed area that includes other hotel properties.
The number of competitive hotel properties in a particular area could have
a material adverse effect on occupancy, average daily rate ("ADR") and room
revenue per available room ("RevPAR") of the Hotels.
<PAGE>
The Company may be competing for investment opportunities with
entities that have substantially greater financial resources than the
Company including lodging companies and other REITs. These entities
generally may be able to accept more risk than the Company can prudently
manage, including risks with respect to the creditworthiness of a hotel
operator or the geographic proximity of its investments. Competition
generally may reduce the number of suitable investment opportunities
offered to the Company and increase the bargaining power of property owners
seeking to sell.
The Company's principal offices are located at 4800 Montgomery Lane,
Suite M25, Bethesda, MD 20814.
FORMATION, INITIAL PUBLIC OFFERING AND SUBSEQUENT ACQUISITIONS/DISPOSITIONS
The Company completed its initial public offering (the "IPO") on
April 29, 1998. In connection with the IPO, the Company raised gross
proceeds of $255.6 million and net proceeds (after deducting underwriting
discounts and offering expenses) of approximately $234.1 million. The
Company contributed all of the net proceeds of the IPO to LaSalle Hotel
Operating Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership"), in exchange for an approximate 82.6% general and limited
partnership interest in the Operating Partnership. The Operating
Partnership used the net proceeds from the Company, the issuance of an
additional 0.9 million Common Shares, the issuance of 1.3 million rights to
purchase Common Shares and the issuance of 3.2 million limited partnership
interests ("Units"), representing approximately 17.4% of the Operating
Partnership, to acquire ten upscale and luxury full service hotels (the
"Initial Hotels").
The Company completed the acquisition of two additional hotel
properties during 1998. On June 1, 1998, the Company acquired a 95.1%
interest in the 457-room San Diego Paradise Point Resort for an aggregate
purchase price of $73.0 million. On June 24, 1998, the Company acquired a
100% interest in the 270-room Harborside Hyatt Conference Center & Hotel
for an aggregate purchase price of $73.5 million.
On June 2, 1999, the Company acquired a 100% interest in the 182-room
Hotel Viking and the adjacent 12-room inn in Newport, Rhode Island (the
"Newport Property") through an indirect subsidiary, LHO Viking Hotel,
L.L.C. (the "Viking Subsidiary LLC"). The Viking Subsidiary LLC is a
limited liability company, of which the Operating Partnership is the sole
member. The Newport Property was acquired from Bellevue Properties Inc.
("Bellevue"), for an aggregate purchase price of $28.0 million funded with
proceeds from a borrowing under the Company's 1998 Amended Credit Facility.
On January 25, 2000, the Company entered into a joint venture
arrangement (the "Chicago Hotel Venture") with an institutional investor to
acquire the 1,176-room Chicago Marriott Downtown (the "Chicago Property")
in Chicago, Illinois. The Company through the Operating Partnership, owns
a 9.9% equity interest in the Chicago Hotel Venture. The Company will
receive an annual preferred return in addition to its pro rata share of
annual cash flow. The Company will also have the opportunity to earn an
incentive participation in net sale proceeds based upon the achievement of
certain overall investment returns, in addition to its pro rata share of
net sale or refinancing proceeds. The Chicago Property was leased to
Chicago 540 Lessee, Inc., in which the Company also owns a 9.9% equity
interest. The institutional investor owns a 90.1% controlling interest in
both the Chicago 540 Hotel Venture and Chicago 540 Lessee, Inc. Marriott
International continues to operate and manage the Chicago Property.
<PAGE>
On July 28, 2000, the Operating Partnership reached a definitive
agreement with the shareholders of LaSalle Hotel Lessee, Inc. ("LHL"), to
purchase all of the issued and outstanding shares of capital stock of LHL
for $500. LHL leases four of the Company's owned hotels, including
Marriott Seaview Resort, LaGuardia Airport Marriott, Omaha Marriott and
Harborside Hyatt Conference Center and Hotel. Effective January 1, 2001,
LHL is a 100% owned subsidiary of the Company as provided for under the
taxable-REIT subsidiary provisions. It is currently anticipated that the
cost associated with the transaction will be expensed in the first quarter
of 2001.
On August 16, 2000, the Company sold Holiday Inn Plaza Park for
$4,600. The asset had been classified as held for sale since December 31,
1999 and was no longer being depreciated. Based on initial pricing
expectations, the net book value of the asset was reduced by $2,000 to
$5,508 in 1999. As of June 30, 2000, a purchase and sale agreement had
been entered into with an expected net sales proceeds of $4,242. As a
result, the Company recognized an additional writedown of $1,266 in the
second quarter of 2000, which included $358 of estimated accrued closing
costs.
On November 15, 2000, the Company announced its Board of Trustees
voted to become a self-managed company effective January 1, 2001 and
terminate its advisory relationship with the Advisor. In connection with
the termination, the Advisor will receive $600 for 2001 transition services
and the Company will purchase assets used to operate the Company at book
value. The entire management team has become employees of LHO and
continues to oversee and manage all activities of the Company under the new
self-managed structure.
Prior to January 1, 2001, the effective date of the REIT Modernization
Act, in order for the Company to satisfy certain requirements for
qualifications as a REIT, neither it nor the Operating Partnership could
lease or operate any of the hotels in which it invested. Accordingly, four
of the Company's Hotels were leased to LHL. The Company owned a 9%
interest in LHL in which the Company together with JLL and LPI Charities, a
charitable corporation organized under the laws of the state of Illinois,
made all material decisions concerning the LHL's business affairs and
operations. The remaining nine Hotels were and will continue to be leased
to unaffiliated lessees (affiliates of whom also operate these Hotels).
THE ADVISOR
Upon completion of the IPO, the Company entered into the Advisory
Agreement with the Advisor to provide acquisition, management, advisory and
administrative services to the Company. The initial term of the Advisory
Agreement extended through December 31, 1999, subject to successive,
automatic one year renewals unless terminated according to the terms of the
Advisory Agreement. The Company's Board of Trustees approved the renewal
of the Advisory Agreement through December 31, 2000. Under the agreement,
the Company had the ability to terminate the Advisory Agreement without
termination fees or penalties upon notice given of at least 180 days. On
November 15, 2000, the Company's Board of Trustee's approved the early
termination of the Advisory Agreement and voted to become a self-managed
REIT effective January 1, 2001. The Company will pay the Advisor $600 for
2001 transition services including waiving the termination notice period,
and providing support and advice through the first quarter of 2001. In
addition, the Company will purchase at book value, the assets used to
operate the Company.
<PAGE>
GROWTH STRATEGIES
The Company's primary objectives are to provide a stable stream of
income to its shareholders through increases in distributable cash flow and
to increase long-term total returns to shareholders through appreciation in
the value of its Common Shares. To achieve these objectives, the Company
seeks to (i) enhance the return from, and the value of, the Company's
Hotels and any additional hotels and (ii) invest in or acquire additional
hotel properties on favorable terms.
The Company seeks to achieve revenue growth principally through
(i) renovations and/or expansions at certain of the Company's Hotels,
(ii) acquisitions of full service hotel properties located in convention,
resort, urban and major business markets in the U.S. and abroad, especially
upscale and luxury full service hotels in such markets where the Company
perceives strong demand growth or significant barriers to entry, and (iii)
selective development of hotel properties, particularly upscale and luxury
full service properties in high demand markets where development economics
are favorable.
The Company intends to acquire additional hotel properties in targeted
markets, consistent with the growth strategies outlined above and which
may:
. possess unique competitive advantages in the form of location,
physical facilities or other attributes;
. be available at significant discounts to replacement cost, including
when such discounts result from reduced competition for properties with
long-term management and/or franchise agreements;
. benefit from brand or franchise conversion, new management,
renovations or redevelopment or other active and aggressive asset
management strategies; or
. have expansion opportunities.
The Company believes its acquisition capabilities are enhanced by its
considerable experience, resources and relationships in the hotel industry
specifically and the real estate industry generally. Additionally, the
Company believes that having multiple independent Hotel Operators creates a
network that will continue to generate significant acquisition
opportunities.
RECENT DEVELOPMENTS
The Company is actively marketing Radisson Hotel Tampa for sale.
Accordingly, the asset was classified as held for sale on December 6, 2000
and depreciation was suspended as of that date. Based on initial pricing
expectations, the Company recognized a writedown of $11,030, reducing the
net book value of the asset to $17,027 in 2000, which included $200 of
estimated accrued closing costs. There can be no assurance that real
estate held for sale will be sold.
On February 26, 2001, the Company terminated the operating lease on
the Hotel Viking with Bellevue Properties, Inc. and entered into a lease
with LHL on essentially the same terms. Bellevue Properties, Inc. received
$840 in payment relating to termination, tax settlement due under the
Purchase and Sale Agreement and other items. Noble House Hotel and Resorts
replaced Bellevue Properties, Inc. as manager for the property.
<PAGE>
On March 1, 2001, the Company redeemed the $40.0 million tax-exempt
Massport Bonds, which had a 10.0% coupon. Proceeds for the redemption were
derived from $37.1 million of tax exempt and $5.4 million of taxable bonds,
each having a 17-year maturity, bearing interest based on a weekly floating
rate and having no principal reductions for the life of the bonds. Due to
the nature of these bonds, they can be redeemed at any time without
penalty. The new bonds are secured by letters of credit issued by GE
Capital Corporation. The letters of credit are collateralized by the
Harborside Hyatt Conference Center and Hotel. The excess proceeds of
approximately $5,900 were used to pay down borrowings on the 1998 Second
Amended Credit facility.
On March 8, 2001, the Company acquired a 100% interest in four full-
service hotels with a total of 502 guest rooms in Washington, D.C. for an
aggregate purchase price of approximately $44.0 million. Each of the four
hotels will be fully renovated, improved and repositioned as unique high-
end, independent boutique hotels. The Company will undertake the
redevelopment program, currently projected at a total of approximately
$30.0 million, in conjunction with the Kimpton Hotel & Restaurant Group,
LLC who was also retained to manage and operate the hotel collection.
These four hotels have operated as the 99-room Canterbury Hotel, located at
1733 N Street, NW; the 82-room Clarion Hampshire House Hotel at 1310 New
Hampshire Avenue, NW; the 137-room Quality Hotel and Suites Downtown at
1315 16th Street, NW; and the 184-room Howard Johnson Plaza Hotel and
Suites, 1430 Rhode Island Avenue, NW. Originally constructed as apartment
buildings, each hotel features either large rooms or suites. Upon
completion of the redevelopment program, LaSalle intends to rename each
property and the Kimpton Group will operate each as independent, non-
branded boutique hotels.
HOTEL RENOVATIONS
The Company believes that its regular program of capital improvements
at its Hotels, including replacement and refurbishment of furniture,
fixtures, and equipment ("FF&E"), helps maintain and enhance their
competitiveness and maximizes revenue growth under the Participating
Leases. During the year ended December 31, 2000, the Company spent
approximately $32.5 million on renovations and additional capital
improvements at the Hotels. Additionally, the Company is planning to spend
approximately $14.0 to $16.0 million on renovations and additional capital
improvements at the Hotels during 2001.
Under the Participating Leases, the Company established a reserve for
capital improvements at the Hotels (the "Reserve Funds"). The Reserve
Funds have not been recorded on the books and records of the Company, as
such amounts will be capitalized as incurred. The amounts obligated under
the Reserve Funds range from 4.0% to 5.5% of the individual Hotel's total
revenues. The total amount obligated by the Company under the Reserve
Funds was approximately $10.5 million at December 31, 2000, of which $3.4
million is available in restricted cash reserves for future capital
expenditures.
TAX STATUS
The Company has elected to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code. As a result, the Company
generally will not be subject to corporate income tax on that portion of
its net income that is currently distributed to shareholders. A REIT is
subject to a number of highly technical and complex organizational and
operational requirements, including requirements with respect to the nature
of its gross income and assets and a requirement that it currently
distribute at least 90% of its taxable income. The Company may, however,
be subject to certain state and local taxes on its income and property.
Effective January 1, 2001, LHL, a 100% owned subsidiary of the
Company, is a taxable-REIT subsidiary ("TRS") and as such is required to
pay income taxes at the applicable rates.
<PAGE>
SEASONALITY
The Hotels' operations are seasonal. Eight of the Company's Hotels
maintain higher occupancy rates during the second and third quarters. The
Marriott Seaview Resort generates a large portion of its revenue from golf
related business and, as a result, revenues fluctuate according to the
season and the weather. Radisson Hotel Tampa and Le Montrose All Suite
Hotel and Le Meridien Dallas experience their highest occupancies in the
first quarter, while Holiday Inn Beachside Resort and Le Meridien New
Orleans experience their highest occupancies in the first and second
quarters. This seasonality pattern can be expected to cause fluctuations
in the Company's quarterly lease revenue under the Participating Leases.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
liable for the costs of removal or remediation of certain hazardous or
toxic substances on, under, or in such property. Such laws often impose
liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of hazardous or toxic substances. In
addition, the presence of contamination from hazardous or toxic substances,
or the failure to remediate such contaminated property properly, may
adversely affect the owner's ability to borrow using such property as
collateral. Furthermore, a person who arranges for the disposal or
treatment of a hazardous or toxic substance at a property owned by another,
or who transports such substance to such property, may be liable for the
costs of removal or remediation of such substance released into the
environment at the disposal or treatment facility. The costs of
remediation or removal of such substances may be substantial, and the
presence of such substances, may adversely affect the owner's ability to
sell such real estate or to borrow using such real estate as collateral.
In connection with the ownership and operation of the Hotels, the Company,
the Operating Partnership, or the Lessee, as the case may be, may be
potentially liable for such costs.
Phase I environmental site assessments ("ESAs") have been performed on
all of the Hotels by a qualified independent environmental engineer. The
purpose of the Phase I ESAs is to identify potential sources of
contamination for which the Company may be responsible and to assess the
status of environmental regulatory compliance. The Phase I ESAs include
historical reviews of the Hotels, reviews of certain public records,
preliminary investigations of the sites and surrounding properties,
screening for the presence of asbestos-containing materials,
polychlorinated biphenyls, underground storage tanks, and the preparation
and issuance of a written report. The Phase I ESA's do not include
invasive procedures, such as soil sampling or ground water analysis.
The ESAs have not revealed any environmental liability or compliance
concerns that the Company believes would have a material adverse effect on
the Company's business, assets, results of operations, or liquidity, nor is
the Company aware of any material environmental liability or concerns.
Nevertheless, it is possible that the Phase I ESAs did not reveal all
environmental liabilities or compliance concerns or that material
environmental liabilities or compliance concerns exist of which the Company
is currently unaware. Moreover, no assurance can be given that (i) future
laws, ordinances or regulations will not impose any material environmental
liability or (ii) the current environmental condition of the Hotels will
not be affected by the condition of the properties in the vicinity of the
Hotels (such as the presence of leaking underground storage tanks) or by
third parties unrelated to the Operating Partnership or the Company.
<PAGE>
The Company believes that its Hotels are in compliance, in all
material respects, with all federal, state and local environmental
ordinances and regulations regarding hazardous or toxic substances and
other environmental matters, the violation of which would have a material
adverse effect on the Company. The Company has not been notified by any
governmental authority of any material noncompliance, liability or claim
relating to hazardous or toxic substances or other environmental matters in
connection with any of its present properties.
EMPLOYEES
Effective January 1, 2001, the Company has 19 employees. Prior to
January 1, 2001, the date the Company became self-managed, the Company had
no employees. The Advisor managed the day-to-day operations of the
Company. All persons employed in the day-to-day operations of the
Company's Hotels are employees of the management companies engaged by the
Lessees to operate such hotels.
I
TEM 2. PROPERTIES
HOTEL PROPERTIES
At December 31, 2000, the Company owned interests in the following 13
hotel properties:
Number of
Guest
Property Rooms Location
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Radisson Convention Hotel 565 Bloomington, MN
Le Meridien New Orleans 494 New Orleans, LA
Le Meridien Dallas 407 Dallas, TX
Marriott Seaview Resort 297 Absecon, NJ
(Atlantic City)
Holiday Inn Beachside Resort 222 Key West, FL
San Diego Paradise Point Resort 457 San Diego, CA
LaGuardia Airport Marriott 438 New York, NY
Omaha Marriott Hotel 299 Omaha, NE
Radisson Hotel Tampa 269 Tampa, FL
Le Montrose All Suite Hotel 132 West Hollywood, CA
Harborside Hyatt Conference
Center & Hotel 270 Boston, MA
Hotel Viking 237 Newport, RI
Chicago Marriott Downtown 1,176 Chicago, IL
RADISSON CONVENTION HOTEL. Radisson Convention Hotel is an upscale
full service convention hotel located at the intersection of Interstate 494
and Highway 100, approximately 15 minutes from the Minneapolis/St. Paul
International Airport, and five miles from the Mall of America. The hotel
is leased to and operated by affiliates of Radisson Group, Inc.
("Radisson").
<PAGE>
LE MERIDIEN NEW ORLEANS. Le Meridien New Orleans is a luxury full
service convention oriented hotel located in downtown New Orleans, a major
convention city. The hotel is centrally located across the street from the
French Quarter and near the central business district, the Ernest N. Morial
Convention Center and the New Orleans Superdome. The hotel has received
the AAA Four Diamond award for 15 consecutive years. The hotel is subject
to a 99-year ground lease, which expires May 2081. The hotel is leased to
and operated by affiliates of Le Meridien Hotels & Resorts ("Meridien").
LE MERIDIEN DALLAS. Le Meridien Dallas is an upscale full service
convention oriented hotel located in downtown Dallas, approximately 25
minutes from the Dallas/Fort Worth International Airport, in the heart of
the city's arts and financial districts. The hotel is conveniently located
near the City Convention Center, four stops away on the new Dallas light
rail system, with a DART station adjacent to the hotel. The hotel is
leased to and operated by Meridien.
MARRIOTT SEAVIEW RESORT. Marriott Seaview Resort is a luxury golf and
conference resort located in Brigantine Bay, approximately nine miles north
of Atlantic City, New Jersey. The hotel is leased to LHL and operated by
Marriott International, Inc. ("Marriott") pursuant to a long-term
incentive-based operating agreement. The resort received the AAA four
diamond award at the beginning of 2001.
HOLIDAY INN BEACHSIDE RESORT. Holiday Inn Beachside Resort is an
upscale full service resort comprised of several one, two and three-story
buildings, located on an approximately 7.8 acre parcel north of U.S. 1 on
the beach facing the gulf of Mexico. The resort is located on the island
of Key West, considered to have the most consistent weather in Florida, and
benefits from the island's reputation as a popular tourist destination.
The hotel is leased to and operated by affiliates of Crestline Hotel &
Resorts.
SAN DIEGO PARADISE POINT RESORT. San Diego Paradise Point Resort is a
luxury resort that lies on 44 acres and has nearly one mile of beachfront
and is located in the heart of Mission Bay on Vacation Island, a 4,600-acre
aquatic park in southwest San Diego County. The resort is minutes away
from the San Diego International Airport and convenient to many major San
Diego tourist attractions including Sea World, Old Town, Downtown San
Diego, the San Diego Convention Center, Qualcomm Stadium and the San Diego
Zoo. The hotel is subject to a 50-year ground lease, which expires June
2049. The hotel is leased to and operated by WestGroup San Diego
Associates, Ltd ("WestGroup"), an affiliate of Noble House Hotels and
Resorts.
LAGUARDIA AIRPORT MARRIOTT. LaGuardia Airport Marriott is an upscale
full service urban/major business hotel located directly across from New
York's LaGuardia Airport. The hotel is five minutes from Shea Stadium and
the USTA National Tennis Center and 20 minutes from Manhattan. The hotel
is leased to LHL and operated by Marriott pursuant to a long-term incentive
based operating agreement.
OMAHA MARRIOTT HOTEL. Omaha Marriott Hotel is an upscale full service
major business hotel located in the western suburbs of Omaha at one of the
city's busiest intersections (I-680 and West Dodge Road). The hotel is
located in the Regency Office Park, a mixed use development containing over
865,000 square feet of office and retail space, and directly across West
Dodge Road from Westroads Shopping Center, the largest shopping mall in
Omaha. The hotel is leased to LHL and operated by Marriott pursuant to a
long-term incentive based operating agreement.
<PAGE>
RADISSON HOTEL TAMPA. The Radisson Hotel Tampa is an upscale full
service major business hotel located in east suburban Tampa, Florida. The
hotel is situated at the entrance to Sabal Business Park, a three million
square foot office complex. The hotel is near Busch Gardens and Raymond
James Stadium, 50 minutes from Walt Disney World in Orlando, and a 35
minute drive to Tampa International Airport. The hotel is leased to and
operated by Radisson. The Company is actively marketing Radisson Hotel
Tampa for sale. Accordingly, the asset was classified as held for sale on
December 6, 2000 and deprecation was suspended as of that date.
LE MONTROSE ALL SUITE HOTEL. Le Montrose All Suite Hotel is a five-
story, luxury full-service hotel located in West Hollywood, California, two
blocks east of Beverly Hills and one block south of the "Sunset Strip".
The hotel is within walking distance of many of the area's finest
restaurants, retail shops and night clubs. The hotel attracts short and
long-term guests and small groups primarily from the recording, film and
design industries. The hotel is leased to and operated by OLS.
HARBORSIDE HYATT CONFERENCE CENTER & HOTEL. Harborside Hyatt
Conference Center & Hotel is a full-service luxury conference and airport
hotel located adjacent to Boston's Logan International Airport along the
Boston waterfront. The property features 19,000 square feet of meeting
space and is directly across from Boston's central business district and
next to the Ted Williams tunnel, providing convenient access to downtown
Boston. The property is subject to a long-term ground lease from Massport,
Logan International Airport's owner and operating authority. The hotel is
leased by LHL and operated by Hyatt pursuant to a long-term incentive-based
operating agreement.
THE HOTEL VIKING. The Hotel Viking is a full-service upscale resort
located on Bellevue Avenue in Newport, RI, a resort area that is rapidly
becoming a year round hotel market. The Hotel offers 29,000 square feet of
meeting space, a restaurant, a lounge and a rooftop bar. The property also
includes the fully restored Kay Chapel and Trinity Parish House, both
adjacent to the Hotel. The hotel was leased and operated by Viking Hotel
Corporation, an affiliate of Bellevue Properties Inc. On February 26,
2001, the Company terminated the operating lease with Bellevue Properties,
Inc. and entered into a lease with LHL. Noble House Hotel and Resorts
replaced Bellevue Properties, Inc. as manager for the property.
CHICAGO MARRIOTT DOWNTOWN. The Chicago Marriott Downtown is a full-
service, upscale convention hotel located at the intersection of North
Michigan Avenue and Ohio Street in the heart of downtown Chicago's world
famous "Magnificent Mile". The property has over 60,000 square feet of
meeting space, five food and beverage outlets, a health club and sports
center, a business center and a gift shop. The Chicago Marriott Downtown
has superb visibility and allows guests convenient access to a variety of
attractions. A world-renowned shopping destination, the "Magnificent Mile"
is home to such retailers as Neiman Marcus, Saks Fifth Avenue, Marshall
Fields, and Niketown. The hotel is operated and managed by Marriott.
THE PARTICIPATING LEASES
Prior to January 1, 2001, the effective date for the REIT
Modernization Act, in order for the Company to qualify as a REIT, neither
the Company nor the Operating Partnership was able to or could operate
hotels or related properties. The Operating Partnership leased the Hotels
to certain lessees ("Lessees") for terms of between six and 11 years (from
commencement) pursuant to separate Participating Leases that provide for
rent equal to the greater of Base Rent or Participating Rent and which set
forth the Lessees' required capitalization and certain other matters.
Unless otherwise noted, each Participating Lease contains the provisions
described below.
<PAGE>
PARTICIPATING LEASE TERMS. The Participating Leases have an average
term of approximately 10 years, with expiration dates staggered between the
years 2004 and 2009, subject to earlier termination upon the occurrence of
certain contingencies described in the Participating Leases (including,
particularly, the provisions summarized below under the captions "Damage to
Hotels," "Condemnation of Hotels," "Termination of Participating Leases for
Failure to Meet Performance Goals" and "Termination of Participating Leases
upon Disposition of Hotels"). The variation of the lease terms is intended
to provide the Company with protection from the risk inherent in
simultaneous lease expirations and to align the expiration of certain of
the Participating Leases with the expiration of the applicable franchise
license.
BASE RENT; PARTICIPATING RENT; ADDITIONAL CHARGES. Each Participating
Lease requires the applicable Lessee to pay (x) the greater of (i) Base
Rent in a fixed amount (ii) Participating Rent based on certain percentages
of room revenue, food and beverage revenue and telephone and other revenue
at the applicable Hotel, and (y) certain other amounts, including utility
charges, certain impositions and insurance premiums, and interest accrued
on any late payments or charges ("Additional Charges"). Each lease year,
the Base Rent and Participating Rent thresholds are increased to reflect
any increase in the applicable Consumer Price Index published by the Bureau
of Labor Statistics of the United States of America Department of Labor,
U.S. City Average, Urban Wage Earners and Clerical Workers ("CPI").
Lessees are required to pay Base Rent monthly in arrears by the first day
of each calendar month, and Participating Rent is payable quarterly in
arrears by the twentieth day of each fiscal quarter, except for the Hotels
operated by Marriott, the Hotel operated by Hyatt and Hotel Viking, whose
rents are due in accordance with their respective Participating Leases, as
defined. Participating Rent is calculated based on the year-to-date
departmental receipts as of the end of the preceding fiscal quarter, plus
the prorated amount of each of the applicable departmental thresholds for
the fiscal quarter, or portion thereof, minus the cumulative Participating
Rent previously paid for such fiscal year and the cumulative Base Rent paid
for such fiscal year as of the end of the preceding fiscal quarter.
Other than real estate and personal property taxes, casualty insurance
including business interruption insurance, ground lease payments, capital
impositions and capital replacements and refurbishments (determined in
accordance with generally accepted accounting principles ("GAAP")), which
are obligations of the Company, the Participating Leases require the
Lessees to pay rent, condominium dues, certain insurance, all costs and
expenses, and all utility and other charges incurred in the operation of
the Hotels. The Participating Leases also provide for rent reductions and
abatements in the event of damage or destruction or a partial taking of any
Hotel as described under "Damage to Hotels" and "Condemnation of Hotels."
The Company has sold certain FF&E to the Lessees of Radisson
Convention Hotel and Le Meridien Dallas at its book value in exchange for
promissory notes receivable ("FF&E Notes") of approximately $1.0 million
and $.6 million, respectively. The FF&E Notes bear interest at 6.0% and
5.6% per annum, respectively, and are payable in monthly installments of
interest only. These FF&E Notes have an initial term of five years unless
extended at the Company's option. Additionally, the Company provided
working capital to each of the Lessees in the aggregate amount of $5.8
million in exchange for a note receivable ("Working Capital Notes"). The
Working Capital Notes bear interest at either 5.6% or 6.0% per annum, and
are payable in monthly installments of interest only. The term of each
Working Capital Note is identical to the term of the related Participating
Lease. Payments made under the FF&E Notes and the Working Capital Notes are
used to reduce the related Participating Lease payments by an equal amount.
The total of the interest income payments and Participating Lease payments
will be equal to the amounts calculated by applying the rent provisions of
the Participating Leases to the revenues of the Hotels.
<PAGE>
RESERVES. The Participating Leases for the Hotels obligate the
Company to make funds available for capital improvements at the Hotels
(including the periodic replacement or refurbishment of FF&E)in amounts
ranging from 4.0% to 5.5% of total revenue from the Hotels, with the amount
of such reserve with respect to each hotel representing projected capital
requirements of each hotel. The Company's obligation to make funds
available for capital improvements has not been recorded on the books and
records of the Company as such amounts are and will be capitalized as
incurred. Any unexpended amounts will remain the property of the Company
upon termination of the Participating Leases. The reserve requirements for
the hotels operated by Marriott and Hyatt are contained in certain non-
cancelable operating agreements, which require the reserves for the hotels
operated by Marriott and Hyatt to be maintained through restricted cash
escrows ("FF&E Escrows"). The amounts maintained in the FF&E escrows have
been recorded on the books and records of the Company. Otherwise, the
Lessees are required, at their expense, to maintain the Hotels in good
order and repair, subject to ordinary wear and tear, and to make all
necessary and appropriate nonstructural, foreseen and unforeseen, and
ordinary and extraordinary repairs (other than capital repairs) which may
be necessary and appropriate to keep the Hotels in good order and repair.
The Lessees are not obligated to bear the cost of any capital
improvements or capital repairs to the Hotels. With the consent of the
Company, however, the Lessees may utilize funds from the capital
expenditure reserves to make capital additions, modifications or
improvements to the Hotels. All such alterations, replacements and
improvements are subject to all the terms and provisions of the
Participating Leases and will become the property of the Company upon
termination of the Participating Leases. The Company owns substantially all
personal property (other than FF&E which has been sold to the Lessees of
Radisson Convention Hotel and Le Meridien Dallas, inventory, linens and
other nondepreciable personal property) not affixed to, or deemed a part
of, the real estate or improvements on the Hotels, except to the extent
that ownership of such personal property would cause any portion of the
rents under the Participating Leases not to qualify as "rents from real
property" for REIT income test purposes.
INSURANCE AND PROPERTY TAXES. The Company is responsible for paying
(i) real estate and personal property taxes on the Hotels, (ii) any ground
lease payments on the Hotels, (iii) casualty insurance on the Hotels, and
(iv) business interruption insurance on the Hotels. The Lessees are
required to pay for or reimburse the Company for all liability insurance on
the Hotels, with extended coverage, including comprehensive general public
liability, workers' compensation and other insurance appropriate and
customary for properties similar to the Hotels and naming the Company as an
additional insured, where permitted by law.
EVENTS OF DEFAULT. Events of Default under the Participating Leases
include, among others, the following:
(i) the failure by a Lessee to pay Base or Participating Rent
within ten days after same is due; or with respect to Radisson Convention
Hotel, ten days after notice of non-payment;
(ii) the failure of a Lessee to observe or perform any other term of
a Participating Lease and the continuation of such failure beyond any
applicable cure or grace period;
(iii) the failure of a Lessee to pay for required insurance;
(iv) the failure of a Lessee to maintain the Required Minimum Net
Worth or the security deposit, as applicable;
<PAGE>
(v) should a Lessee or Operator file a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or consent to the appointment of a custodian, receiver,
trustee or other similar office with respect to it or any substantial part
of its assets, or take corporate action for the purpose of any of the
foregoing; or if a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the Lessee
or Operator, a custodian, receiver, trustee or other similar officer with
respect to the Lessee or Operator or any substantial part of its assets, or
if an order for relief shall be entered in any case or proceeding for
liquidation or reorganization or otherwise to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding up or liquidation of the Lessee or Operator, or if any
petition for any such relief shall be filed against the Lessee or Operator
and such petition shall not be dismissed within 120 days;
(vi) should a Lessee or Operator cause a default beyond applicable
grace periods, if any, under any Franchise Agreement or Operator Agreement
relating to any Hotel; or
(vii) should a Lessee or Operator voluntarily cease operations of the
Leased Property for more than three (3) days other than by reason of
casualty, condemnation or force majeure.
In addition, an Event of Default will result in a cross-default of all
other Participating Leases to which the Lessee is a party; except with
respect to a default at Radisson Hotel Tampa, which would not result in a
cross default of Radisson Convention Hotel.
INDEMNIFICATION. Under each of the Participating Leases, the Lessees
will indemnify, and are obligated to hold harmless, the Company, the
Advisor and their officers and trustees, from and against all liabilities,
costs and expenses (including reasonable attorneys' fees and expenses)
incurred by, imposed upon or asserted against the Company or any of them on
account of, among other things, (i) any accident or injury to persons or
property on or about the Hotels, (ii) any misuse by the applicable Lessee
or any of its agents of the leased property, (iii) any environmental
liability caused or resulting from any action or negligence of the Lessee
or Operator (see "Environmental Matters"); (iv) taxes and assessments in
respect of the Hotels (other than real estate and personal property taxes
and income taxes of the Company on income attributable to the Hotels and
capital impositions); (v) the sale or consumption of alcoholic beverages on
or in the real property or improvements thereon; or (vi) the failure to
comply with the terms of the Participating Leases by the Lessee; provided,
however, that such indemnification will not be construed to require the
Lessee to indemnify the Company against the Company's own negligent acts or
misconduct.
ASSIGNMENT AND SUBLEASING. The Lessees are not permitted to sublet
all or any part of the Hotels or assign their interest under any of the
Participating Leases, other than to affiliates of certain of the applicable
Lessees, without the prior written consent of the Company. No assignment or
subletting will release a Lessee from any of its obligations under the
Participating Leases unless the Company expressly agrees that the Lessee
shall be released from any of its obligations under the Participating
Leases.
<PAGE>
DAMAGE TO HOTELS. In the event of damage to or destruction of any
hotel covered by insurance which then renders the leased property
unsuitable for its intended use and occupancy as a hotel, the Participating
Lease shall terminate, and the Company shall generally be entitled to
retain the proceeds of insurance. In the event that damage to or
destruction of a hotel which is covered by insurance does not render the
leased property unsuitable for its intended use and occupancy as a hotel,
the Company generally will be obligated to repair or restore the hotel to
substantially the same condition as existed immediately prior to such
damage. In the event of damage to or destruction of any hotel that is not
covered by insurance, the Company generally, may either repair, rebuild or
restore the hotel (at the Company's expense) to substantially the same
condition as existed immediately prior to such damage, or terminate the
Participating Lease on the terms and conditions set forth in such
Participating Lease.
CONDEMNATION OF HOTELS. In the event of a total condemnation of a
hotel, the relevant Participating Lease will terminate with respect to such
hotel as of the date of taking, and the Company will be entitled to all of
the condemnation award in accordance with the provisions of the
Participating Lease. In the event of a partial taking which does not render
the property unsuitable for its intended use as a hotel, then the Company
generally will be obligated to restore the untaken portion of the property,
and the Company shall contribute the condemnation award to the cost of such
restoration.
TERMINATION OF PARTICIPATING LEASES. The Company has the right to
terminate the Participating Lease for a hotel if the hotel fails to meet
certain performance goals, as defined. Additionally, in the event the
Company enters into an agreement to sell or otherwise transfer a hotel, the
Company, at its option, may terminate the Participating Lease upon 30 days'
notice to the applicable Lessee, subject to certain provisions.
Additionally, in the event that changes in federal income tax laws allow
the Company or a subsidiary or affiliate to directly operate hotels, the
Company will have the right to terminate all, but not less than all,
Participating Leases with the Lessees.
OTHER LEASE COVENANTS. Each Lessee has agreed that during the term of
its Participating Lease, the Lessee will not engage in any unrelated
business activities. The owners of each Lessee and their parent entities
have agreed that, for the term of its Participating Lease, any sale of
their interest in such Lessee, or of their hotel management businesses in
general, will subject their interest in the Lessee to a limited fair market
value acquisition right in favor of a designee of the Company. In the event
that the Company exercises this right, any nonselling partner of the Lessee
will have the right to put its interest in the Lessee to the Company's
designee at a price equal to the fair market value of such interest. The
Participating Leases require each Lessee to make available to the Company
unaudited monthly and quarterly and audited annual operating information
for each Hotel leased by such Lessee.
INVENTORY. All inventory required in the operation of the hotels is
owned by the applicable Lessee. Upon termination of a related Participating
Lease, the Lessee shall surrender the related hotel together with all such
inventory to the Company.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Each of the Company and the Operating Partnership is not aware of any
material pending or threatened legal proceedings to which the Company or
the Operating Partnership, or any of their subsidiaries is a party or of
which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's
shareholders during the fourth quarter of the year covered by this Annual
Report on Form 10-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON SHARES AND
RELATED SHAREHOLDER MATTERS
MARKET INFORMATION
The Common Shares of the Company began trading on the New York Stock
Exchange ("NYSE") on April 24, 1998 under the symbol "LHO". The following
table sets forth for the indicated periods the high and low sales for the
Common Shares and the cash distributions declared per share:
High Low Distributions
---- --- -------------
2000
----
First quarter $13-3/8 $11-3/16 $0.380
Second quarter $15-1/8 $12-1/2 $0.385
Third quarter $15-1/8 $13-3/4 $0.385
Fourth quarter $15-7/8 $14 $0.385
1999
----
First quarter $13-11/16 $10-1/2 $0.375
Second quarter $15-15/16 $12-7/16 $0.380
Third quarter $16-1/8 $12-3/4 $0.380
Fourth quarter $13 $10-13/16 $0.380
SHAREHOLDER INFORMATION
As of March 14, 2001, there were 223 record holders of the Company's
Common Shares, including shares held in "street name" by nominees who are
record holders, and approximately 7,500 beneficial holders.
In order to comply with certain requirements related to qualification
of the Company as a REIT, the Company's Amended and Restated Declaration of
Trust limits the number of Common Shares that may be owned by any single
person or affiliated group to 9.8% of the outstanding Common Shares.
<PAGE>
DISTRIBUTION INFORMATION
In 2000, the Company paid $1.535 per Common Share in distributions, of
which 82.25% represented ordinary income and 17.75% represented return of
capital for tax purposes.
The Company currently anticipates that it will maintain at least the
distribution rates experienced over the past two years in the near term,
unless actual results of operations, economic conditions or other factors
differ from its current expectations. The declaration of distributions by
the Company is in the sole discretion of the Company's Board of Trustees
and depends on the actual cash flow of the Company, its financial
condition, capital expenditure requirements for the Company's Hotels, the
annual distribution requirements under the REIT provisions of the Code and
such other factors as the Board of Trustees deems relevant.
UNITS
In conjunction with the IPO, 3,181,723 Units were issued on April 29,
1998 (inception). On August 24, 1999, November 29, 1999 and October 24,
2000, 180,636, 1,441,853, and 36,754 Units were converted to Common
Shares, respectively. On January 25, 2000, 16,667 Units were issued in
connection with the Chicago Hotel Venture. At December 31, 2000, there
were 1,539,147 Units outstanding. On January 1, 2001, JLL and its
affiliates converted 964,334 Units to Common Shares. Unitholders receive
distributions per unit in the same manner as distributions distributed on a
per share basis to the common shareholders.
SALES OF UNREGISTERED SECURITIES
On June 1, 1998, in conjunction with the purchase of the San Diego
Paradise Point Resort, the Company sold 112,458 Common Shares to WestGroup
for cash consideration of approximately $2.0 million. This sale was not
registered under the Securities Act of 1933, as amended (the "Securities
Act") in reliance upon the exemption from the registration requirements
thereof provided by Section 4(2) of the Securities Act.
On January 25, 2000, in conjunction with the Chicago Hotel Venture and
the acquisition of the Chicago Property, the Company issued 16,667 Units to
Buck 540 Hotel Company LLC for consideration of approximately $300. This
sale was not registered under the Securities Act of 1933, as amended, in
reliance upon the exemption from the registration requirements thereof
provided by Section 4(2) of the Securities Act.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL INFORMATION
The following tables set forth selected historical operating and
financial data for the Company and selected historical financial data for
LRP Bloomington Limited Partnership, which is the predecessor of the
Company (the "Predecessor"). The selected historical financial data for
the Company for the years ended December 31, 2000 and 1999 and for the
period from April 29, 1998 (inception) through December 31, 1998, and the
selected historical financial data for the Predecessor for the period from
January 1, 1998 through April 28, 1998, the years ended December 31, 1997
and 1996 have been derived from the historical financial statements of the
Company and the Predecessor, respectively. The following selected
financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and all of the financial statements and notes thereto included elsewhere in
this Form 10-K.
LASALLE HOTEL PROPERTIES
SELECTED HISTORICAL OPERATING AND FINANCIAL DATA
(Unaudited, Dollars in thousands, except share data)
For the
For the year ended period from
December 31, April 29, 1998
---------------------- (inception) through
2000 1999 December 31, 1998
---------- ---------- -------------------
OPERATING DATA:
REVENUE:
Participating lease
revenue . . . . . . . . . . $ 83,772 $ 76,843 $ 46,464
Interest income. . . . . . . 1,271 988 567
Equity in income (loss) of
Affiliated Lessee . . . . . 85 57 (59)
Equity in income (loss) of
Joint Venture . . . . . . . 1,067 -- --
Other income . . . . . . . . 56 66 21
---------- ---------- ---------
Total revenue. . . . . . . 86,251 77,954 46,993
EXPENSES:
Depreciation and
other amortization . . . . 29,078 25,378 13,666
Real estate, personal
property taxes,
and insurance. . . . . . . 8,462 8,205 5,047
Ground rent. . . . . . . . . 3,574 3,351 1,886
General and administrative . 952 1,342 459
Interest . . . . . . . . . . 21,052 16,181 8,474
Amortization of deferred
financing costs . . . . . . 1,139 992 514
Advisory fee (1) . . . . . . 3,840 3,670 2,134
Other expense. . . . . . . . 19 140 13
Minority interest in
Operating Partnership . . . 488 2,706 2,567
Writedown of property
held for sale . . . . . . . 12,296 2,000 --
---------- ---------- ----------
Total expenses,
minority interest
and writedown . . . . . . 80,900 63,965 34,760
---------- ---------- ----------
Net income applicable to
common shareholders . . . . . $ 5,351 $ 13,989 $ 12,233
========== ========== ==========
<PAGE>
For the
For the year ended period from
December 31, April 29, 1998
---------------------- (inception) through
2000 1999 December 31, 1998
---------- ---------- -------------------
Net income per common share
- basic . . . . . . . . . . . $ 0.32 $ 0.91 $ 0.80
- diluted . . . . . . . . . . $ 0.32 $ 0.91 $ 0.80
========== ========== ==========
Weighted average number of
common shares outstanding -
- basic . . . . . . . . . . . 16,920,596 15,432,667 15,209,555
- diluted . . . . . . . . . . 16,982,962 15,432,667 15,209,555
========== ========== ==========
As of December 31,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
BALANCE SHEET DATA:
Investment in hotel
properties, net . . . . . . . $ 486,184 $ 501,191 $ 467,552
Total assets . . . . . . . . . 531,893 532,072 496,338
Borrowings under the
credit facility . . . . . . . 113,500 164,900 164,700
Bonds payable, net . . . . . . 40,314 41,571 42,828
Mortgage loans . . . . . . . . 119,964 46,306 --
Minority interest in
Operating Partnership . . . . 20,288 22,417 47,694
Shareholders' equity . . . . . 223,528 242,568 228,384
For the
For the year ended period from
December 31, April 29, 1998
---------------------- (inception) through
2000 1999 December 31, 1998
---------- ---------- -------------------
OTHER DATA:
Funds from operations (2). . $ 47,984 $ 44,065 $ 28,466
Cash provided by operating
activities. . . . . . . . . 40,835 45,923 21,280
Cash used in investing
activities. . . . . . . . . (31,797) (63,660) (406,732)
Cash provided by (used in)
financing activities. . . . (9,236) 17,779 387,022
Distributions declared . . . 28,405 27,910 18,590
<PAGE>
LRP BLOOMINGTON LIMITED PARTNERSHIP (3)
SELECTED PREDECESSOR HISTORICAL FINANCIAL DATA
(Unaudited, Dollars in thousands)
For the
period from Year Ended
January 1, December 31,
1998 through ------------------
April 28, 1998 1997 1996
-------------- ------- -------
OPERATING DATA:
REVENUES:
Room revenue . . . . . . . . . . . $ 4,285 $13,863 $13,419
Food and beverage revenue. . . . . 3,459 10,214 9,276
Telephone revenue. . . . . . . . . 124 491 523
Other revenue. . . . . . . . . . . 537 1,649 1,399
------- ------- -------
Total revenue. . . . . . . . . . 8,405 26,217 24,617
OPERATING EXPENSES:
Departmental and
operating expenses . . . . . . . 5,712 17,404 16,462
Management fees. . . . . . . . . . 336 1,111 1,053
Property taxes . . . . . . . . . . 405 1,240 1,191
Interest expense . . . . . . . . . 833 2,658 2,601
Depreciation and amortization. . . 1,196 3,123 2,718
Advisory fees. . . . . . . . . . . 53 159 159
------- ------- -------
Total expenses . . . . . . . . . 8,535 25,695 24,184
------- ------- -------
Net income (loss). . . . . . . . . . $ (130) $ 522 $ 433
======= ======= =======
(1) Represents advisory fee paid to the Advisor for acquisition,
management, advisory and administrative services provided to the Company.
The Advisor received an annual base fee up to 5% of the Company's net
operating income, as defined in the Advisory Agreement, and an annual
incentive fee, which prior to January 1, 1999, was limited to 1% of the
Company's prorated pro forma net operating income based on growth in Funds
from Operations ("FFO") per share.
(2) FFO, as defined by the National Association of Real Estate Investment
Trusts ("NAREIT"), represents net income applicable to common shareholders
(computed in accordance with GAAP), excluding gains (losses) from debt
restructuring and sales of property (including furniture and equipment),
plus real estate related depreciation and amortization (excluding
amortization of deferred financing costs), and after adjustments for
unconsolidated partnerships and joint ventures. FFO does not represent
cash generated from operating activities in accordance with GAAP, is not
necessarily indicative of cash flow available to fund cash needs and should
not be considered as an alternative to net income as an indication of
performance or to cash flow as a measure of liquidity. The Company
considers FFO to be an appropriate measure of the performance of an equity
REIT in that such calculation is a measure used by the Company to evaluate
its performance against its peer group and is a basis for making the
determination as to the allocation of its resources and reflects the
Company's ability to meet general operating expenses. Although FFO has
been computed in accordance with the current NAREIT definition, FFO as
presented may not be comparable to other similarly titled measures used by
other REIT's. FFO may include funds that may not be available for
management's discretionary use due to functional requirements to conserve
funds for capital expenditures and property acquisitions, and other
commitments and uncertainties.
(3) The Predecessor was formed on December 1, 1995 for the purpose of
acquiring and operating the Radisson Convention Hotel. On April 29, 1998,
the Predecessor contributed the Radisson Convention Hotel to the Company.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
This report includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of
historical facts, included in this report that address activities, events
or developments that the Company expects, believes or anticipates will or
may occur in the future, including such matters as future capital
expenditures, distributions and acquisitions (including the amount and
nature thereof), expansion and other development trends of the real estate
industry, business strategies, expansion and growth of the Company's
operations and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the
Company in light of their experience and perceptions of historical trends,
current conditions, expected future developments and other factors they
believe are appropriate. Such statements are subject to a number of
assumptions, risks and uncertainties, general economic and business
conditions, the business opportunities that may be presented to and pursued
by the Company, changes in laws or regulations and other factors, many of
which are beyond the control of the Company. Any such statements are not
guarantees of future performance and actual results or developments may
differ materially from those anticipated in the forward-looking statements.
GENERAL BACKGROUND
The following discusses: (i) the Company's actual results of
operations for the year ended December 31, 2000 compared to the Company's
actual results of operations for the year ended December 31, 1999, and (ii)
the Company's actual results of operations for the year ended December 31,
1999 compared to the Company's pro forma results of operations for the year
ended December 31, 1998. This discussion should be read in conjunction
with the consolidated financial statements and notes thereto appearing
elsewhere in this form 10-K. The Company has not included a discussion of
the Predecessor, as its financial information would not be deemed
comparable to the Company. However, the Predecessor's financial
information has been included in the notes to the consolidated financial
statements.
The pro forma financial information of the Company is presented as if
(i) the IPO and the related formation transactions and the acquisitions of
the Hotel Viking had been consummated as of January 1, 1999 and (ii) the
acquisition of the Chicago Marriott Downtown had been consummated as of
January 1, 1999. The pro forma financial information is not necessarily
indicative of what actual results of operations of the Company would have
been assuming (i) the IPO and the related formation transactions and the
subsequent acquisitions of the Hotel Viking had been consummated and the
twelve Hotels had been leased as of January 1, 1999, and (ii) the
acquisition of the Chicago Marriott Downtown had been consummated and the
hotel subsequently leased as of January 1, 1999 nor does it purport to
represent the results of operations for future periods.
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED DECEMBER 31, 2000 TO THE YEAR ENDED
DECEMBER 31, 1999
For the year ended December 31, 2000, participating lease revenue
earned by the Company increased by approximately $7.0 million from $76.8
million to $83.8 million. This increase is primarily attributable to
increased revenues at the San Diego Paradise Point Resort, LaGuardia
Airport Marriott and Radisson Convention Hotel. These hotels benefitted
from strong group and leisure demand during the year. San Diego Paradise
Point Resort also benefitted from significant renovations, which were
completed in 1999. Partly offsetting these increases were decreases in
participating lease revenue caused by decreased occupancy at Le Meridien
Dallas due to reduced citywide demand and the sale of Holiday Inn Plaza
Park during the third quarter of 2000.
Equity in income from Joint Venture was approximately $1.1 million for
the year ended December 31, 2000. There was no equity income from Joint
Venture in the results of operations for 1999.
Depreciation expense increased by approximately $3.7 million from
$25.4 million to $29.1 million due primarily to additional depreciation on
capital improvements which were placed into service during 2000. In
addition, depreciation expense for the year ended December 31, 2000
includes depreciation taken on the Hotel Viking for the entire year while
for the year ended December 31, 1999 depreciation is included since its
date of acquisition, June 2, 1999.
Real estate and personal property taxes, insurance and ground rent
increased by approximately $0.4 million from $11.6 million to $12.0
million. This increase is due primarily to increased real estate taxes at
the Hotels and ground rent for Harborside Hyatt Conference Center & Hotel
and the San Diego Paradise Point Resort. The increase in ground rent is
attributable to higher revenues at the properties as the ground rent at the
Harborside Hyatt Conference Center and Hotel and the San Diego Paradise
Point Resort is a percentage of revenues.
General and administrative expense decreased by approximately $0.3
million from $1.3 million to $1.0 million due primarily to lower annual
report costs and a decrease in general legal expense.
Interest expense increased by approximately $4.9 million from $16.2
million to $21.1 million primarily due to an increase in weighted average
debt outstanding from $234.6 million for 1999 to $273.0 million for 2000.
The increase in debt outstanding is a result of the purchase of the Hotel
Viking on June 2, 1999 and the investment in the Chicago Hotel Venture
which were financed with borrowings under the 1998 Second Amended Credit
Facility, as well as additional borrowings under the 1998 Second Amended
Credit Facility to finance capital improvements during 2000. In addition,
the weighted average interest rate increased from 6.9% for 1999 to 7.9% for
2000. The increase in interest expense was offset by $0.7 million of
capitalized interest, which was primarily a result of the renovation and
expansion of the Hotel Viking and the continuing renovation of the San
Diego Paradise Point Resort during 2000.
Advisory fees increased by approximately $0.1 million from $3.7
million to $3.8 million due primarily to an increase in base fee for 2000,
offset by a decrease attributable to higher incentive fees for 1999.
Advisory fees also include $53 and $12 of expense for options granted to
the Advisor for 2000 and 1999, respectively.
On August 16, 2000, the Company sold Holiday Inn Plaza Park for $4.6
million. Based on net sales proceeds of $4.2 million, the Company recorded
an additional write-down of $1.3 million for the quarter ended June 30,
2000. At December 31, 1999, Holiday Inn Plaza Park was held for sale by
the Company. Based on initial pricing expectations, the net book value of
<PAGE>
the asset was reduced by $2.0 million. In addition, Radisson Tampa was
held for sale by the company on December 6, 2000. Based on initial pricing
expectations, the Company recognized a writedown of $11.0 million reducing
the net book value of the asset to $17.0 million for the quarter ended
December 31, 2000, which included $0.2 million of estimated accrued closing
costs.
Minority interest decreased $2.2 million from $2.7 million to $0.5
million due primarily to a decrease in income before minority interest from
$16.7 million for 1999 to $5.8 million for 2000. In addition, the weighted
average number of Units outstanding decreased from approximately 3.0
million Units for 1999 to 1.6 million Units for 2000.
As a result of the foregoing items, net income to common shareholders
decreased approximately $8.6 million from $14.0 million for 1999 to $5.4
million for 2000.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1999 TO THE PRO FORMA YEAR ENDED
DECEMBER 31, 1998
The Company earned approximately $76.8 million in participating lease
revenue during the year ended December 31, 1999. For the pro forma year
ended December 31, 1998, participating lease revenues would have been $75.0
million. This increase is due to increases in participating lease revenues
from the Le Meridien Dallas and Le Meridien New Orleans, which had
increased hotel revenues for the year ended December 31, 1999. The
Le Meridien hotels benefitted from the renovations, which took place at
each of the respective hotels during 1998. Participating lease revenues
for the Harborside Hyatt Conference Center and Hotel also increased due to
strong rate and occupancy at the hotel. These increases were offset by a
decrease in participating lease revenues at the San Diego Paradise Point
Resort in 1999 due to decreased occupancy levels at the hotel resulting
from the significant renovations taking place at the property during the
year ended December 31, 1999.
Depreciation expense increased to $25.4 million or 13.4% for the year
ended December 31, 1999, compared to depreciation expense for the pro forma
year ended December 31, 1998, which would have been $22.4 million. This
increase is attributable to the additional depreciation expense incurred on
capital improvements, which were placed into service during 1999.
Real estate and personal property taxes, insurance and ground rent
increased $0.7 million to $11.6 million for the year ended December 31,
1999 from $10.9 million for the pro forma year ended December 31, 1998.
This increase is primarily attributable to increased real estate taxes at
the hotels.
General and administrative expense increased to $1.3 million for the
year ended December 31, 1999, compared to pro forma general and
administrative expense for the year ended December 31, 1999, which would
have been $ 0.7 million. This increase is attributable to additional
administrative costs incurred for the year ended December 31, 1999.
Interest expense was $16.2 million for the year ended December 31,
1999 and the pro forma year ended December 31, 1998.
Amortization of deferred financing costs increased to $1.0 million for
the year ended December 31, 1999, compared to the comparable pro forma
period in 1998, in which amortization costs would have been $0.8 million.
This $0.2 million increase is attributable to the amortization in 1999 of
costs incurred in late 1998 for the amendment to the credit facility, as
well as the amortization of financing costs related to 1999 Mortgage Loan
(hereinafter defined). These costs would not have been incurred in the pro
forma year ended December 31, 1998.
<PAGE>
Advisory fees for the year ended December 31, 1999 were $3.7 million
compared to $3.8 million for the pro forma year ended December 31, 1998.
This decrease is attributable to a higher incentive fee for the pro forma
year ended December 31, 1998, offset by an increase in the base fee for the
year ended December 31, 1999. Advisory fees for the year ended
December 31, 1999 also include $12 of expense for options granted to the
Advisor during 1999.
At December 31, 1999, Holiday Inn Plaza Park was held for sale by the
Company. Based on initial pricing expectations, the net book value of the
asset was reduced by $ 2.0 million. This writedown is not included in the
results of operations for the pro forma year ended December 31, 1998.
Minority interest was $2.7 million for the year ended December 31,
1999 compared to $3.6 million for the pro forma year ended December 31,
1998. This decrease is primarily attributable to lower income before
minority interest of $4.1 million for the year ended December 31, 1999
versus the pro forma year ended December 31, 1998.
Net income decreased approximately $3.1 million to $14.0 million for
the year ended December 31, 1999 compared to net income of $17.1 million
for the pro forma year ended December 31, 1998.
FUNDS FROM OPERATIONS AND EBITDA
The Company considers Funds From Operations ("FFO") and earnings
before interest, taxes, depreciation and amortization ("EBITDA") to be key
measures of a REIT's performance and should be considered along with, but
not as an alternative to, net income and cash flow as a measure of the
Company's operating performance and liquidity.
The Company believes that FFO and EBITDA are helpful to investors as a
measure of the performance of an equity REIT because, along with cash flow
from operating activities, financing activities and investing activities,
they provide investors with an indication of the ability of the Company to
incur and service debt, to make capital expenditures and to fund other cash
needs. The White Paper on FFO approved by the Board of Governors of the
National Association of Real Estate Investment Trusts ("NAREIT") in October
1999 defines FFO as net income (loss) (computed in accordance with GAAP),
excluding gains (or losses) from debt restructuring and sales of
properties, plus real estate related depreciation and amortization
(excluding amortization of deferred finance cost) and after comparable
adjustments for the Company's portion of these items related to
unconsolidated entities and joint ventures. The Company computes FFO in
accordance with standards established by NAREIT which may not be comparable
to FFO reported by other REITs that do not define the term in accordance
with the current NAREIT definition or that interpret the current NAREIT
definition differently than the Company. FFO and EBITDA do not represent
cash generated from operating activities determined by GAAP and should not
be considered as an alternative to net income (determined in accordance
with GAAP) as an indication of the Company's financial performance or to
cash flow from operating activities (determined in accordance with GAAP) as
a measure of the Company's liquidity, nor are they indicative of funds
available to fund the Company's cash needs, including its ability to make
cash distributions. FFO and EBITDA may include funds that may not be
available for management's discretionary use due to functional requirements
to conserve funds for capital expenditures and property acquisitions, and
other commitments and uncertainties.
The following is a reconciliation between net income and FFO for the
years ended December 31, 2000 and 1999 and for the period from April 29,
1998 (inception) through December 31, 1998 (in thousands, except share
data):
<PAGE>
For the
For the year ended period from
December 31, April 29, 1998
---------------------- (inception) through
2000 1999 December 31, 1998
---------- ---------- -------------------
Net income applicable to
common shareholders. . . . . $ 5,351 $ 13,989 $ 12,233
Depreciation . . . . . . . . . 29,064 25,370 13,666
Equity in depreciation of
Joint Venture. . . . . . . . 785 -- --
Minority interest. . . . . . . 488 2,706 2,567
Writedown of properties
held for sale. . . . . . . . 12,296 2,000 --
---------- ---------- ----------
FFO. . . . . . . . . . . . . . $ 47,984 $ 44,065 $ 28,466
========== ========== ==========
Weighted average common
shares and units
outstanding
- basic . . . . . . . . . . . 18,488,475 18,419,694 18,391,278
- diluted . . . . . . . . . . 18,550,841 18,419,694 18,391,278
========== ========== ==========
The following is a reconciliation between net income and EBITDA (in
thousands):
For the
period from
April 29, 1998
For the For the (inception)
year ended year ended through
December 31, December 31, December 31,
2000 1999 1998
------------ ------------ ------------
EBITDA:
Net income . . . . . . . . $ 5,351 $ 13,989 $ 12,233
Interest . . . . . . . . . 21,052 16,181 8,474
Depreciation and
amortization . . . . . . 30,217 26,370 14,180
Equity in depreciation/
amortization of
Joint Venture. . . . . . 839 -- --
Equity in interest
expense of
Joint Venture. . . . . . 1,038 -- --
Minority interest. . . . . 488 2,706 2,567
Writedown of assets
held for sale. . . . . . 12,296 2,000 --
----------- ----------- -----------
EBITDA . . . . . . . . $ 71,281 $ 61,246 $ 37,454
=========== =========== ===========
<PAGE>
THE HOTELS
The following table sets forth historical comparative information with
respect to occupancy, average daily rate (ADR) and room revenue per
available room (RevPAR) for the comparable Hotels, the non-comparable
Hotels and total Hotel portfolio for the years ended December 31, 2000 and
1999.
Year Ended December 31,
-------------------------------------
2000 1999 Variance
------- ------- --------
COMPARABLE HOTELS (a)
Occupancy. . . . . . . . . . 74.5% 74.2% 0.4%
ADR. . . . . . . . . . . . . $156.20 $145.97 7.0%
RevPAR . . . . . . . . . . . $116.33 $108.34 7.4%
NON-COMPARABLE HOTELS (b)
Occupancy. . . . . . . . . . 66.3% 64.6% 2.6%
ADR. . . . . . . . . . . . . $137.57 $129.48 6.2%
RevPAR . . . . . . . . . . . $ 91.21 $ 83.58 9.1%
TOTAL PORTFOLIO
Occupancy. . . . . . . . . . 72.5% 72.0% 0.7%
ADR. . . . . . . . . . . . . $152.19 $142.51 6.8%
RevPAR . . . . . . . . . . . $110.40 $102.55 7.7%
(a) Comparable Hotels include all Hotels excluding those in Non-
Comparable.
(b) Non-Comparable Hotels represent Hotels which underwent significant
renovations and include the following:
The Hotel Viking, Harborside Hyatt, Radisson Convention Hotel,
Marriott Seaview Resort, and San Diego Paradise Point Resort in Quarter 1,
The Hotel Viking and San Diego Paradise Point Resort in Quarter 2, Key West
Beachside Resort in Quarter 3, and Key West Beachside Resort, Radisson
Tampa, LeMontrose All-Suite Hotel, The Hotel Viking and San Diego Paradise
Point Resort in Quarter 4.
The Company's total portfolio RevPAR growth of 7.7% in 2000
significantly outperformed the overall market. In 2000, the Company saw
substantial RevPAR gains from the hotels which were renovated during 1998
and 1999. The Company continues to benefit from its ownership of high
quality hotels located in strong markets with high barriers to entry and
its continuing refurbishment and repositioning programs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash to meet its cash requirements,
including distributions to shareholders, is its pro rata share of the
Operating Partnership's cash flow from the Participating Leases. Except for
the security deposits required under the Participating Leases, the Lessees'
obligations under the Participating Leases are unsecured and the Lessees'
abilities to make rent payments to the Operating Partnership, and the
Company's liquidity, including its ability to make distributions to
shareholders, will be dependent on the Lessees' abilities to generate
sufficient cash flow from the operations of the Hotels.
In April 1998, the Company entered into a $200 million senior
unsecured revolving credit facility (the "1998 Credit Facility") to be used
for acquisitions, capital improvements, working capital and general
corporate purposes. The Company amended its 1998 Credit Facility on
October 30, 1998. Under the Amended and Restated Senior Unsecured Credit
Agreement, as amended (the "1998 Amended Credit Facility"), the total
commitment was increased by $35 million, from $200 million to $235 million.
<PAGE>
On November 13, 2000, the Company amended the 1998 Amended Credit Facility.
Under the Second Amended and Restated Senior Unsecured Credit Agreement
(the "1998 Second Amended Credit Facility"), the total commitment was
reduced by $35 million, from $235 million to $200 million. Borrowings
under the 1998 Second Amended Credit Facility bear interest at floating
rates equal to LIBOR plus an applicable margin or an "Adjusted Base Rate"
plus an applicable margin, at the election of the Company. For the year
ended December 31, 2000, the weighted average interest rate for borrowings
under the 1998 Second Amended Credit Facility was approximately 8.1%. The
Company did not have any Adjusted Base Rate borrowings outstanding at
December 31, 2000. Additionally, the Company is required to pay an unused
commitment fee which is variable, determined from a ratings or leverage
based pricing matrix, currently set at 25 basis points. The Company
incurred an unused commitment fee of approximately $0.2 million for each of
the years ended December 31, 2000 and December 31, 1999. The 1998 Second
Amended Credit Facility matures on December 31, 2003 and contains certain
financial covenants relating to debt service coverage, market value net
worth and total funded indebtedness.
In conjunction with the June 1998 acquisition of the Harborside Hyatt
Conference Center and Hotel, the Company assumed $40 million of special
project revenue bonds ("Massport Bonds") previously issued under the loan
and trust agreement with the Massachusetts Port Authority ("Massport"), as
amended ("Massport Bond Agreement"). In conjunction with the Massport
Bonds, the Company recorded a premium of $3.5 million, of which $0.3
million remains unamortized at December 31, 2000. The Massport Bonds are
collateralized by the leasehold improvements and bear interest at 10.0% per
annum through the date of maturity, March 1, 2026. Interest payments are
due semiannually on March 1 and September 1. Interest expense, net of the
premium amortization totaled $2.7 million for each of the years ended
December 31, 2000 and December 31, 1999. The Massport Bonds shall be
redeemed in part commencing March 1, 2001 and annually until March 1, 2026,
at which time the remaining principal and any accrued interest thereon is
due in full. The Company has the option to prepay the Massport Bonds in
full beginning March 1, 2001 subject to a prepayment penalty which varies
depending on the date of prepayment. On March 1, 2001, the Company
redeemed the $40.0 million tax-exempt Massport Bonds, which had a 10.0%
coupon. Proceeds for the redemption were derived from $37.1 million of tax
exempt and $5.4 million of taxable bonds, each having a 17-year maturity,
bearing interest based on a weekly floating rate and having no principal
reductions for the life of the bonds. Due to the nature of these bonds,
they can be redeemed at any time without penalty. The new bonds are
secured by letters of credit issued by GE Capital Corporation. The letters
of credit are collateralized by the Harborside Hyatt Conference Center and
Hotel. The excess proceeds of approximately $5,900 were used to pay down
borrowings on the 1998 Second Amended Credit facility.
On July 29, 1999, the Company entered into a $46.5 million mortgage
loan (the "1999 Mortgage Loan"). The loan is subject to a fixed interest
rate of 8.1% and requires interest and principal payments based on a 25-
year amortization schedule. The 1999 Mortgage Loan matures on July 31,
2009 and is collateralized by the Radisson Convention Hotel located in
Bloomington, Minnesota and the Le Meridien Dallas. Interest expense for
the year ended December 31, 2000 and for the period from July 29, 1999
through December 31, 1999 was $3.7 and $1.6 million, respectively. The
1999 Mortgage Loan had a balance of $45.7 million at December 31, 2000.
On July 27, 2000, the Company, entered into three ten-year mortgage
loans totaling $74.5 million (the "2000 Mortgage Loans"). The loans are
subject to a fixed interest rate of 8.08% and require interest and
principal payments based on a 27-year amortization schedule. The 2000
Mortgage Loans are secured by the Le Montrose All-Suite Hotel located in
West Hollywood, California, Le Meridien New Orleans and the Key West
Beachside Resort. Interest expense for the period from July 27, 2000
through December 31, 2000 was $2.6 million. The 2000 Mortgage Loans had a
balance of $74.3 million at December 31, 2000.
<PAGE>
At December 31, 2000, the Company had approximately $1.4 million of
cash and cash equivalents and had $113.5 million outstanding under its 1998
Second Amended Credit Facility.
Net cash provided by operating activities was approximately $40.1
million for the year ended December 31, 2000 primarily due to the
collections of Participation Lease revenues during 2000, which was offset
by payments for real estate taxes, personal property taxes, interest
expense, insurance, ground rent and the Advisory Fee.
Net cash used in investing activities was approximately $31.8 million
for the year ended December 31, 2000 primarily due to capital improvement
expenditures at the Hotels.
Net cash used in financing activities was approximately $9.2 million
for the year ended December 31, 2000 primarily attributable to repayments
on borrowings under the 1998 Second Amended Credit Facility and the payment
of distributions to the common shareholders and unit holders, offset by net
proceeds from the 2000 Mortgage Loans and borrowings under the 1998 Second
Amended Credit Facility.
The Company's policy is to incur debt only if upon such incurrence the
Company's total funded indebtedness would not exceed 50% of "Aggregate
Asset Value." For purposes of this policy, Aggregate Asset Value is defined
as the sum of (a) for all the Company's properties owned for more than four
quarters ("Seasoned Properties"), the EBITDA (reduced by the aggregate FF&E
reserves for the relevant period in respect of the Seasoned Properties) of
the Seasoned Properties for the preceding four quarters times 10, (b) for
all Properties owned for less than four quarters ("New Properties"), the
investment amount (which shall include the purchase price, including
assumed indebtedness, and all acquisition costs) of the New Properties and
95% of all the capital expenditures with respect to the New Properties,
(c) liquid investments, and (d) investments in unconsolidated entities.
The Board of Trustees can change this policy at any time without the
approval of the common shareholders.
The Company has considered its short-term (one year or less) liquidity
needs and the adequacy of its estimated cash flow from operations and other
expected liquidity sources to meet these needs. The Company believes that
its principal short-term liquidity needs are to fund normal recurring
expenses, debt service requirements and the minimum distribution required
to maintain the Company's REIT qualification under the Code. The Company
anticipates that these needs will be met with cash flows provided by
operating activities. The Company has also considered capital improvements
and property acquisitions as short-term needs that will be funded either
with cash flows provided by operating activities, utilizing availability
under the 1998 Second Amended Credit Facility, other indebtedness, or the
issuance of additional equity securities.
The Company expects to meet long-term (greater than one year)
liquidity requirements such as property acquisitions, scheduled debt
maturities, major renovations, expansions and other nonrecurring capital
improvements through estimated cash flows from operations, long-term
unsecured and secured indebtedness and the issuance of additional equity
securities. The Company will acquire or develop additional hotel
properties only as suitable opportunities arise, and the Company will not
undertake acquisition or development of properties unless stringent
acquisition/development criteria have been achieved.
<PAGE>
RESERVE FUNDS
The Company is obligated to maintain Reserve Funds for capital
expenditures at the Hotels, as determined in accordance with the
Participating Leases. The majority of Reserve Funds have not been recorded
on the books and records of the Company as such amounts will be capitalized
as incurred. The amounts obligated under the Reserve Funds range from 4.0%
to 5.5% of the individual Hotel's total revenues. The total amount
obligated by the Company under the Reserve Funds is approximately $10.5
million at December 31, 2000, of which $3.4 million is available in
restricted cash reserves for future capital expenditures. Purchase orders
and letters of commitment totaling approximately $3.0 million have been
issued for renovations at the Hotels. The Company has committed to these
projects and anticipates making similar arrangements with the existing
Hotels or any future hotels that it may acquire.
SUBSEQUENT EVENT
On January 1, 2001, JLL and its affiliates redeemed 964,334 Units
resulting in 574,813 Units or 3.1% of the Operating Partnership not held by
LHO.
Effective January 1, 2001, the Company became a self-managed REIT.
The Company terminated its advisory relationship with the Advisor in
accordance with the Termination and Services Agreement dated December 28,
2000. In connection with the termination, the Advisor will receive $600
for 2001 transition services. The Company purchased assets used to operate
the Company at book value of approximately $302 and paid $50 for
informational technology services. The entire management team has become
employees of LHO and continues to oversee and manage all activities of the
Company under the new self-managed structure.
Effective January 1, 2001, the Company purchased all of the issued and
outstanding shares of capital stock of LHL for $500 in accordance with the
Stock Purchase Agreement dated July 28, 2000. LHL leases four of the
Company's owned hotels, including Marriott Seaview Resort, LaGuardia
Airport Marriott, Omaha Marriott and Harborside Hyatt Conference Center and
Hotel. Effective January 1, 2001, LHL is a 100% owned subsidiary of the
company as provided for under the taxable-REIT subsidiary provisions. It
is currently anticipated that the cost associated with the transaction will
be expensed in the first quarter of 2001.
On January 15, 2001, the Company paid its regular fourth quarter
distribution of $0.385 per share/unit on its Common Shares and Units.
On February 1, 2001, an affiliate of the Advisor exercised 300,000
options. Proceeds from the options were used to reduce outstanding
borrowings on the 1998 Second Amended Credit Facility.
On February 26, 2001, the Company terminated the operating lease on
the Viking Hotel with Bellevue Properties, Inc. and entered into a lease
with LHL on essentially the same terms. Bellevue Properties, Inc. received
$840 in payment relating to termination, tax settlement due under the
Purchase and Sale Agreement and other items. Noble House Hotel and Resorts
replaced Bellevue Properties, Inc. as manager for the property.
On March 1, 2001, the Company redeemed the $40.0 million tax-exempt
Massport Bonds, which had a 10.0% coupon. Proceeds for the redemption were
derived from $37.1 million of tax exempt and $5.4 million of taxable bonds,
each having a 17-year maturity, bearing interest based on a weekly floating
rate and having no principal reductions for the life of the bonds. Due to
the nature of these bonds, they can be redeemed at any time without
penalty. The new bonds are secured by letters of credit issued by GE
Capital Corporation. The letters of credit are collateralized by the
Harborside Hyatt Conference Center and Hotel. The excess proceeds of
approximately $5,900 were used to pay down borrowings on the 1998 Second
Amended Credit facility.
<PAGE>
On March 8, 2001, the Company acquired a 100% interest in four full-
service hotels with a total of 502 guest rooms in Washington, D.C. for an
aggregate purchase price of approximately $44.0 million. Each of the four
hotels will be fully renovated, improved and repositioned as unique high-
end, independent boutique hotels. The Company will undertake the
redevelopment program, currently projected at a total of approximately
$30.0 million, in conjunction with the Kimpton Hotel & Restaurant Group,
LLC who was also retained to manage and operate the hotel collection.
These four hotels have operated as the 99-room Canterbury Hotel, located at
1733 N Street, NW; the 82-room Clarion Hampshire House Hotel at 1310 New
Hampshire Avenue, NW; the 137-room Quality Hotel and Suites Downtown at
1315 16th Street, NW; and the 184-room Howard Johnson Plaza Hotel and
Suites, 1430 Rhode Island Avenue, NW. Originally constructed as apartment
buildings, each hotel features either large rooms or suites. Upon
completion of the redevelopment program, LaSalle intends to rename each
property and the Kimpton Group will operate each as independent, non-
branded boutique hotels.
INFLATION
The Company's revenues come primarily from the Participating Leases,
thus the Company's revenues will vary based on changes in the revenues at
the Hotels. Therefore, the Company relies entirely on the performance of
the Hotels and the lessees' abilities to increase revenues to keep pace
with inflation. Operators of hotels can change room rates quickly, but
competitive pressures may limit the Lessees' and their Operators abilities
to raise rates faster than inflation or even at the same rate.
The Company's expenses are subject to inflation. These expenses
(primarily real estate and personal property taxes and property and
casualty insurance) are expected to grow with the general rate of
inflation, except for instances in which the properties are subject to
periodic real estate tax reassessments.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Financial Instruments and Hedging Activities" ("SFAS 133"),
subsequently amended by SFAS No. 137 and SFAS No. 138. This statement,
effective for fiscal years beginning after June 15, 2000, establishes new
accounting and reporting standards requiring that every derivative
instrument, including certain derivative instruments imbedded in other
contracts, be recorded on the balance sheet as either an asset or liability
measured at its fair value. The statement also requires that the changes
in the derivative's fair value be recognized in earnings unless specific
hedge accounting criteria are met. Currently, the pronouncement has no
impact on the Company, as the Company does not have any derivative
instruments nor has entered into any hedging activities.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition
in Financial Statements". In June 2000, the SEC staff amended SAB 101 to
provide registrants with additional time to implement SAB 101. The SEC
staff determined that a lessor should defer recognition of contingent
rental income until the specified target that triggers the contingent
rental income is achieved. The Company recognizes lease revenue on an
accrual basis pursuant to the terms of the respective Participating Leases
in which Participating Rent is calculated using quarterly thresholds.
Accordingly, SAB No. 101 will not have an impact on the Company.
<PAGE>
I
TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates.
The Company's policy is to manage interest rates through the use of a
combination of fixed and variable rate debt. The Company's interest rate
risk management objective is to limit the impact of interest rate changes
on earnings and cash flows and to lower its overall borrowing costs. To
achieve these objectives, the Company borrows at a combination of fixed and
variable rates.
In 1998, the Company obtained the 1998 Second Amended Credit Facility,
which provides for a maximum borrowing amount of up to $200 million.
Borrowings under the 1998 Second Amended Credit Facility bear interest at
variable market rates. At December 31, 2000, the Company's outstanding
borrowings under the 1998 Second Amended Credit Facility were $113.5
million. The weighted average interest rate under the facility for the
years ended December 31, 2000 and December 31, 1999 was 8.1% and 6.8%
respectively. A .25% change in interest rates would have changed interest
expense by $0.4 million for the year ended December 31, 2000. This change
is based upon the weighted average borrowings under the 1998 Second Amended
Credit Facility for the year ended December 31, 2000, which were $154.4
million.
At December 31, 2000, the Company also had outstanding bonds payable
of $40.3 million, of which $40.0 million represents the principal balance
of the bonds and the remaining $0.3 million represents unamortized premium.
The bonds bear interest at a fixed rate. For fixed rate debt, changes in
interest rates generally affect the fair value of the debt, but not the
earnings or cash flows of the Company. Changes in the fair market value of
fixed rate debt generally will not have a significant impact on the
Company, unless the Company is required to refinance such debt. At
December 31, 2000, the carrying value of the bonds approximated their fair
value. On March 1, 2001, the Company redeemed the $40.0 million tax-exempt
Massport Bonds, which had a 10.0% coupon. Proceeds for the redemption were
derived from $37.1 million of tax-exempt and $5.4 million of taxable bonds,
each having a 17-year maturity, bearing interest based on a weekly floating
rate and having no principal reductions for the life of the bonds. Due to
the nature of these bonds, they can be redeemed at any time without
penalty. The new bonds are secured by letters of credit issued by GE
Capital Corporation. The letters of credit are collateralized by the
Harborside Hyatt Conference Center and Hotel. The excess proceeds of
approximately $5,900 were used to pay down borrowings on the 1998 Second
Amended Credit Facility.
In 1999, the Company entered into a $46.5 million mortgage loan (the
"1999 Mortgage Loan"). The loan is subject to a fixed interest rate of
8.1%, matures on July 31, 2009 and requires interest and principal payments
based on a 25-year amortization schedule. At December 31, 2000, the 1999
Mortgage Loan had a balance of $45.7 million. At December 31, 2000, the
carrying value of the 1999 Mortgage Loan approximated its fair value.
On July 27, 2000, the Company entered into three ten-year mortgage
loans totaling $74.5 million (the "2000 Mortgage Loans"). The loans are
subject to a fixed interest rate of 8.08% and require interest and
principal payments based on a 27-year amortization schedule. At
December 31, 2000, the 2000 Mortgage Loans had a balance of $74.3 million.
At December 31, 2000, the carrying value of the 2000 Mortgage Loans
approximated its fair value.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to the Financial Statements on page F-1.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference to
the material in the Company's Proxy Statement for the 2001 Annual Meeting
of Shareholders (the Proxy Statement) under the captions "Election of
Trustees".
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to
the material in the Proxy Statement under the caption "Executive
Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to
the material in the Proxy Statement under the caption "Principal and
Management Shareholders."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
the material in the Proxy Statement under the caption "Certain
Relationships and Related Transactions."
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS
Included herein at pages F-1 through F-44
2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is included
herein at pages F-31 through F-33.
Schedule III - Real Estate and Accumulated Depreciation
All other schedules for which provision is made in
Regulation S-X are either not required to be included herein under the
related instructions or are inapplicable or the related information is
included in the footnotes to the applicable financial statement and,
therefore, have been omitted.
3. EXHIBITS
The following exhibits are filed as part of this Annual
Report on Form 10-K:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10(i) Stock Purchase Agreement dated July 28, 2000
by and among LaSalle Hotel Operating Partnership, L.P. and LaSalle Hotel
Co-Investment, Inc., LPI Charities and LaSalle Hotel Properties.
10(ii) Second Amended and Restated Senior Unsecured
Credit Agreement dated November 13, 2000 by and among Societe Generale Bank
of Montreal, Deutche Banc Alex. Brown and LaSalle Hotel Operating
Partnership, L.P.
10(iii) Environmental Indemnification Agreement dated
November 13, 2000 by and among Societe Generale, Bank of Montreal, Deutsche
Banc. Alex. Brown and LaSalle Hotel Operating Partnership, L.P.
10(iv) Guaranty and Contribution Agreement dated
November 13, 2000 by and among Societe Generale, Bank of Montreal, Deutche
Banc Alex. Brown and LaSalle Hotel Operating Partnership, L.P.
10(v) Termination and Services Agreement dated
December 28, 2000 by and among LaSalle Hotel Properties, and LaSalle Hotel
Advisors, Inc. and LaSalle Investment Management, Inc.
10(vi) Revolving Credit Note dated January 3, 2001
between LaSalle Hotel Lessee, Inc. and Firstar Bank, National Association.
10(vii) Guaranty dated January 3, 2001 between
LaSalle Hotel Lessee, Inc. and Firstar Bank, National Association.
<PAGE>
21 List of subsidiaries
23 Consent of KPMG LLP
(b) REPORTS ON FORM 8-K
A report on Form 8-K dated November 14, 2000 was filed on
November 15, 2000 reporting other events under Item 5. The report includes
the Company's press release dated November 14, 2000, announcing that it had
renewed and extended its bank credit facility. The report also includes
the Company's press release announcing that its Board of Trustees voted for
the Company to become a self-managed REIT, beginning January 1, 2001.
A report on Form 8-K dated October 30, 2000 was filed on
November 1, 2000 reporting other events under Item 5. The report includes
the Company's press release dated October 30, 2000, which reports earnings
for the quarter and nine months ended September 30, 2000.
A report on Form 8-K dated October 26, 2000 was filed on
October 26, 2000 reporting a Regulation FD Disclosure Item 9. The report
announces the Company's conference call to be held on October 31, 2000 to
discuss the Company's results for the quarter and nine months ended
September 30, 2000 and its outlook for the fourth quarter 2000 and the year
2001.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
LASALLE HOTEL PROPERTIES
Dated: March 23, 2001 BY: /S/ HANS S. WEGER
------------------------------
Hans S. Weger
Executive Vice President,
Treasurer and Chief
Financial Officer
(Authorized Officer and
Principal Financial and
Accounting Officer)
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
trustees of LaSalle Hotel Properties, hereby severally constitute Jon E.
Bortz, Michael D. Barnello and Hans S. Weger, and each of them singly, our
true and lawful attorneys with full power to them, and each of them singly,
to sign for us and in our names in the capacities indicated below, the Form
10-K filed herewith and any and all amendments to said Form 10-K, and
generally to do all such things in our names and in our capacities as
officers and trustees to enable LaSalle Hotel Properties to comply with the
provisions of the Securities Exchange Act of 1934, as amended and all
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming our signatures as they may be signed by our said attorneys,
or any of them, to said Form 10-K and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and dates indicated.
DATE SIGNATURE TITLE
---- --------- -----
March 23, 2001 /s/ Jon E. Bortz Chairman and
-------------------------- Chief Executive Officer
Jon E. Bortz
March 23, 2001 /s/ Stuart L. Scott
-------------------------- Trustee
Stuart L. Scott
March 23, 2001 /s/ Darryl Hartley-Leonard Trustee
--------------------------
Darryl Hartley-Leonard
March 23, 2001 /s/ George F. Little, II Trustee
--------------------------
George F. Little, II
March 23, 2001 /s/ William S. McCalmont Trustee
--------------------------
William S. McCalmont
<PAGE>
DATE SIGNATURE TITLE
---- --------- -----
March 23, 2001 /s/ Donald S. Perkins Trustee
--------------------------
Donald S. Perkins
March 23, 2001 /s/ Donald A. Washburn Trustee
--------------------------
Donald A. Washburn
March 23, 2001 /s/ Michael D. Barnello Chief Operating Officer and
-------------------------- Executive Vice President
Michael D. Barnello of Acquisitions
<PAGE>
LASALLE HOTEL PROPERTIES
INDEX TO FINANCIAL STATEMENTS
LASALLE HOTEL PROPERTIES
Report of Independent Accountants. . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of December 31, 2000 and 1999 . . . F-3
Consolidated Statements of Operations for the years ended
December 31, 2000 and 1999 and for the period from
April 29, 1998 (inception) through December 31, 1998 . . . . . . F-5
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 2000 and 1999 and for the period
from April 29, 1998 (inception) through December 31, 1998. . . . F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 2000 and 1999 and for the period from
April 29, 1998 (inception) through December 31, 1998 . . . . . . F-8
Notes to Consolidated Financial Statements . . . . . . . . . . . . F-10
Schedule III - Real Estate and Accumulated Depreciation. . . . . . F-31
LASALLE HOTEL LESSEE, INC.
Report of Independent Accountants. . . . . . . . . . . . . . . . . F-34
Balance Sheets as of December 31, 2000 and 1999. . . . . . . . . . F-35
Statements of Operations for the years ended
December 31, 2000, 1999 and 1998 . . . . . . . . . . . . . . . . F-36
Statements of Stockholders' Equity (Deficit) for the
years ended December 31, 2000, 1999 and 1998 . . . . . . . . . . F-37
Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998. . . . . . . . . . . . . . . . . . . . . . . F-38
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . F-39
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of
LaSalle Hotel Properties:
We have audited the consolidated financial statements of LaSalle Hotel
Properties as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
LaSalle Hotel Properties as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for the years ended December 31,
2000 and 1999 and for the period from April 29, 1998 (inception) through
December 31, 1998 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG LLP
Chicago, Illinois
January 22, 2001, except as to Note 19,
which is as of March 8, 2001.
<PAGE>
LASALLE HOTEL PROPERTIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
December 31, December 31,
2000 1999
------------ ------------
ASSETS
------
Investment in hotel properties, net. . . $ 486,184 $ 501,191
Investment in Affiliated Lessee. . . . . 13 36
Investment in Joint Venture. . . . . . . 5,647 --
Cash and cash equivalents. . . . . . . . 1,414 1,612
Restricted cash reserves . . . . . . . . 14,640 12,883
Rent receivable from lessees:
Affiliated lessee. . . . . . . . . . . 2,344 1,675
Other lessees. . . . . . . . . . . . . 6,816 3,744
Notes receivable:
Affiliated lessee. . . . . . . . . . . 3,900 3,900
Other lessees. . . . . . . . . . . . . 3,517 3,617
Other. . . . . . . . . . . . . . . . . 506 442
Deferred financing costs, net. . . . . . 4,415 1,623
Prepaid expenses and other assets. . . . 2,497 1,349
---------- ----------
Total assets . . . . . . . . . $ 531,893 $ 532,072
========== ==========
<PAGE>
LASALLE HOTEL PROPERTIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
(Dollars in thousands, except per share data)
December 31, December 31,
2000 1999
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Borrowings under credit facility . . . . $ 113,500 $ 164,900
Bonds payable, net . . . . . . . . . . . 40,314 41,571
Mortgage loans . . . . . . . . . . . . . 119,964 46,306
Due to JLL . . . . . . . . . . . . . . . 966 1,123
Due to Affiliated Lessee . . . . . . . . 756 30
Accounts payable and accrued expenses. . 5,436 6,147
Distributions payable. . . . . . . . . . 7,131 7,000
---------- ----------
Total liabilities. . . . . . . 288,067 267,077
Minority interest in Operating
Partnership. . . . . . . . . . . . . . 20,288 22,417
Minority interest in other partnerships. 10 10
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Preferred shares of beneficial interest,
$.01 par value, 20,000,000 shares
authorized, no shares issued and
outstanding at December 31, 2000
and 1999 . . . . . . . . . . . . . . -- --
Common shares of beneficial interest,
$.01 par value, 100,000,000 shares
authorized, 16,982,416 and 16,863,052
shares issued and outstanding at
December 31, 2000 and 1999,
respectively . . . . . . . . . . . . 170 169
Additional paid-in capital . . . . . . 256,950 255,329
Distributions in excess of
Retained Earnings. . . . . . . . . . (33,592) (12,930)
---------- ----------
Total shareholders' equity . . 223,528 242,568
---------- ----------
Total liabilities and
shareholders' equity . . . . $ 531,893 $ 532,072
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
LASALLE HOTEL PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
For the
For the year ended period from
December 31, April 29, 1998
---------------------- (inception) through
2000 1999 December 31, 1998
---------- ---------- -------------------
Revenues:
Participating lease revenue:
Affiliated Lessee. . . . . $ 30,963 $ 28,290 $ 19,436
Other lessees. . . . . . . 52,809 48,553 27,028
Interest income:
Affiliated lessee. . . . . 228 228 54
Other lessees. . . . . . . 205 205 135
Other. . . . . . . . . . . 838 555 378
Equity in income (loss) of
Affiliated Lessee . . . . . 85 57 (59)
Equity in income of
Joint Venture . . . . . . . 1,067 -- --
Other income . . . . . . . . 56 66 21
---------- ---------- ----------
Total revenues . . . . 86,251 77,954 46,993
---------- ---------- ----------
Expenses:
Depreciation and other
amortization. . . . . . . . 29,078 25,378 13,666
Real estate, personal
property taxes and
insurance . . . . . . . . . 8,462 8,205 5,047
Ground rent. . . . . . . . . 3,574 3,351 1,886
General and administrative . 952 1,342 459
Interest . . . . . . . . . . 21,052 16,181 8,474
Amortization of deferred
financing costs. . . . . . 1,139 992 514
Advisory fee . . . . . . . . 3,840 3,670 2,134
Other expenses . . . . . . . 19 140 13
---------- ---------- ----------
Total expenses . . . . 68,116 59,259 32,193
---------- ---------- ----------
Income before minority
interest and writedown of
property held for sale. . . . 18,135 18,695 14,800
Writedown of properties
held for sale . . . . . . . . 12,296 2,000 --
---------- ---------- ----------
Income before minority
interest. . . . . . . . . . . 5,839 16,695 14,800
Minority interest in
Operating Partnership . . . . 488 2,706 2,567
---------- ---------- ----------
Net income applicable to
common shareholders . . . . . $ 5,351 $ 13,989 $ 12,233
========== ========== ==========
<PAGE>
LASALLE HOTEL PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
(Dollars in thousands, except per share data)
For the
For the year ended period from
December 31, April 29, 1998
---------------------- (inception) through
2000 1999 December 31, 1998
---------- ---------- -------------------
Net income applicable to
common shareholders per
weighted average common
share outstanding
- basic . . . . . . . . . . . $ 0.32 $ 0.91 $ 0.80
- diluted . . . . . . . . . . $ 0.32 $ 0.91 $ 0.80
========== ========== ==========
Weighted average number of
common shares outstanding
- basic . . . . . . . . . . . 16,920,596 15,432,667 15,209,555
- diluted . . . . . . . . . . 16,982,962 15,432,667 15,209,555
========== ========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
LASALLE HOTEL PROPERTIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except per share data)
Distribu-
tions in
Additional Excess of
Common Paid-In Retained Retained
Shares Capital Earnings Earnings Total
------ --------- -------- --------- --------
Initial funding. . . $ -- $ 1 $ -- $ -- $ 1
Net proceeds from
issuance of common
shares. . . . . . . 142 234,052 -- -- 234,194
Issuance of
restricted common
shares. . . . . . . 9 16,409 -- -- 16,418
Proceeds from
issuance of
common shares . . . 1 1,999 -- -- 2,000
Issuance of rights
and options to
purchase shares . . -- 2,997 -- -- 2,997
Adjustment required
to reflect pre-
decessor's basis. . -- (24,082) -- -- (24,082)
Distributions
declared ($1.01
per common share) . -- -- (12,233) (3,144) (15,377)
Net income . . . . . -- -- 12,233 -- 12,233
---- -------- -------- -------- --------
Balance,
December 31,
1998. . . . . . . . 152 231,376 -- (3,144) 228,384
Offering costs . . . -- (106) -- -- (106)
Issuance of shares . 1 216 -- -- 217
Options granted
to Advisor. . . . . -- 12 -- -- 12
Unit conversions . . 16 23,831 -- -- 23,847
Distributions
declared ($1.515
per common share) . -- -- (13,989) (9,786) (23,775)
Net income . . . . . -- -- 13,989 -- 13,989
---- -------- -------- -------- --------
Balance,
December 31,
1999. . . . . . . . 169 255,329 -- (12,930) 242,568
Issuance of Shares . -- 482 -- -- 482
Options granted
to advisor. . . . . -- 53 -- -- 53
Options exercised. . 1 560 -- -- 561
Unit conversions . . -- 526 -- -- 526
Distributions
declared ($1.535
per common share) . -- -- (5,351) (20,662) (26,013)
Net income . . . . . -- -- 5,351 -- 5,351
---- -------- -------- -------- --------
Balance,
December 31,
2000. . . . . . . . $170 $256,950 $ -- $(33,592) $223,528
==== ======== ======== ======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
LASALLE HOTEL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share data)
For the
For the year ended period from
December 31, April 29, 1998
-------------------- (inception) through
2000 1999 December 31, 1998
---------- ---------- -------------------
Cash flows from operating
activities:
Net income . . . . . . . . . . $ 5,351 $ 13,989 $ 12,233
Adjustments to reconcile
net income to net cash
flow provided by operating
activities:
Depreciation and other
amortization . . . . . . . 29,078 25,378 13,666
Amortization of deferred
financing fees . . . . . . 1,139 992 514
Bond premium amortization. . (1,257) (1,257) (652)
Minority interest in
Operating Partnership. . . 488 2,706 2,567
Options granted to
Advisor. . . . . . . . . . 53 12 --
Writedown of properties
held for sale. . . . . . . 12,296 2,000 --
Equity in (income) loss
of Affiliated Lessee . . . (85) (57) 59
Equity in (income) loss
of Joint Venture . . . . . (1,067) -- --
Changes in assets and
liabilities:
Rent receivable from
lessees. . . . . . . . . . (3,823) (2,249) (3,088)
Prepaid expenses and
other assets . . . . . . . (1,969) 3,442 (3,952)
Notes receivable . . . . . . (56) -- --
Due to JLL . . . . . . . . . 255 392 811
Due to LHL . . . . . . . . . 756 -- --
Accounts payable and
accrued expenses . . . . . (324) 575 (878)
---------- ---------- ----------
Net cash flow
provided by operat-
ing activities . . . . 40,835 45,923 21,280
---------- ---------- ----------
Cash flows from investing
activities:
Improvements and additions
to hotel properties. . . . . (30,965) (31,912) (9,309)
Acquisitions of hotel
properties . . . . . . . . . -- (28,233) (380,250)
Investment in Joint Venture. . (4,785) -- --
Distributions from
Joint Venture. . . . . . . . 1,129 -- --
Advances to Affiliated
Lessee . . . . . . . . . . . -- -- (2,405)
Distributions from Affiliated
Lessee . . . . . . . . . . . 108 -- --
Funding of notes receivable. . -- (421) (4,951)
<PAGE>
LASALLE HOTEL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
For the
For the year ended period from
December 31, April 29, 1998
-------------------- (inception) through
2000 1999 December 31, 1998
---------- ---------- -------------------
Funding of restricted
cash reserves. . . . . . . . (15,901) (18,997) (14,385)
Proceeds from restricted
cash reserves. . . . . . . . 14,144 15,903 4,596
Proceeds from minority
interest in other
partnerships . . . . . . . . -- -- 10
Proceeds from sale of
investments in hotel
properties . . . . . . . . . 4,473 -- --
Capital contribution to
affiliated lessee. . . . . . -- -- (38)
---------- ---------- ----------
Net cash flow used in
investing
activities . . . . . . (31,797) (63,660) (406,732)
---------- ---------- ----------
Cash flows from financing
activities:
Borrowings under credit
facility . . . . . . . . . . 50,300 86,830 164,700
Repayments under credit
facility . . . . . . . . . . (101,700) (86,630) --
Proceeds from mortgage loans . 74,500 46,500 --
Mortgage loan repayments . . . (842) (194) --
Payment of deferred
financing costs. . . . . . . (3,781) (811) (2,190)
Proceeds from issuance of
common shares. . . . . . . . -- -- 257,601
Proceeds from exercise of
stock options. . . . . . . . 561 -- --
Offering costs . . . . . . . . -- (106) (21,401)
Distributions. . . . . . . . . (28,274) (27,810) (11,688)
---------- ---------- ----------
Net cash flow provided
by (used in) financ-
ing activities . . . . (9,236) 17,779 387,022
---------- ---------- ----------
Net change in cash and
cash equivalents . . . . . . . (198) 42 1,570
Cash and cash equivalents at
beginning of period. . . . . . 1,612 1,570 --
---------- ---------- ----------
Cash and cash equivalents at
end of period . . . . . . . . . $ 1,414 $ 1,612 $ 1,570
========== ========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
LASALLE HOTEL PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, expect per share data)
1. ORGANIZATION AND INITIAL PUBLIC OFFERING
LaSalle Hotel Properties (the "Company") was organized in the state of
Maryland on January 15, 1998. The Company is a real estate investment
trust ("REIT") as defined in the Internal Revenue Code. The Company was
formed to own hotel properties and to continue and expand the hotel
investment activities of Jones Lang LaSalle Incorporated (formerly LaSalle
Partners Incorporated) and certain of its affiliates (collectively "JLL").
On April 23, 1998, the Company's Registration Statement on Form S-11 was
declared effective. The Company had no operations prior to April 29, 1998.
On April 29, 1998, the Company completed an initial public offering (the
"IPO") of 14,200,000 common shares of beneficial interest (the "Common
Shares"). The offering price of all Common Shares sold was $18 per common
share, resulting in gross proceeds of $255,600 and net proceeds (less the
underwriters' discount and offering expenses) of $234,138. The Company
contributed all of the net proceeds of the IPO to LaSalle Hotel Operating
Partnership, L.P., a limited partnership (the "Operating Partnership"), in
exchange for an approximate 82.6% general partnership interest in the
Operating Partnership. The Operating Partnership used the net proceeds
from the Company, the issuance of additional Common Shares of the Company,
the issuance of rights to purchase Common Shares and the issuance of
limited partnership interests ("Units"), representing an approximate 17.4%
interest in the Operating Partnership, to acquire ten upscale and luxury
full service hotels (the "Initial Hotels").
As of December 31, 2000, the Company owned interests in 13 hotels with
approximately 5,300 guest rooms (the "Hotels") located in eleven states.
The Company owns 100% equity interests in 11 of the hotels and a 95.1%
interest in a partnership which owns one hotel and a 9.9% equity interest
in the Chicago Hotel Venture (as defined in Note 4) which also owns one
hotel. All of the Hotels are leased under participating leases
("Participating Leases") which provide for rent based on hotel revenues and
are managed by independent hotel operators ("Hotel Operators"). Eight of
the Hotels are leased to unaffiliated lessees (affiliates of whom also
operate these hotels) and four of the Hotels are leased to LaSalle Hotel
Lessee, Inc. ("LHL"). As more fully described in Note 4 below, the Hotel
which is owned by the Chicago Hotel Venture is leased to Chicago 540 Lessee
in which the Company also has a 9.9% equity interest.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company, the Operating Partnership and its consolidated subsidiaries and
partnerships. All significant intercompany balances and transactions have
been eliminated.
USE OF ESTIMATES
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of certain assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is determined by using available market information and
appropriate valuation methodologies. The Company's financial instruments
include cash and cash equivalents, accounts receivable, accounts payable,
accrued expenses, borrowings against the 1998 Second Amended Credit
Facility, borrowings under the 1999 Mortgage Loan and borrowings under the
2000 Mortgage Loans (all defined in Note 7). Due to their short
maturities, cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses are carried at amounts which reasonably
approximate fair value. As borrowings under the 1998 Second Amended Credit
Facility bear interest at variable market rates, carrying value
approximates market value at December 31, 2000 and 1999. At December 31,
2000, the carrying value of the 1999 Mortgage Loan and 2000 Mortgage Loans
approximated fair value, as the interest rates associated with the
borrowings approximated current market rates.
INVESTMENT IN HOTEL PROPERTIES
Hotel properties are stated at cost and are depreciated using the
straight-line method over estimated useful lives ranging from 27.5-30 years
for buildings and improvements and 5 years for furniture, fixtures and
equipment.
The Company periodically reviews the carrying value of each Hotel to
determine if circumstances exist indicating an impairment in the carrying
value of the investment in the hotel or that depreciation periods should be
modified. If facts or circumstances support the possibility of impairment,
the Company will prepare a projection of the undiscounted future cash
flows, without interest charges, of the specific hotel and determine if the
investment in such hotel is recoverable based on the undiscounted future
cash flows. If impairment is indicated, an adjustment will be made to the
carrying value of the hotel based on discounted future cash flows. In
1999, the Company recorded a writedown of $2,000 for the Holiday Inn Plaza.
In 2000, the Company recorded an additional writedown of $1,266 for the
Holiday Inn Plaza Park and $11,030 for the Radisson Hotel Tampa (see Note
6). The Company does not believe that there are any factors or
circumstances indicating impairment of any of its investments in the
remaining twelve Hotels.
Hotel properties are considered held for sale when actively marketed
and sale is expected to occur within one year.
INVESTMENTS IN JOINT VENTURE
Investment in Joint Venture represents the Company's 9.9% equity
interest in Chicago Hotel Venture and Chicago 540 Lessee (as defined in
Note 4). The Company accounts for its Investment in Joint Ventures under
the equity method of accounting. Accordingly, the Company carries its
investment at cost, plus its equity in net earnings, less distributions
received since the date of acquisition. In addition, pursuant to the joint
venture agreement, the Company earns a priority preferred return based on
the net operating cash flow of Chicago Hotel Venture.
INVESTMENT IN LHL
The Company owned a 9% interest in LHL in which the Company together
with JLL and LPI Charities, a charitable corporation organized under the
laws of the state of Illinois, made all material decisions concerning the
business affairs and operations. Accordingly, the Company did not control
LHL and carried its investment at cost, plus its equity in net earnings,
less distributions received since the date of inception.
<PAGE>
On July 28, 2000, the Operating Partnership reached a definitive
agreement with the shareholders of LHL, to purchase all of the issued and
outstanding shares of capital stock of LHL for $500. LHL leases four of
the Company's owned hotels, including Marriott Seaview Resort, LaGuardia
Airport Marriott, Omaha Marriott and Harborside Hyatt Conference Center and
Hotel. Effective January 1, 2001, LHL is a 100% owned subsidiary of the
Company as provided for under the taxable-REIT subsidiary provisions. It
is currently anticipated that the cost associated with the transaction will
be expensed in the first quarter of 2001.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less
when purchased are considered to be cash equivalents.
DEFERRED FINANCING FEES
Deferred financing fees are recorded at cost and are amortized over
the three-year term of the 1998 Second Amended Credit Facility and over the
ten-year terms of the 1999 Mortgage Loan and 2000 Mortgage Loans.
Accumulated amortization at December 31, 2000, 1999 and 1998 was $2,304,
$1,316 and $474, respectively.
DISTRIBUTIONS
The Company pays regular quarterly distributions to its shareholders
as directed by the Board of Trustees. The Company's ability to pay
distributions is dependent on the receipt of distributions from the
Operating Partnership.
REVENUE RECOGNITION
The Company recognizes lease revenue on an accrual basis pursuant to
the terms of the respective Participating Leases. Base and participating
rent is recognized based on quarterly thresholds, pursuant to the lease
agreements (see Note 10).
MINORITY INTEREST
Minority interest in the Operating Partnership represents the limited
partners' proportionate share of the equity in the Operating Partnership.
At December 31, 2000, the aggregate partnership interest held by the
limited partners in the Operating Partnership was approximately 8.4%.
Income is allocated to minority interest based on the weighted average
percentage ownership throughout the year. On January 1, 2001, JLL and its
affiliates redeemed 964,334 Units resulting in 574,813 Units or 3.1%
partnership interest held by the limited partners.
Minority interest in the San Diego Subsidiary Partnership (as defined
in Note 4) represents the limited partner's proportionate share of the
equity in the San Diego Subsidiary Partnership. Income is allocated to
minority interest based on the terms of the partnership agreement.
INCOME TAXES
The Company has elected to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code (the "Code"). As a result, the
Company generally will not be subject to Federal corporate income tax on
that portion of its net income that is currently distributed to
shareholders. Accordingly, no provision for income taxes has been made in
the accompanying consolidated financial statements.
Effective January 1, 2001, LHL, a 100% owned subsidiary of the Company
is a taxable-REIT subsidiary ("TRS") and as such is required to pay income
taxes at the applicable rates.
<PAGE>
For federal income tax purposes, the cash distributions paid to
shareholders may be characterized as ordinary income, return of capital
(generally non-taxable) or capital gains. For 2000, 82.25% of the
Company's distributions were fully taxable as ordinary income, while 17.75%
represented a return of capital. For 1999, 91.10% of the Company's
distributions were fully taxable as ordinary income, while 8.90%
represented a return of capital. For 1998, the Company's distributions
were fully taxable as ordinary income.
EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
based on the weighted average number of common shares outstanding plus the
effect of in-the-money stock options.
3. NOTES RECEIVABLE
The Company provided working capital to the Affiliated Lessee and the
other lessees in the aggregate amount of $5,834 in exchange for notes
receivable ("Working Capital Notes"). In addition, the Company sold
certain furniture, fixtures and equipment to two of its unaffiliated
lessees in exchange for notes receivable ("FF&E Notes") of $1,583. Both
the Working Capital Notes and the FF&E Notes are payable in monthly
installments of interest only. The Working Capital Notes bear interest at
either 5.6% or 6% per annum and have terms identical to the terms of the
related Participating Lease. The FF&E Notes bear interest at 5.6% and 6.0%
per annum and have an initial term of five years unless extended at the
Company's option.
4. ACQUISITION/DISPOSITION OF HOTEL PROPERTIES
The Initial Hotels were previously owned by various limited and
general partnerships (the "Existing Partnerships"). In conjunction with
the IPO and the related formation transactions, the Initial Hotels, except
for Radisson Convention Hotel (previously owned by LRP Bloomington Limited
Partnership), were purchased by the Company from their Existing
Partnerships and were accounted for as purchase transactions. LRP
Bloomington Limited Partnership, the Existing Partnership that retained the
largest number and percentages of voting rights of the Company after the
formation transactions, was designated as the predecessor (the
"Predecessor") for accounting purposes. Therefore, the Company recorded a
purchase accounting adjustment in order to account for the Radisson
Convention Hotel using the historical basis of accounting.
In June 1998, the Company acquired an interest in the San Diego
Princess Resort (the "San Diego Property") through a subsidiary
partnership, LHO Mission Bay Hotel, L.P. (the "San Diego Subsidiary
Partnership"). The San Diego Subsidiary Partnership is a limited
partnership of which the Operating Partnership holds an approximate 95.1%
general partnership interest. The 457-room San Diego Property was renamed
the San Diego Paradise Point Resort.
The San Diego Property was acquired for an aggregate purchase price of
$73.0 million funded with proceeds from a borrowing under the Company's
1998 Credit Facility (as defined in Note 7) and from the proceeds of the
sale of 112,458 Common Shares to the limited partner of the San Diego
Subsidiary Partnership who operates the San Diego Property pursuant to the
terms of a participating lease.
Also in June 1998, the Company acquired a 100% interest in the 270-
room Harborside Hyatt Conference Center & Hotel in Boston (the "Boston
Property") through an indirect subsidiary, LHO Harborside Hotel, L.L.C.
(the "Harborside Subsidiary LLC"). The Harborside Subsidiary LLC is a
limited liability company, of which the Operating Partnership is the sole
member.
<PAGE>
The Boston Property was acquired for an aggregate purchase price of
$73.5 million, which included $40.0 million of tax exempt industrial
revenue bonds to which the Boston Property is no longer subject to. The
remainder of the purchase price was funded with proceeds from a borrowing
under the Company's 1998 Credit Facility. Hyatt Hotels Corporation
continues to operate the Boston Property under an existing management
agreement.
On June 2, 1999, the Company acquired a 100% interest in the 182-room
Hotel Viking and the adjacent 12-room inn in Newport, Rhode Island (the
"Newport Property") through an indirect subsidiary, LHO Viking Hotel,
L.L.C. (the "Viking Subsidiary LLC"). The Viking Subsidiary LLC is a
limited liability company, of which the Operating Partnership is the sole
member. The Newport Property was acquired from Bellevue Properties Inc.
("Bellevue"), for an aggregate purchase price of $28 million funded with
proceeds from a borrowing under the Company's 1998 Amended Credit Facility.
On January 25, 2000, the Company entered into a joint venture
arrangement (the "Chicago Hotel Venture") with an institutional investor to
acquire the 1,176-room Chicago Marriott Downtown (the "Chicago Property")
in Chicago, Illinois. The Company, through the Operating Partnership, owns
a 9.9% equity interest in the Chicago Hotel Venture. The Company will
receive an annual preferred return in addition to its pro rata share of
annual cash flow. The Company will also have the opportunity to earn an
incentive participation in net sale proceeds based upon the achievement of
certain overall investment returns, in addition to its pro rata share of
net sale or refinancing proceeds. The Chicago Property was leased to
Chicago 540 Lessee, Inc., in which the Company also owns a 9.9% equity
interest. The institutional investor owns a 90.1% controlling interest in
both the Chicago 540 Hotel Venture and Chicago 540 Lessee, Inc. Marriott
International continues to operate and manage the Chicago Property.
On August 16, 2000, the Company sold Holiday Inn Plaza Park for
$4,600. The asset had been classified as held for sale since December 31,
1999 at which time depreciated was suspended. Based on initial pricing
expectations, the net book value of the asset was reduced by $2,000 to
$5,508 in 1999. As of June 30, 2000, a purchase and sale agreement had
been entered into with an expected net sales proceeds of $4,242. As a
result, the Company recognized an additional writedown of $1,266 in the
second quarter of 2000, which included $358 of estimated accrued closing
costs.
5. INVESTMENT IN HOTEL PROPERTIES
Investment in hotel properties as of December 31, 2000 and 1999
consists of the following:
December 31, December 31,
2000 1999
------------ ------------
Land . . . . . . . . . . . . . . . . $ 46,384 $ 49,308
Buildings and improvements . . . . . 427,114 421,134
Furniture, fixtures and equipment. . 87,548 77,030
-------- --------
561,046 547,472
Accumulated depreciation . . . . . . (74,862) (46,281)
-------- --------
$486,184 $501,191
======== ========
The Hotels are located in California (2), Florida (2), Illinois,
Louisiana, Massachusetts, Minnesota, Nebraska, New Jersey, New York, Rhode
Island and Texas.
<PAGE>
6. REAL ESTATE HELD FOR SALE
On August 16, 2000, the Company sold Holiday Inn Plaza Park for
$4,600. The asset had been classified as held for sale since December 31,
1999 at which time depreciated was suspended. Based on initial pricing
expectations, the net book value of the asset was reduced by $2,000 to
$5,508 in 1999. As of June 30, 2000, a purchase and sale agreement had
been entered into with an expected net sales proceeds of $4,242. As a
result, the Company recognized an additional writedown of $1,266 in the
second quarter of 2000, which included $358 of estimated accrued closing
costs.
The Company is actively marketing Radisson Hotel Tampa for sale.
Accordingly, the asset was classified as held for sale on December 6, 2000
and will no longer be depreciated subsequent to this date. Based on
initial pricing expectations, the Company recognized a writedown of $11,030
reducing the net book value of the asset to $17,027 in 2000, which included
$200 of estimated accrued closing costs. There can be no assurance that
real estate held for sale will be sold.
Results of operations for the Radisson Hotel Tampa and Holiday Inn
Plaza Park are as follows:
For the
For the year ended period from
December 31, April 29, 1998
-------------------- (inception) through
2000 1999 December 31, 1998
---------- ---------- -------------------
Total Revenues . . . . . . . . . $ 3,548 $ 4,299 $ 2,558
Total Expenses . . . . . . . . . 2,121 2,185 1,240
Income from Operations . . . . . $ 1,427 $ 2,114 $ 1,318
7. LONG-TERM DEBT
CREDIT FACILITY
In April 1998, the Company obtained a three-year commitment for a $200
million senior unsecured revolving credit facility (the "1998 Credit
Facility") to be used for acquisitions, capital improvements, working
capital and general corporate purposes. The Company amended the 1998
Credit Facility on October 30, 1998. Under the Amended and Restated Senior
Unsecured Credit Agreement, as amended (the "1998 Amended Credit
Facility"), the commitment was increased by an additional $35 million,
bringing the total commitment under the facility to $235 million. On
November 13, 2000, the Company amended the 1998 Amended Credit Facility.
Under the Second Amended and Restated Senior Unsecured Credit Agreement, as
amended (the "1998 Second Amended Credit Facility"), the commitment was
reduced by $35 million, bringing the total commitment under the facility to
$200 million. The reduction was based on anticipated usage over the life
of the facility. Borrowings under the 1998 Second Amended Credit Facility
bear interest at floating rates equal to LIBOR plus an applicable margin or
an "Adjusted Base Rate" plus an applicable margin, at the election of the
Company. For the years ended December 31, 2000 and December 31, 1999, the
weighted average interest rate on borrowings under the 1998 Second Amended
Credit Facility was 8.1% and 6.8%, respectively. The Company did not have
any Adjusted Base Rate borrowings outstanding at December 31, 2000 or 1999.
Additionally, the Company is required to pay an unused commitment fee which
is variable, determined from a ratings based pricing matrix, currently set
at 25 basis points. The Company incurred an unused commitment fee of
approximately $200 and $162 for the years ended December 31, 2000 and
December 31, 1999, respectively. The 1998 Second Amended Credit Facility
matures on December 31, 2003 and contains certain financial covenants
relating to debt service coverage, market value net worth and total funded
indebtedness. At December 31, 2000 and 1999, the Company had outstanding
borrowings against the 1998 Second Credit Facility of $113,500 and
$164,900, respectively.
<PAGE>
BONDS PAYABLE
On June 24, 1998 the Company, through the Harborside Subsidiary LLC,
acquired the Boston Property subject to $40,000 of special project revenue
bonds ("Massport Bonds") previously issued under the loan and trust
agreement with the Massachusetts Port Authority ("Massport"), as amended
("Massport Bond Agreement"). In conjunction with the Massport Bonds, the
Company recorded a premium of $3,480, of which $314 remains unamortized at
December 31, 2000. The Massport Bonds are collateralized by the leasehold
improvements and bear interest at 10.0% per annum through the date of
maturity, March 1, 2026. Interest payments are due semiannually on March 1
and September 1. Interest expense, net of the premium amortization, for
the years ended December 31, 2000 and December 31, 1999 totaled $2,743 for
both periods. The Massport Bonds shall be redeemed in part commencing
March 1, 2001 and annually until March 1, 2026, at which time the remaining
principal and any accrued interest thereon is due in full. The Company has
the option to prepay the Massport Bonds in full beginning March 1, 2001
subject to a prepayment penalty which varies depending on the date of
prepayment. Future principal payments are as follows:
2001. . . . . . . . . . . . . $ 400
2002. . . . . . . . . . . . . 400
2003. . . . . . . . . . . . . 400
2004. . . . . . . . . . . . . 500
2005. . . . . . . . . . . . . 500
Thereafter. . . . . . . . . . 37,800
-------
$40,000
=======
Under the terms of the Massport Bond Agreement, certain cash reserves
are required to be held in trust for payments of interest, credit
enhancement fees and ground rent. As of December 31, 2000 and 1999, these
reserves totaled $7,864 and $7,311, respectively, and are included in
Restricted Cash Reserves.
In addition, the Massport Bond Agreement was supplemented by a credit
enhancement agreement (the "Massport Credit Enhancement Agreement").
Pursuant to the Massport Credit Enhancement Agreement, certain funds have
been set aside by Massport to provide additional deficit funding if the
amounts held in trust by the Company are not sufficient to cover the debt
service requirements on the outstanding Massport Bonds. In consideration
for the Massport Credit Enhancement Agreement, the Company is required to
pay an annual enhancement fee of $150, payable March 1 and September 1.
On March 1, 2001, the Company redeemed the $40.0 million tax-exempt
Massport Bonds, which had a 10.0% coupon. Proceeds for the redemption were
derived from $37.1 million of tax exempt and $5.4 million of taxable bonds,
each having a 17-year maturity, bearing interest based on a weekly floating
rate and having no principal reductions for the life of the bonds. Due to
the nature of these bonds, they can be redeemed at any time without
penalty. The new bonds are secured by letters of credit issued by GE
Capital Corporation. The letters of credit are collateralized by the
Harborside Hyatt Conference Center and Hotel. The excess proceeds of
approximately $5,900 were used to pay down borrowings on the 1998 Second
Amended Credit facility.
<PAGE>
MORTGAGE LOANS
On July 29, 1999, the Company, through the newly formed LHO Financing
Partnership I, L.P. (the "Financing Partnership") entered into a $46,500
mortgage loan (the "1999 Mortgage Loan"). The Financing Partnership is
effectively wholly owned by the Company. The 1999 Mortgage Loan is secured
by the Radisson Convention Hotel and Le Meridien Dallas. The loan matures
on July 31, 2009 and does not allow for prepayment prior to January 31,
2009, without penalty. The loan bears interest at a fixed rate of 8.1% and
requires interest and principal payments based on a 25-year amortization
schedule. The loan agreement requires the Financing Partnership to hold
funds in escrow for the payment of one half year's insurance and real
estate taxes. The 1999 Mortgage Loan also requires the Financing
Partnership to maintain a certain debt service coverage ratio.
The 1999 Mortgage Loan had principal balances of $45,690 and $46,306
at December 31, 2000 and December 31, 1999, respectively. Future scheduled
debt principal payments at December 31, 2000 are as follows (in thousands):
2001. . . . . . . . . . . . . $ 667
2002. . . . . . . . . . . . . 723
2003. . . . . . . . . . . . . 784
2004. . . . . . . . . . . . . 850
2005. . . . . . . . . . . . . 922
Thereafter. . . . . . . . . . 41,744
-------
$45,690
=======
On July 27, 2000, the Company, through three newly formed
partnerships, LHO Hollywood LM, L.P., LHO New Orleans LM, L.P., and LHO Key
West HI, L.P. (the "2000 Financing Partnerships"), entered into three ten-
year mortgage loans totaling $74,500 (the "2000 Mortgage Loans"). The 2000
Mortgage Loans are secured by the Le Montrose All-Suite Hotel located in
West Hollywood, California, Le Meridien New Orleans and the Key West
Beachside Resort. The loans bear interest at a fixed rate of 8.08% and
require interest and principal payments based on a 27-year amortization
schedule. The loan agreements require the 2000 Financing Partnerships to
hold funds in escrow for the payment of one half year's insurance and real
estate taxes and one month's ground rent. The 2000 Mortgage loans also
require the 2000 Financing Partnerships to maintain certain debt service
coverage ratios.
The 2000 Mortgage Loans had a principal balance of $74,274 at
December 31, 2000. Future scheduled debt principal payments at
December 31, 2000 are as follows (in thousands):
2001. . . . . . . . . . . . . $ 735
2002. . . . . . . . . . . . . 798
2003. . . . . . . . . . . . . 864
2004. . . . . . . . . . . . . 921
2005. . . . . . . . . . . . . 1,016
Thereafter. . . . . . . . . . 69,940
-------
$74,274
=======
<PAGE>
8. SHAREHOLDERS' EQUITY
COMMON SHARES OF BENEFICIAL INTEREST
In connection with the acquisition of the Initial Hotels, the Company
issued 912,122 restricted Common Shares to JLL. The Common Shares were
valued at $18.00 per share or $16,418. The Company also granted 1,280,569
rights mainly to purchase Common Shares at the exercise price of $18.00 per
share in connection with the acquisition of the Initial Hotels. Among the
rights which were granted, 457,346 were granted to the Advisor (as defined
in Note 11). The Advisor may exercise its rights to purchase Common Shares
or Units, at the option of the Company. The Company has recorded these
rights in shareholders' equity at their fair value on the date of grant,
which was $2,997. All rights have a one year vesting period and a 10 year
term. At December 31, 2000, all of the rights were exercisable.
In connection with the purchase of the San Diego Property (see
Note 4), the sole limited partner in the San Diego Subsidiary Partnership
(which is an affiliate of the hotel operator) acquired 112,458 Common
Shares, from the Company for a purchase price of $2,000. The purchase and
sale of the Common Shares was a condition to the selection of the affiliate
of the limited partner as operator of the San Diego Property, and the
Common Shares have been pledged to the Operating Partnership to secure the
limited partner's obligations under the related Participating Lease.
On February 22, 1999, the Company issued 4,995 Common Shares to the
Board of Trustees for their 1998 Compensation. The annual fee paid to the
Board of Trustees is paid 50% in cash and 50% in Common Shares. Each
trustee may elect to receive Common Shares in lieu of receiving 50% of
their annual fee in cash.
On March 4, 1999, pursuant to the advisory agreement, the Company
issued 10,988 Common Shares to the Advisor for the incentive portion of the
1998 advisory fee, in lieu of the $155, which would have otherwise been due
to the Advisor.
On May 13, 1999, the Company's registration statement on Form S-3
under the Securities Act of 1933 (the "Securities Act"), as amended,
registering $200,000 of Common Shares, Common Share Warrants, Preferred
Shares of Beneficial Interest (the "Preferred Shares") and Depository
Shares representing Preferred Shares was declared effective.
In connection with the Chicago Hotel Venture and the acquisition of
the Chicago Property (See Note 4), the Company issued 16,667 Units to an
affiliate of the previous owner of the Hotel for consideration valued at
approximately $300.
On February 14, 2000, the Company issued 6,125 Common Shares to the
non-affiliated members of its Board of Trustees for 1999 compensation. The
Common Shares were issued in lieu of cash, at the trustee's election.
These Common Shares were issued under the 1998 Share Option and Incentive
Plan (the "1998 SIP").
On February 15, 2000, pursuant to the advisory agreement, the Company
issued 31,318 Common Shares to the Advisor for the incentive portion of the
1999 advisory fee, in lieu of the $412, which would have otherwise been due
to the Advisor.
As of December 31, 2000, the Company has reserved 1,500,000 Common
Shares for future issuance under the 1998 SIP (as defined in Note 12). The
Company has also reserved a total of 1,280,569 Common Shares for future
issuance pursuant to rights which have been issued and 1,539,147 Common
Shares for issuance upon the conversion of the Units, both of which were
issued in connection with the IPO, the acquisition of the Initial Hotels
and the formation of the Company.
<PAGE>
During 2000, the Company granted options to the Advisor under the 1998
SIP. In conjunction with this grant, the Company recorded an expense of
$53 for the year ended December 31, 2000, which is included in Advisory Fee
in the accompanying statements of operations. These options vested on
January 18, 2000.
OPERATING PARTNERSHIP UNITS
The outstanding Units are redeemable at the option of the holder for a
like number of Common Shares of the Company or, at the option of the
Company, for the cash equivalent thereof.
On October 24, 2000, 36,754 Units were converted to Common Shares. At
December 31, 2000, 1,539,147 Units were outstanding. On January 1, 2001,
JLL and its affiliates redeemed 964,334 Units resulting in 574,813 Units
outstanding.
9. EARNINGS PER SHARE
The limited partners' outstanding units in the Operating Partnership
("Units") have been excluded from the diluted earnings per share
calculation as there would be no effect on the amounts since the minority
interests' share of income would also be added back to net income.
The following table sets forth the computation of basic and diluted
EPS:
For the
period from
April 29, 1998
For the For the (inception)
Year Ended Year Ended through
December 31, December 31, December 31,
2000 1999 1998
------------ ------------ -------------
Numerator:
Net income . . . . . . $ 5,351 $ 13,989 $ 12,233
========== ========== ==========
DENOMINATOR:
Weighted average
number of common
shares - Basic . . . 16,920,596 15,432,667 15,209,555
Effect of Dilutive
Securities Common
Stock Options. . . . 62,366 -- --
---------- ---------- ----------
Weighted average
number of common
shares - Diluted . . 16,982,962 15,432,667 15,209,555
---------- ---------- ----------
BASIC EPS:
Net income per
weighted average
common shares. . . . $ 0.32 $ 0.91 $ 0.80
========== ========== ==========
DILUTED EPS:
Net income per
weighted average
common shares. . . . $ 0.32 $ 0.91 $ 0.80
========== ========== ==========
<PAGE>
10. PARTICIPATING LEASES
The Participating Leases have noncancelable terms ranging from six to
eleven years (from commencement), subject to earlier termination on the
occurrence of certain contingencies, as defined. The rent due under each
Participating Lease is the greater of base rent, as defined, or
participating rent. Participating rent applicable to room and other hotel
revenues varies by lease and is calculated by multiplying fixed percentages
by the total amounts of such revenues over specified threshold amounts.
Both the base rent and the participating rent thresholds used in computing
percentage rents applicable to room and other hotel revenues, including
food and beverage revenues, are subject to annual adjustments based on
increases in the United States Consumer Price Index ("CPI") published by
the Bureau of Labor Statistics of the United States of America Department
of Labor, U.S. City Average, Urban Wage Earners and Clerical Workers.
Participating Lease revenues for the years ended December 31, 2000 and 1999
and for the period from April 29, 1998 (inception) through December 31,
1998 were $83,772, $76,843 and $46,464, of which $30,751, $25,271 and
$15,256 was in excess of base rent, respectively.
Future minimum rentals (without reflecting future CPI increases) to be
received by the Company pursuant to the Participating Leases for each of
the years in the period 2000 to 2004 and in total thereafter are as
follows:
2001 . . . . . . . . . . . . . . . . $ 54,568
2002 . . . . . . . . . . . . . . . . 54,568
2003 . . . . . . . . . . . . . . . . 54,816
2004 . . . . . . . . . . . . . . . . 54,816
2005 . . . . . . . . . . . . . . . . 54,816
Thereafter . . . . . . . . . . . . . 139,701
11. ADVISORY AGREEMENT
Upon completion of the IPO, the Company entered into an advisory
agreement with LaSalle Hotel Advisors, Inc. (the "Advisor"), a wholly owned
subsidiary of JLL. From its inception through December 31, 2000, JLL acted
as an external advisor providing management, acquisition, advisory and
administration services pursuant to an Advisory Agreement and Employee
Lease Agreement (collectively the "Advisory Agreement"). The initial term
of the Advisory Agreement extended through December 31, 1999, subject to
successive, automatic one year renewals unless terminated according to the
terms of the Advisory Agreement. On October 25, 1999, the Company's Board
of Trustees approved the renewal of the Advisory Agreement through December
31, 2000.
On November 15, 2000, the Company's Board of Trustees approved the
termination of the Advisory Agreement and voted to become a self-managed
REIT effective January 1, 2001. The Company will pay the Advisor $600 for
2001 transition services including waiving the termination notice period,
and providing support and advice through the first quarter of 2001. In
addition, the Company will purchase assets to operate the Company at book
value.
The Advisory Agreement provided for payment of a base fee, payable
quarterly, starting at 5% of the first $100.0 million of net operating
income ("NOI") (as defined). The percentage of NOI used to calculate the
base fee is reduced by .2% for every incremental $125.0 million of NOI
above $100.0 million until $600.0 million, at which point any excess NOI
above $600.0 million is subject to a base fee of 4%.
<PAGE>
In addition, the Advisory Agreement provided for payment of an annual
incentive fee to be paid by the Company in arrears. The annual incentive
fee is equal to 25% of the product of (i) the amount by which the funds
from operations ("FFO") per common share/Unit (as defined) for the calendar
year then ended (the "Measurement Year") exceeded a growth rate of 7% per
annum of the FFO per common share/Unit for the prior calendar year and (ii)
the common shares/Units outstanding for the Measurement Year. For partial
years, the incentive fee was calculated on a pro rata basis for only that
portion of the year that the Advisory Agreement was in effect. Payment of
the incentive fee was in common shares or Units at the option of the
Advisor.
12. SHARE OPTION AND INCENTIVE PLAN
In April 1998, the Board of Trustees adopted and the then current
shareholder, approved the Share Option and Incentive Plan (the "1998 SIP")
which is currently administered by the Compensation, Contract and
Governance Committee (the "Compensation Committee") of the Board of
Trustees. The Advisor and its employees and the Hotel Operators and their
employees generally are eligible to participate in the 1998 SIP.
Independent Trustees continuing in office after an annual meeting of
shareholders of the Company receive automatic annual grants of options to
purchase 1,000 Common Shares at a per share exercise price equal to fair
market value of a Common Share on the date of the meeting.
The 1998 SIP authorizes, among other things: (i) the grant of share
options that qualify as incentive options under the Code; (ii) the grant of
share options that do not so qualify; (iii) the grant of share options in
lieu of cash Trustees' fees; (iv) grants of Common Shares in lieu of cash
compensation; and (v) the making of loans to acquire Common Shares in lieu
of compensation. The exercise price of share options is determined by the
Compensation Committee, but may not be less than 100% of the fair market
value of the Common Shares on the date of grant. Options under the plan
vest over a period determined by the Compensation Committee, which is
generally a three year period. The duration of each option is also
determined by the Compensation Committee, however, the duration of each
option shall not exceed 10 years from date of grant.
On May 19, 1999, the common shareholders approved an amendment to the
1998 SIP, increasing the number of Common Shares authorized for issuance
under the SIP from 757,000 to 1,500,000. Accordingly, at December 31, 2000
and 1999, 1,500,000 shares were authorized for issuance under the 1998 SIP.
On February 1, 2001, an affiliate of the Advisor exercised 300,000
options. Proceeds from the options were used to reduce outstanding
borrowings on the 1998 Second Amended Credit Facility.
<PAGE>
Stock option transactions are summarized as follows:
2000 1999 1998
----------------- ---------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- -------- ------ -------- ------ --------
Outstanding
at beginning
of the year . 380,200 $13.84 81,000 $16.22 -- $ --
Options
granted . . . 333,500 11.81 310,700 13.20 81,000 16.22
Options
exercised . . (45,167) 12.41 -- -- -- --
Options
forfeited . . (27,666) 15.19 (11,500) 13.25 -- --
------- ------ ------- ------ ------ ------
Outstanding
at end of
year. . . . . 640,867 $12.83 380,200 $13.84 81,000 $16.22
======= ====== ======= ====== ======= ======
Exercisable
at end of
the year. . . 395,740 43,667
Available for
future grant
at year end . 802,846 1,114,805 676,000
Weighted
average per
share fair
value of
options
granted during
the year. . . $ 1.32 $ 1.55 $ 0.94
Options Outstanding Options Exercisable
--------------------------------- ----------------------
Number Weighted Weighted Number Weighted
Range of Outstand- Average Average Outstand- Average
Exercise ing at Remaining Exercise ing at Exercise
Prices 12/31/00 Life Price 12/31/00 Price
------------- --------- --------- --------- ----------- --------
$11.63-$18.00 640,867 5.6 years $12.83 395,740 $12.99
The fair value of each stock option granted is estimated on the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions:
2000 1999 1998
------ ------ -------
Expected Life. . . . . . . . . 7.2 7.2 7.9
Expected Volatility. . . . . . 23.8% 32.0% 13.4%
Risk-free Interest Rate. . . . 4.7% 4.8% 4.7%
Dividend Yield . . . . . . . . 11.8% 10.9% 9.3%
<PAGE>
PRO FORMA NET INCOME AND NET INCOME PER COMMON SHARE
The Company has applied Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for the 1998 SIP. Accordingly, no
compensation costs have been recognized, except $53 and $12 for the options
granted to the Advisor during 2000 and 1999, respectively, which were
accounted for under the method required by Statement of Financial
Accounting Standards ("SFAS") No. 123. Had compensation cost for all of
the options granted under the Company's 1998 SIP been determined in
accordance with the method required by SFAS No. 123, the Company's net
income and net income per common share for 2000, 1999 and 1998 would
approximate the pro forma amounts below (in thousands, except per share
data).
2000 1999 1998
------------------ ----------------- -----------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
-------- -------- -------- -------- -------- --------
Net income . . $ 5,351 $ 5,215 $ 13,989 $ 13,886 $ 12,233 $ 12,229
======== ======== ======== ======== ======== ========
Net income
per common
share:
Basic. . . . $ 0.32 $ 0.31 $ 0.91 $ 0.90 $ 0.80 $ 0.80
======== ======== ======== ======== ======== ========
Diluted. . . $ 0.32 $ 0.31 $ 0.91 $ 0.90 $ 0.80 $ 0.80
======== ======== ======== ======== ======== ========
13. LHL
A significant portion of the Company's participating lease revenue is
derived from the Participating Leases with LHL. Certain condensed
financial information, related to the LHL's financial statements, is as
follows:
December 31, December 31,
2000 1999
------------ ------------
Balance Sheet Information:
Cash and cash equivalents. . . . . . . . $ 6,208 $ 5,494
Due from LaSalle Hotel Properties. . . . 756 30
Total assets . . . . . . . . . . . . . . 12,887 11,176
Notes payable to LaSalle Hotel
Properties . . . . . . . . . . . . . . 3,900 3,900
Total liabilities. . . . . . . . . . . . 12,834 10,777
Stockholders' equity (deficit) . . . . . 53 399
Total liabilities and stockholders'
equity (deficit) . . . . . . . . . . . 12,887 11,176
For the
For the year ended period from
December 31, April 29, 1998
------------------- (inception) through
2000 1999 December 31, 1998
-------- -------- -------------------
Statement of Operations
Information:
Total revenues . . . . . . . . $107,991 $100,700 $ 66,335
Participating lease expense. . 30,963 28,290 19,436
Net income (loss). . . . . . . 862 633 (659)
At December 31, 2000, 1999 and 1998, the Company owed LHL $756, $30
and $614, respectively, for reimbursement of capital improvements, which
were paid by LHL.
<PAGE>
On July 28, 2000, the Operating Partnership reached a definitive
agreement with the shareholders of LaSalle Hotel Lessee, Inc. ("LHL"), to
purchase all of the issued and outstanding shares of capital stock of LHL
for $500. LHL leases four of the Company's owned hotels, including
Marriott Seaview Resort, LaGuardia Airport Marriott, Omaha Marriott and
Harborside Hyatt Conference Center and Hotel. Effective January 1, 2001,
LHL is a 100% owned subsidiary of the Company as provided for under the
taxable-REIT subsidiary provisions. It is currently anticipated that the
cost associated with the transaction will be expensed in the first quarter
of 2001.
14. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
For the
For the year ended period from
December 31, April 29, 1998
------------------- (inception) through
2000 1999 December 31, 1998
-------- -------- -------------------
Interest paid,
net of capitalized interest. . $ 22,300 $ 17,652 $ 7,325
======== ======== ========
Interest capitalized . . . . . . $ 699 $ 174 $ 57
======== ======== ========
Supplemental schedule of non-
cash investing and financing
activities:
Issuance of Units in conjunc-
tion with the investment
in Chicago Hotel Venture . . $ 300 $ -- $ --
======== ======== ========
Advances to Affiliated Lessee
converted to notes
receivable . . . . . . . . . $ -- $ 2,400 $ --
======== ======== ========
Distributions payable. . . . . $ 7,131 $ 7,000 $ 6,902
======== ======== ========
Exchange of Units for
Common Shares:
Minority interest. . . . . . . $ (526) $(23,847) $ --
Common stock . . . . . . . . . -- 16 --
Additional paid in capital . . 526 23,831 --
-------- -------- --------
$ -- $ -- $ --
======== ======== ========
In conjunction with the hotel
acquisitions, the Company
assumed the following assets
and liabilities:
Purchase of real estate. . . . $ -- $ 28,052 $470,859
Adjustment required to reflect
predecessor's basis. . . . . -- -- 33,012
Note receivable. . . . . . . . -- 167 --
Other assets purchased . . . . -- 14 --
Liabilities, net of other
assets . . . . . . . . . . . -- -- (3,455)
Bonds payable. . . . . . . . . -- -- (43,480)
Issuance of shares/units . . . -- -- (76,686)
-------- -------- --------
Acquisitions of
hotel properties . . . . . . $ -- $ 28,233 $380,250
======== ======== ========
<PAGE>
For the
For the year ended period from
December 31, April 29, 1998
------------------- (inception) through
2000 1999 December 31, 1998
-------- -------- -------------------
In conjunction with the hotel
disposition, the Company
disposed of the following
assets and liabilities:
Sale of real estate. . . . . . $ (4,580) $ -- $ --
Note receivable. . . . . . . . (100) -- --
Other assets disposed. . . . . (110) -- --
Liabilities. . . . . . . . . . 317 -- --
-------- -------- --------
Disposition of
hotel properties . . . . . . $ (4,473) $ -- $ --
======== ======== ========
15. COMMITMENTS AND CONTINGENCIES
Three of the Hotels are subject to ground leases under noncancelable
operating leases with terms ranging out to May 2081. Total lease expense
for the years ended December 31, 2000 and 1999 and for the period from
April 29, 1998 (inception) through December 31, 1998 was $3,574, $3,351 and
$1,886, respectively. Future minimum lease payments are as follows:
2001. . . . . . . . . . . . . . . . . $ 2,364
2002. . . . . . . . . . . . . . . . . 2,364
2003. . . . . . . . . . . . . . . . . 2,364
2004. . . . . . . . . . . . . . . . . 2,364
2005. . . . . . . . . . . . . . . . . 2,364
Thereafter. . . . . . . . . . . . . . 131,869
--------
$143,689
========
The Company is obligated to make funds available to the Hotels for
capital expenditures (the "Reserve Funds"), as determined in accordance
with the Participating Leases. The Reserve Funds have not been recorded on
the books and records of the Company as such amounts will be capitalized as
incurred. The amounts obligated under the Reserve Funds range from 4.0% to
5.5% of the individual Hotel's total revenues. The total amount obligated
by the Company under the Reserve Funds is approximately $10,521 at
December 31, 2000, of which $3,387 available in restricted cash reserves
for future capital expenditures. Purchase orders and letters of commitment
totaling approximately $3,000 have been issued for renovations at the
Hotels.
The nature of the operations of the Hotels expose them to the risk of
claims and litigation in the normal course of their business. Although the
outcome of these matters cannot be determined, management does not expect
that the ultimate resolution of these matters will have a material adverse
effect on the financial position, operations or liquidity of the Hotels.
16. RELATED PARTY TRANSACTIONS
At December 31, 2000, 1999 and 1998, the Company had a payable to JLL
of $966, $1,123 and $886, respectively, primarily for the advisory fee.
For the years ended December 31, 2000 and 1999 and for the period from
April 29, 1998 (inception) through December 31, 1998, the total advisory
fee was $3,840, $3,670 and $2,134, of which $125, $412 and $155 represented
the incentive portion of the advisory fee, respectively.
<PAGE>
On November 15, 2000, the Company announced its Board of Trustees
voted to become a self-managed company effective January 1, 2001 and
terminate its advisory relationship with Advisor. In connection with the
termination, the Advisor will receive $600 for 2001 transition services and
the Company will purchase assets used to operate the Company at book value.
The entire management team has become employees of LHO and continues to
oversee and manage all activities of the Company under the new self-managed
structure.
17. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The pro forma financial information set forth below is presented as if
the acquisitions of the Hotel Viking and Chicago Marriott Downtown as
discussed in Note 4 had been consummated and leased as of January 1, 1999.
The pro forma financial information is not necessarily indicative of what
actual results of operations of the Company would have been assuming the
acquisitions had been consummated and all the Hotels had been leased as of
January 1, 1999, nor does it purport to represent the results of operations
for future periods.
For the
Year Ended
December 31,
----------------------
2000 1999
---------- ----------
Total revenues . . . . . . . . . . . . . . . . . $ 86,172 $ 78,760
---------- ----------
Depreciation . . . . . . . . . . . . . . . . . . 29,078 25,786
Real estate and personal property taxes and
insurance. . . . . . . . . . . . . . . . . . . 8,462 8,271
General and administrative . . . . . . . . . . . 952 1,342
Interest expense . . . . . . . . . . . . . . . . 21,076 17,261
Amortization of deferred financing costs . . . . 1,139 992
Advisory fees. . . . . . . . . . . . . . . . . . 3,836 3,707
Ground rent. . . . . . . . . . . . . . . . . . . 3,574 3,351
Other expense. . . . . . . . . . . . . . . . . . 19 140
---------- ----------
Income before Minority Interest and
writedown of property held for sale . . . . . . 18,036 17,910
Writedown of property held for sale. . . . . . . 12,296 2,000
---------- ----------
Income before minority interest. . . . . . . . . 5,740 15,910
Minority interest. . . . . . . . . . . . . . . . 480 2,583
---------- ----------
Net income applicable to common shareholders . . $ 5,260 $ 13,327
========== ==========
Net income applicable to common shareholders per
weighted average common share outstanding
- basic. . . . . . . . . . . . . . . . . . . $ 0.31 $ 0.86
========== ==========
- diluted. . . . . . . . . . . . . . . . . . $ 0.31 $ 0.86
========== ==========
Weighted average number of common
shares outstanding
- basic. . . . . . . . . . . . . . . . . . . 16,920,596 15,432,667
========== ==========
- diluted. . . . . . . . . . . . . . . . . . 16,982,962 15,432,667
========== ==========
18. PREDECESSOR INFORMATION
Pursuant to SEC regulations which require the presentation of
predecessor financial information for corresponding periods of the
preceding year, the following information represents condensed statements
of operations and cash flow information of LRP Bloomington Limited
Partnership, which is considered to be the predecessor of the Company, for
the period from January 1, 1998 through April 28, 1998.
<PAGE>
LRP BLOOMINGTON LIMITED PARTNERSHIP (PREDECESSOR)
STATEMENTS OF OPERATIONS
(Dollar Amounts in Thousands)
For the
period from
January 1, 1998
through
April 28, 1998
----------------
REVENUES
Rooms. . . . . . . . . . . . . . . . . . . . . . . $ 4,285
Food & beverage. . . . . . . . . . . . . . . . . . 3,459
Telephone. . . . . . . . . . . . . . . . . . . . . 124
Other. . . . . . . . . . . . . . . . . . . . . . . 537
--------
Total Revenue . . . . . . . . . . . . . . . . 8,405
--------
EXPENSES
Departmental expenses:
Rooms. . . . . . . . . . . . . . . . . . . . . . 1,096
Food & beverage. . . . . . . . . . . . . . . . . 2,379
Telephone. . . . . . . . . . . . . . . . . . . . 88
Other operating departments. . . . . . . . . . . 307
General & administrative . . . . . . . . . . . . . 571
Sales and marketing. . . . . . . . . . . . . . . . 435
Real estate and personal property taxes. . . . . . 405
Property operations and management . . . . . . . . 400
Management fees. . . . . . . . . . . . . . . . . . 336
Energy . . . . . . . . . . . . . . . . . . . . . . 292
Insurance. . . . . . . . . . . . . . . . . . . . . 71
Other fixed expenses . . . . . . . . . . . . . . . 73
Interest expense . . . . . . . . . . . . . . . . . 833
Depreciation and amortization. . . . . . . . . . . 1,196
Advisory fees. . . . . . . . . . . . . . . . . . . 53
--------
Total Expenses. . . . . . . . . . . . . . . . 8,535
--------
Net Loss . . . . . . . . . . . . . . . . . . . . . $ (130)
========
<PAGE>
LRP BLOOMINGTON LIMITED PARTNERSHIP (PREDECESSOR)
STATEMENT OF CASH FLOWS
(Unaudited, Dollar Amounts in Thousands)
For the
period from
January 1, 1998
through
April 28, 1998
----------------
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . $ (130)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization. . . . . . . . . 1,196
Changes in assets and liabilities:
Guest and trade receivables, net. . . . . . . (284)
Inventories . . . . . . . . . . . . . . . . . 8
Prepaid expenses. . . . . . . . . . . . . . . (367)
Accounts payable. . . . . . . . . . . . . . . (133)
Accrued expenses and other liabilities. . . . 515
--------
Net cash provided by operating activities. 805
-------
Cash flows from investing activities:
Proceeds from restricted cash reserves . . . . . 148
Capital expenditures . . . . . . . . . . . . . . (611)
--------
Net cash used in investing activities . . . (463)
--------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . (145)
--------
Net cash used in financing activities . . . (145)
--------
Increase in cash and cash equivalents. . . . . . . 197
Cash and cash equivalents, beginning of period . 1,744
--------
Cash and cash equivalents, end of period . . . . $ 1,941
========
Cash paid for interest . . . . . . . . . . . . . . $ 833
========
<PAGE>
19. SUBSEQUENT EVENTS
Effective January 1, 2001, the Company became a self-managed REIT.
The Company terminated its Advisor relationship with the Advisory in
accordance with the Termination and Services Agreement dated December 28,
2000. In connection with the termination, the Advisor will receive $600
for 2001 transition services. The Company purchased assets used to operate
the Company at book value of approximately $302 and paid $50 for
informational technology services. The entire management team has become
employees of LHO and continues to oversee and manage all activities of the
Company under the new self-managed structure.
Effective January 1, 2001, the Company purchased all of the issued and
outstanding shares of capital stock of LHL for $500 in accordance with the
Stock Purchase Agreement dated July 28, 2000. LHL leases four of the
Company's owned hotels, including Marriott Seaview Resort, LaGuardia
Airport Marriott, Omaha Marriott and Harborside Hyatt Conference Center and
Hotel. Effective January 1, 2001, LHL is a 100% owned subsidiary of the
company as provided for under the taxable-REIT subsidiary provisions. It
is currently anticipated that the cost associated with the transaction will
be expensed in the first quarter of 2001.
On January 1, 2001, JLL and its affiliates redeemed 964,334 Units
resulting in 574,813 Units or 3.1% partnership interest held by the limited
partners.
On January 15, 2001, the Company paid its regular fourth quarter
distribution of $0.385 per share/unit on its Common Shares and Units.
On February 1, 2001, an affiliate of the Advisor exercised 300,000
options. Proceeds from the options were used to reduce outstanding
borrowings on the 1998 Second Amended Credit Facility.
On February 26, 2001, the Company terminated the operating lease on
the Viking Hotel with Bellevue Properties, Inc. and entered into lease with
LHL on essentially the same terms. Bellevue Properties, Inc. received $840
in payment relating to termination, tax settlement due under the Purchase
and Sale Agreement and other items. Noble House Hotel and Resorts replaced
Bellevue Properties, Inc. as manager for the property.
On March 1, 2001, the Company redeemed the $40.0 million tax-exempt
Massport Bonds, which had a 10.0% coupon. Proceeds for the redemption were
derived from $37.1 million of tax exempt and $5.4 million of taxable bonds,
each having a 17-year maturity, bearing interest based on a weekly floating
rate and having no principal reductions for the life of the bonds. Due to
the nature of these bonds, they can be redeemed at any time without
penalty. The new bonds are secured by letters of credit issued by GE
Capital Corporation. The letters of credit are collateralized by the
Harborside Hyatt Conference Center and Hotel. The excess proceeds of
approximately $5,900 were used to pay down borrowings on the 1998 Second
Amended Credit facility.
On March 8, 2001, the Company acquired a 100% interest in four full-
service hotels with a total of 502 guest rooms in Washington, D.C. for an
aggregate purchase price of approximately $44.0 million. Each of the four
hotels will be fully renovated, improved and repositioned as unique high-
end, independent boutique hotels. The Company will undertake the
redevelopment program, currently projected at a total of approximately
$30.0 million, in conjunction with the Kimpton Hotel & Restaurant Group,
LLC who was also retained to manage and operate the hotel collection.
These four hotels have operated as the 99-room Canterbury Hotel, located at
1733 N Street, NW; the 82-room Clarion Hampshire House Hotel at 1310 New
Hampshire Avenue, NW; the 137-room Quality Hotel and Suites Downtown at
1315 16th Street, NW; and the 184-room Howard Johnson Plaza Hotel and
Suites, 1430 Rhode Island Avenue, NW. Originally constructed as apartment
buildings, each hotel features either large rooms or suites. Upon
completion of the redevelopment program, LaSalle intends to rename each
property and the Kimpton Group will operate each as independent, non-
branded boutique hotels.
<PAGE>
20. QUARTERLY OPERATING RESULTS (UNAUDITED)
The Company's unaudited consolidated quarterly operating data for the
years ended December 31, 2000 and 1999 (in thousands, except per share
data). In the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of quarterly results
have been reflected in the data. It is also management's opinion, however,
that quarterly operating data for hotel enterprises are not indicative of
results to be achieved in succeeding quarters or years.
Year Ended December 31, 2000
----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- ---------- ---------- ----------
Total Revenues . . . . . $ 17,146 $ 22,639 $ 26,590 $ 19,875
Total Expenses . . . . . 15,452 18,933 18,858 27,656
---------- ---------- ---------- ----------
Net Income (Loss). . . . $ 1,694 $ 3,706 $ 7,732 $ (7,781)
========== ========== ========== ==========
Net Income (Loss)
Applicable to Common
Shareholders per
Weighted Average Common
Shares Outstanding:
Basic. . . . . . . . . $ 0.10 $ 0.22 $ 0.46 $ (0.46)
========== ========== ========== ==========
Diluted. . . . . . . . $ 0.10 $ 0.22 $ 0.45 $ (0.46)
========== ========== ========== ==========
Weighted Average
Number of Common
Shares outstanding:
Basic. . . . . . . . . 16,881,979 16,901,514 16,925,815 16,972,445
========== ========== ========== ==========
Diluted. . . . . . . . 16,894,833 16,972,049 17,007,337 17,071,733
========== ========== ========== ==========
Year Ended December 31, 1999
----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- ---------- ---------- ----------
Total Revenues . . . . . $ 16,212 $ 20,644 $ 23,576 $ 17,522
Total Expenses . . . . . 13,704 15,410 17,377 17,474
---------- ---------- ---------- ----------
Net Income . . . . . . . $ 2,508 $ 5,234 $ 6,199 $ 48
========== ========== ========== ==========
Net Income Applicable to
Common Shareholders per
Weighted Average Common
Shares Outstanding:
Basic. . . . . . . . . $ 0.16 $ 0.34 $ 0.40 $ --
========== ========== ========== ==========
Diluted. . . . . . . . $ 0.16 $ 0.34 $ 0.40 $ --
========== ========== ========== ==========
Weighted Average
Number of Common
Shares outstanding:
Basic. . . . . . . . . 15,230,052 15,240,563 15,315,174 15,938,385
========== ========== ========== ==========
Diluted. . . . . . . . 15,230,052 15,260,923 15,340,057 15,938,385
========== ========== ========== ==========
<PAGE>
<TABLE>
LASALLE HOTEL PROPERTIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
As of December 31, 2000
<CAPTION>
Costs Capitalized
Subsequent to Gross Amounts at Which
Initial Cost Acquisition Carried At Close of Period
--------------------------- ---------------------------- ---------------------------
Building Building Building
and and and
Improve- Improve- Improve-
Land ments FF&E Land ments FF&E Land ments FF&E
-------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Radisson Convention
Hotel . . . . . . . . $ 8,172 $11,258 $13,811 $ -- $ 1,564 $ 4,841 $ 8,172 $ 12,822 $18,652
Le Meridien
New Orleans . . . . . -- 60,062 6,554 -- 344 2,834 -- 60,406 9,388
Le Meridien
Dallas. . . . . . . . 2,452 20,847 2,166 -- 157 3,065 2,452 21,004 5,231
Marriott Seaview
Resort. . . . . . . . 7,415 40,337 2,339 182 1,490 7,832 7,597 41,827 10,171
Holiday Inn
Beachside Resort. . . 5,505 14,702 1,901 -- 447 795 5,505 15,149 2,696
San Diego
Paradise Point. . . . -- 69,639 3,665 -- 15,962 7,041 -- 85,601 10,706
LaGuardia Airport
Marriott. . . . . . . 8,127 32,139 3,976 -- 1,012 2,236 8,127 33,151 6,212
Omaha Marriott
Hotel . . . . . . . . 4,268 22,405 3,086 -- 403 1,371 4,268 22,808 4,457
Radisson Hotel
Tampa . . . . . . . . 4,383 20,223 2,166 -- 1,185 3,805 4,383 21,408 5,971
Holiday Inn
Plaza Park. . . . . . 1,663 5,335 396 -- 212 392 1,663 5,547 788
Le Montrose
All Suite Hotel . . . 5,004 19,752 2,951 -- 896 1,386 5,004 20,648 4,337
Harborside Hyatt
Conference Center
& Hotel . . . . . . . -- 66,159 5,246 -- 522 2,967 -- 66,681 8,213
Hotel Viking . . . . . 2,504 25,183 365 77 8,059 2,641 2,581 33,242 3,006
-------- -------- -------- ------ ------- ------- ------- -------- -------
Totals . . . . . . . . $ 49,493 $408,041 $ 48,622 $ 259 $32,253 $41,206 $49,752 $440,294 $89,828
======== ======== ======== ====== ======= ======= ======= ======== =======
</TABLE>
<PAGE>
<TABLE>
LASALLE HOTEL PROPERTIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
As of December 31, 2000
<CAPTION>
Life On Which
Write- Date of Depreciation In
down/Sale Accumulated Net Original Date of Income Statement
of Assets Depreciation Book Value Construction Acquisition is Computed
--------- ------------ ---------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C>
Radisson Conven-
tion Hotel. . . . . $ -- $ 12,585 $ 27,061 1969 12/01/95 5 - 30 years
Le Meridien
New Orleans . . . . -- 9,778 60,016 1984 04/29/98 5 - 30 years
Le Meridien
Dallas. . . . . . . -- 4,199 24,488 1980 04/29/98 5 - 30 years
Marriott Seaview
Resort. . . . . . . -- 7,549 52,046 1912 04/29/98 5 - 30 years
Holiday Inn
Beachside Resort. . -- 2,597 20,753 1960 04/29/98 5 - 30 years
San Diego
Paradise Point. . . -- 10,387 85,920 1962 06/01/98 5 - 30 years
LaGuardia Airport
Marriott. . . . . . -- 5,578 41,912 1981 05/01/98 5 - 30 years
Omaha Marriott
Hotel . . . . . . . -- 4,080 27,453 1982 04/29/98 5 - 30 years
Radisson Hotel
Tampa . . . . . . . 10,830(a) 3,905 17,027 1987 04/29/98 5 - 30 years
Holiday Inn
Plaza Park. . . . . 7,998(b) -- -- 1976 04/29/98 5 - 30 years
Le Montrose
All Suite Hotel . . -- 3,637 26,352 1976 04/29/98 5 - 30 years
Harborside Hyatt
Conference Center
& Hotel . . . . . . -- 8,584 66,310 1993 06/24/98 5 - 30 years
Hotel Viking . . . . -- 1,983 36,846 1850 06/02/99 5 - 30 years
------- ------- --------
Totals . . . . . . . $18,828 $74,862 $486,184
======= ======= ========
<FN>
(a) In 2000, the Company recorded a writedown of $10,830 (net of $200 accrued closing costs), on Radisson Hotel
Tampa, which was held for sale as of December 6, 2000. See Note 6 in Notes to Consolidated Financial
Statements.
(b) The Company recorded writedowns of $2,000 and $931 (net of $358 accrued closing costs), for 2000 and 1999,
respectively, on Holiday Inn Plaza Park, which was held for sale as of December 31, 1999. The Company
completed the sale of Holiday Inn Plaza Park during 2000. See Note 6 in Notes to Consolidated Financial
Statements.
</TABLE>
<PAGE>
LASALLE HOTEL PROPERTIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
As of December 31, 2000
Reconciliation of real estate and accumulated depreciation:
Reconciliation of Real Estate:
Balance at April 29, 1998 . . . . . . . . . . . . . . $ 33,241
Acquisitions of hotel properties. . . . . . . . . . 444,863
Improvements and additions to hotel properties. . . 10,359
--------
Balance at December 31, 1998. . . . . . . . . . . . . 488,463
Acquisition of hotel. . . . . . . . . . . . . . . . . 28,052
Improvements and additions to hotel properties. . . . 32,957
Writedown of hotel. . . . . . . . . . . . . . . . . . (2,000)
--------
Balance at December 31, 1999. . . . . . . . . . . . . 547,472
Improvements and additions to hotel properties. . . . 30,402
Writedown of hotels . . . . . . . . . . . . . . . . . (11,761)
Disposal of hotel . . . . . . . . . . . . . . . . . . (5,067)
--------
Balance at December 31, 2000. . . . . . . . . . . . . $561,046
========
Reconciliation of Accumulated Depreciation:
Balance at April 29, 1998 . . . . . . . . . . . . . . $ 7,245
Depreciation. . . . . . . . . . . . . . . . . . . . 13,666
--------
Balance at December 31, 1998. . . . . . . . . . . . . 20,911
Depreciation. . . . . . . . . . . . . . . . . . . . 25,370
--------
Balance at December 31, 1999. . . . . . . . . . . . . 46,281
Depreciation. . . . . . . . . . . . . . . . . . . . 29,064
Disposal of hotel . . . . . . . . . . . . . . . . . (483)
--------
Balance at December 31, 2000. . . . . . . . . . . . . $ 74,862
========
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
LaSalle Hotel Lessee, Inc.
We have audited the accompanying balance sheets of LaSalle Hotel
Lessee, Inc. (the Company) as of December 31, 2000 and 1999 and the related
statements of operations, stockholders' equity (deficit), and cash flows
for the years ended December 31, 2000 and 1999 and for the period from
April 29, 1998 (inception) through December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of LaSalle Hotel
Lessee, Inc. as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for the years ended December 31, 2000 and
1999 and for the period from April 29, 1998 (inception) through
December 31, 1998, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Chicago, Illinois
March 23, 2001
<PAGE>
LASALLE HOTEL LESSEE, INC.
BALANCE SHEETS
(Dollars in Thousands)
December 31, December 31,
2000 1999
------------ ------------
ASSETS
Cash and cash equivalents. . . . . . . $ 6,208 $ 5,494
Accounts receivable - trade,
net of allowance for doubtful
accounts of $118 and $108,
respectively. . . . . . . . . . . . . 4,375 3,689
Inventories. . . . . . . . . . . . . . 609 789
Prepaid expenses and other assets. . . 939 1,174
Due from LaSalle Hotel Properties. . . 756 30
-------- --------
Total assets. . . . . . . . . . . . $ 12,887 $ 11,176
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
Due to LaSalle Hotel Properties. . . . $ 2,344 $ 1,675
Accounts payable
Trade. . . . . . . . . . . . . . . . 2,278 1,254
Advance deposits . . . . . . . . . . 1,192 1,368
Accrued expenses
Accrued sales, use and
occupancy taxes. . . . . . . . . . 544 542
Other accrued liabilities. . . . . . 2,576 2,038
Notes Payable to LaSalle Hotel
Properties . . . . . . . . . . . . . 3,900 3,900
-------- --------
Total liabilities. . . . . . . . 12,834 10,777
-------- --------
Stockholders' equity (deficit)
Common stock . . . . . . . . . . . . -- --
Additional paid-in capital . . . . . 425 425
Retained deficit . . . . . . . . . . (372) (26)
-------- --------
Total stockholders' equity
(deficit). . . . . . . . . . . 53 399
-------- --------
Total liabilities and
stockholders' equity
(deficit). . . . . . . . . . . $ 12,887 $ 11,176
======== ========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
LASALLE HOTEL LESSEE, INC.
STATEMENTS OF OPERATIONS
(Dollars in Thousands)
For the
For the year ended period from
December 31, April 29, 1998
------------------- (inception) through
2000 1999 December 31, 1998
-------- -------- -------------------
REVENUES
Room revenue . . . . . . . . . $ 61,809 $ 57,515 $ 36,643
Telephone revenue. . . . . . . 2,050 1,874 1,124
Food and beverage revenue. . . 34,501 31,855 20,897
Golf revenue . . . . . . . . . 5,777 6,422 5,680
Other revenue. . . . . . . . . 3,635 2,920 1,949
Interest income. . . . . . . . 219 114 42
-------- -------- --------
Total revenues . . . . . 107,991 100,700 66,335
-------- -------- --------
EXPENSES
Departmental expenses of hotels
Rooms. . . . . . . . . . . . 14,215 13,373 8,736
Telephone. . . . . . . . . . 1,147 1,057 607
Food and beverage. . . . . . 24,950 23,550 15,640
Golf . . . . . . . . . . . . 3,838 3,952 3,231
Other. . . . . . . . . . . . 1,598 1,670 1,212
Repairs and maintenance. . . . 4,243 4,097 2,577
Utilities. . . . . . . . . . . 2,739 2,444 1,618
Sales and marketing. . . . . . 6,001 5,564 3,384
General and administrative . . 7,388 7,367 4,940
Insurance. . . . . . . . . . . 723 730 360
Management and incentive fees. 8,138 7,397 4,975
Participation rent . . . . . . 30,963 28,290 19,436
Interest on notes payable. . . 228 228 54
Other expenses . . . . . . . . 336 373 224
-------- -------- --------
Total expenses . . . . 106,507 100,092 66,994
-------- -------- --------
Net income (loss) before
taxes. . . . . . . . . . . . 1,484 608 (659)
Income tax (provision) benefit . (622) 25 --
-------- -------- --------
Net income (loss). . . $ 862 $ 633 $ (659)
======== ======== ========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
LASALLE HOTEL LESSEE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Dollars in Thousands)
APIC -
Common Common Retained
Stock Stock Deficit Total
---------- ---------- ---------- ---------
Initial proceeds
from stock
issuance. . . . . $ -- $ 425 $ -- $ 425
Net loss . . . . . -- -- (659) (659)
---------- ---------- ---------- ---------
Balance at
December 31,
1998. . . . . . . -- 425 (659) (234)
Net income . . . . -- -- 633 633
---------- ---------- ---------- ---------
Balance at
December 31,
1999. . . . . . . -- 425 (26) 399
Distributions. . . -- -- (1,208) (1,208)
Net income . . . . -- -- 862 862
---------- ---------- ---------- ---------
Balance at
December 31,
2000. . . . . . . $ -- $ 425 $ (372) $ 53
========== ========== ========== =========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
LASALLE HOTEL LESSEE, INC.
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the
For the year ended period from
December 31, April 29, 1998
------------------- (inception) through
2000 1999 December 31, 1998
-------- -------- -------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss). . . . . . . $ 862 $ 633 $ (659)
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Bad debts. . . . . . . . . . 98 86 94
Changes in operating assets
and liabilities
Accounts receivable. . . . (784) 30 (3,656)
Inventories. . . . . . . . 180 (48) (663)
Prepaid expenses and
other assets . . . . . . 236 (105) (721)
Accounts payable and
accrued expenses . . . . 1,330 963 2,642
-------- -------- --------
Net cash provided by
(used in) operating
activities . . . . . . 1,922 1,559 (2,963)
-------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from notes payable. . -- -- 1,500
Capital contributions. . . . . -- 193 232
Proceeds from prorations . . . -- -- 2,568
Advances from LaSalle
Hotel Properties . . . . . . -- -- 2,405
Distributions. . . . . . . . . (1,208) -- --
-------- -------- --------
Net cash provided by
(used in) financing
activities . . . . . . (1,208) 193 6,705
-------- -------- --------
Increase in cash and
cash equivalents . . . . . . . 714 1,752 3,742
Cash and cash equivalents
at beginning of period . . . . 5,494 3,742 --
-------- -------- --------
Cash and cash equivalents
at end of period . . . . . . . $ 6,208 $ 5,494 $ 3,742
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOWS:
Cash paid for interest . . . . $ 228 $ 213 $ 54
======== ======== ========
Advances from the Company
converted to notes payable . $ -- $ 2,400 $ --
======== ======== ========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
LASALLE HOTEL LESSEE, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
1. ORGANIZATION
LaSalle Hotel Lessee, Inc. was formed on March 24, 1998 as an Illinois
Corporation, (the "Affiliated Lessee") by Jones Lang LaSalle Incorporated
(formerly LaSalle Partners Incorporated) ("JLL") in connection with the
initial public offering of LaSalle Hotel Properties (the "Company") to
serve as lessee for three of the initial hotels owned by the Company. The
Affiliated Lessee was owned as follows: 9.0% by the Company, 45.5% by JLL
and 45.5% by LPI Charities, a charitable corporation organized under the
laws of the state of Illinois. Accordingly, the stockholders shared in the
profits and losses of the Affiliated Lessee in accordance with their
respective ownership interests. In addition, any cash deficits would have
been funded by the stockholders in proportion to their ownership interests.
The Affiliated Lessee had no operations prior to April 29, 1998. On June
24, 1998, the Affiliated Lessee leased Harborside Hyatt Conference Center
and Hotel (the "Boston Property") from the Company pursuant to the
Company's acquisition of the Boston Property.
The owners capitalized the Affiliated Lessee with cash contributions
totaling $425, which were received during 1999 and 1998. In connection
with the formation of the Affiliated Lessee and the subsequent lease of the
Boston Property, the Affiliated Lessee assumed certain assets and
liabilities of the four hotels. The net liability totaling $2,568 was paid
to the Affiliated Lessee by the Company. All four hotels (the "hotels")
are leased under participating leases ("Participating Leases") which
provide for rent based on hotel revenues and are managed by independent
hotel operators (the "Operators").
On July 28, 2000, the Affiliated Lessee entered into a Stock Purchase
Agreement (the "Sale Agreement") with LaSalle Hotel Operating Partnership,
L.P. (the "Operating Partnership"), to sell all of the issued and
outstanding shares of capital stock of the Affiliated Lessee for $500.
Effective January 1, 2001, the Affiliated Lessee is a 100% owned subsidiary
of the Company as provided for under the taxable-REIT subsidiary
provisions.
The following hotels are leased to the Affiliated Lessee by the
Company:
PROPERTY NAME LOCATION
------------- --------
LaGuardia Airport Marriott New York, NY
Omaha Marriott Hotel Omaha, NE
Marriott Seaview Resort Absecon, NJ (Atlantic City)
Harborside Hyatt
Conference Center and Hotel Boston, MA
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Affiliated Lessee is operated on a calendar year basis. However,
the Marriott hotels are operated on a fiscal year basis. The Marriott
fiscal year ends on the Friday closest to December 31. The 2000 and 1999
fiscal years for Marriott ended on December 29, 2000 and December 31, 1999,
respectively. Both Marriott fiscal years are reflected in the accompanying
financial statements.
<PAGE>
LASALLE HOTEL LESSEE, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
USE OF ESTIMATES
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of certain
assets and liabilities and disclosure of contingent assets and liabilities
at the balance sheet date and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less
when purchased are considered to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is determined by using available market information and
appropriate valuation methodologies. The Affiliated Lessee's financial
instruments include cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses, which due to their short maturities,
are carried at amounts which reasonably approximate fair value.
INVENTORIES
Inventories consisting primarily of food and beverages and gift store
merchandise are stated at the lower of cost or market.
REVENUE RECOGNITION
Revenue is recognized as earned. Ongoing credit evaluations are
performed and an allowance for potential credit losses is provided against
the portion of accounts receivable which is estimated to be uncollectible.
Such losses have been within management's expectations.
MEMBERSHIP FEES
Golf course membership fees are recognized as revenue using the
straight-line method over the membership period.
3. PARTICIPATING LEASES
The Participating Leases are operating leases with noncancelable terms
of 10 years, subject to earlier termination on the occurrence of certain
contingencies, as defined. The rent due under each Participating Lease is
the greater of base rent, as defined, or participating rent. Participating
rent applicable to room and other hotel revenues varies by lease and is
calculated by multiplying fixed percentages by the total amounts of such
revenues over specified quarterly threshold amounts. Both the base rent
and the participating rent thresholds used in computing percentage rents
applicable to room and other hotel revenues, including food and beverage
revenues, are subject to annual adjustments based on increases in the
applicable Consumer Price Index ("CPI"). Participating Lease expense for
the years ended December 31, 2000 and 1999 and for the period from
April 29, 1998 (inception) through December 31, 1998 was $30,963, $28,290
and $19,436 of which approximately $11,941, $9,923 and $7,125 was in excess
of base rent, respectively.
<PAGE>
LASALLE HOTEL LESSEE, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Future minimum rentals (without reflecting future CPI increases) to be
paid by the Affiliated Lessee pursuant to the Participating Leases for the
years 2001 to 2005 and in total thereafter are as follows:
2001 . . . . . . . $ 19,825
2002 . . . . . . . 19,825
2003 . . . . . . . 19,825
2004 . . . . . . . 19,825
2005 . . . . . . . 19,825
Thereafter . . . . 46,948
--------
Total. . . . . . $146,073
========
Other than real estate and personal property taxes, ground rent,
casualty insurance and capital improvements which are obligations of the
Company, the Percentage Leases require the Affiliated Lessee to pay rent,
liability insurance premiums, all costs, expenses, utilities and other
charges incurred in the operation of the leased hotels. At December 31,
2000 and 1999, the Affiliated Lessee had an outstanding receivable of $756
and $30, respectively, from the Company for the reimbursement of capital
improvements, which were paid by the Affiliated Lessee.
The Affiliated Lessee is required to indemnify the Company against all
liabilities, costs and expenses incurred by or asserted against the Company
in the normal course of operating the hotels.
4. ADVISORY AGREEMENT
On April 29, 1998, the Affiliated Lessee entered into an advisory
agreement (the "Advisory Agreement") with LaSalle Hotel Advisors, Inc. (the
"Advisor"), a wholly owned subsidiary of JLL, to provide all management,
administrative and accounting services for the Affiliated Lessee. The
Advisory Agreement will remain in effect until either party gives notice of
termination. This agreement was not renewed for 2001. The Advisory
Agreement provided for an annual fee, prorated for any partial year the
Advisory Agreement is in effect. The advisory fee increased 2% annually
and increased by $2,500 with each additional hotel leased by the Company to
the Affiliated Lessee.
The advisory fee for the years ended December 31, 2000 and 1999 and
for the period from April 29, 1998 (inception) through December 31, 1998
was $27, $26 and $17, respectively.
5. INCOME TAXES
The components of the income tax expense (benefit) were as follows:
2000 1999
-------- --------
Federal
Current. . . . . . . . . . . . . $ 451 $ 11
Deferred . . . . . . . . . . . . -- (33)
State and Local
Current. . . . . . . . . . . . . 171 9
Deferred . . . . . . . . . . . . -- (12)
-------- --------
Total income tax expense
(benefit). . . . . . . . . . . $ 622 $ (25)
======== ========
<PAGE>
LASALLE HOTEL LESSEE, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax
rate to pretax income as a result of the following differences:
For the
For the year ended period from
December 31, April 29, 1998
------------------- (inception) through
2000 1999 December 31, 1998
-------- -------- -------------------
Computed "Expected" tax
expense (benefit)
(2000 and 1999 at 34%,
1998 at 25%). . . . . . . . . . $ 505 $ 207 $ (165)
State income taxes,
net of federal income
tax effect. . . . . . . . . . . 113 51 (35)
Change in valuation
allowance . . . . . . . . . . . -- (292) 200
Other, net . . . . . . . . . . . 4 9 --
-------- -------- --------
Income tax expense
(benefit). . . . . . . . . $ 622 $ (25) $ --
======== ======== ========
The components of the Affiliated Lessee's deferred tax assets as of
December 31 were as follows:
2000 1999
-------- --------
Deferred tax assets:
Operating loss carryforward. . . . $ -- $ --
Gift certificate liability . . . . -- --
Allowance for doubtful accounts. . 45 45
-------- --------
Gross deferred tax assets. . . . . . 45 45
Less: valuation allowance . . . . -- --
-------- --------
Deferred tax assets. . . . . . . . . $ 45 $ 45
======== ========
The deferred tax asset and corresponding valuation allowance existing
at December 31, 1998 were subsequently adjusted to $292 to account for the
final tax loss carryforwards reflected in the 1998 tax returns. Due to the
profitability of the Company in 1999 and the use of available loss
carryforwards, the adjusted valuation allowance of $292 is no longer
necessary, and has been credited in the 1999 tax provision. The deferred
tax asset of $45 at December 31, 2000 is considered realizable given
estimates of future income.
<PAGE>
LASALLE HOTEL LESSEE, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
6. OPERATOR AGREEMENTS
The hotels have entered into separate management agreements ("Operator
Agreements") with the Operators. Pursuant to the terms of the Operator
Agreements, the Operators are to manage the hotels for a base management
fee ranging from 3.0% to 4.0% of gross revenues plus an incentive fee equal
to a percentage of certain measures of profitability, as defined. For the
year ended December 31, 2000, base and incentive management fees totaled
$3,493 and $4,645, respectively. For the year ended December 31, 1999,
base and incentive management fees totaled $3,171 and $4,226, respectively.
For the period from April 29, 1998 (inception) through December 31, 1998,
base and incentive management fees totaled $2,045 and $2,930, respectively.
Management fees of approximately $57 and $49 were payable on December 31,
2000 and December 31, 1999, respectively. In addition, pursuant to the
terms of the Operator Agreements, the Operators provide the hotels with
various services and supplies, including marketing, reservations, and
insurance.
7. CONTINGENCIES
The nature of the operations of the hotels exposes them to the risk of
claims and litigation in the normal course of their business. Although the
outcome of these matters cannot be determined, management does not expect
that the ultimate resolution of these matters to have a material adverse
effect on the financial position, operations or liquidity of the hotels.
8. NOTES PAYABLE
The Company provided working capital to the Affiliated Lessee in the
aggregate amount of $3,900 in exchange for notes payable. The notes bear
interest at 5.6% or 6.0% per annum and are payable in monthly installments
of interest only. The term of each note is identical to the term of the
related participating lease (see Note 11). Interest expense totaled $228,
$228 and $54 for the years ended December 31, 2000 and 1999 and for the
period from April 29, 1998 (inception) through December 31, 1998,
respectively.
9. CONCENTRATION OF RISK
The profitability of the hotels is dependent upon business and leisure
travelers and in certain circumstances, golf tourism. Consequently demand
may fluctuate and be seasonal. Unfavorable economic or weather conditions
could adversely affect the results of operations.
10. DISTRIBUTIONS
In accordance with the Sale Agreement, the Affiliated Lessee made a
remaining capital distribution of $73 and an estimated retained earnings
distribution of $783 to the owners on December 28, 2000. A distribution
adjustment based on actual retained earnings will be made by March 30,
2001.
<PAGE>
LASALLE HOTEL LESSEE, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
11. SUBSEQUENT EVENTS
Effective January 1, 2001, the Company waived all security deposits
with the Affiliated Lessee for its Participating Leases for as long as the
Affiliated Lessee remains a 100% owned subsidiary of the Company. As a
result, on January 5, 2001, $370 of security deposits was returned to the
Affiliated Lessee.
On January 3, 2001, the Affiliated Lessee obtained a three-year
commitment for a $5,000 senior unsecured revolving credit facility (the
"2001 Credit Facility") to be used for working capital and general
corporate purposes. Borrowings under the 2001 Credit Facility bear
interest at floating rates equal to LIBOR plus an applicable margin or an
"Adjusted Base Rate" plus an applicable margin, at the election of the
Affiliated Lessee. The Affiliated Lessee is required to pay an unused
commitment fee which is variable, determined from a ratings based pricing
matrix, currently set at 25 basis points.
On January 17, 2001, the $3,900 note payable due to the Company was
paid from cash and cash equivalents and borrowings under the 2001 Credit
Facility.
On February 26, 2001, the Company entered into a lease with the
Affiliated Lessee for The Hotel Viking, a 237-room historic luxury hotel
located in Newport, Rhode Island. Noble House Hotel and Resorts was hired
as manager for the property.
On March 8, 2001, the Company acquired a 100% interest in four full-
service hotels with a total of 502 guestrooms in Washington, D.C. for an
aggregate purchase price of approximately $44.0 million. The Company
leases these hotels to the Affiliated Lessee. Each of the four hotels will
be fully renovated, improved and repositioned as unique high-end,
independent boutique hotels. The Company will undertake the redevelopment
program, currently projected at a total of approximately $30.0 million, in
conjunction with the Kimpton Hotel & Restaurant Group, LLC who was also
retained to manage and operate the hotel collection. These four hotels
have operated as the 99-room Canterbury Hotel, located at 1733 N Street,
NW; the 82-room Clarion Hampshire House Hotel at 1310 New Hampshire Avenue,
NW; the 137-room Quality Hotel and Suites Downtown at 1315 16th Street, NW;
and the 184-room Howard Johnson Plaza Hotel and Suites, 1430 Rhode Island
Avenue, NW. Originally constructed as apartment buildings, each hotel
features either large rooms or suites. Upon completion of the
redevelopment program, LaSalle intends to rename each property and the
Kimpton Group will operate each as independent, non-branded boutique
hotels.
EXHIBIT 21
----------
LIST OF SUBSIDIARIES
--------------------
LaSalle Hotel Properties
LaSalle Hotel Operating Partnership L.P.
LaSalle Hotel Lessee, Inc.
LHO Financing Partnership I, LP
LHO Financing, Inc.
LHO Carlyle 540, L.L.C.
Chicago 540 Hotel, L.L.C.
Chicago 540 Lessee, Inc.
LHO Harborside Hotel, L.L.C.
LHO Mission Bay Hotel, L.P.
LHO Viking Hotel, L.L.C.
LHO Hollywood LM, L.P.
LHO Hollywood Financing, Inc.
LHO Key West HI, L.P.
LHO Key West Financing, Inc.
LHO New Orleans LM, L.P.
LHO New Orleans Financing, Inc.
EXHIBIT 23
----------
To the Board of Trustees of
LaSalle Hotel Properties:
We consent to incorporation by reference in the registration statements on
Form S-8 (No. 333-72265) and on Form S-3 (Nos. 333-76373 and 333-77371) of
LaSalle Hotel Properties of our report dated January 22, 2001, except as to
Note 19, which is as of March 8, 2001, relating to the consolidated balance
sheets of LaSalle Hotel Properties as of December 31, 2000 and 1999, and
the related consolidated statements of operations, shareholders' equity,
and cash flows for the years ended December 31, 2000 and 1999 and for the
period from April 29, 1998 (inception) through December 31, 1998, and the
related financial statement schedule and our report dated March 23, 2001,
relating to the balance sheets of LaSalle Hotel Lessee, Inc., as of
December 31, 2000 and 1999, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years ended December
31, 2000 and 1999 and for the period from April 29, 1998 (inception)
through December 31, 1998, which reports appear in the December 31, 2000
annual report on Form 10-K of LaSalle Hotel Properties.
KPMG LLP
Chicago, Illinois
March 26, 2001
EXHIBIT (10)(i)
---------------
STOCK PURCHASE AGREEMENT
AMONG
LASALLE HOTEL OPERATING PARTNERSHIP, L.P.
AS BUYER
AND
LASALLE HOTEL CO-INVESTMENT, INC.
LPI CHARITIES
AND
LASALLE HOTEL PROPERTIES
AS SELLERS
DATED AS OF JULY 28, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
----
STOCK PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . 1
1. SALE AND PURCHASE OF SHARES . . . . . . . . . . . . . 1
1.1. Sale and Purchase of Shares. . . . . . . . . 1
1.2. Closing. . . . . . . . . . . . . . . . . . . 1
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS . . . . 1
2.1. Ownership of Shares. . . . . . . . . . . . . 1
2.2. Authorization; Binding Obligation. . . . . . 2
2.3. No Conflict; Absence of Violation. . . . . . 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . 2
3.1. Organization and Good Standing . . . . . . . 2
3.2. Certificate of Incorporation and Bylaws. . . 2
3.3. Capital Structure of the Company . . . . . . 3
3.4. No Conflict; Absence of Violation. . . . . . 3
3.5. No Undisclosed Liabilities . . . . . . . . . 3
3.6. Taxes. . . . . . . . . . . . . . . . . . . . 3
3.7. Title to Property and Assets; Liens. . . . . 4
3.8. Agreements; Action . . . . . . . . . . . . . 4
3.9. Debt Instruments . . . . . . . . . . . . . . 4
3.10. Books and Records. . . . . . . . . . . . . . 4
3.11. Litigation; Disputes . . . . . . . . . . . . 4
3.12. Absence of Employees . . . . . . . . . . . . 4
3.13. Compliance with Law; Approvals . . . . . . . 4
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER . . . . . 5
4.1. Organization and Standing;
Binding Obligation . . . . . . . . . . . . . 5
4.2. Authorization. . . . . . . . . . . . . . . . 5
4.3. No Registration Under the Securities Act . . 5
4.4. Acquisition for Investment . . . . . . . . . 6
4.5. Evaluation of Merits and Risks
of Investment. . . . . . . . . . . . . . . . 6
4.6. Additional Information
. . . . . . . . . . . 6
5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION
TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . 6
5.1. Representations and Warranties to be True
and Correct. . . . . . . . . . . . . . . . . 6
5.2. Performance. . . . . . . . . . . . . . . . . 6
5.3. No Adverse Change in Law . . . . . . . . . . 7
5.4. All Proceedings to be Satisfactory . . . . . 7
5.5. Supporting Documents . . . . . . . . . . . . 7
5.6. Consents . . . . . . . . . . . . . . . . . . 7
6. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION
TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . 7
6.1. Capital Account Distribution . . . . . . . . 7
6.2. Retained Earnings Distribution . . . . . . . 7
6.3. Representations and Warranties to be
True and Correct . . . . . . . . . . . . . . 8
6.4. Consents . . . . . . . . . . . . . . . . . . 8
7. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
REMEDIES. . . . . . . . . . . . . . . . . . . . . . . 8
7.1. Survival of Representations. . . . . . . . . 8
7.2. General Indemnity. . . . . . . . . . . . . . 8
<PAGE>
8. COVENANTS . . . . . . . . . . . . . . . . . . . . . . 8
8.1. Best Efforts . . . . . . . . . . . . . . . . 8
8.2. Additional Payment/ Rebate Amount. . . . . . 9
8.3. Confidentiality. . . . . . . . . . . . . . . 9
9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 9
9.1. Additional Actions and Documents . . . . . . 9
9.2. No Brokers . . . . . . . . . . . . . . . . . 9
9.3. Jury Waiver. . . . . . . . . . . . . . . . . 9
9.4. Publicity. . . . . . . . . . . . . . . . . . 10
9.5. Expenses . . . . . . . . . . . . . . . . . . 10
9.6. Assignment . . . . . . . . . . . . . . . . . 10
9.7. Entire Agreement; Amendment. . . . . . . . . 10
9.8. Waiver . . . . . . . . . . . . . . . . . . . 10
9.9. Severability . . . . . . . . . . . . . . . . 10
9.10. Governing Law. . . . . . . . . . . . . . . . 11
9.11. Notices. . . . . . . . . . . . . . . . . . . 11
9.12. Headings . . . . . . . . . . . . . . . . . . 12
9.13. Execution in Counterparts. . . . . . . . . . 12
9.14. Binding Effect . . . . . . . . . . . . . . . 12
SCHEDULE I . . . . . . . . . . . . . . . . . . . . . . I-1
SCHEDULE II . . . . . . . . . . . . . . . . . . . . . . II-1
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Purchase Agreement") is entered
into as of July 28, 2000 by and among LaSalle Hotel Operating Partnership,
L.P., a Delaware limited partnership ("Buyer"), and LaSalle Hotel Co-
Investment, Inc., a Maryland corporation ("Hotel Co-Investment"), LPI
Charities, an Illinois charitable corporation ("LPI") and LaSalle Hotel
Properties, a Maryland real estate investment trust ("LHO" and collectively
with Hotel Co-Investment and LPI, the "Sellers").
WHEREAS, the Sellers desire to sell, and the Buyer desires to
purchase, all of the issued and outstanding shares (the "Shares") of
capital stock of LaSalle Hotel Lessee, Inc., an Illinois corporation (the
"Company"), for the consideration and on the terms set forth in this
Purchase Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto
intending to be legally bound agree as follows:
1. SALE AND PURCHASE OF SHARES
1.1. Sale and Purchase of Shares
(a) SHARES. Subject to the terms and conditions of this
Purchase Agreement, at the Closing (as defined herein), the Sellers will
sell and transfer the Shares to the Buyer, and the Buyer will purchase the
Shares from the Sellers.
(b) PURCHASE AMOUNT. The purchase price to be paid by the
Buyer to the Sellers (the "Purchase Price") for the Shares shall equal
$500,000 allocated among the Sellers as specified in Schedule I hereto.
1.2. CLOSING
The purchase and sale (the "Closing") provided for in this
Purchase Agreement will take place at the offices of the Buyer's counsel,
Brown & Wood LLP, One World Trade Center, New York, New York 10048, at
10:00 a.m., New York City time, on January 1, 2001, or at such other time
and place as the parties may agree. At the Closing, each of the Sellers
shall deliver to the Buyer certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock powers) for transfer to the
Buyer. As payment in full for the Shares being purchased by it at the
Closing, and against delivery of the stock certificates, on the Closing
Date the Buyer shall deliver to the Sellers either (x) promissory notes,
payable on demand, to each Seller, or (y) wire transfers of immediately
available funds to bank accounts designated by the Sellers the Purchase
Price.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers, individually, with respect to themselves,
represents and warrants to the Buyer on the date hereof and on the Closing
Date as follows:
2.1. OWNERSHIP OF SHARES
Sellers are and will be on the Closing Date the record and beneficial
owners and holders of the Shares, free and clear of all encumbrances.
Hotel Co-Investment owns 45.5 Shares, LPI owns 45.5 Shares and LHO owns 9
Shares. No Seller is a party to any agreement affecting or relating to the
voting, issuance, purchase, redemption, repurchase, transfer or
registration for sale under the Securities Act of 1933, as amended (the
"Securities Act"), of any securities of the Company, except as contemplated
hereunder.
<PAGE>
2.2. AUTHORIZATION; BINDING OBLIGATION
(a) This Purchase Agreement constitutes the legal, valid and
binding obligation of the Sellers and, when executed and delivered by the
Sellers, will be enforceable in accordance with its terms (except as
enforceability may be limited or affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
and equitable principles now or hereafter in effect and affecting the
rights and remedies of creditors generally); and
(b) each document to be executed by the Sellers pursuant
hereto, when executed and delivered in accordance with the provisions
hereof, shall be a valid and binding obligation of the Sellers, enforceable
in accordance with its terms.
2.3. NO CONFLICT; ABSENCE OF VIOLATION
The execution, delivery and performance by the Sellers of this
Purchase Agreement and all other documents contemplated hereby, the
fulfillment of and compliance with the respective terms and provisions
hereof and thereof, and the consummation by the Sellers of the transactions
contemplated hereby and thereby, have been duly authorized and do not and
will not (a) conflict with, or violate any provision of, any foreign,
Federal, state and local statutes, laws, ordinances, regulations, rules,
resolutions, orders, determinations, writs, injunctions, awards (including,
without limitation, awards of any arbitrator), judgments and decrees
applicable to the specified persons or entities and to the businesses and
assets thereof, or any provision of the organizational or governing
documents of any of the Sellers; or (b) conflict with, or result in any
breach of, or constitute a default under any agreement that is material to
any Seller to which any Seller is a party or by which any Seller may be
bound.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represent and warrant to the Buyer on the date hereof and
on the Closing Date as follows:
3.1. ORGANIZATION AND GOOD STANDING
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Illinois and has all requisite
corporate power and corporate authority to own, operate and lease its
assets, to carry on its business as currently conducted and to carry out
the transactions contemplated hereby. The Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each state or other jurisdiction in which either the ownership or use of
the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification. The Company has no
subsidiaries and no equity investment or other interest in, nor has the
Company made advances or loans to, any corporation, association,
partnership, joint venture or other entity, except for loans made to
operators of hotels as described to the Buyer.
3.2. CERTIFICATE OF INCORPORATION AND BYLAWS
The Company has delivered to Buyer a true and complete copy of its
Certificate of Incorporation, as currently in effect (the "Certificate of
Incorporation"), certified as of a recent date by the Secretary of State of
Illinois, and a true and complete copy of the bylaws of the Company, as
currently in effect (the "Bylaws").
<PAGE>
3.3. CAPITAL STRUCTURE OF THE COMPANY
The authorized capital stock of the Company consists of 1,000 shares
of Common Stock, par value $0.01 per share, of which 100 are issued and
outstanding. All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and
nonassessable. No shares of capital stock of the Company have been
reserved for any purpose. There are no outstanding securities convertible
into or exchangeable for the capital stock of the Company, or warrants to
purchase or to subscribe for any shares of such stock or other securities
of the Company. There are no outstanding agreements affecting or relating
to the voting, issuance, purchase, redemption, repurchase, transfer or
registration for sale under the Securities Act, of any securities of the
Company, except as contemplated hereunder.
3.4. NO CONFLICT; ABSENCE OF VIOLATION
(a) The execution, delivery and performance by the Company of
this Purchase Agreement and all other documents contemplated hereby, the
fulfillment of and compliance with the respective terms and provisions
hereof and thereof, and the consummation by the Sellers of the transactions
contemplated hereby and thereby, have been duly authorized and do not and
will not (a) conflict with, or violate any provision of, any foreign,
Federal, state and local statutes, laws, ordinances, regulations, rules,
resolutions, orders, determinations, writs, injunctions, awards (including,
without limitation, awards of any arbitrator), judgments and decrees
applicable to the specified persons or entities and to the businesses and
assets thereof, or any provision of the Certificate of Incorporation or
Bylaws of the Company; (b) conflict with, or result in any breach of, or
constitute a default under any agreement that is material to the business
of the Company ("Material Agreement") to which the Company is a party or by
which the Company or any of its material assets may be bound; or (c) result
in or require the creation or imposition of or result in the acceleration
of any indebtedness, or of any encumbrance of any nature upon, or with
respect to any asset of the Company.
(b) The Company is not in violation of or default under, nor
has the Company breached, any term or provision of its Certificate of
Incorporation or Bylaws or any Material Agreement or restriction to which
the Company is a party or by which the Company is bound.
(c) The Company has not received notice of any violation (or
of any investigation, inspection, audit, or other proceeding by any
governmental authority involving allegations of any violation) of any Law,
nor are they in material default with respect to any Law, and to the
Company's knowledge, no investigation, inspection, audit, or other
proceeding by any governmental authority involving allegations of violation
of any Law is threatened or contemplated.
3.5. NO UNDISCLOSED LIABILITIES
The Company has no liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent, or otherwise)
except for liabilities or obligations reflected or reserved against in the
balance sheet and current liabilities incurred in the ordinary course of
business since the respective dates thereof.
3.6. TAXES
The Company has filed or caused to be filed (on a timely basis since
January 1, 1998) all tax returns that are or were required to be filed by
or with respect to it, either separately or as a member of a group,
pursuant to applicable legal requirements. The Company has made available
to the Buyer, all such tax returns filed by the Company. The Company has
paid, or made provision for the payment of all taxes that have or may have
become due pursuant to these tax returns or otherwise, or pursuant to any
assessment received by the Company.
<PAGE>
3.7. TITLE TO PROPERTY AND ASSETS; LIENS
The Company has good and insurable title to its properties and assets
and has good title to all its leasehold interests, in each case subject to
no mortgage, pledge, lien, lease or charge, other than (i) the lien of
current taxes not yet due and payable and (ii) such minor liens and
encumbrances which arise in the ordinary course of business, and which do
not in any case materially detract from the value or use of the property
subject thereto or materially impair the operations of the Company.
3.8. AGREEMENTS; ACTION
(a) Except as disclosed to the Buyer, there are no
agreements, understandings, instruments, contracts, proposed transactions,
judgments, orders, writs or decrees to which the Company is a party or by
which it is bound which may involve (i) material obligations (contingent or
otherwise) of or material payments to the Company, or (ii) which would
otherwise materially adversely affect the operations of the Company.
(b) Except as disclosed to the Buyer, the Company has not
(other than in the ordinary course of business) (i) incurred any material
indebtedness for money borrowed to any party other than LHO, (ii) made any
material loans or advances to any person, or (iii) sold, exchanged, or
otherwise disposed of any of its assets or rights.
3.9. DEBT INSTRUMENTS
Except as disclosed to the Buyer, the Company is not a party, nor has
the Company assumed any mortgages, indentures, notes, guarantees or other
agreements for or relating to borrowed money (including, without
limitation, conditional sales agreements and capital leases) involving
payments by the Company other than loans from LHO.
3.10. BOOKS AND RECORDS
The books of account, stock records, minute books and other records
of the Company, all of which have been made available to the Buyer, are
true and accurate.
3.11. LITIGATION; DISPUTES
There are no actions, suits, proceedings or investigations pending
or, to the Company's knowledge, threatened against the Company or its
properties before any court or governmental agency that, if determined
adversely to the Company, would result in any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality.
3.12. ABSENCE OF EMPLOYEES
The Company has no employees.
3.13. COMPLIANCE WITH LAW; APPROVALS
The Company has not received notice of any violation (or of any
investigation, inspection, audit, or other proceeding by any governmental
authority involving allegations of any violation) of any law, nor are they
in material default with respect to any law, and to the Company's
knowledge, no investigation, inspection, audit, or other proceeding by any
governmental authority involving allegations of violation of any law is
threatened or contemplated.
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants, to the Sellers as follows:
4.1. ORGANIZATION AND STANDING; BINDING OBLIGATION
The Buyer is a limited partnership, duly organized, validly existing
and in good standing under the laws of the state of Delaware and has the
full and unrestricted power and authority to enter into this Purchase
Agreement and all other documents contemplated hereby and to carry out the
transactions contemplated hereby. This Purchase Agreement constitutes a
valid and binding obligation of the Buyer and, when executed and delivered
by the Buyer, will be enforceable in accordance with its terms, will be in
full force and effect and will constitute a legal, valid and binding
obligation of, and is legally enforceable against, the Buyer (except as
enforceability may be limited or affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
and equitable principles now or hereafter in effect and affecting the
rights and remedies of creditors generally); and each document to be
executed by the Buyer pursuant hereto, when executed and delivered in
accordance with the provisions thereof, shall be a valid and binding
obligation of the Buyer, enforceable in accordance with its terms.
4.2. AUTHORIZATION
The execution, delivery and performance by the Buyer of this Purchase
Agreement and all other documents contemplated hereby, the fulfillment of
and the compliance with the respective terms and provisions hereof and
thereof, and the consummation by the Buyer of the transactions contemplated
hereby and thereby have been duly authorized, and will not (a) conflict
with, or violate any term or provision of the Buyer's partnership agreement
or other governing documents or (b) conflict with, or result in any breach
of, or constitute a default under, any agreement to which either Buyer is a
party or by which the Buyer or its assets are bound. No other action is
necessary for the Buyer to enter into this Purchase Agreement and all other
documents contemplated hereby and to consummate the transactions
contemplated hereby and thereby.
4.3. NO REGISTRATION UNDER THE SECURITIES ACT
(a) The Buyer understands that the Shares to be purchased by
it at Closing pursuant to the terms of this Purchase Agreement have not and
will not be registered under the Securities Act or any state securities
laws, have been issued in reliance upon exemptions contained in the
Securities Act or interpretations thereof and in the applicable state
securities laws, and cannot be offered for sale, sold or otherwise
transferred unless the Shares being acquired hereunder are registered or
qualified for exemption from registration under the Securities Act.
(b) The Buyer understands that the certificates or other
instruments representing the Shares, except as set forth below, shall bear
a restrictive legend in substantially the following form (and the Company
may reasonably place a stop-transfer order against transfer of such stock
certificates):
(i) Securities Act legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE OR ANY CERTIFICATE
ISSUED IN EXCHANGE OR TRANSFER THEREFOR HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE
STATE SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE
SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS, OR (II) AN OPINION OF
COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR (III) UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.
<PAGE>
(ii) Any legend imposed or required by the bylaws of the
Company or applicable state securities laws.
4.4. ACQUISITION FOR INVESTMENT
The Shares are being acquired under this Purchase Agreement by the
Buyer solely for its own account, for investment not as a nominee or agent
and not with a view toward distribution, within the meaning of the
Securities Act. By executing this Purchase Agreement, the Buyer further
represents that the Buyer does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or any third person, with respect to the
Shares.
4.5. EVALUATION OF MERITS AND RISKS OF INVESTMENT
The Buyer has knowledge and experience in financial and business
matters such that it is capable of evaluating the merits and risks of its
investment in the Shares. The Buyer is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act. The Buyer understands and
is able to bear any economic risks associated with such investment
(including, without limitation, the necessity of holding the Shares for an
indefinite period of time).
4.6. ADDITIONAL INFORMATION
The Buyer has received from the Company all of the information which
the Buyer and its representatives have requested from the Company and
consider necessary or appropriate for deciding whether to purchase the
Shares. The Buyer acknowledges that it has been afforded the opportunity
to ask questions and receive answers concerning the Company and to obtain
additional information that it has requested to verify the accuracy of the
information contained herein. Notwithstanding the foregoing, nothing
contained herein shall operate to modify or limit in any respect the
representations and warranties of the Sellers or to relieve them from any
obligations to the Buyer for breach thereof or the making of misleading
statements or the omission of material facts in connection with the
transactions contemplated herein.
5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following
conditions:
5.1. REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT
The representations and warranties of the Sellers and the Company
contained in this Purchase Agreement shall be true, complete and correct in
all material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such
date, and an officer of each of the Sellers and the Company shall have
certified to such effect to the Buyer in writing on behalf of each of the
Sellers.
5.2. PERFORMANCE
Each Seller shall have performed and complied in all material
respects with all agreements contained herein required to be performed or
complied with by it prior to or at the Closing Date, and an officer of each
Seller shall have certified to the Buyer in writing to such effect on
behalf of each Seller.
<PAGE>
5.3. NO ADVERSE CHANGE IN LAW
There shall have been no change in law or regulation which would
prevent the general partner of the Buyer from being taxed as a Real Estate
Investment Trust under Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended after consummation of the transactions
contemplated by this Purchase Agreement.
5.4. ALL PROCEEDINGS TO BE SATISFACTORY
All corporate and other proceedings to be taken by the Company in
connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in form and substance to
the Buyer and its counsel and the Buyer and its counsel shall have received
all such counterpart originals or certified or other copies of such
documents as they reasonably may request.
5.5. SUPPORTING DOCUMENTS
The Company shall deliver a certificate dated as of the Closing Date
and certifying that attached thereto is a true and complete copy of the
Certificate of Incorporation and Bylaws of the Company as in effect on the
date of such certification.
5.6. CONSENTS
The Company shall have received all consents, authorizations and
approvals of governmental and private parties which are required to be
obtained in order to consummate the transactions contemplated hereby, and
such consents, authorizations and approvals shall be in full force and
effect on the Closing Date. All such documents shall be reasonably
satisfactory in form and substance to the Buyer and its counsel.
6. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following
conditions:
6.1. CAPITAL ACCOUNT DISTRIBUTION
Prior to the Closing the Company shall make a Capital Account
Distribution as specified in Schedule II hereto.
6.2. RETAINED EARNINGS DISTRIBUTION
Prior to or contemporaneously with the Closing the Company shall
distribute all retained earnings determined in accordance with generally
accepted accounting principles ("Retained Earnings") from March 24, 1998
(inception) through December 31, 2000 (the "Retained Earnings
Distribution"). Any items of income or expense not received or incurred in
the ordinary course of the Company's business and are inconsistent with the
Company's past operations shall be excluded when calculating Retained
Earnings. The Company shall pay each of the Sellers their pro rata portion
of the Retained Earnings Distribution prior to or contemporaneously with
the Closing based upon the Company's good faith estimate of its Retained
Earnings as of December 31, 2000 (the "Retained Earnings Estimate"). Hotel
Co-Investment shall receive 45.5% of the Retained Earnings Estimate, LPI
shall receive 45.5% of the Retained Earnings Estimate and LHO shall receive
9.0% of the Retained Earnings Estimate.
<PAGE>
6.3. REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT
The representations and warranties of the Buyer contained in this
Purchase Agreement shall be true, complete and correct in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and
the general partner of the Buyer shall have certified to such effect to the
Sellers in writing on behalf of the Buyer.
6.4. CONSENTS
The Buyer shall have received all consents, authorizations and
approvals of governmental and private parties which are required to be
obtained in order to consummate the transactions contemplated hereby, and
such consents, authorizations and approvals be in full force and effect on
the Closing Date. All such documents shall be reasonably satisfactory in
form and substance to the Company and its counsel.
7. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION REMEDIES
7.1. SURVIVAL OF REPRESENTATIONS
All representations, warranties, covenants, and other agreements made
by any party to this Purchase Agreement herein or pursuant hereto shall
also be deemed made on and as of the Closing Date as though such
representations, warranties, covenants, indemnities and other agreements
were made on and as of such date, and all the representations, warranties,
covenants, indemnities and other agreements shall remain in full force and
effect until the close of business on January 1, 2002. No party to this
Purchase Agreement will have any liability with respect to any
representation, warranty, covenant, indemnification or other agreement to
be performed and complied with by it, unless on or before the close of
business on January 1, 2002 such party is notified of a claim specifying
the factual basis of that claim in reasonable detail to the extent then
known by the party giving such notice.
7.2. GENERAL INDEMNITY
The Sellers severally will indemnify and hold harmless the Buyer and
its successors and assigns and their respective directors, officers,
employees and agents against and in respect of any and all costs, expenses,
debts, liabilities and obligations incurred by any of them, including
reasonable attorney fees and expenses, for breach of any representation,
warranty or promise made to the Buyer by the Sellers; provided however,
each Seller shall only indemnify the Buyer with respect to breaches of any
representation, warranty or promise made with respect to it. The Buyer
hereby indemnifies and holds harmless the Sellers and their successors and
assigns and their respective directors, officers, employees and agents
against and in respect of any and all costs, expenses, debts, liabilities
and obligations incurred by any of them, including reasonable attorney fees
and expenses, for breach of any representation, warranty or promise made to
the Sellers by the Buyer.
8. COVENANTS
8.1. BEST EFFORTS
Each party shall use its best efforts timely to satisfy each of the
conditions to be satisfied by it as provided in Sections 5 and 6 of this
Purchase Agreement.
<PAGE>
8.2. ADDITIONAL PAYMENT/ REBATE AMOUNT
(a) After completion of the Company's audit for the year
ended December 31, 2000, but in no event later than March 30, 2001, the
Buyer shall pay each of the Sellers an additional amount (the "Additional
Payment") if the Company's audited Retained Earnings (the "Audited Retained
Earnings") exceed the Retained Earnings Estimate. The Additional Payment
shall equal the Audited Retained Earnings less the Retained Earnings
Estimate. Hotel Co-Investment shall receive 45.5% of the Additional
Payment, LPI shall receive 45.5% of the Additional Payment and LHO shall
receive 9.0% of the Additional Payment.
(b) If the Retained Earnings Estimate exceeds the Audited
Retained Earnings, the Sellers shall make a payment to the Buyer (the
"Rebate Amount"). The Rebate Amount shall equal the Retained Earnings
Estimate less the Audited Retained Earnings. Hotel Co-Investment shall pay
45.5% of the Rebate Amount, LPI shall pay 45.5% of the Rebate Amount and
LHO shall pay 9% of the Rebate Amount.
8.3. CONFIDENTIALITY
Confidential or proprietary information disclosed by the parties
hereto shall be considered confidential information (the "Confidential
Information"). Confidential Information shall not include any information
which (i) is publicly available at the time of disclosure to the receiving
party or thereafter becomes publicly available not as a result of a breach
of any duty of confidentiality to any party hereunder, (ii) was known to
the party charged with a confidentiality obligation hereunder before
disclosure from another party hereto on a confidential basis, (iii) was
obtained from a source acting in good faith which the receiving party
reasonably believed owed no duty of confidentiality to any party hereunder,
or (iv) that is required to be disclosed pursuant to applicable law, a
court order, a judicial proceeding, or the enforcement hereof, provided
that the disclosing party is provided with reasonable prior written notice
so that the disclosing party may contest such disclosure. The Confidential
Information shall not be disclosed by any party to this Purchase Agreement
to any third party.
9. MISCELLANEOUS
9.1. ADDITIONAL ACTIONS AND DOCUMENTS
After Closing, each of the parties hereto hereby agrees to take or
cause to be taken such further actions, to execute, deliver and file or
cause to be executed, delivered and filed such further documents, and will
obtain such consents, as may be necessary or as may be reasonably requested
in order to fully effectuate the purposes, terms and conditions of this
Purchase Agreement.
9.2. NO BROKERS
Each of the parties hereto represents and warrants to the other party
that such party has not engaged any broker, finder or agent in connection
with the transactions contemplated by this Purchase Agreement and has not
incurred (and will not incur) any unpaid liability to any broker, finder or
agent for any brokerage fees, finders' fees or commissions, with respect to
the transactions contemplated by this Purchase Agreement. Each party agrees
to indemnify, defend and hold harmless each of the other parties from and
against any and all claims asserted against such parties for any such fees
or commissions by any persons purporting to act or to have acted for or on
behalf of the indemnifying party.
9.3. JURY WAIVER
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO WAIVE
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS PURCHASE AGREEMENT OR ANY OF THE TRANSACTIONS OR
AGREEMENTS CONTEMPLATED HEREBY.
<PAGE>
9.4. PUBLICITY
Neither the Buyer nor the Company shall issue any press release or
make any public disclosure regarding the transaction contemplated hereby
unless such press release or public disclosure is approved by those parties
expressly mentioned by name in the press release in advance.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the Securities and Exchange Commission or
other regulatory bodies, make such statements with respect to the
transactions contemplated hereby as each may be advised by counsel as
legally necessary or advisable and may make such disclosure as it is
advised by its counsel as required by law.
9.5. EXPENSES
Each party hereto shall pay its own expenses incident to this
Purchase Agreement and the transactions contemplated hereunder, including
all legal and accounting fees and disbursements.
9.6. ASSIGNMENT
Neither party shall assign its rights and obligations under
this Purchase Agreement, in whole or in part, whether by operation of law
or otherwise, without the prior written consent of the other party, and
any, such assignment contrary to the terms hereof shall be null and void
and of no force and effect. In no event shall the assignment by the
Company or the Buyer of its rights or obligations under this Purchase
Agreement, whether before or after the Closing, release the Company or the
Buyer from their respective liabilities and obligations hereunder.
9.7. ENTIRE AGREEMENT; AMENDMENT
This Purchase Agreement, including the Exhibits and other documents
referred to herein or furnished pursuant hereto, constitutes the entire
agreement among the parties hereto with respect to the transactions
contemplated herein, and it supersedes all prior oral or written
agreements, commitments or understandings with respect to the matters
provided for herein. No amendment or modification of this Purchase
Agreement shall be valid or binding unless set forth in writing and duly
executed and delivered by the Sellers and the Buyer.
9.8. WAIVER
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Purchase Agreement or under any other
documents furnished in connection with or pursuant to this Purchase
Agreement shall impair any such right, power or privilege or be construed
as a waiver of any default or any acquiescence therein. No single or
partial exercise of any such right, power or privilege shall preclude the
further exercise of such right, power or privilege, or the exercise of any
other right, power or privilege. No waiver shall be valid against any
party hereto unless made in writing and signed by the party against whom
enforcement of such waiver is sought and then only to the extent expressly
specified therein.
9.9. SEVERABILITY
If any part of any provision of this Purchase Agreement or any other
agreement or document given pursuant to or in connection with this Purchase
Agreement shall be invalid or unenforceable in any respect, such part shall
be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provision or the
remaining provisions of this Purchase Agreement.
<PAGE>
9.10. GOVERNING LAW
This Purchase Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by
and construed in accordance with the laws of the State of Delaware
(excluding the conflicts of law principles thereof).
9.11. NOTICES
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by any party to any other
party pursuant to this Purchase Agreement shall be in writing and shall be
hand delivered, sent by overnight courier or mailed by first-class,
registered or certified mail, return receipt requested, postage prepaid, or
transmitted by telegram, telecopy, addressed as follows:
(i) If to the Buyer:
LaSalle Hotel Operating Partnership, L.P.
c/o LaSalle Hotel Properties
4800 Montgomery Lane
Suite M25
Bethesda, Maryland 20814
Attn: Chief Financial Officer
Fax #: (301) 941-1553
with a copy (which shall not constitute notice) to:
Brown & Wood LLP
555 California Street
San Francisco, CA 94104
Attn: Michael F. Taylor
Fax #: (415) 397-4621
(ii) If to the Sellers:
LaSalle Hotel Co-Investment, Inc.
200 East Randolph Drive
Chicago, IL 60601
Attn: Chief Financial Officer
Fax # (312) 782-4339
LPI Charities
200 East Randolph Drive
Chicago, IL 60601
Attn: Chief Financial Officer
Fax # (312) 782-4339
LaSalle Hotel Properties
4800 Montgomery Lane
Suite M25
Bethesda, Maryland 20814
Attn: Chief Financial Officer
Fax #: (301) 941-1553
with a copy (which shall not constitute notice) to:
Hagan & Associates
200 East Randolph Drive
Chicago, IL 60601
Attn: Robert Hagan
Fax # (312) 228-0982
<PAGE>
(iii) If to the Company:
LaSalle Hotel Lessee, Inc.
200 East Randolph Drive
Chicago, IL 60601
Attn: Chief Financial Officer
Fax # (312) 782-4339
with a copy (which shall not constitute notice) to:
Hagan & Associates
200 East Randolph Drive
Chicago, IL 60601
Attn: Robert Hagan
Fax # (312) 228-0982
Each party may designate by notice in writing a new address to which
any notice, demand, request or communication may thereafter be so given,
served or sent. Each notice, demand, request, or communication which shall
be hand delivered, sent, mailed or telecopied in the manner described
above, shall be deemed sufficiently given, served, sent, received or
delivered for all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt, or (with respect to a
telecopy) the answerback or confirmation being deemed conclusive, but not
exclusive, evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.
9.12. HEADINGS
Section headings contained in this Purchase Agreement are inserted
for convenience of reference only, shall not be deemed to be a part of this
Purchase Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
9.13. EXECUTION IN COUNTERPARTS
To facilitate execution, this Purchase Agreement may be executed in
as many counterparts as may be required. It shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it
shall be sufficient that the signature of, or on behalf of, each party, or
that the signatures of the persons required to bind any party, appear on
one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of
this Purchase Agreement to produce or account for more than a number of
counterparts containing the respective signatures of, or on behalf of, all
of the parties hereto.
9.14. BINDING EFFECT
Subject to any provisions hereof restricting assignment, this
Purchase Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Purchase
Agreement, or have caused this Purchase Agreement to be duly executed on
their behalf, as of the day and year first hereinabove set forth.
BUYER: THE COMPANY:
----- -----------
LASALLE HOTEL OPERATING LASALLE HOTEL LESSEE, INC.
PARTNERSHIP,L.P.
By: LaSalle Hotel Properties
its General Partner By:
------------------------------
Name:
By: Title
------------------------
Name:
Title:
SELLERS:
-------
LASALLE HOTEL CO-INVESTMENT, INC.
By:
--------------------------
Name:
Title
LPI CHARITIES
By:
--------------------------
Name:
Title
LASALLE HOTEL PROPERTIES
By:
--------------------------
Name:
Title
<PAGE>
SCHEDULE I
PURCHASE
SELLER SHARES PRICE
------ ------ --------
LaSalle Hotel Co-Investment, Inc.. . 45.5 $227,500
LPI Charities. . . . . . . . . . . . 45.5 $227,500
LaSalle Hotel Properties . . . . . . 9.0 $ 45,000
----- --------
Total . . . . . . . . . . . . . 100.0 $500,000
===== ========
I-1
<PAGE>
SCHEDULE II
Capital
Account
Seller Distribution
------ ------------
LaSalle Hotel Co-Investment, Inc.. . $33,375.16
LPI Charities. . . . . . . . . . . . $33,375.16
LaSalle Hotel Properties . . . . . . $ 6,601.68
----------
Total . . . . . . . . . . . . . $73,352.00
==========
II-1
EXHIBIT (10)(ii)
----------------
SECOND AMENDED AND RESTATED
SENIOR UNSECURED CREDIT AGREEMENT
Dated as of November 13, 2000
Among
LASALLE HOTEL OPERATING PARTNERSHIP, L.P.
AS THE BORROWER,
SOCIETE GENERALE, SOUTHWEST AGENCY
AS JOINT BOOK RUNNER AND ADMINISTRATIVE AGENT,
BANK OF MONTREAL, CHICAGO BRANCH
AS SYNDICATION AGENT,
DEUTSCHE BANC ALEX. BROWN
AS JOINT BOOK RUNNER AND DOCUMENTATION AGENT
and
THE BANKS NAMED HEREIN
AS THE BANKS
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . 1
Section 1.01 Certain Defined Terms . . . . . . . . . . . . . . . 24
Section 1.02 Computation of Time Periods . . . . . . . . . . . . 24
Section 1.03 Accounting Terms; Changes in GAAP . . . . . . . . . 25
Section 1.04 Types of Advances . . . . . . . . . . . . . . . . . 25
Section 1.05 Miscellaneous . . . . . . . . . . . . . . . . . . . 25
Section 1.06 Amendment and Restatement; Commitment
Increases . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE II
THE ADVANCES AND THE LETTERS OF CREDIT . . . . . . . . . . 26
Section 2.01 The Advances. . . . . . . . . . . . . . . . . . . . 26
Section 2.02 Method of Borrowing . . . . . . . . . . . . . . . . 29
Section 2.03 Fees. . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.04 Reduction of the Commitments. . . . . . . . . . . . 29
Section 2.05 Repayment of Advances . . . . . . . . . . . . . . . 29
Section 2.06 Interest, Late Payment Fee. . . . . . . . . . . . . 29
Section 2.07 Prepayments . . . . . . . . . . . . . . . . . . . . 31
Section 2.08 Breakage Costs. . . . . . . . . . . . . . . . . . . 31
Section 2.09 Increased Costs . . . . . . . . . . . . . . . . . . 32
Section 2.10 Payments and Computations . . . . . . . . . . . . . 33
Section 2.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.12 Illegality. . . . . . . . . . . . . . . . . . . . . 36
Section 2.13 Letters of Credit
. . . . . . . . . . . . . . . . . 37
Section 2.14 Determination of Borrowing Base . . . . . . . . . . 39
Section 2.15 Bank Replacement. . . . . . . . . . . . . . . . . . 40
Section 2.16 Sharing of Payments, Etc. . . . . . . . . . . . . . 40
ARTICLE III
CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . 41
Section 3.01 Conditions Precedent to initial Advance . . . . . . 41
Section 3.02 Conditions Precedent for each Borrowing or
Letter of Credit. . . . . . . . . . . . . . . . . . 42
Section 3.03 Conditions Precedent to a Hotel Property
Qualifying as an Eligible Property. . . . . . . . . 43
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 46
Section 4.01 Existence; Qualification; Partners;
Subsidiaries. . . . . . . . . . . . . . . . . . . . 46
Section 4.02 Partnership and Corporate Power . . . . . . . . . . 46
Section 4.03 Authorization and Approvals . . . . . . . . . . . . 47
Section 4.04 Enforceable Obligations . . . . . . . . . . . . . . 47
Section 4.05 Parent Common Stock . . . . . . . . . . . . . . . . 47
Section 4.06 Financial Statements. . . . . . . . . . . . . . . . 47
Section 4.07 True and Complete Disclosure. . . . . . . . . . . . 47
Section 4.08 Litigation. . . . . . . . . . . . . . . . . . . . . 48
Section 4.09 Use of Proceeds . . . . . . . . . . . . . . . . . . 48
Section 4.10 Investment Company Act. . . . . . . . . . . . . . . 48
Section 4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.12 Pension Plans . . . . . . . . . . . . . . . . . . . 49
Section 4.13 Condition of Hotel Property; Casualties;
Condemnation. . . . . . . . . . . . . . . . . . . . 49
<PAGE>
Page
----
Section 4.14 Insurance . . . . . . . . . . . . . . . . . . . . . 49
Section 4.15 No Burdensome Restrictions; No Defaults . . . . . . 50
Section 4.16 Environmental Condition . . . . . . . . . . . . . . 50
Section 4.17 Legal Requirements, Zoning, Utilities,
Access. . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.18 Existing Indebtedness . . . . . . . . . . . . . . . 51
Section 4.19 Title; Encumbrances . . . . . . . . . . . . . . . . 51
Section 4.20 Leasing Arrangements. . . . . . . . . . . . . . . . 51
Section 4.21 Approved Management Agreements. . . . . . . . . . . 52
ARTICLE V
AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . 52
Section 5.01 Compliance with Laws, Etc.. . . . . . . . . . . . . 52
Section 5.02 Preservation of Existence, Separateness,
Etc.. . . . . . . . . . . . . . . . . . . . . . . . 53
Section 5.03 Payment of Taxes, Etc.. . . . . . . . . . . . . . . 54
Section 5.04 Visitation Rights; Bank Meeting . . . . . . . . . . 54
Section 5.05 Reporting Requirements. . . . . . . . . . . . . . . 57
Section 5.06 Maintenance of Property and Required Work . . . . . 58
Section 5.07 Insurance . . . . . . . . . . . . . . . . . . . . . 58
Section 5.08 Borrowing Base Requirements . . . . . . . . . . . . 58
Section 5.09 Supplemental Guaranties . . . . . . . . . . . . . . 58
Section 5.10 LaSalle Leasing . . . . . . . . . . . . . . . . . . 58
Section 5.11 Use of Proceeds . . . . . . . . . . . . . . . . . . 58
Section 5.12 New Guarantors. . . . . . . . . . . . . . . . . . . 58
ARTICLE VI
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 59
Section 6.01 Liens, Etc. . . . . . . . . . . . . . . . . . . . . 59
Section 6.02 Indebtedness. . . . . . . . . . . . . . . . . . . . 59
Section 6.03 Agreements Restricting Distributions
From Subsidiaries . . . . . . . . . . . . . . . . . 60
Section 6.04 Restricted Payments . . . . . . . . . . . . . . . . 60
Section 6.05 Fundamental Changes; Asset Dispositions . . . . . . 61
Section 6.06 Approved Participating Lessee Ownership . . . . . . 61
Section 6.07 Investments, Loans, Future Properties . . . . . . . 61
Section 6.08 Affiliate Transactions. . . . . . . . . . . . . . . 62
Section 6.09 Sale and Leaseback. . . . . . . . . . . . . . . . . 63
Section 6.10 Sale or Discount of Receivables . . . . . . . . . . 63
Section 6.11 No Further Negative Pledges . . . . . . . . . . . . 63
Section 6.12 Intentionally Deleted . . . . . . . . . . . . . . . 63
Section 6.13 Material Documents. . . . . . . . . . . . . . . . . 63
Section 6.14 Limitations on Development, Construction,
Renovation and Purchase of Hotel Properties . . . . 63
ARTICLE VII
FINANCIAL COVENANTS. . . . . . . . . . . . . . . . . . . . 64
Section 7.01 Parent's Fixed Charge Coverage Ratio. . . . . . . . 64
Section 7.02 Parent's Interest Coverage Ratio. . . . . . . . . . 64
Section 7.03 Unsecured Interest Coverage Ratio . . . . . . . . . 64
Section 7.04 Maintenance of Net Worth. . . . . . . . . . . . . . 64
Section 7.05 Limitations on Total Liabilities. . . . . . . . . . 64
Section 7.06 Limitations on Secured Recourse Indebtedness. . . . 64
Section 7.07 Limitations on Secured Indebtedness . . . . . . . . 64
<PAGE>
Page
----
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES. . . . . . . . . . . . . . . . 65
Section 8.01 Events of Default . . . . . . . . . . . . . . . . . 65
Section 8.02 Optional Acceleration of Maturity . . . . . . . . . 67
Section 8.03 Automatic Acceleration of Maturity. . . . . . . . . 68
Section 8.04 Cash Collateral Account . . . . . . . . . . . . . . 68
Section 8.05 Non-exclusivity of Remedies . . . . . . . . . . . . 69
Section 8.06 Right of Set-off. . . . . . . . . . . . . . . . . . 69
ARTICLE IX
AGENCY AND ISSUING BANK PROVISIONS . . . . . . . . . . . . 70
Section 9.01 Authorization and Action. . . . . . . . . . . . . . 70
Section 9.02 Administrative Agent' Reliance, Etc.. . . . . . . . 70
Section 9.03 Each Administrative Agent and Its Affiliates. . . . 71
Section 9.04 Bank Credit Decision. . . . . . . . . . . . . . . . 71
Section 9.05 Indemnification . . . . . . . . . . . . . . . . . . 71
Section 9.06 Successor Administrative Agent and
Issuing Banks . . . . . . . . . . . . . . . . . . . 71
Section 9.07 Joint Book Runners, Syndication Agent
and Documentation Agent . . . . . . . . . . . . . . 72
ARTICLE X
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 72
Section 10.01 Amendments, Etc.. . . . . . . . . . . . . . . . . . 72
Section 10.02 Notices, Etc. . . . . . . . . . . . . . . . . . . . 74
Section 10.03 No Waiver; Remedies . . . . . . . . . . . . . . . . 74
Section 10.04 Costs and Expenses. . . . . . . . . . . . . . . . . 74
Section 10.05 Binding Effect. . . . . . . . . . . . . . . . . . . 74
Section 10.06 Bank Assignments and Participations . . . . . . . . 75
Section 10.07 Indemnification . . . . . . . . . . . . . . . . . . 77
Section 10.08 Execution in Counterparts . . . . . . . . . . . . . 77
Section 10.09 Survival of Representations, Indemnifications,
etc.. . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.10 Severability. . . . . . . . . . . . . . . . . . . . 77
Section 10.11 Entire Agreement. . . . . . . . . . . . . . . . . . 77
Section 10.12 Usury Not Intended. . . . . . . . . . . . . . . . . 78
Section 10.13 Governing Law . . . . . . . . . . . . . . . . . . . 78
Section 10.14 Consent to Jurisdiction; Service of Process;
Jury Trial. . . . . . . . . . . . . . . . . . . . . 78
Section 10.15 Knowledge of Borrower . . . . . . . . . . . . . . . 79
Section 10.16 Banks Not in Control. . . . . . . . . . . . . . . . 79
Section 10.17 Headings Descriptive. . . . . . . . . . . . . . . . 80
Section 10.18 Time is of the Essence. . . . . . . . . . . . . . . 80
Section 10.19 Scope of Indemnities. . . . . . . . . . . . . . . . 80
Section 10.20 Confidentiality . . . . . . . . . . . . . . . . . . 80
Section 10.21 Hyatt Boston. . . . . . . . . . . . . . . . . . . . 80
<PAGE>
EXHIBITS:
Exhibit A - Form of Note
Exhibit B - Form of Assignment and Acceptance
Exhibit C - Form of Borrowing Base Certificate
Exhibit D - Form of Compliance Certificate
Exhibit E - Form of Environmental Indemnity
Exhibit F - Form of Guaranty
Exhibit G - Form of Notice of Borrowing
Exhibit H - Form of Notice of Conversion or Continuation
Exhibit I - Form of Property Adjustment Report
SCHEDULES:
Schedule 1.01(a) - Commitments
Schedule 1.01(b) - Initial Properties, Initial Investment Amount
and Initial Hotel Value
Schedule 1.01(c) - Approved Managers
Schedule 1.01(d) - Approved Participating Leases
Schedule 1.01(e) - Engineer Report Scope of Services
Schedule 1.01(f) - Approved Engineers
Schedule 1.01(g) - Environmental Report Scope of Services
Schedule 1.01(h) - Approved Environmental Consultants
Schedule 1.01(i) - Guarantors
Schedule 1.01(j) - Qualified Ground Leases
Schedule 1.01(k) - Approved Participating Lessees
Schedule 1.01(l) - Existing Letters of Credit
Schedule 4.01 - Subsidiaries
Schedule 4.08 - Litigation
Schedule 4.17 - Legal Requirements; Zoning; Utilities; Access
Schedule 4.18 - Existing Indebtedness
Schedule 4.21 - Approved Management Agreements
Schedule 5.07 - Insurance
<PAGE>
SECOND AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT, dated
as of November 13, 2000, is among LASALLE HOTEL OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership, as the Borrower, SOCIETE GENERALE,
SOUTHWEST AGENCY, as Joint Book Runner and Administrative Agent, BANK OF
MONTREAL, CHICAGO BRANCH, as Syndication Agent, DEUTSCHE BANC ALEX. BROWN,
as Joint Book Runner and Documentation Agent, and the Banks.
PRELIMINARY STATEMENTS:
WHEREAS, many of the parties hereto previously entered into an
Amended and Restated Senior Unsecured Credit Agreement, dated as of
October 10, 1998, by and between LaSalle Hotel Operating Partnership, L.P.,
a Delaware limited partnership, as the Borrower, Societe Generale,
Southwest Agency, as Co-Arranger, Administrative Agent, and Documentation
Agent, Bank of Montreal, Chicago Branch, as Co-Arranger and Syndication
Agent, and the banks and other lenders a party thereto; as amended by First
Amendment to Amended and Restated Senior Unsecured Credit Agreement dated
as of November 5, 1998; as amended by Second Amendment to Amended and
Restated Senior Unsecured Credit Agreement dated as of April 15, 1999; and
as amended by Consent dated as of August 10, 2000, all executed by and
among such parties (as so amended, the "Existing Credit Agreement")
pursuant to which the banks and other lenders party to the Existing Credit
Agreement (the "Existing Lenders") have made Advances (as defined in the
Existing Credit Agreement) to the Borrower, and have issued or participated
in Letters of Credit (as defined in the Existing Credit Agreement) for the
account of the Borrower, in each case on the terms and conditions set forth
therein;
WHEREAS, the Borrower has requested that the Existing Lenders amend
the Existing Credit Agreement and the other Credit Documents (as defined in
the Existing Credit Agreement, and as used herein, the "Existing Credit
Documents") in order to decrease the Commitments under this Agreement and
revise certain terms thereof and the Existing Lenders have agreed to do so
on the terms and conditions set forth herein; and
WHEREAS, the parties hereto have agreed to amend and restate the
Existing Credit Agreement in its entirety for clarity only, and amend the
other Existing Credit Documents, in order to memorialize such amendments;
WHEREAS, this Second Amended and Restated Credit Agreement
constitutes for all purposes an amendment to the Existing Credit Agreement
and not a new or substitute agreement and each reference to an "Advance"
and "Letter of Credit" herein shall mean such Advance made and each Letter
of Credit issued heretofore under the Existing Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the
provisions contained in this Agreement, the parties hereto do hereby agree
as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (unless otherwise
indicated, such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Accession Agreement" means an Accession Agreement in the form
attached respectively to the Guaranty and Environmental Indemnity as
Annex 1 thereto, which agreement causes the Person executing and delivering
the same to the Administrative Agent to become a party to the Guaranty and
Environmental Indemnity.
<PAGE>
"Acquisition Agreements" means for any Hotel Property the agreements
entered into in connection with the acquisition of such Hotel Property.
"Adjusted Base Rate" means, for any day, the fluctuating rate per
annum of interest equal to the greater of (a) the Prime Rate in effect on
such day and (b) the Federal Funds Rate in effect on such day plus 2%.
"Adjusted Net Worth" means, for the Parent as of any date, the sum of
(a) the Parent's Net Worth on such date PLUS (b) the minority interest
reflected in the Parent's balance sheet on such date determined in
accordance with GAAP.
"Adjusted NOI" means, for any Hotel Property for any period, the
EBITDA of such Hotel Property for such period LESS the aggregate FF&E
Reserves for such period for such Hotel Property.
"Adjustment Event" has the meaning set forth in Section 2.14(b).
"Administrative Agent" means Societe Generale, Southwest Agency, in
its capacity as Administrative Agent for the Banks pursuant to Article IX
and any successor Administrative Agent appointed pursuant to Section 9.06.
"Advisor" means LaSalle Hotel Advisors, Inc..
"Advisory Agreement" means collectively that certain Amended and
Restated Advisory Agreement and the certain Employee Lease Agreement, both
dated January 1, 2000, and both between the Parent and the Advisor, as such
agreements may be amended in accordance with the terms of this Agreement.
"Advisory Fee Letter" has the meaning set forth in Section 2.03(d).
"Advance" means an Advance by a Bank to the Borrower, any such
Advance being either a Base Rate Advance or a LIBOR Advance.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such Person or any Subsidiary of such
Person. The term "control" (including the terms "controlled by" or "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of a Control Percentage, by contract or
otherwise.
"Agreement" has the meaning given such term in the initial paragraph
of this agreement.
"Allocation Percentage" means, for any Person, with respect to a
Person's Joint Venture Subsidiary, the percentage ownership interest of
such Person in such Joint Venture Subsidiary.
"Applicable Lending Office" means, with respect to each Bank, such
Bank's Domestic Lending Office in the case of a Base Rate Advance and such
Bank's LIBOR Lending Office in the case of a LIBOR Advance.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
"Applicable Margin" means, (a) with respect to each Type of Advance
at any date, the applicable percentage per annum set forth below based upon
the Status then in effect under the column for such Type of Advance, (b)
with respect to the letter of credit fee payable under Section 2.03(b) at
any date, the applicable percentage per annum set forth below under the
column "Letters of Credit & LIBOR Advances," based upon the Status then in
effect, and (c) with respect to the commitment fee payable under
Section 2.03(a) at any date, the applicable percentage per annum set forth
below under the column "Unused Commitment Fee," based upon the Status then
in effect.
Letters of Unused
Base Rate Credit & Commitment
Advances LIBOR Advances Fee
---------- -------------- ----------
Level I
Status .250% 1.750% .20%
Level II
Status .375% 1.875% .25%
Level III
Status .500% 2.000% .25%
Level IV
Status .625% 2.125% .25%
Notwithstanding the foregoing, the following provisions shall apply:
(a) if the Leverage Ratio does not exceed 50% on any day from the
Closing Date to December 31, 2000, then until December 31, 2000 the
Applicable Margin for (i) Letters of Credit and LIBOR Advances shall be
1.750%, (ii) Base Rate Advances shall be .250%, and (iii) the Unused
Commitment Fee shall be .250%; PROVIDED that if the Leverage Ratio ever
does exceed 50% prior to January 1, 2001, then from and after the date the
Leverage Ratio exceeds 50% (and regardless of whether the Leverage Ratio
subsequently returns to a level equal to or below 50%) the modification to
the Applicable Margins set forth in this paragraph (a) shall no longer
apply.
(b) On January 1, 2001, all Applicable Margins shall be reset based
upon the Status as calculated on or about November 15, 2000. Thereafter,
all such Applicable Margins shall be reset as contemplated by the
definition of Status.
"Approved Management Agreements" means those certain management
agreements listed on Schedule 4.22 attached hereto and any future
management agreement for an Eligible Property in substantially the same
form or as otherwise approved by the Administrative Agent in writing which
approval shall not be unreasonably withheld or delayed.
"Approved Manager" means those certain managers listed as "Approved
Managers" on Schedule 1.01(c) attached hereto, or any other reputable,
nationally known, third party manager of a Hotel Property approved by the
Administrative Agent in writing which approval shall not be unreasonably
withheld or delayed.
"Approved Other Country" means each of the following countries:
Canada, Mexico, United Kingdom, France, Germany, Spain, Belgium, The
Netherlands, Luxembourg, Italy, Portugal, Austria, Switzerland, Norway,
Sweden, Denmark, U. S. Virgin Islands, Bahamas, and Puerto Rico.
"Approved Participating Leases" means those certain Approved
Participating Leases listed on Schedule 1.01(d) attached hereto and any
future participating lease for an Eligible Property approved by the
Administrative Agent in writing (which approval shall not be unreasonably
withheld if such participating lease permits the lessor under such
participating lease to terminate such lease upon the lessee's failure to
achieve reasonable revenue targets for the applicable Hotel Property).
<PAGE>
"Approved Participating Lessee" means LaSalle Leasing, each of the
other Persons listed on Schedule 1.01(k) attached hereto, and any future
participating lessee for a Hotel Property (a) which is approved by the
Administrative Agent in writing and (b) does not jeopardize the Parent's
REIT status; provided, however, that any lessee (y) in which the Advisor
has a Control Percentage in ownership interest or (z) that is an Approved
Manager or its Affiliate shall automatically be deemed an Approved
Participating Lessee.
"Approved Substitute Advisor" means any Person experienced in the
hospitality industry which is reasonably acceptable to the Administrative
Agent.
"Approved Substitute Advisory Agreement" means any agreement with an
Approved Substitute Advisor pertaining to the providing of advisory
services to the Parent and the Parent's Subsidiaries which is reasonably
acceptable to the Administrative Agent.
"Asset Disposition" means any sale, lease of substantially all of a
Hotel Property (in which the Borrower or a Guarantor is lessor but
exclusive of the Approved Participating Leases), conveyance, exchange,
transfer, or assignment of any Property by the Borrower or a Guarantor to a
Person other than the Borrower or a Guarantor.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Bank and an Eligible Assignee, and accepted by the
Administrative Agent, in substantially the form of the attached Exhibit B.
"Banks" means the lenders listed on the signature pages of this
Agreement and each Eligible Assignee that shall become a party to this
Agreement pursuant to Section 10.06.
"Base Rate Advance" means an Advance which bears interest as provided
in Section 2.06(a).
"Borrower" means LaSalle Hotel Operating Partnership, L.P., a
Delaware limited partnership.
"Borrowing" means a borrowing consisting of simultaneous Advances of
the same Type made by each Bank pursuant to Section 2.01 or Converted by
each Bank to Advances of a different Type pursuant to Section 2.02(b).
"Borrowing Base" means, at any date of its determination, an amount
equal to (a) 50% of the Borrowing Base Hotel Value on such date MINUS (b)
the Unsecured Indebtedness (except for the Obligations) of the Parent and
its Subsidiaries outstanding on such date.
"Borrowing Base Hotel Value" means, at any date of its determination,
an amount equal to the sum of the Hotel Values for all Eligible Properties
on such date.
"Borrowing Base Certificate" means a certificate of the Borrower in
substantially the form of the attached Exhibit C, certified by a
Responsible Officer of Borrower to be true, correct and accurate in all
material respects.
"Borrowing Base Determination Date" means any date the Borrowing Base
is determined in accordance with Section 2.14.
<PAGE>
"Borrowing Base Requirements" means collectively that (a) no more
than 15% of the Borrowing Base Hotel Value may be comprised of Eligible
Properties which are located outside the United States and shall only be in
an Approved Other Country; (b) no more than 10% of the Borrowing Base Hotel
Value may be comprised of Eligible Properties which are limited service
hotels; (c) no more than 20% of the Borrowing Base Hotel Value may be
comprised of Renovating Properties; (d) no more than one (1) Renovating
Property shall be in the Borrowing Base at any time; (e) no more than 20%
of the Borrowing Base Hotel Value may be comprised of Hotel Properties
owned or leased by Joint Venture Subsidiaries; (f) no more than 30% of the
Borrowing Base Hotel Value may be comprised of any one Eligible Property
(except for the San Diego Paradise Point which shall not comprise more than
40% of the Borrowing Base Hotel Value); (g) the Borrowing Base shall be
comprised of at least four (4) Eligible Properties; and (h) no Hotel
Property or other Property shall cause the Parent to forfeit the Parent's
tax status as a REIT.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City or Dallas, Texas and, if
the applicable Business Day relates to any LIBOR Advances, any day other
than a Saturday or Sunday or a day on which banking institutions are
generally authorized or obligated by law or executive order to close in the
City of London, England.
"Calculated Value" means for any Hotel Property the product of (a)
the lesser of (i) the Adjusted NOI for such Hotel Property for the
preceding Rolling Period or (ii) the actual rental payments received by the
Parent or its Subsidiary under the participating lease for such Hotel
Property during such Rolling Period TIMES (b) ten (10).
"Capital Expenditure" means any payment made directly or indirectly
for the purpose of acquiring or constructing fixed assets, Real Property or
equipment which in accordance with GAAP would be capitalized in the fixed
asset accounts of such Person making such expenditure, including, without
limitation, amounts paid or payable for such purpose under any conditional
sale or other title retention agreement or under any Capital Lease, but
excluding repairs of Property in the normal and ordinary course of
business.
"Capitalization Event" means any sale or issuance by the Parent or
any of its Subsidiaries of equity securities except for the issuance of the
Borrower's operating partnership units in exchange for a direct or indirect
ownership interest in a Person that owns a Hotel Property.
"Capital Lease" means, for any Person, any lease of any Property
(whether real, personal or mixed) by that Person as lessee which, in
accordance with GAAP, is or should be accounted for as a capital lease on
the balance sheet of that Person.
"Capitalized Lease Obligations" means, as to any Person, the
capitalized amount of all obligations of such Person or any of its
Subsidiaries under Capitalized Leases, as determined on a consolidated
basis in conformity with GAAP.
"Cash Collateral Account" means a special cash collateral account
containing cash deposited pursuant to the terms of this Agreement to be
maintained at Societe Generale, New York Branch's office in accordance with
Section 8.04.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, state and local
analogs, and all rules and regulations and requirements thereunder in each
case as now or hereafter in effect.
<PAGE>
"Closing Date" means November 13, 2000.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"Commitment" means, with respect to any Bank, the amount set opposite
such Bank's name on Schedule 1.01(a) as its Commitment, or if such Bank has
entered into any Assignment and Acceptance, the amount set forth for such
Bank as its Commitment in the Register maintained by the Administrative
Agent pursuant to Section 10.06(c), as such amount may be reduced pursuant
to Section 2.04.
"Compliance Certificate" means a certificate of the Borrower in
substantially the form of the attached Exhibit D.
"Conditions to Asset Disposition" shall for any Asset Disposition
include all of the following requirements: (a) no Default has occurred and
is continuing or would occur upon the consummation of such Asset
Disposition, as certified by the Borrower; (b) the Borrower shall have
delivered to the Administrative Agent a Property Adjustment Report in
connection with such Asset Disposition; and (c) if required pursuant to the
provisions of Section 2.07(c)(i), the Borrower makes a prepayment of the
Advances in an amount of not less than the amount of Advances that would
need to be repaid, if any, to cure a Borrowing Base deficiency under
Section 2.07(c)(i).
"Consolidated" refers to the consolidation of the accounts of the
Borrower with the Borrower's Subsidiaries and the Parent with the Parent's
Subsidiaries, as applicable, in accordance with GAAP.
"Control Percentage" means, with respect to any Person, the
percentage of the outstanding capital stock of such Person having ordinary
voting power which gives the direct or indirect holder of such stock the
power to elect a majority of the Board of Directors of such Person.
"Controlled Group" means all members of a controlled group of
corporations and all trades (whether or not incorporated) under common
control which, together with the Parent and the Borrower, are treated as a
single employer under Section 414 of the Code.
"Convert", "Conversion", and "Converted" each refers to a conversion
of Advances of one Type into Advances of another Type pursuant to
Section 2.02(b).
"Credit Documents" means this Agreement, the Notes, the Guaranties,
the Environmental Indemnities, the Fee Letter, the Advisory Fee Letter, and
each other agreement, instrument or document executed by the Borrower or
any of its Subsidiaries at any time in connection with this Agreement.
"Default" means (a) an Event of Default or (b) any event or condition
which with notice or lapse of time or both would, unless cured or waived,
become an Event of Default.
"Development Property" means either (a) a new Hotel Property under
construction including the conversion of a non-Hotel Property into a Hotel
Property or (b) an existing Hotel Property which is undergoing an expansion
pursuant to which the total guest rooms for such Hotel Property will be
increased by 50% or more.
"Dollar Equivalent" means the equivalent in another currency of an
amount in U.S. Dollars to be determined by reference to the rate of
exchange quoted by the Administrative Agent, at 12:00 Noon (Dallas, Texas
time) on the date of determination, for the spot purchase in the foreign
exchange market of such amount of Dollars with such other currency.
<PAGE>
"Dollars" and "$" means lawful money of the United States of America.
"Domestic Lending Office" means, with respect to any Bank, the office
of such Bank specified as its "Operations Contact" in the questionnaire
such Bank provided to the Administrative Agent, or such other office of
such Bank as such Bank may from time to time specify to the Borrower and
the Administrative Agent.
"EBITDA" means for any Person or Hotel Property, as applicable, for
any period for which such amount is being determined, an amount equal to
(a) the Net Income for such Person or Hotel Property, as applicable, for
such period PLUS (b) to the extent deducted in determining Net Income,
Interest Expense, income taxes, depreciation, amortization, and other non-
cash items for such period, as determined in accordance with GAAP PLUS (c)
for the Hyatt Boston and Hyatt Boston Lessee, as applicable, the Hyatt
Boston Deemed Interest.
"Effective Date" means the date all of the conditions precedent set
forth in Section 3.01 have been satisfied.
"Eligible Assignee" means (a) a commercial bank (or other financial
institution acceptable to the Administrative Agent and the Borrower)
organized under the laws of the United States, or any State thereof, and
having primary capital of not less than $250,000,000 and approved by the
Administrative Agent and the Issuing Bank, which approvals will not be
unreasonably withheld, (b) a commercial bank (or other financial
institution acceptable to the Administrative Agent and the Borrower)
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development and having primary
capital (or its equivalent) of not less than $250,000,000 (or its Dollar
Equivalent) and approved by the Administrative Agent and the Issuing Bank,
which approvals will not be unreasonably withheld, (c) a Bank, and (d) an
Affiliate of the respective assigning Bank, without approval of any Person
but otherwise meeting the eligibility requirements of (a) or (b) above.
"Eligible Property" means, as of any Borrowing Base Determination
Date, any Hotel Property which is owned or leased by the Borrower or any
Guarantor on such date and was so owned or leased on the date of the most
recent Borrowing Base Certificate delivered to the Banks, and which
satisfies the conditions to qualifying as an Eligible Property set forth in
Section 3.03 on such Borrowing Base Determination Date.
"Engineering Report" means with respect to any Hotel Property, an
engineering report in accordance with the scope of services attached hereto
as Schedule 1.01(e) reasonably satisfactory to the Administrative Agent
prepared for the Banks by a Person set forth on Schedule 1.01(f) or
otherwise satisfactory to the Administrative Agent covering the physical
condition of the Hotel Property, including without limitation the
structural, electrical, plumbing, mechanical and other essential components
of the Hotel Property.
"Environment" or "Environmental" shall have the meanings set forth in
42 U.S.C. Section 9601(8), as amended.
"Environmental Claim" means any third party (including governmental
agencies and employees) action, lawsuit, claim, demand, regulatory action
or proceeding, order, decree, consent agreement or notice of potential or
actual responsibility or violation (including claims or proceedings under
the Occupational Safety and Health Acts or similar laws or requirements
relating to health or safety of employees) which seeks to impose liability
under any Environmental Law.
<PAGE>
"Environmental Indemnity" means one or more environmental indemnity
agreements dated of even date herewith in substantially the form of the
attached Exhibit E executed or to be executed by the Borrower, the Parent
and all Subsidiaries of the Borrower (excluding the Permitted Other
Subsidiaries), and any future environmental indemnities executed in
connection with any Hotel Property, as any of such environmental
indemnities may be amended hereafter in accordance with the terms of such
agreements.
"Environmental Law" means all Legal Requirements arising from,
relating to, or in connection with the Environment, health, or safety,
including without limitation CERCLA, relating to (a) pollution,
contamination, injury, destruction, loss, protection, cleanup, reclamation
or restoration of the air, surface water, groundwater, land surface or
subsurface strata, or other natural resources; (b) solid, gaseous or liquid
waste generation, treatment, processing, recycling, reclamation, cleanup,
storage, disposal or transportation; (c) exposure to pollutants,
contaminants, hazardous, medical, infectious, or toxic substances,
materials or wastes; (d) the safety or health of employees; or (e) the
manufacture, processing, handling, transportation, distribution in
commerce, use, storage or disposal of hazardous, medical, infectious, or
toxic substances, materials or wastes.
"Environmental Permit" means any permit, license, order, approval or
other authorization under Environmental Law.
"Environmental Report" means with respect to any Hotel Property, an
environmental report in accordance with the scope of services attached
hereto as Schedule 1.01(g) reasonably satisfactory to the Administrative
Agent prepared for the Banks by a Person set forth on Schedule 1.01(h) or
otherwise satisfactory to the Administrative Agent certifying to the
Administrative Agent and the Banks that the Hotel Property and the soil and
the groundwater thereunder do not contain Hazardous Substances except for
Permitted Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Federal Reserve Board (or any successor), as in effect
from time to time.
"Exchange Act" has the meaning set forth in Section 2.04.
"Existing Credit Agreement" has the meaning set forth in the
preliminary statements to this Agreement.
"Existing Credit Documents" has the meaning set forth in the
preliminary statements to this Agreement.
"Existing Lenders" has the meaning set forth in the preliminary
statements to this Agreement.
"Existing Letters of Credit" means the letters of credit outstanding
on the date of this Agreement issued for the account of the Borrower or its
Subsidiaries which are described in the attached Schedule 1.01(l), as the
same may be amended, supplemented, and otherwise modified from time to
time.
"Existing Notes" means the promissory notes payable under the
Existing Credit Agreement.
"Event of Default" has the meaning set forth in Section 8.01.
<PAGE>
"Expiration Date" means, with respect to any Letter of Credit, the
date on which such Letter of Credit will expire or terminate in accordance
with its terms.
"Facilitators" means Societe Generale, Southwest Agency, Bank of
Montreal, Chicago Branch, and Bankers Trust Company.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for any such day on such transactions received by
the Administrative Agent from three Federal funds brokers of recognized
standing selected by it.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any of its successors.
"Fee Letter" means the letter agreement dated as of September 18,
2000 among the Borrower, the Parent, and the Facilitators.
"FF&E" means furniture, fixtures and equipment.
"FF&E Reserve" means, for any Person or any Hotel Property for any
period, a reserve equal to four percent (4%) of gross revenues from any
Hotel Property owned by such Person or from such Hotel Property, as
applicable, for such period.
"Fiscal Quarter" means each of the three-month periods ending on
March 31, June 30, September 30 and December 31.
"Fiscal Year" means the twelve-month period ending on December 31.
"Free Cash Flow" means, for any Person for any period, the Funds From
Operations for such period PLUS amortization not included in the
calculation of Funds From Operations LESS (a) the aggregate FF&E Reserves
for such Person and its Subsidiaries for such period, and (b) the aggregate
amount of scheduled principal payments on the Total Liabilities of such
Person (excluding optional prepayments and scheduled principal payments in
respect of any such Indebtedness which is payable in a single installment
at final maturity) required to be made during such period.
"Fund," "Trust Fund," or "Superfund" means the Hazardous Substance
Response Trust Fund, established pursuant to 42 U.S.C. Section 9631 (1988)
and the Post-closure Liability Trust Fund, established pursuant to 42
U.S.C. Section 9641 (1988), which statutory provisions have been amended or
repealed by the Superfund Amendments and Reauthorization Act of 1986, and
the "Fund," "Trust Fund," or "Superfund" that are now maintained pursuant
to 42 U.S.C.Section 9507.
"Funding Deadline" means November 30, 2000
"Funds From Operations" means, for any Person for any period for
which such amount is being determined, an amount equal to such Person's Net
Income for such period excluding gains (losses) from debt restructuring and
sales of property (including furniture and equipment), plus depreciation
and amortization of Real Property and after adjustments for unconsolidated
partnerships and joint ventures, and excluding any payments made in
connection with one-time charges referenced in the definition of Parent's
Adjusted EBITDA.
<PAGE>
"Future Property" means any Hotel Property except for the Initial
Properties which the Borrower or any Subsidiary of the Borrower acquires.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time, applied on a basis consistent with the
requirements of Section 1.03.
"Governmental Authority" means any foreign governmental authority,
the United States of America, any state of the United States of America and
any subdivision of any of the foregoing, and any agency, department,
commission, board, authority or instrumentality, bureau or court having
jurisdiction over any Bank, the Parent, the Borrower, any Subsidiaries of
the Borrower or the Parent, any participating lessee, a manager or any of
their respective Properties.
"Governmental Proceedings" means any action or proceedings by or
before any Governmental Authority, including, without limitation, the
promulgation, enactment or entry of any Legal Requirement.
"Guarantor" means (a) the Parent, (b) each Subsidiary which owns an
Eligible Property, (c) each other direct or indirect Wholly-Owned
Subsidiary of the Borrower (except for any direct or indirect Wholly-Owned
Subsidiary which is contractually prohibited from acting as a Guarantor by
the terms of any document evidencing or securing Indebtedness of the
Borrower or its Subsidiaries permitted by the terms of this Agreement), and
(d) each other direct or indirect Joint Venture Subsidiary or
Unconsolidated Entity of the Borrower designated by the Administrative
Agent (except for any such Person which is contractually prohibited from
acting as a Guarantor by the terms of (i) any document evidencing or
securing Indebtedness of the Borrower or its Subsidiaries permitted by the
terms of this Agreement or (ii) the organizational documents of such
Person). The Guarantors on the Effective Date are identified on
Schedule 1.01(i).
"Guaranty" means one or more Guaranty and Contribution Agreements in
substantially the form of the attached Exhibit F executed by the Parent,
the Borrower and all of the Subsidiaries of the Borrower (excluding the
Permitted Other Subsidiaries), evidencing the joint and several guaranty by
the signatories thereto of the obligations of Borrower in respect of the
Credit Documents, and any future guaranty and contribution agreement
executed to secure Advances except for Supplemental Guaranties, as any of
such agreements may be amended hereafter in accordance with the terms of
such agreements.
"Hazardous Substance" means the substances identified as such
pursuant to CERCLA and those regulated under any other Environmental Law,
including without limitation pollutants, contaminants, petroleum, petroleum
products, radio nuclides, radioactive materials, and medical and infectious
waste.
"Hazardous Waste" means the substances regulated as such pursuant to
any Environmental Law.
"Hotel Property" for any hotel means the Real Property and the
Personal Property for such hotel, and the property referred to in
Section 10.13.
"Hotel Value" means, with respect to any Hotel Property, at any date,
the value thereof to be calculated as follows:
(a) For a Seasoned Property, the Calculated Value for such
Seasoned Property; and
<PAGE>
(b) For a New Property, the Investment Amount in such New
Property; PROVIDED that if the Borrower can provide the Administrative
Agent financial reports for such New Property for the period prior to the
acquisition of such New Property which have been reviewed by KPMG Peat
Marwick L.L.P. or other independent certified public accountants of
nationally recognized standing reasonably acceptable to the Administrative
Agent, then at the Borrower's election the Hotel Value for such New
Property will be the lesser of (i) the Calculated Value for such New
Property or (ii) 120% of the Investment Amount in such New Property.
However, the Hotel Value of a Hotel Property owned or leased by a Joint
Venture Subsidiary shall be deemed to be the Allocation Percentage of the
value calculated above for such Hotel Property. The initial Hotel Value for
the Initial Properties is set forth on Schedule 1.01(b) attached hereto.
"Hyatt Boston" means the Hotel Property called the Hyatt Harborside
Hotel, located in Boston, Massachusetts.
"Hyatt Boston Bond Overlap Period" has the meaning set forth in
Section 10.21.
"Hyatt Boston Deemed Interest" means approximately $200,000 per year
of payments made or to be made by the Hyatt Boston Lessee under the Hyatt
Boston Lease which terminate upon the redemption of the Hyatt Boston
Replacement Bonds.
"Hyatt Boston Existing Bonds" means Massachusetts Port Authority
Special Project Revenue Bonds, Series 1990 issued by the Hyatt Boston
Issuer.
"Hyatt Boston Existing Bonds Credit Enhancement" means any letter of
credit, guaranty or other form of credit enhancement which supports the
Hyatt Boston Existing Bonds.
"Hyatt Boston Issuer" means the Massachusetts Port Authority.
"Hyatt Boston Lease" means that certain Amended and Restated Ground
Lease, by and between the Hyatt Boston Issuer and the Hyatt Boston Lessee,
as amended.
"Hyatt Boston Lessee" means LHO Harborside Hotel, LLC.
"Hyatt Boston Replacement Bonds" means bonds issued by the Hyatt
Boston Issuer in an amount approximately equal to the amount needed to
redeem the Hyatt Boston Existing Bonds, including interest on such bonds
and the costs and expenses of redeeming such bonds and issuing the Hyatt
Boston Replacement Bonds.
"Hyatt Boston Replacement Bonds Proceeds" means the aggregate cash
proceeds received from the issuance of the Hyatt Boston Replacement Bonds
MINUS the expenses incurred in connection with such issuance.
"Hyatt Boston Replacement Bonds Credit Enhancement" means any letter
of credit, guaranty or other form of credit enhancement which supports the
Hyatt Boston Replacement Bonds.
"Improvements" for any hotel means all buildings, structures,
fixtures, tenant improvements and other improvements of every kind and
description now or hereafter located in or on or attached to the Land for
such hotel; and all additions and betterments thereto and all renewals,
substitutions and replacements thereof.
<PAGE>
"Indebtedness" means (without duplication), at any time and with
respect to any Person, (a) indebtedness of such Person for borrowed money
(whether by loan or the issuance and sale of debt securities) or for the
deferred purchase price of property or services purchased (other than
amounts constituting trade payables, accruals or bank drafts arising in the
ordinary course of business); (b) indebtedness of others in the amount
which such Person has directly or indirectly assumed or guaranteed or
otherwise provided credit support therefor or for which such Person is
liable as a partner of such Person; (c) indebtedness of others in the
amount secured by a Lien on assets of such Person, whether or not such
Person shall have assumed such indebtedness; (d) obligations of such Person
in respect of letters of credit, acceptance facilities, or drafts or
similar instruments issued or accepted by banks and other financial
institutions for the account of such Person (other than trade payables or
bank drafts arising in the ordinary course); (e) obligations of such Person
under Capital Leases; and (f) obligations under interest rate swap
agreements, interest rate cap agreements, interest rate collar agreements
or other similar agreements or arrangements designed to protect against
fluctuations in interest rates.
"Initial Properties" means collectively the Hotel Properties listed
on Schedule 1.01(b), and "Initial Property" means any of such Hotel
Properties.
"Interest Expense" means, for any Person for any period for which
such amount is being determined, the total interest expense (including that
properly attributable to Capital Leases in accordance with GAAP) and all
charges incurred with respect to letters of credit determined on a
consolidated basis in conformity with GAAP, PLUS capitalized interest of
such Person and its Subsidiaries PLUS for the Hyatt Boston Lessee, the
Hyatt Boston Deemed Interest.
"Interest Period" means, for each LIBOR Advance comprising part of
the same Borrowing, the period commencing on the date of such Advance or
the date of the Conversion of any Base Rate Advance into such an Advance
and ending on the last day of the period selected by the Borrower pursuant
to the provisions below and Section 2.02 and, thereafter, each subsequent
period commencing on the last day of the immediately preceding Interest
Period and ending on the last day of the period selected by the Borrower
pursuant to the provisions below and Section 2.02. The duration of each
such Interest Period shall be one, two, three, six, nine or twelve months,
in each case as the Borrower may select, upon notice received by the
Administrative Agent not later than 12:00 Noon (Dallas, Texas time) on the
third Business Day prior to the first day of such Interest Period,
PROVIDED, HOWEVER, that:
(a) Interest Periods for Advances of the same Borrowing shall be of
the same duration;
(b) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day,
PROVIDED that if such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day;
(c) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month in which it would have ended if
there were a numerically corresponding day in such calendar month; and
(d) each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires; and
<PAGE>
(e) no Interest Period with respect to any portion of any Advance
shall extend beyond the Maturity Date.
"Interest Rate Agreements" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect the Borrower, the
Parent or any of their respective Subsidiaries against fluctuations in
interest rates.
"Investment" means, with respect to any Person, (a) any loan or
advance to any other Person, (b) the ownership, purchase or other
acquisition of, any Stock, Stock Equivalents, other equity interest,
obligations or other securities of, (i) any other Person, or (ii) all or
substantially all of the assets of any other Person, or (iii) all or
substantially all of the assets constituting the business of a division,
branch or other unit operation of any other Person, or (c) any joint
venture or partnership with, or any capital contribution to, or other
investment in, any other Person or any real property.
"Investment Amount" means (a) for any Hotel Property the sum of (i)
for any Initial Property, the amount set forth for such Initial Property on
Schedule 1.01(b) attached hereto, and for any other Hotel Property, the
aggregate purchase price paid by the Borrower or its Subsidiary for such
other Hotel Property (giving effect to any securities used to purchase a
Hotel Property at the fair market value of the securities at the time of
purchase based upon the price at which such securities could be exchanged
into the Parent's common stock assuming such exchange occurred on the date
of acquiring the Hotel Property), and (ii) 95% of (A) the actual cost of
any Capital Expenditures or FF&E expenditures for such Hotel Property made
by the Borrower or its Subsidiaries during any period minus (B) the FF&E
Reserve for such Hotel Property for such period, and (b) for any other
Investment the aggregate purchase price paid by the Borrower or its
Subsidiary for such other Investment (giving effect to any securities used
to purchase such Investment at the fair market value of the securities at
the time of purchase based upon the price at which such securities could be
exchanged into the Parent's common stock assuming such exchange occurred on
the date of acquiring such Investment).
"Issuing Bank" means Societe Generale, Southwest Agency; any Bank
approved by the Administrative Agent and the Borrower as an "Issuing Bank";
or any Bank acting as a successor issuing bank pursuant to Section 9.06,
and "Issuing Banks" means, collectively, all of such Banks.
"Joint Venture Subsidiary" of a Person means any Subsidiary of such
Person which is controlled and managed by such Person, except for a Wholly-
Owned Subsidiary.
"Land" for any hotel means the real property upon which the hotel is
located, together with all rights, title and interests appurtenant to such
real property, including without limitation all rights, title and interests
to (a) all strips and gores within or adjoining such property, (b) the
streets, roads, sidewalks, alleys, and ways adjacent thereto, (c) all of
the tenements, hereditaments, easements, reciprocal easement agreements,
rights-of-way and other rights, privileges and appurtenances thereunto
belonging or in any way pertaining thereto, (d) all reversions and
remainders, (e) all air space rights, and all water, sewer and wastewater
rights, (e) all mineral, oil, gas, hydrocarbon substances and other rights
to produce or share in the production of anything related to such property,
and (f) all other appurtenances appurtenant to such property, including
without limitation, any now or hereafter belonging or in anywise
appertaining thereto.
"LaSalle Leasing" means LaSalle Hotel Lessee, Inc.
<PAGE>
"Legal Requirement" means any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or official interpretation
of any of the foregoing) of, and the terms of any license or permit issued
by, any Governmental Authority.
"Letter of Credit" means, individually, any letter of credit issued
by the Issuing Bank in accordance with the provisions of Section 2.13 of
this Agreement including any Existing Letter of Credit, and "Letters of
Credit" means all such letters of credit collectively.
"Letter of Credit Documents" means, with respect to any Letter of
Credit, such Letter of Credit and any reimbursement or other agreements,
documents, and instruments entered into in connection with or relating to
such Letter of Credit.
"Letter of Credit Exposure" means, at any time, the sum of (a) the
aggregate undrawn maximum face amount of each Letter of Credit and (b) the
aggregate unpaid amount of all Letter of Credit Obligations at such time.
"Letter of Credit Obligations" means all obligations of the Borrower
arising in respect of the Letter of Credit Documents, including without
limitation the aggregate drawn amounts of Letters of Credit which have not
been reimbursed by the Borrower or converted into an Adjusted Base Rate
Advance pursuant to the provisions of Section 2.13(c).
"Leverage Ratio" means the percentage obtained by dividing (a) the
Parent's Total Liabilities by (b) the Parent Aggregate Asset Value.
"LIBOR" means, for the Interest Period for each LIBOR Advance
comprising part of the same Borrowing, an interest rate per annum (rounded
upward to the nearest whole multiple of 1/16 of 1% per annum) equal to (A)
the rate per annum at which deposits in Dollars are offered by the
Administrative Agent to leading banks and accepted by leading banks in the
London interbank eurodollar market at approximately 12:00 Noon (London
time) two (2) Business Days before the first day of such Interest Period,
in an amount substantially equal to the Administrative Agent's LIBOR
Advance comprising part of such Borrowing and for a period equal to such
Interest Period divided by (B) one minus the LIBOR Reserve Requirement. It
is agreed that for purposes of this definition, LIBOR Advances made
hereunder shall be deemed to constitute Eurocurrency Liabilities as defined
in Regulation D and to be subject to the reserve requirements of
Regulation D.
"LIBOR Advance" means any Advance which bears interest as provided in
Section 2.06(b).
"LIBOR Lending Office" means, with respect to any Bank, the office of
such Bank specified as its "Operations Contact" in the questionnaire such
Bank provided to the Administrative Agent, or such other office of such
Bank as such Bank may from time to time specify to the Borrower and the
Administrative Agent.
"LIBOR Reserve Requirement" shall mean, on any day, that percentage
(expressed as a decimal fraction) which is in effect on such date, as
provided by the Federal Reserve System for determining the maximum reserve
requirements generally applicable to financial institutions regulated by
the Federal Reserve Board comparable in size and type to the Administrative
Agent (including, without limitation, basic, supplemental, marginal and
emergency reserves) under Regulation D with respect to "Eurocurrency
liabilities" as currently defined as Regulation D, or under any similar or
successor regulation with respect to Eurocurrency liabilities or
Eurocurrency funding (or other category of liabilities which includes
deposits by reference to which the interest rate on a LIBOR Advance is
determined or any category or extensions of credit which includes loans by
a non-United States office of the Administrative Agent to United States
residents). Each determination by the Administrative Agent of the LIBOR
Reserve Requirement, shall, in the absence of manifest error, be conclusive
and binding upon the Borrower.
<PAGE>
"Lien" means any mortgage, lien, pledge, charge, deed of trust,
security interest, encumbrance or other type of preferential arrangement to
secure or provide for the payment of any obligation of any Person, whether
arising by contract, operation of law or otherwise (including, without
limitation, the interest of a vendor or lessor under any conditional sale
agreement, Capital Lease or other title retention agreement).
"Liquid Investments" means cash and the following:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States;
(b) (i) negotiable or nonnegotiable certificates of deposit, time
deposits, or other similar banking arrangements maturing within 180 days
from the date of acquisition thereof ("bank debt securities"), issued by
(A) any Bank or (B) any other bank or trust company which has a combined
capital surplus and undivided profit of not less than $250,000,000 or the
Dollar Equivalent thereof, if at the time of deposit or purchase, such bank
debt securities are rated not less than "A" (or the then equivalent) by the
rating service of S&P or of Moody's, and (ii) commercial paper issued by
(A) any Bank or (B) any other Person if at the time of purchase such
commercial paper is rated not less than "A-2" (or the then equivalent) by
the rating service of S&P or not less than "P-2" (or the then equivalent)
by the rating service of Moody's, or upon the discontinuance of both of
such services, such other nationally recognized rating service or services,
as the case may be, as shall be selected by the Borrower with the consent
of the Administrative Agent;
(c) repurchase agreements relating to investments described in
clauses (a) and (b) above with a market value at least equal to the
consideration paid in connection therewith, with any Person who regularly
engages in the business of entering into repurchase agreements and has a
combined capital surplus and undivided profit of not less than $250,000,000
or the Dollar Equivalent thereof, if at the time of entering into such
agreement the debt securities of such Person are rated not less than "A"
(or the then equivalent) by the rating service of S&P or of Moody's; and
(d) such other instruments (within the meaning of New York's
Uniform Commercial Code) as the Borrower may request and the Administrative
Agent may approve in writing, which approval will not be unreasonably
withheld.
"Material Adverse Change" shall mean a material adverse change in the
business, financial condition, or results of operations of the Borrower,
the Parent or any Guarantor, in each case since the date of the most recent
financial statements of the Borrower or the Parent delivered to the Banks.
"Maturity Date" means December 31, 2003.
"Maximum Rate" means the maximum nonusurious interest rate under
applicable law.
"Minimum Tangible Net Worth" means, with respect to the Parent, at
any time, the sum of (a) $230,000,000 PLUS (b) 75% of the aggregate net
proceeds received by the Parent or any of its Subsidiaries after the
Closing Date in connection with any offering of Stock or Stock Equivalents
of the Parent or its Subsidiaries, PLUS (c) 75% of the value of any
partnership interests in Borrower issued after the Closing Date for the
acquisition of a Hotel Property or any interest in a Hotel Property
permitted hereunder.
"Moody's" means Moody's Investor Service Inc.
<PAGE>
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Parent, the Borrower or any member
of a Controlled Group is making or accruing an obligation to make
contributions.
"Net Cash Proceeds" means (a) the aggregate cash proceeds (including,
without limitation, insurance proceeds) received by the Parent, the
Borrower or any of their respective Subsidiaries (as applicable) in
connection with any Asset Disposition or Capitalization Event, MINUS (b)
the reasonable expenses of such Person in connection with such Asset
Disposition or such Capitalization Event.
"Net Income" means, for any Person or Hotel Property for any period
for which such amount is being determined, the net income of such Person
(on a consolidated basis) or Hotel Property, as applicable, after taxes, as
determined in accordance with GAAP, excluding, however, extraordinary
items, including but not limited to (i) any net gain or loss during such
period arising from the sale, exchange, or other disposition of capital
assets (such term to include all fixed assets and all securities) other
than in the ordinary course of business and (ii) any write-up or write-down
of assets; PROVIDED that to the extent that the Net Income for any Hotel
Property does not include a reasonable allocation of administrative,
accounting or other overhead of the Person or Persons who directly or
indirectly own or lease such Hotel Property which directly pertains to the
operation of Hotel Properties, then such allocation amount shall be deemed
subtracted from such Net Income for purposes of the financial tests and
other definitions contained in this Agreement which utilize Hotel Property
Net Income.
"Net Worth" means, for any Person, stockholders equity of such Person
determined in accordance with GAAP.
"New Property" means, as at any date, any Hotel Property (including a
Renovating Property) that is not a Seasoned Property.
"Note" means a promissory note of the Borrower payable to the order
of any Bank, in substantially the form of the attached Exhibit A,
evidencing indebtedness of the Borrower to such Bank resulting from
Advances owing to such Bank, and "Notes" means all of such promissory
notes.
"Notice of Borrowing" means a notice of borrowing in the form of the
attached Exhibit G signed by a Responsible Officer of the Borrower.
"Notice of Conversion or Continuation" means a notice of conversion
or continuation in the form of the attached Exhibit H signed by a
Responsible Officer of the Borrower.
"Obligations" means all Advances, Letter of Credit Obligations, and
other amounts payable by the Borrower to the Administrative Agent or the
Banks under the Credit Documents.
"Parent" means LaSalle Hotel Properties, a Maryland trust.
"Parent Aggregate Asset Value" means the sum of (a) the aggregate
Hotel Value of the Parent Hotel Properties which meet the Parent Hotel
Property Requirements, (b) the Parent's and the Parent's Subsidiaries'
Liquid Investments, (c) for Investments in Unconsolidated Entities which
are in the form of loans to such Unconsolidated Entities, the Investment
Amount of all such Investments and (d) for Investments in Unconsolidated
Entities which are not in the form of loans to such Unconsolidated
Entities, the aggregate sum of the products obtained by multiplying the
Hotel Value for each Hotel Property owned or leased by an Unconsolidated
Entity by the Parent's Unconsolidated Entity Percentage for such
Unconsolidated Entity.
<PAGE>
"Parent Common Stock" means the common shares of beneficial interest
of Parent, par value $.01 per share.
"Parent Hotel Properties" means all Hotel Properties owned or leased
by the Parent or one of the Parent's Subsidiaries, including without
limitation Eligible Properties.
"Parent Hotel Property Requirements" means (a) that all Parent Hotel
Properties are (i) in either the United States of America or an Approved
Other Country and (ii) either (A) full service hotels primarily located in
a resort, convention or urban market or (B) limited service hotels
primarily located in an urban market, (b) that all Parent Hotel Properties
would not, if all were deemed Eligible Properties, cause a material
variation to the Borrowing Base Requirements, (c) no Parent Hotel Property
has a Hotel Value which exceeds 25% of the difference of (i) the Parent
Aggregate Asset Value MINUS (ii) to the extent added in determining the
Parent Aggregate Asset Value, the amount of Liquid Investments, (d) no
Parent Hotel Property is subject to a ground lease which fails in a
material way to qualify as a Qualified Ground Lease, and (e) no Parent
Hotel Property (i) fails to comply in any material respect with all
applicable Environmental Laws, and (ii) is subject to any material
Environmental Claim, all as evidenced by an Environmental Report for such
Parent Hotel Property delivered by the Parent to the Administrative Agent.
"Parent's Adjusted EBITDA" means, for the Parent and the Parent's
Subsidiaries on a Consolidated basis for any period, (a) the EBITDA for
such period PLUS (b) to the extent deducted in determining EBITDA, any one-
time charges on of before December 31, 2001 which in the aggregate do not
exceed $1,800,000 and which are (i) taken within a Rolling Period of the
consummation of the Permitted Proposed Transaction in connection with the
Permitted Proposed Transaction or a write-off of intangible assets
pertaining to LaSalle Leasing or (ii) otherwise approved by the
Administrative Agent LESS (c) the sum of (i) the aggregate base management
fees and employee lease fees paid during such period under the Advisory
Agreement or any Approved Substitute Advisory Agreement and (ii) the
aggregate FF&E Reserves for such period in respect of each Hotel Property
owned by the Parent or its Subsidiaries (whether located on land owned by
or land leased to such owner of the Hotel Property).
"Parent's Fixed Charge Coverage Ratio" means, as of the end of any
Rolling Period, a ratio of (a) the Parent's Adjusted EBITDA for such
Rolling Period to (b) the Parent's Fixed Charges for such Rolling Period.
"Parent's Fixed Charges" means, for the period for which such amount
is being determined, the sum of the following amounts for the Parent and
the Parent's Subsidiaries on a Consolidated basis: (a) the amount (without
duplication) of all mandatory principal payments scheduled to be made
(excluding optional prepayments and scheduled principal payments in respect
of any such Indebtedness which is payable in a single installment at final
maturity), (b) Parent's Interest Expense, (c) all payments scheduled to be
made in respect of Capital Leases, and (d) all preferred stock dividends.
"Parent's Interest Coverage Ratio" means, as of the end of any
Rolling Period, a ratio of (a) Parent's Adjusted EBITDA for such Rolling
Period to (b) the Parent's Interest Expense for such Rolling Period.
"Parent's Interest Expense" means, for the period for which such
amount is being determined, the Interest Expense for the Parent and the
Parent's Subsidiaries on a Consolidated basis.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Encumbrances" means the Liens permitted to exist pursuant
to Section 6.01.
<PAGE>
"Permitted Hazardous Substances" means (a) Hazardous Substances,
petroleum and petroleum products which are (i) used in the ordinary course
of business and in typical quantities for a hotel and (ii) generated, used
and disposed of in accordance with all Legal Requirements and good hotel
industry practice and (b) non-friable asbestos to the extent (i) that no
applicable Legal Requirements require removal of such asbestos from the
Hotel Property and (ii) such asbestos is encapsulated in accordance with
all applicable Legal Requirements and such reasonable operations and
maintenance program as may be required by the Administrative Agent.
"Permitted Hotel Sale" means the Asset Disposition of all, but not a
portion, of (a) a Hotel Property or (b) the ownership interest in a
Subsidiary of the Borrower which owns a Hotel Property, in either case for
which the Conditions to Asset Disposition are satisfied or will be
satisfied within the time periods required under this Agreement.
"Permitted Non-Eligible Property" means any Hotel Property (a) which
either (i) does NOT satisfy the conditions to qualifying as an Eligible
Property set forth in Section 3.03, (ii) has not been submitted to the
Banks as a potential Eligible Property or (iii) has been removed as an
Eligible Property by the Borrower; (b) which is owned by a Permitted Other
Subsidiary; (c) which neither is subject to any Environmental Claim, nor
contains any Hazardous Substance which could reasonably be expected to
cause a Material Adverse Change as evidenced by an Environmental Report
delivered to the Administrative Agent at least 10 days prior to the
acquisition of such Hotel Property by Borrower or one of Borrower's
Subsidiaries; and (d) which, with all other Parent Hotel Properties, will
not cause a violation of the Parent Hotel Property Requirements.
"Permitted Other Subsidiaries" means a Wholly-Owned Subsidiary or a
Joint Venture Subsidiary of the Borrower which (a) does not own any
Eligible Property, and (b) is a bankruptcy remote, single purpose Person.
"Permitted Proposed Transaction" means the purchase by Borrower or a
Subsidiary of Borrower of all of the issued and outstanding shares of the
capital stock of LaSalle Leasing for cash consideration which does not
exceed $1,200,000; PROVIDED that (a) while the Borrower can enter into an
agreement pertaining to such purchase at any time, the Borrower shall not
consummate such purchase until on or after January 1, 2001; (b) the
Borrower shall consummate such purchase pursuant to documentation
reasonably acceptable to the Administrative Agent; (c) the Borrower shall
provide to the Administrative Agent evidence reasonably satisfactory to the
Administrative Agent that the consummation of such purchase shall not cause
a potential Event of Default under Section 8.01(o) of this Agreement
pertaining to the Parent's REIT status.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
limited liability company, joint venture or other entity, or a government
or any political subdivision or agency thereof or any trustee, receiver,
custodian or similar official.
"Personal Property" for any Hotel Property means all FF&E, inventory
and other personal property of every kind, whether now existing or
hereafter acquired, tangible and intangible, now or hereafter located on or
about the Land, and used or to be used in the future in connection with the
operation of such Hotel Property.
"Plan" means an employee benefit plan (other than a Multiemployer
Plan) maintained for employees of the Parent, the Borrower or any member of
a Controlled Group and covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code.
<PAGE>
"Preliminary Property Plan" means for any Hotel Property, the
preliminary financial projections of the Capital Expenditures and the
expenditures for FF&E for such Hotel Property in connection with a
renovation or expansion (but not maintenance) of such Hotel Property, as
such projections may be amended by the Borrower from time to time.
"Prime Rate" means a fluctuating interest rate per annum as shall be
in effect from time to time equal to the rate of interest publicly
announced by the Administrative Agent as its prime commercial lending rate
(which may not be the lowest rate offered to its customers), whether or not
the Borrower has notice thereof.
"Property" of any Person means any property or assets (whether real,
personal, or mixed, tangible or intangible) of such Person.
"Property Adjustment Report" means a certificate of the Borrower in
substantially the form of the attached Exhibit I.
"Property Information" for any Hotel Property means the information
and documentation for such Hotel Property listed in Sections 3.03(f),
3.03(g), 3.03(j)(i)-(iii) and (v) and a commitment for a title policy for
such Hotel Property, together with a legible copy of all documents referred
to in such commitment.
"Property Owner" for any Initial Property or Future Property, means
the Person who owns fee or leasehold title interest (as applicable) in, and
to such Property.
"Pro Rata Share" means, at any time with respect to any Bank, either
(a) the ratio (expressed as a percentage) of such Bank's Commitment at such
time to the aggregate Commitments at such time or (b) if the Commitments
have been terminated, the ratio (expressed as a percentage) of such Bank's
aggregate outstanding Advances and participation interest in the Letter of
Credit Exposure at such time to the aggregate outstanding Advances and
Letter of Credit Exposure of all the Banks at such time.
"Prescribed Forms" means such duly executed form(s) or statement(s),
and in such number of copies, which may, from time to time, be prescribed
by law and which, pursuant to applicable provisions of (a) an income tax
treaty between the United States and the country of residence of the Bank
providing the form(s) or statement(s), (b) the Code, or (c) any applicable
rule or regulation under the Code, permit the Borrower to make payments
hereunder for the account of such Bank free of deduction or withholding of
income or similar taxes (except for any deduction or withholding of income
or similar taxes as a result of any change in or in the interpretation of
any such treaty, the Code or any such rule or regulation).
"Public Offering" means the initial public offering of approximately
14,200,000 shares of Parent Common Stock.
"Qualified Ground Lease" means each of the ground leases or subground
leases set forth on Schedule 1.01(j) hereto and for a Future Property means
any ground lease (a) which is a direct ground lease granted by the fee
owner of real property, (b) which may be transferred and/or assigned
without the consent of the lessor (or as to which the lease expressly
provides that (i) such lease may be transferred and/or assigned with the
consent of the lessor and (ii) such consent shall not be unreasonably
withheld or delayed) or subject to certain reasonable pre-defined
requirements, (c) which has a remaining term (including any renewal terms
exercisable at the sole option of the lessee) of at least twenty (20)
years, (d) under which no material default has occurred and is continuing,
(e) with respect to which a Lien may be granted without the consent of the
lessor, (f) which contains lender protection provisions acceptable to the
Administrative Agent, including, without limitation, provisions to the
effect that (i) the lessor shall notify any holder of a Lien in such lease
<PAGE>
of the occurrence of any default by the lessee under such lease and shall
afford such holder the option to cure such default, and (ii) in the event
that such lease is terminated, such holder shall have the option to enter
into a new lease having terms substantially identical to those contained in
the terminated lease and (g) which is otherwise acceptable in form and
substance to the Administrative Agent.
"Real Property" for any hotel means the Land and the Improvements for
such hotel, including without limitation, parking and other ancillary
functions necessary for the operation of such hotel.
"Register" has the meaning set forth in paragraph (c) of
Section 10.06.
"REIT" means a real estate investment trust under Sections 856-860 of
the Code.
"Release" shall have the meaning set forth in CERCLA or under any
other Environmental Law.
"Renovating Property" means a Hotel Property (a) that has been
designated as such in writing by the Borrower to the Administrative Agent,
and (b) with respect to which a renovation (i) was commenced consisting of
alterations, remodeling and other similar work having an aggregate cost
exceeding ten percent (10%) of the Investment Amount in such Hotel Property
and (ii) was completed, or is reasonably expected to be completed, within
twenty-four (24) months of the commencement of such renovation; PROVIDED
that the Borrower shall only be able to designate (y) one (1) Hotel
Property as a Renovating Property at any one time and (z) a Hotel Property
as a Renovating Property only during the Fiscal Quarters for which the
renovation is occurring (not exceeding eight (8) Fiscal Quarters) and the
Rolling Period following such period.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA.
"Required Lenders" means, at any time, Banks holding at least 51% of
the then aggregate unpaid principal amount of the Notes and the Letter of
Credit Exposure of the Banks at such time, or, if no such principal amount
of the Notes and Letter of Credit Exposure is then outstanding, Banks
having at least 51% of the aggregate amount of the Commitments at such
time.
"Required Work" means, for any Future Property which the Borrower
requests be an Eligible Property, the work agreed upon by the Borrower and
the Administrative Agent, if any, as the Required Work for such Future
Property.
"Response" shall have the meaning set forth in CERCLA or under any
other Environmental Law.
"Responsible Officer" means the Chief Executive Officer, President,
Executive Vice President, Chief Operating Officer, Chief Financial Officer,
or Treasurer of any Person.
"Restricted Payment" means (a) any direct or indirect payment,
prepayment, redemption, purchase, or deposit of funds or Property for the
payment (including any sinking fund or defeasance), prepayment, redemption
or purchase of Indebtedness not permitted by this Agreement, and (b) the
making by any Person of any dividends or other distributions (in cash,
property, or otherwise) on, or payment for the purchase, redemption or
other acquisition of, any shares of any capital stock, any limited
liability company interests or any partnership interests of such Person,
other than dividends or distributions payable in such Person's stock,
limited liability company interests or any partnership interests.
<PAGE>
"Rolling Period" means, as of any date, the four Fiscal Quarters
ending immediately preceding such date.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-
Hill, Inc., or any successor thereof.
"Seasoned Property" means, as at any date, a Hotel Property
(excluding any Renovating Property) that has been owned for four (4) or
more Fiscal Quarters, by the Parent or by a Person that has been a
Subsidiary of the Parent during such entire period.
"Secured Non-Recourse Indebtedness" of any Person means all
Indebtedness of such Person with respect to which recourse for payment is
limited to specific assets encumbered by a Lien securing such Indebtedness;
PROVIDED, HOWEVER, that personal recourse of a holder of Indebtedness
against any obligor with respect thereto for fraud, misrepresentation,
misapplication of cash, non-payment of real estate taxes or ground lease
rent, waste and other circumstances customarily excluded from non-recourse
provisions in non-recourse financing of real estate shall not, by itself,
prevent any Indebtedness from being characterized as Secured Non-Recourse
Indebtedness, PROVIDED FURTHER THAT if a personal recourse claim is made in
connection therewith, such claim shall not constitute Secured Non-Recourse
Indebtedness for the purposes of this Agreement.
"Secured Recourse Indebtedness" of any Person means any Total
Liabilities (excluding any Secured Non-Resource Indebtedness) of such
Person for which the obligations thereunder are secured by a Lien on any
assets of such Person or its Subsidiaries.
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<PAGE>
"Status" means the existence of Level I Status, Level II Status,
Level III Status, or Level IV Status, as the case may be. As used in this
definition:
"Level I Status" exists at any date if, at such date, the
Leverage Ratio is less than or equal to 35%;
"Level II Status" exists at any date if, at such date, the
Leverage Ratio is greater than 35% but less than or equal to 40%;
"Level III Status" exists at any date if, at such date, the
Leverage Ratio is greater than 40% but less than or equal to 45%; and
"Level IV Status" exists at any date if, at such date, the
Leverage Ratio is greater than 45%.
Status shall be determined and changed as of the 45th day following any
Fiscal Quarter. The Leverage Ratio shall be based upon the components of
the calculation of the Leverage Ratio for the Rolling Period just ended or
as of the end of such Rolling Period, as applicable.
"Stock" means shares of capital stock, beneficial or partnership
interests, participations or other equivalents (regardless of how
designated) of or in a corporation or equivalent entity, whether voting or
non-voting, and includes, without limitation, common stock and preferred
stock.
"Stock Equivalents" means all securities (other than Stock)
convertible into or exchangeable for Stock and all warrants, options or
other rights to purchase or subscribe for any stock, whether or not
presently convertible, exchangeable or exercisable.
"Subsidiary" of a Person means any corporation, association,
partnership or other business entity of which more than 50% of the
outstanding shares of capital stock (or other equivalent interests) having
by the terms thereof ordinary voting power under ordinary circumstances to
elect a majority of the board of directors or Persons performing similar
functions (or, if there are no such directors or Persons, having general
voting power) of such entity (irrespective of whether at the time capital
stock (or other equivalent interests) of any other class or classes of such
entity shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned or controlled by
such Person, by such Person and one or more Subsidiaries of such Person or
by one or more Subsidiaries of such Person.
"Supplemental Guarantor" means any partner of the Borrower except for
the Parent or the Guarantors that executes a Supplemental Guaranty.
"Supplemental Guaranty" means any future assumption of liability in a
form reasonably acceptable to the Administrative Agent executed by a
Supplemental Guarantor to secure Advances, as such future supplemental
guaranties may be amended hereafter in accordance with their terms.
"Termination Event" means (a) the occurrence of a Reportable Event
with respect to a Plan, as described in Section 4043 of ERISA and the
regulations issued thereunder (other than a Reportable Event not subject to
the provision for 30-day notice to the PBGC under such regulations),
(b) the withdrawal of the Parent, the Borrower or any of a Controlled Group
from a Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, (c) the giving of a notice of
intent to terminate a Plan under Section 4041(c) of ERISA, (d) the
institution of proceedings to terminate a Plan by the PBGC, or (e) any
other event or condition which constitutes grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.
<PAGE>
"Total Commitments" means the aggregate amount of the Banks'
Commitments which shall initially be Two Hundred Million Dollars
($200,000,000); as such amount may be increased pursuant to the provisions
of Section 1.06 or decreased pursuant to the provisions of Section 2.04 or
other applicable provisions of this Agreement.
"Total Liabilities" of any Person means the sum of the following
(without duplication): (a) all Indebtedness of such Person and its
Subsidiaries determined on a Consolidated basis in conformity with GAAP,
PLUS (b) such Person's Unconsolidated Entity Percentage of Indebtedness
(including Secured Non-Recourse Indebtedness) of such Person's
Unconsolidated Entities, PLUS (c) to the extent not already included in the
calculation of either of the preceding clauses (a) or (b), the aggregate
amount of letters of credit for which such Person or any of its
Subsidiaries would have a direct or contingent obligation to reimburse the
issuers of such letters of credit upon a drawing under such letters of
credit MINUS (d) to the extent included in the calculation of any of the
preceding clauses (a), (b) or (c), (i) trade payables and accruals incurred
in the ordinary course of business, (ii) the amount of any minority
interests and (iii) Capital Lease Obligations for a ground lease for any
Hotel Property for which the annual rental payments for such ground lease
do not exceed 30% of the Adjusted NOI for such Hotel Property.
"Type" has the meaning set forth in Section 1.04.
"Unconsolidated Entity" means, with respect to any Person, at any
date, any other Person in whom such Person holds an Investment, which
Investment is accounted for in the financial statements of such Person on
an equity basis of accounting or as a loan or advance to the other Person,
and whose financial results would not be consolidated under GAAP with the
financial results of such Person on the consolidated financial statements
of such Person, if such statements were prepared as of such date.
"Unconsolidated Entity Percentage" means, for any Person, with
respect to a Person's Unconsolidated Entity, the percentage ownership
interest of such Person in such Unconsolidated Entity; PROVIDED that, in
the event that such Person is the general partner of such Unconsolidated
Entity, such Person's Unconsolidated Entity Percentage with respect to such
Unconsolidated Entity shall be 100% with respect to any Indebtedness for
which recourse may be made against any general partner of such
Unconsolidated Entity (provided that such Indebtedness shall not be deemed
to be recourse to such general partner solely because of certain customary
carveouts to non-recourse Indebtedness); PROVIDED FURTHER that when the
Investment in an Unconsolidated Entity is in the form of preferred stock or
a loan or advance, the Unconsolidated Entity Percentage shall be a
percentage equal to (a) the amount of such Investment DIVIDED by (b) the
aggregate amount of the Investments by all Persons in the Unconsolidated
Entity.
"Unencumbered" means, with respect to any Hotel Property, at any date
of determination, the circumstance that such Hotel Property on such date:
(a) is not subject to any Liens (including restrictions on
transferability or assignability) of any kind (including any such Lien or
restriction imposed by (i) any agreement governing Indebtedness, and (ii)
the organizational documents of the Borrower or any of its Subsidiaries,
but excluding Permitted Encumbrances and, in the case of any Qualified
Ground Lease (to the extent permitted by the definition thereof),
restrictions on transferability or assignability in respect of such
Qualified Ground Lease);
<PAGE>
(b) is not subject to any agreement (including (i) any
agreement governing Indebtedness, and (ii) if applicable, the
organizational documents of the Borrower or any of its Subsidiaries) which
prohibits or limits the ability of the Borrower or any of its Subsidiaries
to create, incur, assume or suffer to exist any Lien upon such Hotel
Property, other than Permitted Encumbrances (excluding any agreement or
organizational document which limits generally the amount of Indebtedness
which may be incurred by the Borrower or its Subsidiaries); and
(c) is not subject to any agreement (including any agreement
governing Indebtedness) which entitles any Person to the benefit of any
Lien (other than Permitted Encumbrances) on such Hotel Property, or would
entitle any Person to the benefit of any such Lien upon the occurrence of
any contingency (including, without limitation, pursuant to an "equal and
ratable" clause).
For the purposes of this Agreement, any Hotel Property owned by a
Subsidiary of the Borrower shall not be deemed to be Unencumbered unless
both (i) such Hotel Property and (ii) all Stock owned directly or
indirectly by Borrower in such Subsidiary is Unencumbered.
"Unsecured Indebtedness" of any Person means the Total Liabilities of
such Person MINUS the sum of the Secured Recourse Indebtedness and Secured
Non-Recourse Indebtedness of such Person.
"Unsecured Interest Coverage Ratio" means, as of the end of any
Rolling Period, a ratio of (a) the amount of (i) the aggregate Adjusted NOI
for all Eligible Properties for such Rolling Period MINUS (ii) for any
Eligible Property the Adjusted NOI attributable to the period of time prior
to a Hotel Property qualifying as an Eligible Property PLUS (iii) for any
previous Eligible Property that no longer qualifies as an Eligible Property
during such Rolling Period the Adjusted NOI for such Hotel Property for the
portion of such Rolling Period that such Hotel Property qualified as an
Eligible Property to (b) the portion of Parent's Interest Expense
attributable to Unsecured Indebtedness for such Rolling Period.
"Wholly-Owned Subsidiary" of a Person means any Subsidiary for which
such Person's ownership interest is 99% or more.
SECTION 1.02 COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and
"until" each means "to but excluding".
SECTION 1.03 ACCOUNTING TERMS; CHANGES IN GAAP.
(a) All accounting terms not specifically defined in this
Agreement shall be construed in accordance with GAAP applied on a
consistent basis.
(b) Unless otherwise indicated, all financial statements of
the Borrower and the Parent, all calculations for compliance with covenants
in this Agreement, and all calculations of any amounts to be calculated
under the definitions in Section 1.01 shall be based upon the Consolidated
accounts of the Borrower, the Parent and their respective Subsidiaries (as
applicable) in accordance with GAAP.
(c) If any changes in accounting principles after
September 30, 2000 required by GAAP or the Financial Accounting Standards
Board of the American Institute of Certified Public Accountants or similar
agencies results in a change in the method of calculation of, or affects
the results of such calculation of, any of the financial covenants,
standards or terms found in this Agreement, then the parties shall enter
into and diligently pursue negotiations in order to amend such financial
covenants, standards or terms so as to equitably reflect such change, with
the desired result that the criteria for evaluating the financial condition
of Borrower and its Subsidiaries (determined on a Consolidated basis) shall
be the same after such change as if such change had not been made.
<PAGE>
SECTION 1.04 TYPES OF ADVANCES. Advances are distinguished by
"Type". The "Type" of an Advance refers to the determination whether such
Advance is a LIBOR Advance or Base Rate Advance, each of which constitutes
a Type.
SECTION 1.05 MISCELLANEOUS. Article, Section, Schedule and Exhibit
references are to Articles and Sections of and Schedules and Exhibits to
this Agreement, unless otherwise specified.
SECTION 1.06 AMENDMENT AND RESTATEMENT; COMMITMENT INCREASES. The
parties hereto agree to use reasonable efforts to accomplish the matters
set forth in the preliminary statements of this Agreement and, without
limitation, agree to the following:
(a) For each Bank which does not have an Existing Note, the
Borrower will execute a Note payable to such Bank in the amount of such
Bank's Commitment which Note will constitute the Note the Borrower is
obligated to deliver to such Bank as provided in Section 3.01.
(b) For each Bank which has an Existing Note, the Borrower
will execute a Note payable to such Bank in the amount of such Bank's
Commitment which Note (i) will replace in its entirety such Bank's Existing
Note and either increase or decrease, as applicable, the Indebtedness
evidenced by the Existing Note and (ii) constitute the Note the Borrower is
obligated to deliver to such Bank as provided in Section 3.01.
(c) The Borrower shall be entitled to request that the Total
Commitments be increased to an amount not exceeding Three Hundred Million
Dollars ($300,000,000); PROVIDED that (i) no Default then exists, (ii) the
Borrower gives the Banks thirty (30) days prior written notice of such
election, (iii) no Bank shall be obligated to increase such Bank's
Commitment without such Bank's written consent which may be withheld in
such Bank's sole discretion, (iv) the Borrower, not the Banks or the
Administrative Agent, is responsible for arranging for Persons to provide
the additional Commitment amounts; and (v) any Person providing any
additional Commitment amount must qualify as an Eligible Assignee and be
reasonably acceptable to the Administrative Agent if such Person is not
already a Bank. In connection with any such increase in the Total
Commitments the parties shall execute any documents reasonably requested in
connection with or to evidence such increase, including without limitation
an amendment to this Agreement.
(d) On the date ("Funding Date") the conditions precedent set
forth in Section 3.01 are satisfied, or, in connection with any future
increase in the Total Commitments permitted by this Agreement, the date
designated by the Administrative Agent, the Banks whose Commitments have
increased in connection with this Agreement or such future increase in the
Total Commitments, as applicable, shall fund to the Administrative Agent
such amounts as may be required to cause each of them to hold its Pro Rata
Share of Advances based upon the Commitments as of such Funding Date, and
the Administrative Agent shall distribute the funds so received to the
other Banks in such amounts as may be required to cause each of them to
hold its Pro Rata Share of Advances as of such Funding Date. The Banks and
the Existing Lenders, as applicable, receiving such amounts to be applied
to LIBOR Advances may demand payment of the breakage costs under
Section 2.08 as though Borrower had elected to prepay such LIBOR Advances
on such date and the Borrower shall pay the amount so demanded as provided
in Section 2.08. The first payment of interest and letter of credit fees
received by the Administrative Agent after such Funding Date shall be paid
to the Banks in amounts adjusted to reflect the adjustments of their
respective Pro Rata Shares of the Advances as of the Funding Date. On the
Funding Date each Bank shall be deemed to have either sold or purchased, as
applicable, participations in the Letter of Credit Exposure sold to the
Banks pursuant to Section 2.13(b) of the Original Credit Agreement so that
upon consummation of all such sales and purchases each Bank holds
participations in the Letter of Credit Exposure equal to such Bank's Pro
Rata Share of the total Letter of Credit Exposure as of such Funding Date.
<PAGE>
ARTICLE II
THE ADVANCES AND THE LETTERS OF CREDIT
SECTION 2.01 THE ADVANCES. Each Bank severally agrees, on the terms
and conditions set forth in this Agreement, to make Advances to the
Borrower from time to time on any Business Day up to 30 days prior to the
Maturity Date in an aggregate amount not to exceed at any time outstanding
an amount equal to such Bank's Commitment LESS such Bank's Pro Rata Share
of the Letter of Credit Exposure at such time. The aggregate amount of all
outstanding Advances and Letter of Credit Exposure at any time may not
exceed either the lesser of (i) the Total Commitments at such time or (ii)
the Borrowing Base at such time. Within the limits of each Bank's
Commitment and the Borrowing Base limitation set forth above, the Borrower
may from time to time prepay pursuant to Section 2.07 and reborrow under
this Section 2.01. Notwithstanding any notice requirement in this Agreement
to the contrary, for the initial Advance only the Banks and the Borrower
agree that if the conditions precedent for the initial Advance set forth in
Section 3.01 are satisfied on or prior to November 14, 2000, the initial
Advance shall be on November 14, 2000 and shall be a LIBOR Advance if
requested by the Borrower.
SECTION 2.02 METHOD OF BORROWING.
(A) NOTICE. Each Borrowing shall be made by telephone
(promptly confirmed in writing on the same day) pursuant to a Notice of
Borrowing, given not later than 12:00 Noon (Dallas, Texas time) (i) on the
third Business Day before the date of the proposed Borrowing, in the case
of a Borrowing consisting of LIBOR Advances, or (ii) on the Business Day
before the date of the proposed Borrowing, in the case of a Borrowing
consisting of Base Rate Advances, by the Borrower to the Administrative
Agent, which shall give each Bank prompt notice on the day of receipt of
such timely telephone call or Notice of Borrowing of such proposed
Borrowing by telecopier. Each Notice of Borrowing shall be in writing or
by telecopier specifying the requested (i) date of such Borrowing, (ii)
Type of Advances comprising such Borrowing, (iii) aggregate amount of such
Borrowing, and (iv) if such Borrowing is to be comprised of LIBOR Advances,
the Interest Period for each such Advance. In the case of a proposed
Borrowing comprised of LIBOR Advances, the Administrative Agent shall
promptly notify each Bank of the applicable interest rate under Section
2.06(b). Each Bank shall, before 12:00 Noon (Dallas, Texas time) on the
date of such Borrowing, make available for the account of its Applicable
Lending Office to the Administrative Agent at its address referred to in
Section 10.02, or such other location as the Administrative Agent may
specify by notice to the Banks, in same day funds, such Bank's Pro Rata
Share of such Borrowing. Upon fulfillment of the applicable conditions set
forth in Article III, the Administrative Agent will make such funds
available to the Borrower at its account with the Administrative Agent or
to such other account as the Borrower shall specify to the Administrative
Agent in writing.
(b) CONVERSIONS AND CONTINUATIONS. In order to elect to
Convert or continue Advances comprising part of the same Borrowing under
this Section, the Borrower shall deliver an irrevocable Notice of
Conversion or Continuation to the Administrative Agent at the
Administrative Agent's office no later than 12:00 Noon (Dallas, Texas time)
(i) on the date which is at least three Business Days in advance of the
proposed Conversion or continuation date in the case of a Conversion to or
a continuation of a Borrowing comprised of LIBOR Advances and (ii) on the
Business Day prior to the proposed conversion date in the case of a
Conversion to a Borrowing comprised of Base Rate Advances. Each such
Notice of Conversion or Continuation shall be in writing or by telecopier,
specifying (i) the requested Conversion or continuation date (which shall
be a Business Day), (ii) the Borrowing amount and Type of the Advances to
be Converted or continued, (iii) whether a Conversion or continuation is
requested, and if a Conversion, into what Type of Advances, and (iv) in the
<PAGE>
case of a Conversion to, or a continuation of, LIBOR Advances, the
requested Interest Period. Promptly after receipt of a Notice of
Conversion or Continuation under this paragraph, the Administrative Agent
shall provide each Bank with a copy thereof and, in the case of a
Conversion to or a continuation of LIBOR Advances, notify each Bank of the
applicable interest rate under Section 2.06(b). For purposes other than
the conditions set forth in Section 3.02, the portion of Advances
comprising part of the same Borrowing that are Converted to Advances of
another Type shall constitute a new Borrowing. If the Borrower shall fail
to specify an Interest Period for a LIBOR Advance including the
continuation of a LIBOR Advance, the Borrower shall be deemed to have
selected a Base Rate Advance.
(c) CERTAIN LIMITATIONS. Notwithstanding anything in
paragraphs (a) and (b) above:
(i) in the case of LIBOR Advances each Borrowing shall be in
an aggregate amount of not less than $1,000,000 or greater multiples of
$100,000;
(ii) except for Borrowings for the acquisition by the Borrower
or its Subsidiary of Investments permitted under Sections 6.07 (c) and (d),
the Borrower may not request Borrowings on more than three days in any
calendar month.
(iii) at no time shall there be more than eight (8) Interest
Periods applicable to outstanding LIBOR Advances;
(iv) the Borrower may not select LIBOR Advances for any
Borrowing to be made, Converted or continued if a Default has occurred and
is continuing;
(v) if any Bank shall, at any time prior to the making of any
requested Borrowing comprised of LIBOR Advances, notify the Administrative
Agent that the introduction of or any change in or in the interpretation of
any law or regulation after the date hereof makes it unlawful, or that any
central bank or other governmental authority asserts that it is unlawful,
for such Bank or its LIBOR Lending Office to perform its obligations under
this Agreement to make LIBOR Advances or to fund or maintain LIBOR
Advances, then such Bank's Pro Rata Share of such Borrowing shall be made
as a Base Rate Advance, provided that such Base Rate Advance shall be
considered part of the same Borrowing and interest on such Base Rate
Advance shall be due and payable at the same time that interest on the
LIBOR Advances comprising the remainder of such Borrowing shall be due and
payable; and such Bank agrees to use commercially reasonable efforts
(consistent with its internal policies and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the
making of such designation would avoid the effect of this paragraph and
would not, in the reasonable judgment of such Bank, be otherwise materially
disadvantageous to such Bank;
(vi) if the Administrative Agent is unable to determine the
LIBOR for LIBOR Advances comprising any requested Borrowing, the right of
the Borrower to select LIBOR Advances for such Borrowing or for any
subsequent Borrowing shall be suspended until the Administrative Agent
shall notify the Borrower and the Banks that the circumstances causing such
suspension no longer exist, and each Advance comprising such Borrowing
shall be a Base Rate Advance;
<PAGE>
(vii) if the Required Lenders shall, at least one Business Day
before the date of any requested Borrowing, notify the Administrative Agent
that the LIBOR for LIBOR Advances comprising such Borrowing will not
adequately reflect the cost to such Banks of making or funding their
respective LIBOR Advances, as the case may be, for such Borrowing, the
right of the Borrower to select LIBOR Advances for such Borrowing or for
any subsequent Borrowing shall be suspended until the Administrative Agent
shall notify the Borrower and the Banks that the circumstances causing such
suspension no longer exist, and each Advance comprising such Borrowing
shall be a Base Rate Advance; and
(viii) if the Borrower shall fail to select the duration or
continuation of any Interest Period for any LIBOR Advances in accordance
with the provisions contained in the definition of "Interest Period" in
Section 1.01 and paragraph (a) or (b) above, the Administrative Agent will
forthwith so notify the Borrower and the Banks and such Advances will be
made available to the Borrower on the date of such Borrowing as Base Rate
Advances or, if an existing Advance, Converted into Base Rate Advances.
(d) NOTICES IRREVOCABLE. Each Notice of Borrowing and Notice
of Conversion or Continuation shall be irrevocable and binding on the
Borrower. In the case of any Borrowing which the related Notice of
Borrowing specifies is to be comprised of LIBOR Advances, the Borrower
shall indemnify each Bank against any loss, out-of-pocket cost or expense
incurred by such Bank as a result of any condition precedent for Borrowing
set forth in Article III not being satisfied for any reason, including,
without limitation, any loss, cost or expense actually incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by
such Bank to fund the Advance to be made by such Bank as part of such
Borrowing when such Advance, as a result of such failure, is not made on
such date.
(e) ADMINISTRATIVE AGENT RELIANCE. Unless the Administrative
Agent shall have received notice from a Bank before the date of any
Borrowing that such Bank will not make available to the Administrative
Agent such Bank's Pro Rata Share of the Borrowing, the Administrative Agent
may assume that such Bank has made its Pro Rata Share of such Borrowing
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (a) of this Section 2.02 and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower
on such date a corresponding amount. If and to the extent that such Bank
shall not have so made its Pro Rata Share of such Borrowing available to
the Administrative Agent, such Bank and the Borrower severally agree to
immediately repay to the Administrative Agent on demand such corresponding
amount, together with interest on such amount, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower, the
interest rate applicable on each such day to Advances comprising such
Borrowing and (ii) in the case of such Bank, the Federal Funds Rate for
each such day. If such Bank shall repay to the Administrative Agent such
corresponding amount and interest as provided above, such corresponding
amount so repaid shall constitute such Bank's Advance as part of such
Borrowing for purposes of this Agreement even though not made on the same
day as the other Advances comprising such Borrowing.
(f) BANK OBLIGATIONS SEVERAL. The failure of any Bank to
make the Advance to be made by it as part of any Borrowing shall not
relieve any other Bank of its obligation, if any, to make its Advance on
the date of such Borrowing. No Bank shall be responsible for the failure
of any other Bank to make the Advance to be made by such other Bank on the
date of any Borrowing.
<PAGE>
(g) NOTES. The indebtedness of the Borrower to each Bank
resulting from Advances owing to such Bank shall be evidenced by the Note
of the Borrower payable to the order of such Bank in substantially the form
of Exhibit A.
SECTION 2.03 FEES.
(a) COMMITMENT FEES. For the period from the Effective Date
to but excluding the Maturity Date the Borrower agrees to pay to the
Administrative Agent for the account of each Bank a commitment fee on the
average daily amount by which such Bank's Commitment exceeds the sum of
such Bank's outstanding Advances and Pro Rata Share of the Letter of Credit
Exposure at a rate per annum equal to the Applicable Margin based upon a
360-day year. Such fees shall be due and payable quarterly in arrears (i)
on the date which is 30 days following the last Business Day of each March,
June, September and December and (ii) on the Maturity Date.
(b) LETTER OF CREDIT FEES. The Borrower agrees to pay to the
Administrative Agent for the benefit of the Banks, fees in respect of all
Letters of Credit outstanding at a rate per annum equal to the Applicable
Margin calculated based upon a 360-day year and in respect of the maximum
amount available from time to time to be drawn under such outstanding
Letters of Credit, payable quarterly in arrears (i) on the date which is 30
days following the last Business Day of each March, June, September and
December and (ii) on the Maturity Date. In addition, the Borrower agrees
to pay to the Issuing Bank for its own account a fee on the average daily
amount of the aggregate undrawn maximum face amount of each Letter of
Credit issued by such Issuing Bank at a rate per annum equal to .125%, such
fees due and payable quarterly in arrears (i) on the date which is 30 days
following the last Business Day of each March, June, September and December
and (ii) on the Maturity Date.
(c) FACILITATORS' FEES. The Borrower agrees to pay to the
Facilitators for their benefit the fees set forth in the Fee Letter as and
when the same are due and payable pursuant to the terms of the Fee Letter.
(d) SG COWEN'S FEES. The Borrower agrees to pay to SG Cowen
for SG Cowen's account the fees set forth in the Advisory Fee Letter (the
"Advisory Fee Letter") dated September 18, 2000, by and between such
parties, as and when the same are due and payable pursuant to the terms of
such Advisory Fee Letter.
SECTION 2.04 REDUCTION OF THE COMMITMENTS. The Borrower may, upon
at least three Business Days' prior notice to the Administrative Agent,
permanently terminate in whole or permanently reduce ratably in part the
Commitments of the Banks; PROVIDED, HOWEVER, that (i) each partial
reduction shall be in the aggregate amount of not less than $5,000,000 or
an integral multiple of $1,000,000 in excess thereof, (ii) no such
reduction shall result in a Borrowing Base deficiency as provided in
Section 2.07(c)(i), and (iii) no such reduction shall result in the Total
Commitments of the Banks being less than $100,000,000.
SECTION 2.05 REPAYMENT OF ADVANCES. The Borrower shall repay the
outstanding principal amount of each Advance on the Maturity Date.
SECTION 2.06 INTEREST, LATE PAYMENT FEE. The Borrower shall pay
interest on the unpaid principal amount of each Advance made by each Bank
from the date of such Advance until such principal amount shall be paid in
full, at the following rates per annum:
<PAGE>
(a) BASE RATE ADVANCES. If such Advance is a Base Rate
Advance, a rate per annum (computed on the actual number of days elapsed,
including the first day and excluding the last, based on a 365 day year)
equal at all times to the lesser of (i) the Adjusted Base Rate in effect
from time to time plus the Applicable Margin and (ii) the Maximum Rate,
payable in arrears on the first day of each calendar month, provided that
during the continuance of an Event of Default, Base Rate Advances shall
bear interest at a rate per annum equal at all times to the lesser of
(i) the rate required to be paid on such Advance immediately prior to the
date on which such Event of Default commenced plus two percent (2%) and
(ii) the Maximum Rate.
(b) LIBOR ADVANCES. If such Advance is a LIBOR Advance, a
rate per annum (computed on the actual number of days elapsed, including
the first day and excluding the last, based on a 360 day year) equal at all
times during the Interest Period for such Advance to the lesser of (i) the
LIBOR for such Interest Period plus the Applicable Margin and (ii) the
Maximum Rate, payable in arrears on the last day of such Interest Period,
and on the date such LIBOR Advance shall be paid in full, and, with respect
to LIBOR Advances having an Interest Period in excess of one month, the
first day of each calendar month during such Interest Period; provided that
during the continuance of an Event of Default, LIBOR Advances shall bear
interest at a rate per annum equal at all times to the lesser of (i) the
rate required to be paid on such Advance immediately prior to the date on
which such Event of Default commenced plus two percent (2%) and (ii) the
Maximum Rate.
(c) USURY RECAPTURE. In the event the rate of interest
chargeable under this Agreement or the Notes at any time is greater than
the Maximum Rate, the unpaid principal amount of the Notes shall bear
interest at the Maximum Rate until the total amount of interest paid or
accrued on the Notes equals the amount of interest which would have been
paid or accrued on the Notes if the stated rates of interest set forth in
this Agreement had at all times been in effect. In the event, upon payment
in full of the Notes, the total amount of interest paid or accrued under
the terms of this Agreement and the Notes is less than the total amount of
interest which would have been paid or accrued if the rates of interest set
forth in this Agreement had, at all times, been in effect, then the
Borrower shall, to the extent permitted by applicable law, pay the
Administrative Agent for the account of the Banks an amount equal to the
difference between (i) the lesser of (A) the amount of interest which would
have been charged on the Notes if the Maximum Rate had, at all times, been
in effect and (B) the amount of interest which would have accrued on the
Notes if the rates of interest set forth in this Agreement had at all times
been in effect and (ii) the amount of interest actually paid or accrued
under this Agreement on the Notes. In the event the Banks ever receive,
collect or apply as interest any sum in excess of the Maximum Rate, such
excess amount shall, to the extent permitted by law, be applied to the
reduction of the principal balance of the Notes, and if no such principal
is then outstanding, such excess or part thereof remaining shall be paid to
the Borrower.
(d) OTHER AMOUNTS OVERDUE. If any amount payable under this
Agreement other than the Advances is not paid when due and payable,
including without limitation, accrued interest and fees, then such overdue
amount shall accrue interest hereon due and payable on demand at a rate per
annum equal to the Adjusted Base Rate plus two percent (2%), from the date
such amount became due until the date such amount is paid in full.
<PAGE>
SECTION 2.07 PREPAYMENTS.
(a) RIGHT TO PREPAY. The Borrower shall have no right to
prepay any principal amount of any Advance except as provided in this
Section 2.07.
(b) OPTIONAL PREPAYMENTS. The Borrower may elect to prepay
any of the Advances, after giving by 12:00 Noon (Dallas, Texas time) (i) in
the case of LIBOR Advances, at least three Business Days' prior written
notice or (ii) in case of Base Rate Advances, at least one Business Day's
prior written notice to the Administrative Agent stating the proposed date
and aggregate principal amount of such prepayment, and if applicable, the
relevant Interest Period for the Advances to be prepaid. If any such
notice is given, the Borrower shall prepay Advances comprising part of the
same Borrowing in whole or ratably in part in an aggregate principal amount
equal to the amount specified in such notice, and with respect to LIBOR
Advances shall also pay accrued interest to the date of such prepayment on
the principal amount prepaid and amounts, if any, required to be paid
pursuant to Section 2.08 as a result of such prepayment being made on such
date; PROVIDED, HOWEVER, that each partial prepayment shall be in an
aggregate principal amount not less than $1,000,000 and in integral
multiples of $100,000.
(c) MANDATORY PREPAYMENTS.
(i) BORROWING BASE DEFICIENCY. On or prior to the fifth
(5th) Business Day following a Borrowing Base Determination Date occurring
under the provisions of Section 2.14, the Borrower shall be required to
prepay Advances in an aggregate amount equal to the excess of (A) the
aggregate amount of outstanding Advances and Letter of Credit Exposure on
such date over (B) the lesser of (1) the Borrowing Base, as determined on
such Borrowing Base Determination Date or (2) the Total Commitments at such
time (or, upon payment in full of all outstanding Advances, to deposit into
the Cash Collateral Account an amount equal to the amount of the Letter of
Credit Exposure which exceeds the Borrowing Base).
(ii) ACCRUED INTEREST. Each prepayment pursuant to this
Section 2.07(c) of a LIBOR Advance shall be accompanied by accrued interest
on the amount prepaid to the date of such prepayment and amounts, if any,
required to be paid pursuant to Section 2.08 as a result of such prepayment
being made on such date.
(d) RATABLE PAYMENTS. Each payment of any Advance pursuant
to this Section 2.07 or any other provision of this Agreement shall be made
in a manner such that all Advances comprising part of the same Borrowing
are paid in whole or ratably in part.
(e) EFFECT OF NOTICE. All notices given pursuant to this
Section 2.07 shall be irrevocable and binding upon the Borrower.
SECTION 2.08 BREAKAGE COSTS. If (a) any payment of principal of any
LIBOR Advance is made other than on the last day of the Interest Period for
such Advance as a result of any payment pursuant to Section 2.07 or the
acceleration of the maturity of the Notes pursuant to Article VIII or
otherwise; (b) any Conversion of a LIBOR Advance is made other than on the
last day of the Interest Period for such Advance pursuant to Section 2.12
or otherwise; or (c) the Borrower fails to make a principal or interest
payment with respect to any LIBOR Advance on the date such payment is due
and payable, the Borrower shall, within 10 days of any written demand sent
by any Bank to the Borrower through the Administrative Agent, pay to the
Administrative Agent for the account of such Bank any amounts (without
duplication of any other amounts payable in respect of breakage costs)
required to compensate such Bank for any losses (other than lost profit),
out-of-pocket costs or expenses which it may reasonably incur as a result
of such payment or nonpayment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Bank to fund or maintain such
Advance.
<PAGE>
SECTION 2.09 INCREASED COSTS.
(a) LIBOR ADVANCES. If, due to either (i) the introduction
of or any change (other than any change by way of imposition or increase of
reserve requirements included in the calculation of the LIBOR) in or in the
interpretation of any law or regulation enacted, issued or promulgated
after the date of this Agreement or (ii) the compliance with any guideline
or request from any central bank or other Governmental Authority (whether
or not having the force of law) enacted, issued or promulgated after the
date of this Agreement, there shall be any increase in the cost to any Bank
of agreeing to make or making, funding or maintaining LIBOR Advances, then
the Borrower shall from time to time, within 10 days of written demand by
such Bank (with a copy of such demand to the Administrative Agent), pay to
the Administrative Agent for the account of such Bank additional amounts
(without duplication of any other amounts payable in respect of increased
costs) sufficient to compensate such Bank for such increased cost;
PROVIDED, HOWEVER, that, before making any such demand, each Bank agrees to
use commercially reasonable efforts (consistent with its internal policy
and legal and regulatory restrictions) to designate a different Applicable
Lending Office if the making of such a designation would avoid the need
for, or reduce the amount of, such increased cost and would not, in the
reasonable judgment of such Bank, be otherwise disadvantageous to such
Bank. A certificate as to the amount of such increased cost and detailing
the calculation of such cost submitted to the Borrower and the
Administrative Agent by such Bank at the time such Bank demands payment
under this Section shall be conclusive and binding for all purposes, absent
manifest error.
(b) CAPITAL ADEQUACY. If any Bank or the Issuing Bank
determines in good faith that compliance with any law or regulation or any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law) enacted, issued or promulgated
after the date of this Agreement affects or would affect the amount of
capital required or expected to be maintained by such Bank or the Issuing
Bank and that the amount of such capital is increased by or based upon the
existence of such Bank's commitment to lend or the Issuing Bank's
commitment to issue Letters of Credit or any Bank's commitment to risk
participate in Letters of Credit and other commitments of this type, then,
upon 30 days prior written notice by such Bank or the Issuing Bank (with a
copy of any such demand to the Administrative Agent), the Borrower shall
immediately pay to the Administrative Agent for the account of such Bank or
to the Issuing Bank, as the case may be, from time to time as specified by
such Bank or the Issuing Bank, additional amounts (without duplication of
any other amounts payable in respect of increased costs) sufficient to
compensate such Bank or the Issuing Bank, in light of such circumstances,
(i) with respect to such Bank, to the extent that such Bank reasonably
determines such increase in capital to be allocable to the existence of
such Bank's commitment to lend under this Agreement or its commitment to
risk participate in Letters of Credit and (ii) with respect to the Issuing
Bank, to the extent that such Issuing Bank reasonably determines such
increase in capital to be allocable to the issuance or maintenance of the
Letters of Credit. A certificate as to such amounts and detailing the
calculation of such amounts submitted to the Borrower and the
Administrative Agent by such Bank or the Issuing Bank shall be conclusive
and binding for all purposes, absent manifest error.
<PAGE>
(c) LETTERS OF CREDIT. If any change in any law or
regulation or in the interpretation thereof by any court or administrative
or Governmental Authority charged with the administration thereof enacted,
issued or promulgated after the date of this Agreement shall either
(i) impose, modify, or deem applicable any reserve, special deposit, or
similar requirement against letters of credit issued by, or assets held by,
or deposits in or for the account of, Issuing Bank or any Bank or
(ii) impose on Issuing Bank or any Bank any other condition regarding the
provisions of this Agreement relating to the Letters of Credit or any
Letter of Credit Obligations, and the result of any event referred to in
the preceding clause (i) or (ii) shall be to increase the cost to Issuing
Bank of issuing or maintaining any Letter of Credit, or increase the cost
to such Bank of its risk participation in any Letter of Credit (which
increase in cost shall be determined by Issuing Bank's or such Bank's
reasonable allocation of the aggregate of such cost increases resulting
from such event), then, within 10 days of written demand by Issuing Bank or
such Bank (with a copy sent to the Administrative Agent), as the case may
be, the Borrower shall pay to the Administrative Agent for the account of
Issuing Bank or Bank, as the case may be, from time to time as specified by
Issuing Bank or such Bank, additional amounts which shall be sufficient to
compensate such Issuing Bank or such Bank for such increased cost. Issuing
Bank and each Bank agrees to use commercially reasonable efforts
(consistent with internal policy and legal and regulatory restrictions) to
designate a different Applicable Lending Office for the booking of its
Letters of Credit or risk participations if the making of such designation
would avoid the effect of this paragraph and would not, in the reasonable
judgment of Issuing Bank or such Bank, be otherwise disadvantageous to
Issuing Bank or such Bank, as the case may be. A certificate as to such
increased cost incurred by Issuing Bank or such Bank, as the case may be,
as a result of any event mentioned in clause (i) or (ii) above, and
detailing the calculation of such increased costs submitted by Issuing Bank
or such Bank to the Borrower and the Administrative Agent, shall be
conclusive and binding for all purposes, absent manifest error.
SECTION 2.10 PAYMENTS AND COMPUTATIONS.
(a) Payment Procedures. Except if otherwise set forth
herein, the Borrower shall make each payment under this Agreement and under
the Notes not later than 12:00 Noon (Dallas, Texas time) on the day when
due in Dollars to the Administrative Agent without setoff, deduction or
counterclaim at the location referred to in the Notes (or such other
location as the Administrative Agent shall designate in writing to the
Borrower) in same day funds. The Administrative Agent will on the same day
such payment is deemed received from the Borrower cause to be distributed
like funds relating to the payment of principal, interest or fees ratably
(other than amounts payable solely to the Administrative Agent, the Issuing
Banks, or a specific Bank pursuant to Section 2.03(b), 2.03(c), 2.06(c),
2.08, 2.09, 2.11, 2.12, or 2.13(c) but after taking into account payments
effected pursuant to Section 10.04) to the Banks in accordance with each
Bank's Pro Rata Share for the account of their respective Applicable
Lending Offices, and like funds relating to the payment of any other amount
payable to any Bank or Issuing Bank for the account of its Applicable
Lending Office, in each case to be applied in accordance with the terms of
this Agreement. If and to the extent that the Administrative Agent shall
not have so made payment to a Bank on the day required under this
Agreement, the Administrative Agent agrees to immediately pay such Bank
such payment, together with interest on such amount, for each day from the
date such amount was deemed received by the Administrative Agent until the
date such amount is paid to such Bank at the Federal Funds Rate for each
such day.
<PAGE>
(b) COMPUTATIONS. All computations of interest based on the
Adjusted Base Rate shall be made by the Administrative Agent on the basis
of a year of 365 days and all computations of fees and interest based on
the LIBOR and the Federal Funds Rate shall be made by the Administrative
Agent on the basis of a year of 360 days, in each case for the actual
number of days (including the first day, but excluding the last day)
occurring in the period for which such interest or fees are payable. Each
determination by the Administrative Agent of an interest rate shall be
conclusive and binding for all purposes, absent manifest error.
(c) NON-BUSINESS DAY PAYMENTS. Whenever any payment shall be
stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall
in such case be included in the computation of payment of interest or fees,
as the case may be; PROVIDED, however, that if such extension would cause
payment of interest on or principal of LIBOR Advances to be made in the
next following calendar month, such payment shall be made on the next
preceding Business Day.
(d) ADMINISTRATIVE AGENT RELIANCE. Unless the Administrative
Agent shall have received written notice from the Borrower prior to the
date on which any payment is due to the Banks that the Borrower will not
make such payment in full, the Administrative Agent may assume that the
Borrower has made such payment in full to the Administrative Agent on such
date and the Administrative Agent may, in reliance upon such assumption,
cause to be distributed to each Bank on such date an amount equal to the
amount then due such Bank. If and to the extent the Borrower shall not
have so made such payment in full to the Administrative Agent, each Bank
shall repay to the Administrative Agent forthwith on demand such amount
distributed to such Bank, together with interest, for each day from the
date such amount is distributed to such Bank until the date such Bank
repays such amount to the Administrative Agent, at the Federal Funds Rate
for each such day.
(e) APPLICATION OF PAYMENTS. Unless otherwise specified in
Section 2.07 hereof, whenever any payment received by the Administrative
Agent under this Agreement is insufficient to pay in full all amounts then
due and payable under this Agreement and the Notes, such payment shall be
distributed and applied by the Administrative Agent and the Banks in the
following order: FIRST, to the payment of fees and expenses due and
payable to the Administrative Agent under and in connection with this
Agreement or any other Credit Document; SECOND, to the payment of all
expenses due and payable under Section 2.11(c), ratably among the Banks in
accordance with the aggregate amount of such payments owed to each such
Bank; THIRD, to the payment of fees due and payable to the Issuing Bank
pursuant to Section 2.03(b); FOURTH, to the payment of all other fees due
and payable under Section 2.03; and FIFTH, to the payment of the interest
accrued on and the principal amount of all of the Notes and the interest
accrued on and all Letter of Credit Obligations, regardless of whether any
such amount is then due and payable, ratably among the Banks in accordance
with the respective Pro Rata Share.
(f) REGISTER. The Administrative Agent shall record in the
Register the Commitment and the Advances from time to time of each Bank and
each repayment or prepayment in respect to the principal amount of such
Advances of each Bank. Any such recordation shall be conclusive and
binding on the Borrower and each Bank, absent manifest error; PROVIDED
HOWEVER, that failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower's obligations hereunder in
respect of such Advances.
<PAGE>
SECTION 2.11 TAXES.
(a) NO DEDUCTION FOR CERTAIN TAXES. Any and all payments by
the Borrower shall be made, in accordance with Section 2.10, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Bank, Issuing Bank, and the
Administrative Agent, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which such Bank,
Issuing Bank, or the Administrative Agent (as the case may be) is organized
or any political subdivision of such jurisdiction or by the jurisdiction of
such Bank's Applicable Lending Office or any political subdivision of such
jurisdiction (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"Taxes"). If the Borrower shall be required by law to deduct any Taxes
from or in respect of any sum payable to any Bank, Issuing Bank, or the
Administrative Agent, (i) the sum payable shall be increased as may be
necessary so that, after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.11),
such Bank, Issuing Bank, or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made; PROVIDED, however, that if the Borrower's obligation
to deduct or withhold Taxes is caused solely by such Bank's, Issuing
Bank's, or the Administrative Agent's failure to provide the forms
described in paragraph (e) of this Section 2.11 and such Bank, Issuing
Bank, or the Administrative Agent could have provided such forms, no such
increase shall be required; (ii) the Borrower shall make such deductions;
and (iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable Legal
Requirements.
(b) OTHER TAXES. In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement, the Notes, or the other Credit Documents
(hereinafter referred to as "Other Taxes").
(c) INDEMNIFICATION. Subject to the proviso of Section
2.11(a), the Borrower indemnifies each Bank, Issuing Bank, and the
Administrative Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
Governmental Authority on amounts payable under this Section 2.11) paid by
such Bank, Issuing Bank, or the Administrative Agent (as the case may be)
and any liability (including interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. Each payment required to be made by the
Borrower in respect of this indemnification shall be made to the
Administrative Agent for the benefit of any party claiming such
indemnification within 30 days from the date the Borrower receives written
demand detailing the calculation of such amounts therefor from the
Administrative Agent on behalf of itself as Administrative Agent, Issuing
Bank, or any such Bank. If any Bank, the Administrative Agent, or Issuing
Bank receives a refund in respect of any Taxes or Other Taxes paid by the
Borrower under this paragraph (c), such Bank, the Administrative Agent, or
Issuing Bank, as the case may be, shall promptly pay to the Borrower the
Borrower's share of such refund.
(d) EVIDENCE OF TAX PAYMENTS. The Borrower will pay prior to
delinquency all Taxes and Other Taxes payable in respect of any payment.
Within 30 days after the date of any payment of Taxes, the Borrower will
furnish to the Administrative Agent, at its address referred to in
Section 10.02, the original or a certified copy of a receipt evidencing
payment of such Taxes or Other Taxes.
<PAGE>
(e) FOREIGN BANK WITHHOLDING EXEMPTION. Each Bank and each
Issuing Bank that is not incorporated under the laws of the United States
of America or a state thereof agrees that it will deliver to the Borrower
and the Administrative Agent on the date of this Agreement or upon the
effectiveness of any Assignment and Acceptance two duly completed copies of
the Prescribed Forms, certifying in each case that such Bank is entitled to
receive payments under this Agreement and the Notes payable to it, without
deduction or withholding of any United States federal income taxes. Each
Bank which delivers to the Borrower and the Administrative Agent a
Prescribed Form further undertakes to deliver to the Borrower and the
Administrative Agent two further copies of a replacement Prescribed Form,
on or before the date that any such Prescribed Form expires or becomes
obsolete or after the occurrence of any event requiring a change in the
most recent form previously delivered by it to the Borrower and the
Administrative Agent, and such extensions or renewals thereof as may
reasonably be requested by the Borrower and the Administrative Agent
certifying that such Bank is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal
income taxes. If an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which any
delivery required by the preceding sentence would otherwise be required
which renders all such forms inapplicable or which would prevent any Bank
from duly completing and delivering any such Prescribed Form with respect
to it and such Bank advises the Borrower and the Administrative Agent that
it is not capable of receiving payments without any deduction or
withholding of United States federal income tax, such Bank shall not be
required to deliver such forms. The Borrower shall withhold tax at the
rate and in the manner required by the laws of the United States with
respect to payments made to a Bank failing to timely provide the requisite
Prescribed Forms.
SECTION 2.12 ILLEGALITY. If any Bank shall notify the
Administrative Agent and the Borrower that the introduction of or any
change in or in the interpretation of any Legal Requirement makes it
unlawful, or that any central bank or other Governmental Authority asserts
that it is unlawful for such Bank or its LIBOR Lending Office to perform
its obligations under this Agreement to maintain any LIBOR Advances of such
Bank then outstanding hereunder, then, notwithstanding anything herein to
the contrary, the Borrower shall, if demanded by such Bank by notice to the
Borrower and the Administrative Agent no later than 12:00 Noon (Dallas,
Texas time), (a) if not prohibited by Legal Requirement to maintain such
LIBOR Advances for the duration of the Interest Period, on the last day of
the Interest Period for each outstanding LIBOR Advance of such Bank or
(b) if prohibited by Legal Requirement to maintain such LIBOR Advances for
the duration of the Interest Period, on the second Business Day following
its receipt of such notice from such Bank, Convert all LIBOR Advances of
such Bank then outstanding to Base Rate Advances, and pay accrued interest
on the principal amount Converted to the date of such Conversion and
amounts, if any, required to be paid pursuant to Section 2.08 as a result
of such Conversion being made on such date. Each Bank agrees to use
commercially reasonable efforts (consistent with its internal policies and
legal and regulatory restrictions) to designate a different Applicable
Lending Office if the making of such designation would avoid the effect of
this paragraph and would not, in the reasonable judgment of such Bank, be
otherwise disadvantageous to such Bank.
<PAGE>
SECTION 2.13 LETTERS OF CREDIT.
(a) ISSUANCE. From time to time from the date of this
Agreement until three months before the Maturity Date, at the request of
the Borrower, the Issuing Bank shall, on any Business Day and on the terms
and conditions hereinafter set forth, issue, increase, decrease, amend, or
extend the expiration date of Letters of Credit for the account of the
Borrower (for its own benefit or for the benefit of any of its
Subsidiaries). Upon the Effective Date, but subject to the limitations
contained in the following sentence, each Existing Letter of Credit shall
be automatically converted to a Letter of Credit. No Letter of Credit will
be issued, increased, or extended and no Existing Letter of Credit will be
converted to a Letter of Credit (i) if such issuance, increase, or
extension would cause the Letter of Credit Exposure to exceed the lesser of
(x) $25,000,000 or (y) an amount equal to (A) the lesser of the Borrowing
Base or the Total Commitments LESS (B) the aggregate outstanding Advances
and Letter of Credit Exposure at such time; (ii) unless such Letter of
Credit has an Expiration Date not later than the earlier of (A) one year
after the date of issuance thereof and (B) one day prior to the Maturity
Date; (iii) unless such Letter of Credit is in form and substance
acceptable to the respective Issuing Bank; (iv) unless such Letter of
Credit is a standby letter of credit not supporting the repayment of
indebtedness for borrowed money of any Person; (v) unless the Borrower has
delivered to the respective Issuing Bank the completed and executed Letter
of Credit Documents (other than the Letter of Credit) on such Issuing
Bank's standard form, which shall contain terms no more restrictive than
the terms of this Agreement; (vi) unless such Letter of Credit is governed
by the International Standby Practices (1998) ("ISP") or any successor to
the ISP; and (vii) unless no Default has occurred and is continuing or
would result from the issuance of such Letter of Credit. If the terms of
any of the Letter of Credit Documents referred to in the foregoing
clause (v) conflicts with the terms of this Agreement, the terms of this
Agreement shall control.
(b) PARTICIPATIONS. On the date of the issuance or increase
of any Letter of Credit on or after the Effective Date or the conversion of
any Existing Letter of Credit to a Letter of Credit in accordance with
provisions of the preceding Section 2.13(a), each Issuing Bank shall be
deemed to have sold to each other Bank and each other Bank shall have been
deemed to have purchased from such Issuing Bank a participation in the
Letter of Credit Exposure related to the Letters of Credit issued by such
Issuing Bank equal to such Bank's Pro Rata Share at such date and such sale
and purchase shall otherwise be in accordance with the terms of this
Agreement. Each Issuing Bank shall promptly notify each such participant
Bank by telex, telephone, or telecopy of each Letter of Credit of such
Issuing Bank issued, increased or decreased, and the actual dollar amount
of such Bank's participation in such Letter of Credit. Each Bank's
obligation to purchase participating interests pursuant to this Section and
to reimburse the respective Issuing Bank for such Bank's Pro Rata Share of
any payment under a Letter of Credit by such Issuing Bank not reimbursed in
full by the Borrower shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any of the
circumstances described in paragraph (d) below, (ii) the occurrence and
continuance of a Default, (iii) an adverse change in the financial
condition of the Borrower or any Guarantor, or (iv) any other circumstance,
happening or event whatsoever, whether or not similar to any of the
foregoing, except for any such circumstance, happening or event
constituting or arising from gross negligence or willful misconduct on the
part of such Issuing Bank.
<PAGE>
(c) REIMBURSEMENT. The Borrower shall pay promptly on demand
to each Issuing Bank in respect of each Letter of Credit issued by such
Issuing Bank an amount equal to any amount paid by such Issuing Bank under
or in respect of such Letter of Credit. In the event any Issuing Bank
makes a payment pursuant to a request for draw presented under a Letter of
Credit and such payment is not promptly reimbursed by the Borrower upon
demand, such Issuing Bank shall give notice of such payment to the
Administrative Agent and the Banks, and each Bank shall promptly reimburse
such Issuing Bank for such Bank's Pro Rata Share of such payment, and such
reimbursement shall be deemed for all purposes of this Agreement to
constitute a Base Rate Advance to the Borrower from such Bank. If such
reimbursement is not made by any Bank to any Issuing Bank on the same day
on which such Issuing Bank shall have made payment on any such draw, such
Bank shall pay interest thereon to such Issuing Bank for each such day from
the date such payment should have been made until the date repaid at a rate
per annum equal to the Federal Funds Rate for each such day. The Borrower
hereby unconditionally and irrevocably authorizes, empowers, and directs
the Administrative Agent and the Banks to record and otherwise treat each
payment under a Letter of Credit not immediately reimbursed by the Borrower
as a Borrowing comprised of Base Rate Advances to the Borrower.
(d) OBLIGATIONS UNCONDITIONAL. Except to the extent provided
in Section 2.13(e), the obligations of the Borrower under this Agreement in
respect of each Letter of Credit shall be unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement
under all circumstances, notwithstanding the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit Documents;
(ii) any amendment or waiver of or any consent to departure
from any Letter of Credit Documents;
(iii) the existence of any claim, set-off, defense or other
right which the Borrower or any Bank or any other Person may have at any
time against any beneficiary or transferee of such Letter of Credit (or any
Persons for whom any such beneficiary or any such transferee may be
acting), the respective Issuing Bank or any other Person or entity, whether
in connection with this Agreement, the transactions contemplated in this
Agreement or in any Letter of Credit Documents or any unrelated
transaction;
(iv) any statement or any other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect to the extent the respective Issuing Bank would not be liable
therefor pursuant to the following paragraph (e);
(v) payment by the respective Issuing Bank under such Letter
of Credit against presentation of a draft or certificate which does not
comply with the terms of such Letter of Credit; or
(vi) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing.
(e) LIABILITY OF ISSUING BANKS. The Borrower assumes all
risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. No
Issuing Bank, nor any other Bank, nor any of their respective officers or
directors shall be liable or responsible for:
(i) the use which may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith;
<PAGE>
(ii) the validity, sufficiency or genuineness of documents, or
of any endorsement thereon, even if such documents should prove to be in
any or all respects invalid, insufficient, fraudulent or forged;
(iii) payment by such Issuing Bank against presentation of
documents which do not comply with the terms of a Letter of Credit,
including failure of any documents to bear any reference or adequate
reference to the relevant Letter of Credit; or
(iv) any other circumstances whatsoever in making or failing
to make payment under any Letter of Credit (including such Issuing Bank's
own negligence);
EXCEPT that the Borrower shall have a claim against such Issuing Bank, and
such Issuing Bank shall be liable to, and shall promptly pay to, the
Borrower, to the extent of any direct, as opposed to consequential, damages
suffered by the Borrower which the Borrower proves were caused by (A) such
Issuing Bank's willful misconduct or gross negligence in determining
whether documents presented under a Letter of Credit comply with the terms
of such Letter of Credit or (B) such Issuing Bank's gross negligence in
failing to make lawful payment under any Letter of Credit after the
presentation to it of a draft and certificate strictly complying with the
terms and conditions of such Letter of Credit. In furtherance and not in
limitation of the foregoing, any Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation.
SECTION 2.14 DETERMINATION OF BORROWING BASE. The Borrowing Base
shall be determined by the Administrative Agent, as follows:
(a) QUARTERLY. On the 45th day following each calendar
quarter the Administrative Agent shall determine the Borrowing Base upon
receipt of a Borrowing Base Certificate setting forth the components of the
Borrowing Base dated as of the last day of the immediately preceding
calendar quarter.
(b) PROPERTY ADJUSTMENTS. Following each addition or
deletion of a Hotel Property as an Eligible Property (an "Adjustment
Event"), and the Administrative Agent's receipt of a Property Adjustment
Report with respect thereto, the Administrative Agent shall adjust the
Borrowing Base accordingly.
(c) REDUCTION OF COMMITMENTS. Following each reduction of
the Commitments pursuant to the provisions of Section 2.04.
(d) NOTICE OF BORROWING BASE CHANGE. Promptly following any
date the Borrowing Base is re-determined in accordance with the preceding
paragraphs, the Administrative Agent shall give notice to the Banks and the
Borrower of the new Borrowing Base.
<PAGE>
SECTION 2.15 BANK REPLACEMENT.
(a) RIGHT TO REPLACE. The Borrower shall have the right to
replace each Bank affected by a condition under Section 2.02(c)(v), 2.09,
2.11, or 2.12 for more than 90 days (each such affected Bank, an "Affected
Bank") in accordance with the procedures in this Section 2.15 and provided
that no reduction of the total Commitments occurs as a result thereof.
(b) FIRST RIGHT OF REFUSAL; REPLACEMENT.
(i) Upon the occurrence of any condition permitting the
replacement of a Bank, the Administrative Agent in its sole discretion
shall have the right to reallocate the amount of the Commitments of the
Affected Banks, including without limitation to Persons which are not
already party to this Agreement but which qualify as Eligible Assignees,
which election shall be made by written notice within 30 days after the
date such condition occurs.
(ii) If the aggregate amount of the reallocated Commitments is
less than the Commitments of the Affected Banks, (A) the respective
Commitments of the Banks which have received such reallocated Commitments
shall be increased by the respective amounts of their proposed
reallocations, and (B) the Borrower shall have the right to add additional
Banks which are Eligible Assignees to this Agreement to replace such
Affected Banks, which additional Banks would have aggregate Commitments no
greater than those of the Affected Banks MINUS the amounts of the
Commitments already reallocated.
(c) PROCEDURE. Any assumptions of Commitments pursuant to
this Section 2.15 shall be (i) made by the purchasing Bank or Eligible
Assignee and the selling Bank entering into an Assignment and Assumption
and by following the procedures in Section 10.06 for adding a Bank. In
connection with the reallocation of the Commitments of any Bank pursuant to
the foregoing paragraph (b), each Bank with a reallocated Commitment shall
purchase from the Affected Banks at par such Bank's ratable share of the
outstanding Advances of the Affected Banks and assume such Bank's ratable
share of the Affected Banks' Letter of Credit Exposure.
SECTION 2.16 SHARING OF PAYMENTS, ETC. If any Bank shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right
of set-off or otherwise) on account of its Advances or its share of Letter
of Credit Obligations in excess of its Pro Rata Share of payments on
account of the Advances or Letter of Credit Obligations obtained by all the
Banks, such Bank shall notify the Administrative Agent and forthwith
purchase from the other Banks such participations in the Advances made by
them or Letter of Credit Obligations held by them as shall be necessary to
cause such purchasing Bank to share the excess payment ratably in
accordance with the requirements of this Agreement with each of them;
PROVIDED, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Bank, such purchase from each
Bank shall be rescinded and such Bank shall repay to the purchasing Bank
the purchase price to the extent of such Bank's ratable share (according to
the proportion of (a) the amount of the participation sold by such Bank to
the purchasing Bank as a result of such excess payment to (b) the total
amount of such excess payment) of such recovery, together with an amount
equal to such Bank's ratable share (according to the proportion of (a) the
amount of such Bank's required repayment to the purchasing Bank to (b) the
total amount of all such required repayments to the purchasing Bank) of any
interest or other amount paid or payable by the purchasing Bank in respect
of the total amount so recovered. The Borrower agrees that any Bank so
purchasing a participation from another Bank pursuant to this Section 2.16
may, to the fullest extent permitted by Legal Requirement, unless and until
rescinded as provided above, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if
such Bank were the direct creditor of the Borrower in the amount of such
participation.
<PAGE>
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The
obligation of each Bank to make its initial Advance as part of the initial
Borrowing and of the Issuing Bank to issue the initial Letter of Credit are
subject to the following conditions precedent being satisfied on or prior
to the Funding Deadline:
(a) DOCUMENTATION. The Administrative Agent shall have
received counterparts of this Agreement executed by the Borrower and the
Banks, and the following duly executed by all the parties thereto, in form
and substance satisfactory to the Administrative Agent, and, with respect
to this Agreement, all Guaranties and the Environmental Indemnity, in
sufficient copies for each Bank:
(i) the Notes, all Guaranties, and the Environmental
Indemnity;
(ii) a certificate from the Chief Executive Officer, President
or Chief Financial Officer of the Parent on behalf of the Borrower dated as
of the Effective Date stating that as of the Effective Date (A) all
representations and warranties of the Borrower set forth in this Agreement
and the Credit Documents are true and correct in all material respects;
(B) no Default has occurred and is continuing; (C) the conditions in this
Section 3.01 have been met or waived in writing; and (D) to the best of the
Borrower's knowledge there are no claims, defenses, counterclaims or
offsets by the Borrower against the Banks under the Credit Documents;
(iii) a certificate of the Secretary or an Assistant Secretary
of the Parent on behalf of the Borrower and each Guarantor dated as of the
date of this Agreement certifying as of the date of this Agreement (A) the
names and true signatures of officers or authorized representatives of the
general partner of the Borrower and such Guarantor authorized to sign the
Credit Documents to which such Person is a party as general partner of such
Person, (B) resolutions of the Board of Directors or the members of the
general partner of such Person with respect to the transactions herein
contemplated, (C) either (x) the copies of the organizational documents of
the general partner of such Person delivered to the Banks are still true
and correct and have not been amended or modified since such date or (y)
copies of any modification or amendment to the organizational documents of
the general partner of such Person made since such date, (D) a true and
correct copy of the partnership agreement for such Person, and (E) a true
and correct copy of all partnership authorizations necessary or desirable
in connection with the transactions herein contemplated;
(iv) a certificate of the Secretary or an Assistant Secretary
of the Parent dated as of the date of this Agreement certifying as of the
date of this Agreement (A) resolutions of the Board of Directors of such
Person with respect to the transactions herein contemplated, (B) the copies
of the charter and bylaws of the Parent and any modification or amendment
to the articles or certificate of incorporation or bylaws of the Parent
made since such date, and (C) that the Parent owns 100% of the general
partner interests and at least 70% of the limited partnership interests in
the Borrower;
<PAGE>
(v) (A) one or more favorable written opinions of Brown &
Wood L.L.P., special counsel for the Borrower, the Parent, and their
Subsidiaries, in a form reasonably acceptable to the Administrative Agent,
in each case dated as of the Closing Date and with such changes as the
Administrative Agent may approve, and (B) such other legal opinions as the
Administrative Agent shall reasonably request, in each case dated as of the
Closing Date and with such changes as the Administrative Agent may approve;
(vi) a Borrowing Base Certificate dated as of the Closing
Date, duly completed and executed by the Chief Financial Officer or
Treasurer of the Parent on behalf of the Borrower; and
(vii) such other documents, governmental certificates,
agreements, and lien searches as the Administrative Agent may reasonably
request.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article IV hereof, the Guaranties, and the
Environmental Indemnity shall be true and correct in all material respects.
(c) CERTAIN PAYMENTS. The Borrower shall have paid the fees
required to be paid as of the execution of this Credit Agreement pursuant
to the Fee Letter.
(d) REQUIREMENTS. The Borrowing Base Requirements and the
Parent Hotel Property Requirements are met.
(e) OTHER. The Administrative Agent shall have received such
other approvals, opinions or documents deemed necessary or desirable by any
Bank or the Administrative Agent as such party may reasonably request.
If the conditions set forth in this Section 3.01 are not satisfied on or
prior to the Funding Deadline, the obligation of each Bank to make Advances
and the obligation of each Issuing Bank to issue, increase, or extend
Letters of Credit shall immediately and automatically be terminated and the
Notes, all interest on the Notes, all Letter of Credit Obligations, and all
other amounts payable under this Agreement shall immediately and
automatically become and be due and payable in full, without presentment,
demand, protest or any notice of any kind (including, without limitation,
any notice of intent to accelerate or notice of acceleration), all of which
are hereby expressly waived by the Borrower. However, Borrower shall pay
to the Facilitators all fees and expenses as set forth in the Fee Letter.
SECTION 3.02 CONDITIONS PRECEDENT FOR EACH BORROWING OR LETTER OF
CREDIT. The obligation of each Bank to fund an Advance on the occasion of
each Borrowing (other than the Conversion or continuation of any existing
Borrowing) and of any Issuing Bank to issue or increase or extend any
Letter of Credit shall be subject to the further conditions precedent that
on the date of such Borrowing or the issuance or increase or extension of
such Letter of Credit:
(a) the following statements shall be true (and each of the
giving of the applicable Notice of Borrowing and the acceptance by the
Borrower of the proceeds of such Borrowing or the issuance or increase or
extension of such Letter of Credit shall constitute a representation and
warranty by the Borrower that on the date of such Borrowing or the issuance
or increase or extension of such Letter of Credit such statements are
true):
(i) the representations and warranties contained in
Article IV hereof, the Guaranties, and the Environmental Indemnity are
correct in all material respects on and as of the date of such Borrowing or
the issuance or increase or extension of such Letter of Credit, before and
after giving effect to such Borrowing or to the issuance or increase or
extension of such Letter of Credit and to the application of the proceeds
from such Borrowing, as though made on and as of such date; and
<PAGE>
(ii) no Default has occurred and is continuing or would result
from such Borrowing or from the application of the proceeds therefrom;
(b) the Borrower shall have executed and delivered to the
Administrative Agent a Borrowing Base Certificate dated not earlier than
the date 10 days prior to the anticipated date of such Borrowing and a
Notice of Borrowing delivered in accordance with Section 2.02; and
(c) the Administrative Agent shall have received such other
approvals, opinions or documents deemed necessary or desirable by any Bank
or the Administrative Agent as such party may reasonably request.
SECTION 3.03 CONDITIONS PRECEDENT TO A HOTEL PROPERTY QUALIFYING AS
AN ELIGIBLE PROPERTY. In order for an Initial Property or a Future
Property to qualify initially and thereafter to continue to qualify as an
Eligible Property, the following conditions precedent must be satisfied and
remain satisfied for that Property:
(a) TITLE. Such Hotel Property (i) is Unencumbered, (ii)
free of all material title defects, and (iii) either (A) owned (together
with the land on which it is located) in fee simple by the Borrower or its
direct or indirect Wholly-Owned Subsidiary or Joint Venture Subsidiary or
(B) owned by the Borrower or its direct or indirect Wholly-Owned Subsidiary
or Joint Venture Subsidiary and located on land leased to the Borrower or
such Subsidiary pursuant to a Qualified Ground Lease, all as evidenced by a
copy of the most recent ALTA Owner's Policy of Title Insurance (or
commitment to issue such a policy to the Borrower or its Subsidiary owning
or to own such Hotel Property) relating to such Hotel Property showing the
identity of the fee titleholder thereto and all matters of record as of its
date.
(b) GUARANTOR. In addition, if the Property Owner for such
Hotel Property is not the Borrower, the following:
(i) The Property Owner shall be either a Wholly-Owned
Subsidiary or a Joint Venture Subsidiary of the Borrower whose sole assets
are Eligible Properties, who is not liable for any Indebtedness other than
the Obligations, who complies in all material respects with all of the
covenants and requirements of Guarantors under the Credit Documents and who
has delivered to the Administrative Agent either (A) an original Guaranty
and Environmental Indemnity executed by such Subsidiary or (B) an Accession
Agreement executed by such Subsidiary; and
(ii) a written opinion of the Borrower's counsel or counsels
covering such matters relating to the Property Owner as the Administrative
Agent reasonably requires.
(c) APPROVED PARTICIPATING LEASE. (i) Such Hotel Property is
leased to an Approved Participating Lessee pursuant to an Approved
Participating Lease, (ii) no material default by the Approved Participating
Lessee or the Property Owner under the Approved Participating Lease exists
beyond any applicable cured period (provided that for purposes of this
subsection (c) such cure period will be deemed to commence running when the
Borrower, the Parent or a Guarantor has knowledge of such default), (iii)
the Approved Participating Lease remains in full force and effect, and (iv)
no failure to achieve specified financial results under such Approved
Participating Lease has occurred which would allow the Property Owner for
such Hotel Property to terminate such Approved Participating Lease.
<PAGE>
(d) APPROVED MANAGEMENT AGREEMENT. Except for those Hotel
Properties managed pursuant to an Approved Participating Lease for such
Hotel Property, (i) such Hotel Property is managed by an Approved Manager
pursuant to an Approved Management Agreement, (ii) no material default by
the owner under the Approved Management Agreement exists, and (iii) the
Approved Management Agreement remains in full force and effect;
(e) QUALIFIED GROUND LEASES. In addition, if the Hotel
Property is subject to a Qualified Ground Lease, no default by the lessee
under the Qualified Ground Lease exists and the Qualified Ground Lease
remains in full force and effect.
(f) PROPERTY CONDITION. Such Hotel Property is free of all
material structural defects, as evidenced by an Engineering Report.
(g) ENVIRONMENTAL CONDITION. Such Hotel Property is (1) in
compliance, in all material respects, with all applicable Environmental
Laws, and (2) not subject to any material Environmental Claim, all as
evidenced by an Environmental Report.
(h) ADVERSE PROPERTY SITUATION. Neither all nor any material
portion of the Hotel Property shall be the subject of any proceeding by a
governmental authority for the condemnation, seizure or appropriation
thereof, nor the subject of any negotiations for sale in lieu of
condemnation, seizure or appropriation.
(i) TYPE AND LOCATION. Such Hotel Property is (i) located in
either the United States of America or in an Approved Other Country and
(ii) either (A) a full service hotel located in a resort, convention or
urban market or (B) a limited service hotel located in an urban market.
(j) DOCUMENTS AND INFORMATION. The Administrative Agent
shall have received each of the following executed by the Borrower, the
Property Owner or other appropriate person, in form and substance
reasonably satisfactory to the Administrative Agent:
(i) a copy of each of the following for such Hotel Property
certified as true and correct by the Borrower:
A. if the Hotel Property is subject to an Approved Management
Agreement, the Approved Management Agreement for the Hotel Property;
B. the Approved Participating Lease;
C. if the Hotel Property is subject to a Qualified Ground Lease,
the Qualified Ground Lease; and
D. if the Property Owner is not the Borrower, the Property Owner's
articles of incorporation, by-laws, partnership agreements, as applicable,
and certificates of existence, good standing and authority to do business
from each appropriate state authority, and partnership or corporate, as
applicable, authorizations authorizing the execution, delivery and
performance of the Accession Agreement all certified to be true and
complete by a duly authorized officer of such Property Owner;
(ii) if the Borrower has received a survey of the Real
Property, a copy of such survey;
(iii) (A) a description of such Hotel Property, such
description to include the age, location and number of rooms or suites of
such Hotel Property, and (B) to the extent available, statistics with
respect to the occupancy of the Hotel Property, operating statements, and
an analysis of the revenue per available room, in each case for the three
(3) prior Fiscal Years and the completed Fiscal Quarters of the current
Fiscal Year;
<PAGE>
(iv) certificates and, to the extent within the Borrower's
control, policies of insurance evidencing that the Hotel Property is
covered by the insurance required pursuant to Section 5.07 hereof; and
(v) all other documents reasonably required by the
Administrative Agent.
(k) OTHER REQUIREMENTS. In addition, the following:
(i) As certified in writing by the Borrower to the
Administrative Agent and the Banks at least 10 Business Days prior to the
date the Borrower proposes such Hotel Property qualify as an Eligible
Property, the Hotel Property individually qualifies as an Eligible Property
and the addition of the Hotel Property as an Eligible Property shall not
(A) cause the Eligible Properties in the aggregate to violate the Borrowing
Base Requirements, (B) cause a Default, or (C) cause or result in the
Borrower or the Parent failing to comply with any of the financial
covenants contained herein; and
(ii) The Borrower shall have delivered to the Administrative
Agent the Property Information for such Hotel Property 10 Business Days
prior to the date the Borrower proposes such Hotel Property qualify as an
Eligible Property.
(l) OTHER ACTIONS. Borrower shall have executed and
acknowledged (or caused to be executed and acknowledged) and delivered to
the Administrative Agent, on behalf of the Banks, all documents, and taken
all actions reasonably required by the Administrative Agent from time to
time to confirm the rights created or now or hereafter intended to be
created under the Credit Documents, or otherwise to carry out the purposes
of the Credit Documents, and the transactions contemplated thereunder. The
Administrative Agent shall have received all other evidence and information
that they may reasonably require.
As of the date of this Agreement, (a) the Borrower represents to the Banks
and the Administrative Agent that to the best of the Borrower's knowledge
the Initial Properties qualify as Eligible Properties, and (b) the Banks
and the Administrative Agent agree with the Borrower that to their actual
knowledge, without investigation, the Initial Properties qualify as
Eligible Properties.
Upon 10 Business Days prior written notice from the Borrower to the
Administrative Agent, the Borrower can designate that a Hotel Property be
added (subject to the other requirements for a Hotel Property qualifying as
an Eligible Property) or deleted as an Eligible Property. Such notice
shall be accompanied by a Property Adjustment Report with respect to such
addition or deletion and (a) with respect to an addition, the certificate
required under Section 3.03(k)(i) and (b) with respect to a deletion,
Borrower's certification in such detail as reasonably required by the
Administrative Agent that such deletion shall not (A) cause the Eligible
Properties in the aggregate to violate the Borrowing Base Requirements, (B)
cause a Default, or (C) cause or result in the Borrower or the Parent
failing to comply with any of the financial covenants contained herein.
Notwithstanding anything contained in this Agreement to the contrary, the
Required Lenders in their reasonable discretion may upon 30 days prior
written notice to the Borrower designate that a Hotel Property is no longer
an Eligible Property upon their determination that such Hotel Property does
not satisfy the requirements for qualifying as an Eligible Property;
PROVIDED that if during such 30 day period the Borrower can satisfy those
requirements deemed unsatisfied by the Required Lenders, such Hotel
Property shall remain an Eligible Property.
If no Default exists at such time, then in connection with any deletion of
a Hotel Property from qualifying as an Eligible Property, any Borrower's
Subsidiary which owned or leased such Hotel Property, but not any other
Eligible Property, shall be released from such Subsidiaries obligations
under the Guaranty.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
SECTION 4.01 EXISTENCE; QUALIFICATION; PARTNERS; SUBSIDIARIES.
(a) The Borrower is a limited partnership duly organized,
validly existing, and in good standing under the laws of Delaware and in
good standing and qualified to do business in each jurisdiction where its
ownership or lease of property or conduct of its business requires such
qualification, except where the failure to so qualify would not cause a
Material Adverse Change.
(b) The Parent is a real estate investment trust duly
organized, validly existing, and in good standing under the laws of
Maryland and in good standing and qualified to do business in each
jurisdiction where its ownership or lease of property or conduct of its
business requires such qualification, except where the failure to so
qualify would not have a material adverse effect on the Parent. The Parent
has no first tier Subsidiaries except for the Borrower or members of
Permitted Other Subsidiaries.
(c) The Parent is the Borrower's sole general partner with
full power and authority to bind the Borrower to the Credit Documents.
(d) The Parent owns a 1.1% general partner interest in and an
approximately 89.7% limited partnership interest in the Borrower.
(e) Each Subsidiary of the Borrower is a limited partnership,
general partnership or limited liability company duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
formation and in good standing and qualified to do business in each
jurisdiction where its ownership or lease of property or conduct of its
business requires such qualification, except where the failure to so
qualify would not have a material adverse effect on such Subsidiary. The
Borrower has no Subsidiaries on the date of this Agreement other than the
Subsidiaries listed on the attached Schedule 4.01, and Schedule 4.01 lists
the jurisdiction of formation and the address of the principal office of
each such Subsidiary existing on the date of this Agreement. As of the
date of this Agreement, the Borrower and/or the Parent owns, directly or
indirectly, at least 99% of the interests in each such Subsidiary.
(f) As of the date of this Agreement, neither the Borrower,
nor the Parent, nor any of the Subsidiaries own directly or indirectly (i)
such a percentage of the beneficial ownership interest in any Approved
Participating Lessee or (ii) such an Investment in the Personal Property
for any Hotel Property as would cause a potential Event of Default under
Section 8.01(o).
SECTION 4.02 PARTNERSHIP AND CORPORATE POWER. The execution,
delivery, and performance by the Borrower, the Parent, and each Guarantor
of the Credit Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby (a) are within such Persons'
trust, partnership, limited liability company and corporate powers, as
applicable, (b) have been duly authorized by all necessary trust,
corporate, limited liability company and partnership action, as applicable,
(c) do not contravene (i) such Person's declaration of trust, certificate
or articles, as the case may be, of incorporation or by-laws, operating
agreement or partnership agreement, as applicable, or (ii) any law or any
contractual restriction binding on or affecting any such Person, the
contravention of which could reasonably be expected to cause a Material
Adverse Change, and (d) will not result in or require the creation or
imposition of any Lien prohibited by this Agreement. At the time of each
<PAGE>
Borrowing, such Borrowing and the use of the proceeds of such Borrowing
will be within the Borrower's partnership powers, will have been duly
authorized by all necessary partnership action, (a) will not contravene
(i) the Borrower's partnership agreement or (ii) any law or any contractual
restriction binding on or affecting the Borrower, the contravention of
which could reasonably be expected to cause a Material Adverse Change, and
(b) will not result in or require the creation or imposition of any Lien
prohibited by this Agreement.
SECTION 4.03 AUTHORIZATION AND APPROVALS. No authorization or
approval or other action by, and no notice to or filing with, any
Governmental Authority is required for the due execution, delivery and
performance by the Borrower, the Parent, or any Guarantor of the Credit
Documents to which it is a party or the consummation of the transactions
contemplated thereby. At the time of each Borrowing, no authorization or
approval or other action by, and no notice to or filing with, any
Governmental Authority will be required for such Borrowing or the use of
the proceeds of such Borrowing the absence of which could reasonably be
expected to cause a Material Adverse Change.
SECTION 4.04 ENFORCEABLE OBLIGATIONS. This Agreement, the Notes,
and the other Credit Documents to which the Borrower is a party have been
duly executed and delivered by the Borrower; each Guaranty and the other
Credit Documents to which each Guarantor and the Parent is a party have
been duly executed and delivered by such Guarantor and the Environmental
Indemnity has been duly executed and delivered by the parties thereto.
Each Credit Document is the legal, valid, and binding obligation of the
Borrower, the Parent, and each Guarantor which is a party to it enforceable
against the Borrower, the Parent, and each such Guarantor in accordance
with its terms, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium, or similar
law affecting creditors' rights generally and by general principles of
equity (whether considered in proceeding at law or in equity).
SECTION 4.05 PARENT COMMON STOCK. The entire authorized capital
stock of the Parent consists of 100,000,000 shares of Parent Common Stock
of which 16,982,416 shares of Parent Common Stock are duly and validly
issued and outstanding, fully paid and nonassessable as of the Effective
Date. The issuance and sale of such Parent Common Stock either (i) has
been registered under applicable federal and state securities laws or (ii)
was issued pursuant to an exemption therefrom. The Parent meets the
requirements for taxation as a REIT under the Code.
SECTION 4.06 FINANCIAL STATEMENTS. The Consolidated balance sheet
of the Parent and its Subsidiaries, and the related Consolidated statements
of operations, shareholders' equity and cash flows, of the Parent and its
Subsidiaries contained in the most recent financial statements delivered to
the Banks, fairly present the financial condition in all material respects
and reflects the Indebtedness of the Parent and its Subsidiaries as of the
respective dates of such statements and the results of the operations of
the Initial Properties for the periods indicated, and such balance sheet
and statements were prepared in accordance with GAAP, subject to year-end
adjustments. Since the date of the statements for the Fiscal Quarter
ending September 30, 2000, neither a Material Adverse Change, nor any
material adverse change to the prospects or the Property of the Parent or
the Borrower has occurred.
SECTION 4.07 TRUE AND COMPLETE DISCLOSURE. No representation,
warranty, or other statement made by the Borrower (or on behalf of the
Borrower) in this Agreement or any other Credit Document contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements contained therein not misleading in light
<PAGE>
of the circumstances in which they were made as of the date of this
Agreement. There is no fact known to the Borrower or the Parent on the
date of this Agreement that has not been disclosed to the Administrative
Agent which could reasonably be expected to cause a Material Adverse
Change. All projections, estimates, and pro forma financial information
furnished by the Borrower and the Parent or on behalf of the Borrower or
the Parent were prepared on the basis of assumptions, data, information,
tests, or conditions believed to be reasonable at the time such
projections, estimates, and pro forma financial information were furnished.
No representation, warranty or other statement made in any filing required
by the Exchange Act contains any untrue statement of material fact or omits
to state any material fact necessary to make the statements contained
therein not misleading in light of the circumstances in which they were
made as of the date same were made. Borrower and/or Parent have made all
filings required by the Exchange Act.
SECTION 4.08 LITIGATION. Except as set forth in the attached
Schedule 4.08, as of the date of this Agreement there is no pending or, to
the best knowledge of the Borrower, threatened action or proceeding
affecting the Borrower, the Parent, any Approved Participating Lessee or
any of their respective Subsidiaries before any court, Governmental
Authority or arbitrator.
SECTION 4.09 USE OF PROCEEDS.
(a) ADVANCES. The proceeds of the Advances have been, and will be
used by the Borrower (i) to refinance existing Indebtedness, (ii) to make
investments permitted pursuant to the provisions of Section 6.07, (iii) to
finance the renovation, repair, restoration and expansion of Hotel
Properties, Capital Expenditures and expenditures for FF&E for any Hotel
Properties in accordance with the provisions of Section 5.06 and as
permitted pursuant to the provisions of Sections 6.07 and 6.14, (iv) for
general corporate purposes of the Borrower and its Subsidiaries, (v) to
repurchase Parent Common Stock as permitted pursuant to the provisions of
Section 6.04(f), and (vi) for costs incurred in connection with any
Capitalization Event done in compliance with this Agreement.
(b) REGULATIONS. No proceeds of Advances will be used to purchase
or carry any margin stock in violation of Regulations T, U or X of the
Federal Reserve Board, as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof. The Borrower
is not engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of
the Federal Reserve Board).
SECTION 4.10 INVESTMENT COMPANY ACT. Neither the Borrower, the
Parent nor any of their respective Subsidiaries is an "investment company"
or a company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
SECTION 4.11 TAXES. All federal, state, local and foreign tax
returns, reports and statements required to be filed (after giving effect
to any extension granted in the time for filing) by the Parent, the
Borrower, their respective Subsidiaries, or any member of a Controlled
Group have been filed with the appropriate governmental agencies in all
jurisdictions in which such returns, reports and statements are required to
be filed, and where the failure to file could reasonably be expected to
cause a Material Adverse Change, except where contested in good faith and
by appropriate proceedings; and all taxes and other impositions due and
payable (which are material in amount) have been timely paid prior to the
date on which any fine, penalty, interest, late charge or loss (which are
material in amount) may be added thereto for non-payment thereof except
where contested in good faith and by appropriate proceedings. As of the
date of this Agreement, neither the Parent, the Borrower nor any member of
a Controlled Group has given, or been requested to give, a waiver of the
statute of limitations relating to the payment of any federal, state, local
<PAGE>
or foreign taxes or other impositions. None of the Property owned by the
Parent, the Borrower or any other member of a Controlled Group is Property
which the Parent, the Borrower or any member of a Controlled Group is
required to be treated as being owned by any other Person pursuant to the
provisions of Section 168(f)(8) of the Code. Proper and accurate amounts
have been withheld by the Borrower and all members of each Controlled Group
from their employees for all periods to comply in all material respects
with the tax, social security and unemployment withholding provisions of
applicable federal, state, local and foreign law. Timely payment of all
material sales and use taxes required by applicable law have been made by
the Parent, the Borrower and all other members of each Controlled Group,
the failure to timely pay of which could reasonably be expected to cause a
Material Adverse Change. The amounts shown on all tax returns to be due
and payable have been paid in full or adequate provision therefor is
included on the books of the appropriate member of the applicable
Controlled Group.
SECTION 4.12 PENSION PLANS. All Plans are in compliance in all
material respects with all applicable provisions of ERISA. No Termination
Event has occurred with respect to any Plan, and each Plan has complied
with and been administered in all material respects in accordance with
applicable provisions of ERISA and the Code. No "accumulated funding
deficiency" (as defined in Section 302 of ERISA) has occurred and there has
been no excise tax imposed under Section 4971 of the Code. No Reportable
Event has occurred with respect to any Multiemployer Plan, and each
Multiemployer Plan has complied with and been administered in all material
respects with applicable provisions of ERISA and the Code. Neither the
Parent, the Borrower, nor any member of a Controlled Group has had a
complete or partial withdrawal from any Multiemployer Plan for which there
is any material withdrawal liability. As of the most recent valuation date
applicable thereto, neither the Parent, the Borrower nor any member of a
Controlled Group has received notice that any Multiemployer Plan is
insolvent or in reorganization.
SECTION 4.13 CONDITION OF HOTEL PROPERTY; CASUALTIES; CONDEMNATION.
Except as disclosed in an Engineering Report, each Initial Property and any
Future Property (a) is and will continue to be in good repair, working
order and condition, normal wear and tear excepted, (b) is free of
structural defects, (c) is not subject to material deferred maintenance and
(d) has and will have all building systems contained therein and all other
FF&E in good repair, working order and condition, normal wear and tear
excepted. The FF&E Reserve for each Hotel Property provides or will
provide adequate financial reserves for the payment of the maintenance of
the Hotel Properties, including replacement of FF&E, in accordance with
Section 5.06. None of the Properties of the Borrower or of any of its
Subsidiaries has been materially and adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of property or
cancellation of contracts, permits or concessions by a Governmental
Authority, riot, activities of armed forces or acts of God or of any public
enemy. No condemnation or other like proceedings that has had, or could
reasonably be expected to result in, a Material Adverse Change, are pending
and served nor, to the knowledge of the Borrower, threatened against any
Property in any manner whatsoever. No casualty has occurred to any
Property that could reasonably be expected to have a Material Adverse
Change.
SECTION 4.14 INSURANCE. The Borrower and each of its Subsidiaries
carry, or are the beneficiaries under, the insurance required pursuant to
the provisions of Section 5.07.
<PAGE>
SECTION 4.15 NO BURDENSOME RESTRICTIONS; NO DEFAULTS.
(a) Except in connection with Indebtedness which is (i)
either permitted pursuant to the provisions of Section 6.02, or (ii) being
repaid with the proceeds of the initial Borrowing, neither the Parent, the
Borrower nor any of their respective Subsidiaries is a party to any
indenture, loan or credit agreement. Neither the Borrower, the Parent nor
any of their respective Subsidiaries is a party to any agreement or
instrument or subject to any charter or corporate restriction or provision
of applicable law or governmental regulation which could reasonably be
expected to cause a Material Adverse Change. Neither the Borrower, the
Parent nor any of their Subsidiaries is in default under or with respect to
(i) any contract, agreement, lease or other instrument which could
reasonably be expected to cause a Material Adverse Change or (ii) any
Qualified Ground Lease, Approved Participating Lease, franchise agreement
or Approved Management Agreement. Neither the Borrower, the Parent nor any
of their Subsidiaries has received any notice of default under any material
contract, agreement, lease or other instrument which is continuing and
which, if not cured, could reasonably be expected to cause a Material
Adverse Change.
(b) No Default has occurred and is continuing.
SECTION 4.16 ENVIRONMENTAL CONDITION.
(a) Except as disclosed in the Environmental Reports, to the
knowledge of the Borrower, the Borrower and its Subsidiaries (i) have
obtained all Environmental Permits material for the ownership and operation
of their respective Properties and the conduct of their respective
businesses; (ii) have been and are in material compliance with all terms
and conditions of such Environmental Permits and with all other
requirements of applicable Environmental Laws; (iii) have not received
notice of any violation or alleged violation of any Environmental Law or
Environmental Permit; and (iv) are not subject to any actual or contingent
Environmental Claim.
(b) Except as set forth in the Environmental Reports, to the
knowledge of Borrower, none of the present or previously owned or operated
Property of the Borrower or of any of its present or former Subsidiaries,
wherever located, (i) has been placed on or proposed to be placed on the
National Priorities List, the Comprehensive Environmental Response
Compensation Liability Information System list, or their state or local
analogs, or have been otherwise investigated, designated, listed, or
identified as a potential site for removal, remediation, cleanup, closure,
restoration, reclamation, or other response activity under any
Environmental Laws which could reasonably be expected to cause a Material
Adverse Change; (ii) is subject to a Lien, arising under or in connection
with any Environmental Laws, that attaches to any revenues or to any
Property owned or operated by the Borrower or any of its Subsidiaries,
wherever located; (iii) has been the site of any Release, use or storage of
Hazardous Substances or Hazardous Wastes from present or past operations
except for Permitted Hazardous Substances, which Permitted Hazardous
Substances have not caused at the site or at any third-party site any
condition that has resulted in or could reasonably be expected to result in
the need for Response or (iv) none of the Improvements are constructed on
land designated by any Governmental Authority having land use jurisdiction
as wetlands.
SECTION 4.17 LEGAL REQUIREMENTS, ZONING, UTILITIES, ACCESS. Except
as set forth on Schedule 4.17 attached hereto, the use and operation of
each Hotel Property as a commercial hotel with related uses constitutes a
legal use under applicable zoning regulations (as the same may be modified
by special use permits or the granting of variances) and complies in all
material respects with all Legal Requirements, and does not violate in any
material respect any material approvals, material restrictions of record or
<PAGE>
any material agreement affecting any Hotel Property (or any portion
thereof). The Borrower and its Subsidiaries possess all certificates of
public convenience, authorizations, permits, licenses, patents, patent
rights or licenses, trademarks, trademark rights, trade names rights and
copyrights (collectively "Permits") required by Governmental Authority to
own and operate the Hotel Properties, except for those Permits if not
obtained would not cause a Material Adverse Change. The Borrower and its
Subsidiaries own and operate their business in material compliance with all
applicable Legal Requirements. To the extent necessary for the full
utilization of each Hotel Property in accordance with its current use,
telephone services, gas, steam, electric power, storm sewers, sanitary
sewers and water facilities and all other utility services are available to
each Hotel Property, are adequate to serve each such Hotel Property, exist
at the boundaries of the Land and are not subject to any conditions, other
than normal charges to the utility supplier, which would limit the use of
such utilities. All streets and easements necessary for the occupancy and
operation of each Hotel Property are available to the boundaries of the
Land.
SECTION 4.18 EXISTING INDEBTEDNESS. Except for the Obligations, the
only Indebtedness of the Borrower, the Parent or any of their respective
Subsidiaries existing as of the Effective Date is the Secured Non-Recourse
Indebtedness, Secured Recourse Indebtedness and other Indebtedness set
forth on Schedule 4.18 attached hereto and certain other Indebtedness
incurred in the ordinary course of business not to exceed $50,000. No
"default" or "event of default", however defined, has occurred and is
continuing under any such Indebtedness (or with respect to the giving of
this representation after the date of this Agreement, as otherwise
disclosed to the Administrative Agent in writing after the date of this
Agreement and prior to the date such representation is deemed given).
SECTION 4.19 TITLE; ENCUMBRANCES. With respect to the Initial
Properties, the Borrower or any Guarantor, as the case may be, has (i) good
and marketable fee simple title to the Real Property (other than for Real
Property subject to a ground lease, as to which it has a valid leasehold
interest) and (ii) good and marketable title to the Personal Property
(other than Personal Property for any Hotel Property for which the Property
Owner has a valid leasehold interest) free and clear of all Liens, and
there exists no Liens or other charges against such Property or leasehold
interest or any of the real or personal, tangible or intangible, Property
of the Borrower or any Guarantor (including without limitation statutory
and other Liens of mechanics, workers, contractors, subcontractors,
suppliers, taxing authorities and others; provided that certain Capital
Expenditures have been made to the Hotel Properties prior to the Effective
Date for which the payment is not past due), except (A) Permitted
Encumbrances and (B) the Personal Property (plus any replacements thereof)
owned by an Approved Participating Lessee.
SECTION 4.20 LEASING ARRANGEMENTS. The only material leases of
Eligible Properties for which either the Borrower or a Guarantor is a
lessee are the Qualified Ground Leases. The Property Owner for a Real
Property subject to a Qualified Ground Lease is the lessee under such
Qualified Ground Lease and no consent is necessary to such Person being the
lessee under such Qualified Ground Lease which has not already been
obtained. The Qualified Ground Leases are in full force and effect and no
defaults exist thereunder. The only material leases burdening the Hotel
Properties for which the lessee is entitled to participate in the increased
revenues of the Hotel Properties are the Approved Participating Leases.
The Approved Participating Leases are in full force and effect and no
defaults by the Borrower or any Subsidiary exist thereunder.
<PAGE>
SECTION 4.21 APPROVED MANAGEMENT AGREEMENTS. The only management
agreements burdening the Initial Properties (excluding the Permitted Non-
Eligible Properties) are the Approved Management Agreements set forth on
Schedule 4.21 attached hereto. To the knowledge of the Borrower, the
Approved Participating Lessee for a Hotel Property subject to a Approved
Management Agreement is a party to such Approved Management Agreement and
no consent is necessary to such Person being the owner under such Approved
Management Agreement which has not already been obtained. To the knowledge
of the Borrower, the Approved Management Agreements are in full force and
effect and no material defaults by the Approved Participating Lessee exist
thereunder.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note or any amount under any Credit Document shall
remain unpaid, any Letter of Credit shall remain outstanding, or any Bank
shall have any Commitment hereunder, unless the Administrative Agent shall
otherwise consent in writing (subject to the provisions of Section 10.01),
the Borrower agrees to comply with the following covenants.
SECTION 5.01 COMPLIANCE WITH LAWS, ETC. The Borrower will comply,
and cause each of its Subsidiaries to comply, in all material respects with
all Legal Requirements.
SECTION 5.02 PRESERVATION OF EXISTENCE, SEPARATENESS, ETC.
(a) The Borrower will (i) preserve and maintain, and cause
each of its Subsidiaries and the Parent to preserve and maintain, its
partnership, limited liability company, corporate or trust (as applicable)
existence, rights, franchises and privileges in the jurisdiction of its
formation, and (ii) qualify and remain qualified, and cause each such
Subsidiary and the Parent to qualify and remain qualified, as a foreign
partnership, limited liability company, corporation or trust, as
applicable, in each jurisdiction in which qualification is necessary or
desirable in view of its business and operations or the ownership of its
properties, and, in each case, where failure to qualify or preserve and
maintain its rights and franchises could reasonably be expected to cause a
Material Adverse Change.
(b) (i) The Parent Common Stock shall at all times be duly
listed on the New York Stock Exchange, Inc. and (ii) the Parent shall
timely file all reports required to be filed by it with the New York Stock
Exchange, Inc. and the Securities and Exchange Commission.
(c) The Borrower shall cause the Permitted Other Subsidiaries
which have Indebtedness and own a Hotel Property to, (i) maintain financial
statements, payroll records, accounting records and other corporate records
and other documents separate from each other and any other Person, (ii)
maintain its own bank accounts in its own name, separate from each other
and any other Person, (iii) pay its own expenses and other liabilities from
its own assets and incur (or endeavor to incur) obligations to other
Persons based solely upon its own assets and creditworthiness and not upon
the creditworthiness of each other or any other Person, and (iv) file its
own tax returns or, if part of a consolidated group, join in the
consolidated tax return of such group as a separate member thereof. The
Borrower shall use reasonable efforts to correct any known misunderstanding
or misrepresentation regarding the independence of the Permitted Other
Subsidiaries from the Borrower and the Borrower's other Subsidiaries.
<PAGE>
(d) The Borrower shall, and shall cause the Permitted Other
Subsidiaries which have Indebtedness and own a Hotel Property to, take all
actions necessary to keep such Permitted Other Subsidiaries separate from
the Borrower and the Borrower's other Subsidiaries, including, without
limitation, (i) the taking of action under the direction of the Board of
Directors, members or partners, as applicable, of such Permitted Other
Subsidiaries and, if so required by the Certificate of Incorporation or the
bylaws, operating agreement or partnership agreement, as applicable, of
such Permitted Other Subsidiaries or by any Legal Requirement, the approval
or consent of the stockholders, members or partners, as applicable, of such
Permitted Other Subsidiaries, (ii) the preparation of corporate,
partnership or limited liability company minutes for or other appropriate
evidence of each significant transaction engaged in by such Permitted Other
Subsidiaries, (iii) the observance of separate approval procedures for the
adoption of resolutions by the Board of Directors or consents by the
partners, as applicable, of such Permitted Other Subsidiaries, on the one
hand, and of the Borrower and the Borrower's other Subsidiaries, on the
other hand, (iv) the holding of the annual stockholders meeting, if
applicable, of such Permitted Other Subsidiaries, which are corporations on
a date other than the date of the annual stockholders' meeting of the
Parent, and (v) preventing the cash, cash equivalents, credit card receipts
or other revenues of the Hotel Properties owned by such Permitted Other
Subsidiaries or any other assets of such Permitted Other Subsidiaries from
being commingled with the cash, cash equivalents, credit card receipts or
other revenues collected by the Borrower or the Borrower's other
Subsidiaries.
(e) The Borrower shall, and shall cause the Permitted Other
Subsidiaries to, manage the business of and conduct the administrative
activities of the Permitted Other Subsidiaries independently from the
business of the Borrower, any of the Borrower's other Subsidiaries and any
other Person. Any moneys earned by the Permitted Other Subsidiaries on
their assets or proceeds of the sale of any of their assets shall be
deposited in bank accounts separate from any of the assets of the Borrower,
any of the Borrower's other Subsidiaries and any other Person, and no
assets of the Permitted Other Subsidiaries shall become commingled with
assets of such Persons.
(f) The Borrower shall hold itself out, and shall continue to
hold itself out, to the public and to its creditors as a legal entity,
separate and distinct from all other entities, and shall continue to take
all steps reasonably necessary to avoid (i) misleading any other Person as
to the identity of the entity with which such Person is transacting
business or (ii) implying that the Borrower is, directly or indirectly,
absolutely or contingently, responsible for the Indebtedness or other
obligations of the Permitted Other Subsidiaries or any other Person.
SECTION 5.03 PAYMENT OF TAXES, ETC. The Borrower will pay and
discharge, and cause each of its Subsidiaries to pay and discharge, before
the same shall become delinquent (a) all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
profits or Property that are material in amount, prior to the date on which
penalties attach thereto and (b) all lawful claims that are material in
amount which, if unpaid, might by Legal Requirement become a Lien upon its
Property; PROVIDED, HOWEVER, that neither the Borrower nor any such
Subsidiary shall be required to pay or discharge any such tax, assessment,
charge, levy, or claim (a) which is being contested in good faith and by
appropriate proceedings, (b) with respect to which reserves in conformity
with GAAP have been provided, (c) such charge or claim does not constitute
and is not secured by any choate Lien on any portion of any Hotel Property
and no portion of any Hotel Property is in jeopardy of being sold,
forfeited or lost during or as a result of such contest, (d) neither the
Administrative Agent nor any Bank could become subject to any civil fine or
penalty or criminal fine or penalty, in each case as a result of non-
payment of such charge or claim and (e) such contest does not, and could
not reasonably be expected to, result in a Material Adverse Change.
<PAGE>
SECTION 5.04 VISITATION RIGHTS; BANK MEETING. At any reasonable
time and from time to time and so long as any visit or inspection will not
unreasonably interfere with the Borrower's or any of its Subsidiaries'
operations, upon reasonable notice and during normal business hours, the
Borrower will, and will cause its Subsidiaries and the Approved
Participating Lessees to, permit the Administrative Agent or any of its
agents or representatives thereof (at Borrower's expense) and any Bank or
any of its agents or representatives thereof (at such Bank's expense), to
examine and make copies of and abstracts from the records and books of
account of, and visit and inspect at its reasonable discretion the
properties of, the Borrower and any such Subsidiary, to discuss the
affairs, finances and accounts of the Borrower and any such Subsidiary with
any of their respective officers or directors. Without in any way limiting
the foregoing, the Borrower will, upon the request of the Administrative
Agent, participate in a meeting with the Administrative Agent and the Banks
once during each calendar year to be held at a location as may be agreed to
by the Borrower and the Administrative Agent at such time as may be agreed
to by the Borrower and the Administrative Agent; provided that the Borrower
shall not be obligated to reimburse the Banks for such Persons' travel
expenses in connection with such meeting.
SECTION 5.05 REPORTING REQUIREMENTS. The Borrower will furnish to
the Administrative Agent and, with respect to those items set forth in
clauses (a)-(f) and (k), furnish copies to each Bank:
(a) QUARTERLY FINANCIALS. As soon as available and in any event not
later than 45 days after the end of each Fiscal Quarter of the Parent, the
unaudited Consolidated balance sheets of the Parent and its Subsidiaries as
of the end of such quarter and the related unaudited statements of income,
shareholders' equity and cash flows of the Parent and its Subsidiaries for
such Fiscal Quarter and the period commencing at the end of the previous
year and ending with the end of such Fiscal Quarter, and the corresponding
figures as at the end of, and for, the corresponding periods in the
preceding Fiscal Year, all duly certified with respect to such statements
(subject to year-end audit adjustments) by a Responsible Officer of the
Parent as having been prepared in accordance with GAAP, together with (i) a
Compliance Certificate duly executed by a Responsible Officer of the
Parent, (ii) a completed Borrowing Base Certificate duly executed by a
Responsible Officer of the Parent setting forth the components of the
Borrowing Base as of the last day of the immediately preceding Fiscal
Quarter, and (iii) a certificate in form similar to the Borrowing Base
Certificate duly executed by a Responsible Officer of the Parent setting
forth for those Hotel Properties owned or leased by the Parent or any of
its Subsidiaries except for the Eligible Properties the Adjusted NOI for
the Rolling Period just ended and Investment Amount, separately totaled for
those Hotel Properties which are unencumbered, those Hotel Properties which
secure Secured Recourse Indebtedness and those Hotel Properties which
secure Secured Non-Recourse Indebtedness. As soon as available and in any
event not later than 60 days after the end of each Fiscal Quarter of the
Parent, (i) written notice of any anticipated material variation to an
operating budget prepared pursuant to Section 5.05(e) and (ii) a report
certified by a Responsible Officer of the Parent setting forth for each of
the Hotel Properties owned or leased by the Parent or any of its
Subsidiaries for the Fiscal Quarter just ended the average daily rate, the
average occupancy, the RevPAR, the total gross revenues, the total
expenses, the Adjusted NOI and the payments made under the participating
leases for such Hotel Properties.
(b) ANNUAL FINANCIALS. As soon as available and in any event not
later than 90 days after the end of each Fiscal Year of the Parent, a copy
of the Consolidated balance sheets of the Parent and its Subsidiaries as of
the end of such Fiscal Year and the related Consolidated statements of
income, shareholders' equity and cash flows of the Parent and its
Subsidiaries for such Fiscal Year, and the corresponding figures as at the
<PAGE>
end of, and for, the preceding Fiscal Year, and certified by KPMG Peat
Marwick L.L.P. or other independent certified public accountants of
nationally recognized standing reasonably acceptable to the Administrative
Agent in an opinion, without qualification as to the scope, and including,
if requested by the Administrative Agent, any management letters delivered
by such accountants to the Parent in connection with such audit, together
with (i) a Compliance Certificate duly executed by a Responsible Officer of
the Parent, (ii) a completed Borrowing Base Certificate duly executed by a
Responsible Officer of the Parent setting forth the components of the
Borrowing Base as of the day of such financial statements and (iii) the
document required in clauses (iii) of the first sentence of the preceding
Section 5.05(a). As soon as available and in any event not later than 105
days after the end of each Fiscal Year of the Parent, the documents
required in the second sentence of the preceding Section 5.05(a).
(c) LASALLE LEASING FINANCIALS. As soon as available and in any
event not later than 60 days after the end of each Fiscal Quarter of
LaSalle Leasing, the unaudited Consolidated balance sheets of LaSalle
Leasing and its Subsidiaries as of the end of such quarter and the related
unaudited statements of income, shareholders' equity and cash flows of
LaSalle Leasing and its Subsidiaries for the period commencing at the end
of the previous year and ending with the end of such Fiscal Quarter, and
the corresponding figures as at the end of, and for, the corresponding
period in the preceding Fiscal Year, all duly certified with respect to
such statements (subject to year-end audit adjustments) by a Responsible
Officer of LaSalle Leasing as having been prepared in accordance with GAAP.
As soon as available and in any event not later than 120 days after the end
of each Fiscal Year of LaSalle Leasing, as applicable, (i) a copy of the
annual audit report for such year for LaSalle Leasing and its Subsidiaries,
if any, including therein audited Consolidated balance sheets of LaSalle
Leasing and its Consolidated Subsidiaries as of the end of such fiscal year
and the related Consolidated statements of income, shareholders' equity and
cash flows of LaSalle Leasing and its Subsidiaries for such fiscal year,
and the corresponding figures as at the end of, and for, the preceding
fiscal year, in each case certified by an independent certified public
accountant reasonably acceptable to the Administrative Agent and including,
if requested by the Administrative Agent, any management letters delivered
by such accountants to LaSalle Leasing in connection with such audit.
(d) ANNUAL BUDGETS. No later than 60 days after the start of each
Fiscal Year, the annual operating budget and Capital Expenditure and FF&E
expenditure budget for such Fiscal Year for each Hotel Property owned or
leased by the Parent or one of its Subsidiaries and such budgets on a
Consolidated basis for the Parent and its subsidiaries, all in reasonable
detail and duly certified by a Responsible Officer of the Parent as the
budgets presented or to be presented to the Parent's Board of Directors for
their review.
(e) SECURITIES LAW FILINGS. Promptly and in any event within 10
Business Days after the sending or filing thereof, copies of all proxy
material, reports and other information which the Borrower, the Parent or
any of their respective Subsidiaries sends to or files with the United
States Securities and Exchange Commission or sends to all shareholders of
the Parent or partners of the Borrower.
(f) DEFAULTS. As soon as possible and in any event within five
days after the occurrence of each Default known to a Responsible Officer of
the Borrower, the Parent or any of their respective Subsidiaries, a
statement of an authorized financial officer or Responsible Officer of the
Borrower setting forth the details of such Default and the actions which
the Borrower has taken and proposes to take with respect thereto.
<PAGE>
(g) ERISA NOTICES. As soon as possible and in any event (i) within
30 days after the Parent, the Borrower or any of a Controlled Group knows
that any Termination Event described in clause (a) of the definition of
Termination Event with respect to any Plan has occurred, (ii) within 10
days after the Parent, the Borrower or any of a Controlled Group knows that
any other Termination Event with respect to any Plan has occurred, a
statement of the Chief Financial Officer of the Parent describing such
Termination Event and the action, if any, which the Parent, the Borrower or
such member of such Controlled Group proposes to take with respect thereto;
(iii) within 10 days after receipt thereof by the Parent, the Borrower or
any of a Controlled Group from the PBGC, copies of each notice received by
the Parent, the Borrower or any such member of such Controlled Group of the
PBGC's intention to terminate any Plan or to have a trustee appointed to
administer any Plan; and (iv) within 10 days after receipt thereof by the
Parent, the Borrower or any member of a Controlled Group from a
Multiemployer Plan sponsor, a copy of each notice received by the Parent,
the Borrower or any member of such Controlled Group concerning the
imposition or amount of withdrawal liability pursuant to Section 4202 of
ERISA.
(h) ENVIRONMENTAL NOTICES. Promptly upon receipt thereof by the
Parent, the Borrower or any of their Subsidiaries, a copy of any form of
notice, summons or citation received from the United States Environmental
Protection Agency, or any other Governmental Authority concerning (i)
violations or alleged violations of Environmental Laws, which seeks to
impose liability therefor, (ii) any action or omission on the part of the
Parent or Borrower or any of their present or former Subsidiaries in
connection with Hazardous Waste or Hazardous Substances which, based upon
information reasonably available to the Borrower, could reasonably be
expected to cause a Material Adverse Change or an Environmental Claim in
excess of $1,000,000, (iii) any notice of potential responsibility under
CERCLA, or (iv) concerning the filing of a Lien upon, against or in
connection with the Parent, Borrower, their present or former Subsidiaries,
or any of their leased or owned Property, wherever located.
(i) OTHER GOVERNMENTAL NOTICES OR ACTIONS. Promptly and in any
event within five Business Days after receipt thereof by the Borrower, the
Parent or any of their respective Subsidiaries, (i) a copy of any notice,
summons, citation, or proceeding seeking to adversely modify in any
material respect, revoke, or suspend any license, permit, or other
authorization from any Governmental Authority, which action could
reasonably be expected to cause a Material Adverse Change, and (ii) any
revocation or involuntary termination of any license, permit or other
authorization from any Governmental Authority, which revocation or
termination could reasonably be expected to cause a Material Adverse
Change.
(j) REPORTS AFFECTING THE BORROWING BASE. On or prior to the 5th
day following any Adjustment Event, a Property Adjustment Report with
respect to such Adjustment Event.
<PAGE>
(k) PRESS RELEASES. Promptly and in any event within 5 days after
the sending or releasing thereof, copies of all press releases or other
releases of information to the public by the Borrower, the Parent or any of
their respective Subsidiaries or releases of information to the Parent's
shareholders.
(l) OTHER NOTICES.
(i) Promptly, a copy of any notice of default or any other
material notice (including without limitation property condition reviews)
received by the Borrower or any Guarantor from any franchisor, Approved
Manager, or any ground lessor under a Qualified Ground Lease, and
(ii) Promptly following any merger or dissolution of any
Subsidiary of the Borrower which is permitted hereunder or event which
would make any of the representations in Section 4.01-4.04 untrue, notice
thereof.
(m) MATERIAL LITIGATION. As soon as possible and in any event
within five days of any of the Borrower, the Parent or any of their
respective Subsidiaries having knowledge thereof, notice of any litigation,
claim or any other event which could reasonably be expected to cause a
Material Adverse Change.
(n) PRELIMINARY PROPERTY PLAN. Prior to making Capital
Expenditures or FF&E expenditures for the renovation or expansion of a
Hotel Property, the Preliminary Property Plan for such renovation or
expansion in sufficient detail as the Administrative Agent shall reasonably
request.
(o) OTHER INFORMATION. Such other information respecting the
business or Properties, or the condition or operations, financial or
otherwise, of the Borrower, the Parent or any of their respective
Subsidiaries, as the Administrative Agent may from time to time reasonably
request.
SECTION 5.06 MAINTENANCE OF PROPERTY AND REQUIRED WORK. The
Borrower will, and will cause each of its Subsidiaries to, (a) maintain
their owned, leased, or operated Property in a manner consistent for hotel
properties and related property of the same quality and character and shall
keep or cause to be kept every part thereof and its other properties in
good condition and repair, reasonable wear and tear excepted, and make all
reasonably necessary repairs, renewals or replacements thereto as may be
reasonably necessary to conduct the business of the Borrower and its
Subsidiaries, (b) not remove, demolish or structurally alter, or permit or
suffer the removal, demolition or structural alteration of, any of the
Improvements except for the renovation or expansion of a Hotel Property (i)
for which the Borrower has delivered a Preliminary Property Plan to the
Administrative Agent and (ii) which complies with the limitations set forth
in this Agreement on the aggregate amount of renovations and expansions the
Borrower, the Parent and their Subsidiaries are permitted at any one time,
(c) not knowingly or willfully permit the commission of waste or other
injury, or the occurrence of pollution, contamination or any other
condition in, on or about any Hotel Property, (d) maintain and repair each
Hotel Property as required by any franchise agreement, license agreement,
management agreement or ground lease for such Hotel Property, (e) commence
the Required Work for any Hotel Property by a date which would allow a
reasonable period of time to complete such work on or prior to the deadline
set for such Required Work agreed to by the Borrower and the Administrative
Agent, and (f) after any commencement of any of work for any Hotel Property
diligently perform such work (i) for the Required Work, by the required
deadline, (ii) in a good and workmanlike manner and (iii) in compliance in
all material respects with all Legal Requirements. Except as may be
required to maintain the Parent's status as a REIT under the Code, any
Capital Expenditures or expenditures or leases for FF&E made for any Hotel
Property shall be in the name of the Property Owner for such Hotel
Property.
<PAGE>
SECTION 5.07 INSURANCE. The Borrower will maintain and/or remain
the beneficiary under, and cause each of its Subsidiaries to maintain
and/or remain the beneficiary under, the insurance required pursuant to
Schedule 5.07.
SECTION 5.08 BORROWING BASE REQUIREMENTS. The Borrower shall cause
the Hotel Properties in the Borrowing Base to at all times comply with the
Borrowing Base Requirements; PROVIDED that (a) if the requirements of
clauses (a), (b), (c), or (e) of the definition of Borrowing Base
Requirements are not met, then within 2 Business Days of notice of such
failure either (i) the Borrower shall have cured such failure or (ii) for
Borrowing Base purposes the Borrower shall have lowered the Hotel Value of
those Eligible Properties that contributed to such failure to the point
that such failure no longer exists, (b) if the requirements of clause (f)
of the definition of Borrowing Base Requirements are not met, then within
180 days of notice of such failure either (i) the Borrower shall have cured
such failure or (ii) for Borrowing Base purposes the Borrower shall have
lowered the Hotel Value of those Eligible Properties that contributed to
such failure to the point that such failure no longer exists, and (c) if
the requirements of clause (g) of the definition of Borrowing Base
Requirements are not met and such failure remains uncured 180 days after
notice of the commencement of such failure, then such failure shall
constitute an Event of Default without any notice being given to the
Borrower or any Guarantor in connection therewith.
SECTION 5.09 SUPPLEMENTAL GUARANTIES. The Borrower has requested
and the Administrative Agent has agreed that any partner of the Borrower
except the Parent or any other Guarantor may execute a Supplemental
Guaranty. However, the execution of or release of any Supplemental
Guaranty shall not be construed as a release or modification of any
obligation of a Guarantor under a Guaranty or Environmental Indemnity.
SECTION 5.10 LASALLE LEASING. Prior to the consummation of the
Permitted Proposed Transaction, upon knowledge of a material default by
LaSalle Leasing under an Approved Participating Lease, the Borrower will
send, or will cause the Guarantor who is a party to such Approved
Participating Lease to send, a notice of such default to LaSalle Leasing as
provided in the document under which such default has occurred and provide
a copy of such notice to the Administrative Agent. For purposes of this
Section 5.10, a "material default" shall mean a monetary default and any
default, which if not cured, would be a default under any applicable
franchise agreement and Approved Management Agreement allowing the Person
party to such agreement to terminate such agreement.
SECTION 5.11 USE OF PROCEEDS. The proceeds of the Advances have
been, and will be used by the Borrower for the purposes set forth in
Section 4.09(a).
SECTION 5.12 NEW GUARANTORS. Within ten (10) days of the creation
of or Investment in a Person which falls within the definition of a
Guarantor, Borrower shall cause such Person to deliver to the
Administrative Agent either (A) an original Guaranty and Environmental
Indemnity executed by such Person or (B) an Accession Agreement executed by
such Person.
<PAGE>
ARTICLE VI
NEGATIVE COVENANTS
So long as any Note or any amount under any Credit Document shall
remain unpaid, any Letter of Credit shall remain outstanding, or any Bank
shall have any Commitment, the Borrower agrees, unless the Administrative
Agent shall otherwise consent in writing (subject to the provisions of
Section 10.01), to comply with the following covenants.
SECTION 6.01 LIENS, ETC. The Borrower will not create, assume,
incur or suffer to exist, or permit any of its Subsidiaries (except for
Permitted Other Subsidiaries) to create, assume, incur, or suffer to exist,
any Lien on or in respect of any of its Property whether now owned or
hereafter acquired, or assign any right to receive income, except that the
Borrower and its Subsidiaries may create, incur, assume or suffer to exist
Liens:
(a) securing the Obligations;
(b) for taxes, assessments or governmental charges or levies on
Property of the Borrower or any Guarantor to the extent not required to be
paid pursuant to Sections 5.03;
(c) Liens imposed by law (such as landlords', carriers', warehouse-
men's and mechanics' liens or otherwise arising from litigation) (a) which
are being contested in good faith and by appropriate proceedings, (b) with
respect to which reserves in conformity with GAAP have been provided, (c)
which have not resulted in any Hotel Property being in jeopardy of being
sold, forfeited or lost during or as a result of such contest, (d) neither
the Administrative Agent nor any Bank could become subject to any civil
fine or penalty or criminal fine or penalty, in each case as a result of
non-payment of such charge or claim and (e) such contest does not, and
could not reasonably be expected to, result in a Material Adverse Change;
(d) on leased personal property to secure solely the lease
obligations associated with such property;
(e) Liens securing Secured Recourse Indebtedness and Secured Non-
Recourse Indebtedness permitted pursuant to the provisions of Section 6.02;
and
(f) Liens on the Hyatt Boston Replacement Bonds Proceeds as
contemplated by Section 10.21.
SECTION 6.02 INDEBTEDNESS. The Borrower, the Parent and their
respective Subsidiaries will not incur or permit to exist any Indebtedness
other than the Obligations and the following:
(a) Unsecured Indebtedness which is less than or equal to
$50,000,000;
(b) Secured Recourse Indebtedness and Secured Non-Recourse
Indebtedness incurred by Permitted Other Subsidiaries to the extent (i)
that the covenants contained in Article VII are complied with, (ii) the
Secured Recourse Indebtedness secured by a Hotel Property does not exceed
65% of the Hotel Value of such Hotel Property and all Secured Recourse
Indebtedness in the aggregate secured by Hotel Properties does not exceed
65% of the aggregate Hotel Value of such Hotel Properties, and (iii) the
Secured Non-Recourse Indebtedness secured by a Hotel Property does not
exceed 70% of the Hotel Value of such Hotel Property and all Secured Non-
Recourse Indebtedness in the aggregate secured by Hotel Properties does not
exceed 70% of the aggregate Hotel Value of such Hotel Properties;
<PAGE>
(c) Indebtedness in the form of Interest Rate Agreements; provided
that (i) such agreements shall be unsecured, (ii) the dollar amount of
indebtedness subject to such agreements and the indebtedness subject to
Interest Rate Agreements in the aggregate shall not exceed the sum of the
amount of the Commitments and other Indebtedness permitted pursuant to this
Section 6.02 which bears interest at a variable rate, and (iii) the
agreements shall be at such interest rates and otherwise in form and
substance reasonably acceptable to the Administrative Agent;
(d) Any of the following Indebtedness incurred by the Parent:
(i) guaranties in connection with the Indebtedness secured by
a Hotel Property of (A) if the Hotel Property is subject to a ground lease,
the payment of rent under such ground lease, (B) real estate taxes relating
to such Hotel Property, and (C) capital reserves required under such
Indebtedness; and
(ii) indemnities for certain acts of malfeasance,
MISAPPROPRIATION and misconduct and an environmental indemnity for the
lender under Indebtedness permitted under this Agreement; and
(iii) indemnities for certain acts of malfeasance,
misappropriation and misconduct by the Permitted Other Subsidiaries and
environmental indemnities, all for the benefit of the lenders of other
Permitted Other Subsidiary Indebtedness in connection with such
Indebtedness; and
(iv) guaranties of franchise agreements; and
(v) extensions, renewals and refinancing of any of the
Indebtedness specified in paragraphs (a) - (d) above so long as the
principal amount of such Indebtedness is not thereby increased; and
(e) The Indebtedness secured by the Hyatt Boston Replacement Bonds
Proceeds as contemplated by Section 10.21.
SECTION 6.03 AGREEMENTS RESTRICTING DISTRIBUTIONS FROM SUBSIDIARIES.
The Borrower will not, nor will it permit any of its Subsidiaries (other
than Permitted Other Subsidiaries) to, enter into any agreement (other than
a Credit Document) which limits distributions to or any advance by any of
the Borrower's Subsidiaries to the Borrower.
SECTION 6.04 RESTRICTED PAYMENTS. Neither the Parent, the Borrower,
nor any of their respective Subsidiaries, will make any Restricted Payment,
except that:
(a) provided no Default has occurred and is continuing or would
result therefrom, the Parent may in any Fiscal Quarter, based on the
immediately preceding Rolling Period, make cash payments to its
shareholders (including in connection with the repurchase of Stock or Stock
Equivalents) which with the previous such cash payments in the three
immediately preceding Fiscal Quarters are not in excess of the greater of
(i) the lesser of (A) ninety percent (90%) of the Funds From Operations of
the Parent during such preceding Rolling Period or (B) one hundred percent
(100%) of Free Cash Flow of the Parent during such preceding Rolling Period
and (ii) the greater of (A) the amount required for the Parent to maintain
its status as a REIT or (B) the amount required to ensure that the Parent
will avoid imposition of an excise tax for failure to make certain minimum
distributions on a calendar year basis;
(b) provided no Default has occurred and is continuing or would
result therefrom, the Borrower shall be entitled to make cash distributions
to its partners, including the Parent;
<PAGE>
(c) a Subsidiary of the Borrower may make a Restricted Payment to
the Borrower,
(d) the limited partners of the Borrower shall be entitled to
exchange limited partnership interests in the Borrower for the Parent's
stock or redeem such interests for cash, as provided in the Borrower's
limited partnership agreement;
(e) the Borrower shall be entitled to issue limited partnership
interests in the Borrower in exchange of ownership interests in
Subsidiaries and Unconsolidated Entities which own a Future Property to the
extent such Investment is permitted pursuant to the provisions of Section
6.07; and
(f) provided no Default has occurred and is continuing or would
result therefrom, the Parent may repurchase up to $25,000,000 of Parent
Common Stock in the aggregate.
SECTION 6.05 FUNDAMENTAL CHANGES; ASSET DISPOSITIONS. Neither the
Parent, the Borrower, nor any of their respective Subsidiaries (other than
the Permitted Other Subsidiaries) will, (a) merge or consolidate with or
into any other Person, unless (i) a Guarantor is merged into the Borrower
or another Guarantor and the Borrower or such other Guarantor, as the case
may be, is the surviving Person or a Subsidiary (other than a Permitted
Other Subsidiary which has Indebtedness other than the Obligations) is
merged into any Subsidiary (other than a Permitted Other Subsidiary which
has Indebtedness other than the Obligations), and (ii) immediately after
giving effect to any such proposed transaction no Default would exist; (b)
sell, transfer, or otherwise dispose of all or any of the such Person's
material property except for a Permitted Hotel Sale, dispositions or
replacements of personal property in the ordinary course of business, or
Hotel Properties which are not Eligible Properties; (c) enter into a lease
(other than an Approved Participating Lease) of all or substantially all of
any Eligible Property with any Person without the consent of the
Administrative Agent; (d) sell or otherwise dispose of any material shares
of capital stock, membership interests or partnership interests of any
Subsidiary (except for a Permitted Other Subsidiary); (e) except for the
Permitted Proposed Transaction, sales of ownership interests permitted
under this Agreement, and the issuance of limited partnership interests in
the Borrower in exchange for ownership interests in Subsidiaries and
Unconsolidated Entities to the extent permitted pursuant to the provisions
of Section 6.04, materially alter the corporate, capital or legal structure
of any such Person (except for a Permitted Other Subsidiary); (f)
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution) provided that nothing herein shall prohibit the Borrower from
dissolving any Subsidiary which has no assets on the date of dissolution or
(g) materially alter the character of their respective businesses from that
conducted as of the date of this Agreement.
SECTION 6.06 APPROVED PARTICIPATING LESSEE OWNERSHIP. Neither the
Parent nor the Borrower shall, nor shall permit any of their respective
Subsidiaries to own directly or indirectly such a percentage of the
beneficial ownership interest in any Approved Participating Lessee as would
cause a potential Event of Default under Section 8.01(o) of this Agreement.
SECTION 6.07 INVESTMENTS, LOANS, FUTURE PROPERTIES. Neither the
Parent nor the Borrower shall, nor shall permit any of their respective
Subsidiaries to, acquire by purchase, or otherwise, all or substantially
all of the business, property or fixed assets of any Person or any Hotel
Property, make or permit to exist any loans, advances or capital
contributions to, or make any Investments in (including without limitation,
loans and advances to, and other Investments in, Subsidiaries), or purchase
or commit to purchase any evidences of Indebtedness of, stock or other
securities, partnership interests, member interests or other interests in
any Person, except the following (provided that after giving effect thereto
there shall exist no Default):
<PAGE>
(a) the purchase of Liquid Investments with any Person which
qualifies as an Eligible Assignee;
(b) trade and customer accounts receivable which are for goods
furnished or services rendered in the ordinary course of business and are
payable in accordance with customary trade terms, and other assets owned in
the ordinary course of owning the Parent Hotel Properties;
(c) a Future Property which qualifies as an Eligible Property or a
Permitted Non-Eligible Property;
(d) Investments in (i) unimproved land which do not in the
aggregate have an Investment Amount which exceeds 5% of the Parent
Aggregate Asset Value; (ii) Development Properties which do not in the
aggregate have an Investment Amount which exceeds 20% of the Parent
Aggregate Asset Value, (iii) Unconsolidated Entities (A) which do not in
the aggregate have an Investment Amount which exceeds 20% of the Parent
Aggregate Asset Value, (B) for which the Investment Amounts for those
Investments which are in the form of preferred stock or a loan or advance
do not exceed $5,000,000 in the aggregate, and (C) which have not for any
individual Unconsolidated Entity incurred Indebtedness which exceeds 75% of
the lesser of the appraised value or the Investment Amount of the Hotel
Properties owned by such Unconsolidated Entity, and (iv) mortgages, deeds
of trust, deeds to secure debt or similar instruments that are a lien on
real property which are improved by fully operational hotels and secure
Indebtedness evidenced by a note or bond which do not in the aggregate have
an Investment Amount which exceeds 10% of the Parent Aggregate Asset Value;
PROVIDED that the aggregate Investment Amount for all Investments made
pursuant to this Section 6.07(d) shall not exceed 30% of the Parent
Aggregate Asset Value;
(e) The Investment to be made in connection with the Permitted
Proposed Transaction; and
(f) The Investment in the Hyatt Boston Replacement Bonds Proceeds
as contemplated by Section 10.21.
Notwithstanding the foregoing, neither the Borrower, nor the Parent, nor
their respective Subsidiaries shall acquire a Future Property or otherwise
make an Investment which would (a) cause the Eligible Properties in the
aggregate to violate the Borrowing Base Requirements, (b) cause the Parent
Hotel Properties in the aggregate to violate in any material way the Parent
Hotel Property Requirements without the Administrative Agent's written
consent, (c) cause a Default, (d) cause or result in the Borrower or the
Parent failing to comply with any of the financial covenants contained
herein, (e) cause the aggregate Investment Amount for (i) all Future
Properties located outside the United States and (ii) all Investments made
pursuant to Section 6.07(d) which are either located outside the United
States or in an Unconsolidated Entity which has at least 50% of its assets
located outside the United States to exceed 15% of the Parent Aggregate
Asset Value, (f) cause the Parent's or any Subsidiary's Investment in the
Personal Property for any Hotel Property to cause a potential Event of
Default under Section 8.01(o) of this Agreement.
SECTION 6.08 AFFILIATE TRANSACTIONS. Except for the Advisory
Agreement and payments allowed in accordance therewith, the Approved
Participating Leases, the Permitted Proposed Transaction, and as otherwise
approved by a majority of the Board of Trustees of the Parent including a
majority of the independent trustees, the Borrower will not, and will not
permit any of its Subsidiaries to, make, directly or indirectly (a) any
transfer, sale, lease, assignment or other disposal of any assets to any
Affiliate of the Borrower which is not a Guarantor or any purchase or
acquisition of assets from any such Affiliate; or (b) any arrangement or
other transaction directly or indirectly with or for the benefit of any
such Affiliate (including without limitation, guaranties and assumptions of
obligations of an Affiliate), other than in the ordinary course of business
and at market rates.
<PAGE>
SECTION 6.09 SALE AND LEASEBACK. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into any arrangement with any
Person, whereby in contemporaneous transactions the Borrower or such
Subsidiary sells essentially all of its right, title and interest in a
material asset and the Borrower or such Subsidiary acquires or leases back
the right to use such property.
SECTION 6.10 SALE OR DISCOUNT OF RECEIVABLES. The Borrower will
not, and will not permit any of its Subsidiaries to, directly or
indirectly, sell with recourse, or discount or otherwise sell for less than
the face value thereof, any of its notes or accounts receivable.
SECTION 6.11 NO FURTHER NEGATIVE PLEDGES. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into or suffer to
exist any agreement (other than this Agreement and the Credit Documents)
(a) prohibiting the creation or assumption of any Lien upon the Properties
of the Borrower or any of its Subsidiaries (except for the Permitted Other
Subsidiaries), whether now owned or hereafter acquired, or (b) requiring an
obligation to be secured if some other obligation is or becomes secured.
SECTION 6.12 INTENTIONALLY DELETED.
SECTION 6.13 MATERIAL DOCUMENTS. The Borrower will not, nor will it
permit any of its Subsidiaries (other than Permitted Other Subsidiaries) or
any Approved Participating Lessee (other than as a lessee of a Permitted
Non-Eligible Property) to, enter into any termination, material
modification or material amendment any of the following documents without
the written consent of the Administrative Agent:
(a) Approved Management Agreement;
(b) Approved Participating Lease;
(c) Qualified Ground Lease; and
(d) Any other material agreement.
In addition, the Borrower will not permit the Parent to enter into any
termination, material modification or material amendment of the Advisory
Agreement or any Approved Substitute Advisory Agreement without the written
consent of the Administrative Agent; provided that the Advisory Agreement
or any Approved Substitute Advisory Agreement may be terminated without the
consent of the Administrative Agent if either (a) within 10 days of such
termination the Parent enters into an Approved Substitute Advisory
Agreement or (b) within 10 days of such termination the Parent or the
Borrower employs Jon E. Bortz or another person reasonably acceptable to
the Required Lenders as such Person's chairman of the board, president or
chief executive officer. Any termination, modification or amendment
prohibited under this Section 6.13 shall, to the extent permitted by
applicable law, be void and of no force and effect.
SECTION 6.14 LIMITATIONS ON DEVELOPMENT, CONSTRUCTION, RENOVATION
AND PURCHASE OF HOTEL PROPERTIES. Neither the Parent nor the Borrower
shall or shall permit any of their respective Subsidiaries to (a) engage in
the development, construction or expansion of any Hotel Properties (except
for Development Properties permitted by the provisions of Section 6.07 or
Renovating Properties) or (b) enter into any binding agreements to purchase
Hotel Properties or other assets; provided that the Parent, the Borrower
and their Subsidiaries may enter into binding agreements to purchase Hotel
Properties or other assets if at all times such Person has available
sources of capital equal to the portion of the purchase price of such Hotel
Properties or other assets which constitutes a recourse obligation of the
Parent, the Borrower or its Subsidiary, which available sources of capital
may include Advances to the extent that the Borrower may borrow the same
for the purposes required or other Indebtedness permitted by the terms of
this Agreement.
<PAGE>
ARTICLE VII
FINANCIAL COVENANTS
So long as any Note or any amount under any Credit Document shall
remain unpaid, any Letter of Credit shall remain outstanding, or any Bank
shall have any Commitment hereunder, unless the Administrative Agent shall
otherwise consent in writing (subject to the provisions of Section 10.01),
the Borrower agrees to comply and cause the Parent to comply with the
following covenants.
SECTION 7.01 PARENT'S FIXED CHARGE COVERAGE RATIO. The Parent shall
maintain at the end of each Rolling Period a Parent's Fixed Charge Coverage
Ratio of not less than 2.00 to 1.0.
SECTION 7.02 PARENT'S INTEREST COVERAGE RATIO. The Parent shall
maintain at the end of each Rolling Period a Parent's Interest Coverage
Ratio of not less than 2.25 to 1.0.
SECTION 7.03 UNSECURED INTEREST COVERAGE RATIO. The Parent shall
maintain at the end of each Rolling Period an Unsecured Interest Coverage
Ratio of not less than 2.25 to 1.0.
SECTION 7.04 MAINTENANCE OF NET WORTH. The Parent shall at all
times maintain an Adjusted Net Worth of not less than the Minimum Tangible
Net Worth.
SECTION 7.05 LIMITATIONS ON TOTAL LIABILITIES. The Parent shall not
on any date permit the Leverage Ratio to be greater than 50%.
SECTION 7.06 LIMITATIONS ON SECURED RECOURSE INDEBTEDNESS. The
Parent shall not on any date on a Consolidated basis permit the Secured
Recourse Indebtedness (excluding the Obligations) of the Parent, to exceed
15% of the Parent Aggregate Asset Value.
SECTION 7.07 LIMITATIONS ON SECURED INDEBTEDNESS. The Parent shall
not at any time on a Consolidated basis permit the sum of the Parent's
Secured Non-Recourse Indebtedness and Secured Recourse Indebtedness to
exceed 35% of the Parent Aggregate Asset Value.
<PAGE>
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
SECTION 8.01 EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an "Event of Default" under any Credit
Document:
(a) PRINCIPAL OR LETTER OF CREDIT OBLIGATION PAYMENT. The Borrower
shall fail to pay any principal of any Note or any Letter of Credit
Obligation when the same becomes due and payable as set forth in this
Agreement;
(b) INTEREST OR OTHER OBLIGATION PAYMENT. The Borrower shall fail
to pay any interest on any Note or any fee or other amount payable
hereunder or under any other Credit Document when the same becomes due and
payable as set forth in this Agreement, provided however that the Borrower
will have a grace period of five days after the payments covered by this
Section 8.01(b) becomes due and payable for the first two defaults under
this Section 8.01(b) in every calendar year;
(c) REPRESENTATION AND WARRANTIES. Any representation or warranty
made or deemed to be made (i) by the Borrower in this Agreement or in any
other Credit Document, (ii) by the Borrower (or any of its officers) in
connection with this Agreement or any other Credit Document, or (iii) by
any Subsidiary in any Credit Document shall prove to have been incorrect in
any material respect when made or deemed to be made;
(d) COVENANT BREACHES. (i) The Borrower shall fail to perform or
observe any covenant contained in Sections 5.02(a)(i), (b)(i) or (f),
Article VI or Article VII of this Agreement or the Borrower shall fail to
perform or observe, or shall fail to cause any Guarantor to perform or
observe any covenant in any Credit Document beyond any notice and/or cure
period for such default expressly provided in such Credit Document or (ii)
the Borrower or any Guarantor shall fail to perform or observe any term or
covenant set forth in any Credit Document which is not covered by
clause (i) above or any other provision of this Section 8.01, in each case
if such failure shall remain unremedied for 30 days after the earlier of
the date written notice of such default shall have been given to the
Borrower or such Guarantor by the Administrative Agent or any Bank or the
date a Responsible Officer of the Borrower or any Guarantor has actual
knowledge of such default, unless such default in this clause (ii) cannot
be cured in such 30 day period and the Borrower is diligently proceeding to
cure, or caused to be cured, such default, in which event the cure period
shall be extended to 90 days;
(e) CROSS-DEFAULTS.
(i) with respect to (A) any Secured Non-Recourse Indebtedness
which is outstanding in a principal amount of at least $10,000,000
individually or when aggregated with all such Secured Non-Recourse
Indebtedness of the Borrower, the Parent or any of their respective
Subsidiaries or (B) any other Indebtedness (but excluding Indebtedness
evidenced by the Notes) which is outstanding in a principal amount of at
least $5,000,000 individually or when aggregated with all such Indebtedness
of the Borrower, the Parent or any of their respective Subsidiaries, any of
the following:
A. any such Indebtedness shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof,
B. the Borrower, the Parent or any of their respective
Subsidiaries shall fail to pay any principal of or premium or interest of
any of such Indebtedness (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Indebtedness, or
<PAGE>
C. any other event shall occur or condition shall exist under any
agreement or instrument relating to such Indebtedness, and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to permit the
holders of such Indebtedness to accelerate the maturity of such
Indebtedness;
(f) INSOLVENCY. The Borrower, the Parent, any of their respective
Subsidiaries, or the Approved Participating Lessee or Approved Manager for
Hotel Properties which comprise twenty-five percent (25%) or more of the
Borrowing Base Hotel Value shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against the Borrower, the
Parent, any of their respective Subsidiaries, or the Approved Participating
Lessee or Approved Manager for Hotel Properties which comprise twenty-five
percent (25%) or more of the Borrowing Base Hotel Value seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee or other similar official
for it or for any substantial part of its property and, in the case of any
such proceeding instituted against the Borrower, the Parent, any of their
respective Subsidiaries, or the Approved Participating Lessee or Approved
Manager for Hotel Properties which comprise twenty-five percent (25%) or
more of the Borrowing Base Hotel Value, either such proceeding shall remain
undismissed for a period of 60 days or any of the actions sought in such
proceeding shall occur; or the Borrower, the Parent, any of their
respective Subsidiaries, or the Approved Participating Lessee or Approved
Manager for Hotel Properties which comprise twenty-five percent (25%) or
more of the Borrowing Base Hotel Value shall take any corporate action to
authorize any of the actions set forth above in this paragraph (f);
(g) JUDGMENTS. Any judgment or order for the payment of money in
excess of $10,000,000 (reduced for purposes of this paragraph for the
amount in respect of such judgment or order that a reputable insurer has
acknowledged being payable under any valid and enforceable insurance
policy) shall be rendered against the Borrower, the Parent or any of their
respective Subsidiaries which, within 60 days from the date such judgment
is entered, shall not have been discharged or execution thereof stayed
pending appeal;
(h) ERISA. (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan, (iii) a Reportable Event shall occur with respect to,
or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee
is likely to result in the termination of such Plan for purposes of
Title IV of ERISA, unless such Reportable Event, proceedings or appointment
are being contested by the Parent or the Borrower in good faith and by
appropriate proceedings, (iv) any Plan shall terminate for purposes of
Title IV of ERISA, (v) the Parent, the Borrower or any member of a
Controlled Group shall incur any liability in connection with a withdrawal
from a Multiemployer Plan or the insolvency (within the meaning of Section
4245 of ERISA) or reorganization (within the meaning of Section 4241 of
ERISA) of a Multiemployer Plan, unless such liability is being contested by
the Parent or the Borrower in good faith and by appropriate proceedings, or
(vi) any other event or condition shall occur or exist, with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could
subject the Borrower or any Guarantor to any tax, penalty or other
liabilities in the aggregate exceeding $10,000,000;
<PAGE>
(i) GUARANTY. Any Guaranty except a Supplemental Guaranty shall
for any reason cease to be valid and binding on any Guarantor or any
Guarantor shall so state in writing;
(j) ENVIRONMENTAL INDEMNITY. Any Environmental Indemnity shall for
any reason cease to be valid and binding on any Person party thereto or any
such Person shall so state in writing;
(k) APPROVED PARTICIPATING LESSEE. Either (i) a material default
by the Approved Participating Lessee shall occur under any Approved
Participating Lease related to Hotel Properties which comprise twenty-five
percent (25%) or more of the Borrowing Base Hotel Value which shall remain
uncured following any notice and cure period under such document, or (ii)
with respect to Hotel Properties which comprise twenty-five percent (25%)
or more of the Borrowing Base Hotel Value, the Approved Participating Lease
for any Hotel Property is terminated;
(l) INTENTIONALLY DELETED.;
(m) DEFAULT UNDER QUALIFIED GROUND LEASE. Qualified Ground Leases
for Hotel Properties which comprise twenty-five percent (25%) or more of
the Borrowing Base Hotel Value have in the aggregate either (i) been
terminated because of a default by the lessee under such Qualified Ground
Lease or (ii) are subject to a default by the lessee under such Qualified
Ground Lease which has not been cured or waived 10 days prior to the date
the ground lessors under such Qualified Ground Lease would have the right
to terminate such Qualified Ground Leases;
(n) MANAGER. The Approved Participating Lessees for Hotel
Properties which comprise twenty-five percent (25%) or more of the
Borrowing Base Hotel Value shall not have replaced the Approved Manager for
such Hotel Properties with a reputable, nationally known, third party
manager acceptable to the Administrative Agent within 120 days of the
terminations of the Approved Management Agreements for such Hotel
Properties except in connection with an Asset Disposition;
(o) PARENT'S REIT STATUS. There shall be a determination from the
applicable Governmental Authority from which no appeal can be taken that
the Parent's tax status as a REIT has been lost;
(p) PARENT COMMON STOCK. The Parent at any time hereafter fails to
cause the Parent Common Stock to be duly listed on the New York Stock
Exchange, Inc.; or
(q) CHANGES IN OWNERSHIP AND CONTROL. Any of the following occur
without the written consent of the Required Lenders : (a) the Parent (i)
amends the Borrower's partnership agreement in any material respect, (ii)
admits a new general partner to the Borrower, (iii) own less than 70% of
the partnership interests in and beneficial ownership of the Borrower, or
(iv) resigns as general partner of the Borrower; (b) the Advisory Agreement
or any Approved Substitute Advisory Agreement shall be modified, amended or
terminated except as permitted by the provisions of Section 6.13; or (c) if
(i) neither the Advisory Agreement nor any Approved Substitute Advisory
Agreement remains in effect for 10 or more days, (ii) the Parent or the
Borrower shall cease to employ Jon E. Bortz or other persons as
contemplated by Section 6.13, and, (iii) within 180 days following the
termination of such employment of Mr. Bortz or other such persons for any
reason, another person reasonably acceptable to the Required Lenders is not
employed as the applicable officer of the Parent or the Borrower.
SECTION 8.02 OPTIONAL ACCELERATION OF MATURITY. If any Event of
Default (other than an Event of Default pursuant to paragraph (f) of
Section 8.01 with respect to the Borrower or the Parent) shall have
occurred and be continuing, then, and in any such event,
<PAGE>
(a) the Administrative Agent (i) shall at the request, or may with
the consent, of the Required Lenders, by notice to the Borrower, declare
the obligation of each Bank to make Advances and the obligation of each
Issuing Bank to issue, increase, or extend Letters of Credit to be
terminated, whereupon the same shall forthwith terminate, and (ii) shall at
the request, or may with the consent, of the Required Lenders, by notice to
the Borrower, declare the Notes, all interest thereon, the Letter of Credit
Obligations, and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all such interest, all such
Letter of Credit Obligations and all such amounts shall become and be
forthwith due and payable in full, without presentment, demand, protest or
further notice of any kind (including, without limitation, any notice of
intent to accelerate or notice of acceleration), all of which are hereby
expressly waived by the Borrower,
(b) the Borrower shall, on demand of the Administrative Agent at
the request or with the consent of the Required Lenders, deposit into the
Cash Collateral Account an amount of cash equal to the Letter of Credit
Exposure as security for the Obligations to the extent the Letter of Credit
Obligations are not otherwise paid at such time, and
(c) the Administrative Agent shall at the request of, or may with
the consent of, the Required Lenders proceed to enforce its rights and
remedies under the Credit Documents for the ratable benefit of the Banks by
appropriate proceedings.
SECTION 8.03 AUTOMATIC ACCELERATION OF MATURITY. If any Event of
Default pursuant to paragraph (f) of Section 8.01 with respect to the
Borrower or the Parent shall occur,
(a) the obligation of each Bank to make Advances and the obligation
of each Issuing Bank to issue, increase, or extend Letters of Credit shall
immediately and automatically be terminated and the Notes, all interest on
the Notes, all Letter of Credit Obligations, and all other amounts payable
under this Agreement shall immediately and automatically become and be due
and payable in full, without presentment, demand, protest or any notice of
any kind (including, without limitation, any notice of intent to accelerate
or notice of acceleration), all of which are hereby expressly waived by the
Borrower and
(b) to the extent permitted by law or court order, the Borrower
shall deposit into the Cash Collateral Account an amount of cash equal to
the outstanding Letter of Credit Exposure as security for the Obligations
to the extent the Letter of Credit Obligations are not otherwise paid at
such time.
SECTION 8.04 CASH COLLATERAL ACCOUNT.
(a) PLEDGE. The Borrower hereby pledges, and grants to the
Administrative Agent for the benefit of the Banks, a security interest in
all funds held in the Cash Collateral Account maintained with Societe
Generale, New York Branch from time to time, but under the control of the
Administrative Agent, and all proceeds thereof, as security for the payment
of the Obligations, including without limitation all Letter of Credit
Obligations owing to any Issuing Bank or any other Bank due and to become
due from the Borrower to any Issuing Bank or any other Bank under this
Agreement in connection with the Letters of Credit and the Borrower agrees
to execute all cash management or cash collateral agreements and UCC-1
Financing Statements requested by the Administrative Agent as needed or
desirable for the Administrative Agent to have a perfected first lien
security interest in the Cash Collateral Account.
<PAGE>
(b) APPLICATION AGAINST LETTER OF CREDIT OBLIGATIONS. The
Administrative Agent may, at any time or from time to time apply funds then
held in the Cash Collateral Account to the payment of any Letter of Credit
Obligations owing to any Issuing Bank, in such order as the Administrative
Agent may elect, as shall have become or shall become due and payable by
the Borrower to any Issuing Bank under this Agreement in connection with
the Letters of Credit.
(c) DUTY OF CARE. The Administrative Agent shall cause Societe
Generale, New York Branch to exercise reasonable care in the custody and
preservation of any funds held in the Cash Collateral Account and Societe
Generale, New York Branch shall be deemed to have exercised such care if
such funds are accorded treatment substantially equivalent to that which
Societe Generale, New York Branch accords its own property, it being
understood that neither Societe Generale, New York Branch, nor the
Administrative Agent shall have any responsibility for taking any necessary
steps to preserve rights against any parties with respect to any such
funds.
SECTION 8.05 NON-EXCLUSIVITY OF REMEDIES. No remedy conferred upon
the Administrative Agent or the Banks is intended to be exclusive of any
other remedy, and each remedy shall be cumulative of all other remedies
existing by contract, at law, in equity, by statute or otherwise.
SECTION 8.06 RIGHT OF SET-OFF. Upon (a) the occurrence and during
the continuance of any Event of Default and (b) the granting of the
consent, if any, specified by Section 8.02 to authorize the Administrative
Agent to declare the Notes and any other amount payable hereunder due and
payable pursuant to the provisions of Section 8.02 or the automatic
acceleration of the Notes and all amounts payable under this Agreement
pursuant to Section 8.03, each Bank is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Bank to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement, the Note held by such Bank, and the other Credit Documents,
irrespective of whether or not such Bank shall have made any demand under
this Agreement, such Note, or such other Credit Documents, and although
such obligations may be unmatured. Each Bank agrees to promptly notify the
Borrower after any such set-off and application made by such Bank, provided
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Bank under this Section are in
addition to any other rights and remedies (including, without limitation,
other rights of set-off) which such Bank may have.
<PAGE>
ARTICLE IX
AGENCY AND ISSUING BANK PROVISIONS
SECTION 9.01 AUTHORIZATION AND ACTION. Each Bank hereby appoints
and authorizes the Administrative Agent to take such action as the
Administrative Agent on its behalf and to exercise such powers under this
Agreement and the other Credit Documents as are delegated to the
Administrative Agent by the terms hereof and of the other Credit Documents,
together with such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement or any other Credit
Document (including, without limitation, enforcement or collection of the
Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Banks and all holders of Notes;
PROVIDED, however, that the Administrative Agent shall not be required to
take any action which exposes the Administrative Agent to personal
liability or which is contrary to this Agreement, any other Credit
Document, or applicable law. The functions of the Administrative Agent are
administerial in nature and in no event shall the Administrative Agent have
a fiduciary or trustee relation in respect of any Bank by reason of this
Agreement or any other Credit Document. Within 5 Business Days of the
Administrative Agent or a Bank receiving actual notice (without any duty to
investigate) of a Default, the Administrative Agent or such Bank, as
applicable, will provide written notice of such Default to the Banks.
SECTION 9.02 ADMINISTRATIVE AGENT'S RELIANCE, ETC. Neither the
Administrative Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken
(including such Person's own negligence) by it or them under or in
connection with this Agreement or the other Credit Documents, except for
its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Administrative Agent:
(a) may treat the payee of any Note as the holder thereof until the
Administrative Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Administrative
Agent; (b) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any Bank and shall not
be responsible to any Bank for any statements, warranties or
representations made in or in connection with this Agreement or the other
Credit Documents; (d) shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or
conditions of this Agreement or any other Credit Document on the part of
the Parent, the Borrower or their Subsidiaries or to inspect the property
(including the books and records) of the Borrower or its Subsidiaries; (e)
shall not be responsible to any Bank for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other Credit Document; and (f) shall incur no liability
under or in respect of this Agreement or any other Credit Document by
acting upon any notice, consent, certificate or other instrument or writing
(which may be by telecopier, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
<PAGE>
SECTION 9.03 ADMINISTRATIVE AGENT AND ITS AFFILIATES. With respect
to its Commitment, the Advances made by it and the Notes issued to it, the
Administrative Agent shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though it were not
the Administrative Agent. The term "Bank" or "Banks" shall, unless
otherwise expressly indicated, include the Administrative Agent in its
individual capacity. The Administrative Agent and its Affiliates may
accept deposits from, lend money to, act as trustee under indentures of,
and generally engage in any kind of business with, the Borrower or any of
its Subsidiaries, and any Person who may do business with or own securities
of the Borrower or any such Subsidiary, all as if the Administrative Agent
were not the Administrative Agent hereunder and without any duty to account
therefor to the Banks.
SECTION 9.04 BANK CREDIT DECISION. Each Bank acknowledges that it
has, independently and without reliance upon the Administrative Agent or
any other Bank and based on the Parent's and the Borrower's financial
statements and the Parent's filings under the Exchange Act and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement.
SECTION 9.05 INDEMNIFICATION. The Banks severally agree to
indemnify the Administrative Agent and each Issuing Bank (to the extent not
reimbursed by the Borrower), according to their respective Pro Rata Shares
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Administrative Agent or such Issuing Bank in any way
relating to or arising out of this Agreement or any action taken or omitted
by the Administrative Agent or such Issuing Bank under this Agreement or
any other Credit Document (including the Administrative Agent's or such
Issuing Bank's own negligence), provided that no Bank shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
the Administrative Agent's or such Issuing Bank's gross negligence or
willful misconduct. Without limitation of the foregoing, each Bank agrees
to reimburse the Administrative Agent promptly upon demand for its Pro Rata
Share of any out-of-pocket expenses (including reasonable counsel fees)
incurred by the Administrative Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement or
any other Credit Document, to the extent that the Administrative Agent is
not reimbursed for such expenses by the Borrower.
SECTION 9.06 SUCCESSOR ADMINISTRATIVE AGENT AND ISSUING BANKS. The
Administrative Agent or any Issuing Bank may resign at any time by giving
written notice thereof to the Banks and the Borrower and may be removed at
any time with cause by the Required Lenders upon receipt of written notice
from the Required Lenders to such effect. Upon receipt of notice of any
such resignation or removal, the Required Lenders shall have the right to
appoint a successor Administrative Agent or Issuing Bank acceptable to the
Borrower. If no successor Administrative Agent or Issuing Bank shall have
been so appointed, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent's or Issuing Bank's giving of
notice of resignation or the Required Lenders' removal of the retiring
Administrative Agent or Issuing Bank, then the retiring Administrative
Agent or Issuing Bank may, on behalf of the Banks and the Borrower, appoint
a successor Administrative Agent or Issuing Bank acceptable to the
Borrower, which shall be a commercial bank meeting the financial
requirements of an Eligible Assignee and, in the case of an Issuing Bank, a
<PAGE>
Bank. Upon the acceptance of any appointment as Administrative Agent or
Issuing Bank by a successor Administrative Agent or Issuing Bank, such
successor Administrative Agent or Issuing Bank shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent or Issuing Bank, and the retiring
Administrative Agent or Issuing Bank shall be discharged from its duties
and obligations under this Agreement and the other Credit Documents, except
that the retiring Issuing Bank shall remain an Issuing Bank with respect to
any Letters of Credit issued by such Issuing Bank and outstanding on the
effective date of its resignation or removal and the provisions affecting
such Issuing Bank with respect to such Letters of Credit shall inure to the
benefit of the retiring Issuing Bank until the termination of all such
Letters of Credit. After any retiring Administrative Agent's or Issuing
Bank's resignation or removal hereunder as Administrative Agent or Issuing
Bank, the provisions of this Article IX shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was such
Administrative Agent or Issuing Bank under this Agreement and the other
Credit Documents.
SECTION 9.07 JOINT BOOK RUNNERS, SYNDICATION AGENT AND DOCUMENTATION
AGENT. Bank of Montreal, Chicago Branch shall be named Syndication Agent
under the Credit Documents, but the Syndication Agent shall have no right
or duty to act as agent on behalf of the Banks in such capacity. Deutsche
Banc Alex. Brown shall be named Joint Book Runner and Documentation Agent
under the Credit Documents, but such Joint Book Runner and the
Documentation Agent shall have no right or duty to act as agent on behalf
of the Banks in such capacities. Societe Generale, Southwest Agency shall
be named Joint Book Runner Agent under the Credit Documents, but such Joint
Book Runner shall have no right or duty to act as agent on behalf of the
Banks in such capacity.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement, the Notes, or any other Credit Document, nor
consent to any departure by the Borrower or any Guarantor therefrom, nor
increase in the aggregate Commitments of the Banks, shall in any event be
effective unless the same shall be in writing and signed by the
Administrative Agent, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
PROVIDED, however, that no amendment shall increase the Commitment of any
Bank without the written consent of such Bank, and no amendment, waiver or
consent shall, unless in writing and signed by all the Banks, do any of the
following: (a) increase the aggregate Commitments of the Banks in excess
of $300,000,000, (b) reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder or under any other Credit
Document or otherwise release the Borrower from any Obligations, (c)
postpone any date fixed for any scheduled payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, (d)
change the percentage of the Commitments of the Banks which shall be
required for the Banks or any of them to take any action hereunder or under
any other Credit Document, (e) amend this Section 10.01, (f) amend the
definition of "Required Lenders", (g) amend the definition of "Borrowing
Base", "Borrowing Base Hotel Value" or "Hotel Value", but not the
definitions that are used in such definitions, or (h) release the Parent
from its obligations under the Guaranty; and PROVIDED, further, that no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent or any Issuing Bank in addition to the Banks required
above to take such action, affect the rights or duties of the
Administrative Agent or such Issuing Bank, as the case may be, under this
Agreement or any other Credit Document. In addition, none of the following
decisions shall be made without the written consent of the Required
Lenders:
<PAGE>
(a) release any Guarantor except the Parent from its obligations
under any of the Guaranties, provided that the Administrative Agent can (i)
release any Supplemental Guarantor from its obligations under any of the
Supplemental Guaranties and (ii) if no Default then exists, release any
Subsidiary of the Borrower which no longer is a Property Owner of an
Eligible Property;
(b) release any Person from its obligations under any of the
Environmental Indemnities;
(c) any determination to make a Borrowing after the occurrence and
during the continuance of an Event of Default;
(d) increases the maximum duration of Interest Periods permitted
under this Agreement;
(e) any waiver or any amendment to the financial covenants
contained in Article VII of this Agreement or any definitions used therein;
(f) any material waiver or modification of the covenants contained
in Article V or Article VI;
(g) amends any of the definitions that are used in the definition
of "Borrowing Base" or "Borrowing Base Hotel Value";
(h) any amendment, supplement or modification to, or waiver of, the
provisions of Section 8.01 of this Agreement;
(i) any determination to send notice to the Borrower of, or
otherwise declare, an Event of Default pursuant to Section 8.01 of this
Agreement;
(j) any determination to accelerate the Obligations pursuant to
Section 8.02 of this Agreement;
(k) any exercise remedies under any Credit Document;
(l) any material decision regarding the operation, maintenance,
sale or other disposition of any Property after the foreclosure upon such
Property, provided that Administrative Agent shall be able to take any
action it determines necessary to preserve or maintain any such Property
and provided further that if the Required Lenders cannot agree on the sale
or disposition of such Property, the Administrative Agent shall not sell or
dispose of such Property, but shall continue to hold such Property for the
benefit of the Banks;
(m) any waiver for more than 45 days of, or any material amendment
to, the reporting requirements set forth in clauses (a)-(d) of Section 5.05
of this Agreement;
(n) any material waiver of the conditions to a Hotel Property
qualifying as either an Eligible Property or a Permitted Non-Eligible
Property; and
(o) any other material waiver or modification of the Credit
Documents.
Any amendment to a covenant of the Parent or any of its Subsidiaries or
amendment to a definition shall require the Borrower's written consent.
<PAGE>
SECTION 10.02 NOTICES, ETC. Except a specifically provided herein,
all notices and other communications shall be in writing (including
telecopy or telex) and mailed, telecopied, telexed, hand delivered or
delivered by a nationally recognized overnight courier, (a) if to the
Borrower, at its address at 4800 Montgomery Lane, Suite M25, Bethesda,
Maryland 20814, Attention: Mr. Hans S. Weger, with a copy to Michael F.
Taylor at Brown & Wood LLP, 555 California Street, San Francisco,
California 94104-1715 (telephone: (415) 772-1205; telecopy (415) 397-4621)
and a copy to Robert K. Hagan at Hagan & Associates, Suite 4322, 200 East
Randolph Drive, Chicago, Illinois 60601 (telephone: (312) 228-2050;
telecopy (312) 228-0982); (b) if to any Bank at its Domestic Lending
Office; (c) if to the Administrative Agent or to Societe Generale,
Southwest Agency in its capacity as an Issuing Bank, at its address at 4900
Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas 75201, Attention:
Carina Huynh, (telecopy: (214) 979-2727; telephone: (214) 979-2774); or,
(d) as to each party, at such other address or teletransmission number as
shall be designated by such party in a written notice to the other parties.
All such notices and communications shall, when mailed, telecopied, telexed
or hand delivered or delivered by overnight courier, be effective three
days after deposited in the mails, when telecopy transmission is completed,
when confirmed by telex answer-back or when delivered, respectively, except
that notices and communications to the Administrative Agent pursuant to
Article II or Article IX shall not be effective until received by the
Administrative Agent.
SECTION 10.03 NO WAIVER; REMEDIES. No failure on the part of any
Bank, the Administrative Agent, or any Issuing Bank to exercise, and no
delay in exercising, any right hereunder or under any Note shall operate as
a waiver thereof; nor shall any single or partial exercise of any such
right preclude any other or further exercise thereof or the exercise of any
other right. The remedies provided in this Agreement and the other Credit
Documents are cumulative and not exclusive of any remedies provided by law.
SECTION 10.04 COSTS AND EXPENSES. The Borrower agrees to pay on
demand all out-of-pocket costs and expenses of the Administrative Agent in
connection with the preparation, execution, delivery, due diligence,
administration, modification and amendment of this Agreement, the Notes and
the other Credit Documents and syndication of the Obligations including,
without limitation, (a) the reasonable fees and out-of-pocket expenses of
Bracewell & Patterson, L.L.P., counsel for the Administrative Agent and the
Banks, and (b) to the extent not included in the foregoing, the costs of
any local counsel, travel expenses of the Administrative Agent and its
consultants and representatives, Engineering Reports, Environmental
Reports, mortgage and intangible taxes (if any), and any title or Uniform
Commercial Code search costs, any flood plain search costs, insurance
consultant costs and other costs usual and customary in connection with a
credit facility of this type. In addition, the Borrower agrees to pay on
demand all reasonable out-of-pocket costs and expenses, if any, of the
Administrative Agent, each Issuing Bank, and each Bank (including, without
limitation, reasonable counsel fees and expenses of the Administrative
Agent, such Issuing Bank, and each Bank) in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement and the other Credit Documents.
SECTION 10.05 BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Borrower and the Administrative
Agent, and when the Administrative Agent shall have, as to each Bank,
either received a counterpart hereof executed by such Bank or been notified
by such Bank that such Bank has executed it and thereafter shall be binding
upon and inure to the benefit of the Borrower, the Administrative Agent,
each Issuing Bank, and each Bank and their respective successors and
assigns, except that the Borrower shall not have the right to assign its
rights or delegate its duties under this Agreement or any interest in this
Agreement without the prior written consent of each Bank.
<PAGE>
SECTION 10.06 BANK ASSIGNMENTS AND PARTICIPATIONS.
(a) ASSIGNMENTS. Any Bank may assign to one or more banks or other
entities all or any portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it, the Notes held by it, and the
participation interest in the Letter of Credit Obligations held by it);
PROVIDED, HOWEVER, that (i) each such assignment shall be of a constant,
and not a varying, percentage of all of such Bank's rights and obligations
under this Agreement and shall involve a ratable assignment of such Bank's
Commitment, such Bank's Advances and such Bank's participation in Letter of
Credit Exposure, (ii) the amount of the resulting Commitment and Advances
of the assigning Bank (unless it is assigning all its Commitment) and the
assignee Bank pursuant to each such assignment (determined as of the date
of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $10,000,000 and shall be an integral multiple of
$1,000,000, (iii) each such assignment shall be to an Eligible Assignee,
(iv) the parties to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with the Notes subject to such
assignment, (v) the Administrative Agent shall consent to such assignment,
which consent shall not be unreasonably withheld or delayed, and (vi) each
Eligible Assignee (other than an Eligible Assignee which is an Affiliate of
the assigning Bank) shall pay to the Administrative Agent a $3,500
administrative fee. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least three Business Days
after the execution thereof, (A) the assignee thereunder shall be a party
hereto for all purposes and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Bank hereunder and (B)
such Bank thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of such Bank's rights and obligations
under this Agreement, such Bank shall cease to be a party hereto).
Notwithstanding anything herein to the contrary, any Bank may assign, as
collateral or otherwise, any of its rights under the Credit Documents to
any Federal Reserve Bank.
(b) TERM OF ASSIGNMENTS. By executing and delivering an Assignment
and Acceptance, the Bank thereunder and the assignee thereunder confirm to
and agree with each other and the other parties hereto as follows: (i)
other than as provided in such Assignment and Acceptance, such Bank makes
no representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency of value of this Agreement or any other instrument
or document furnished pursuant hereto; (ii) such Bank makes no
representation or warranty and assumes no responsibility with respect to
the financial condition of the Borrower or the Guarantors or the
performance or observance by the Borrower or the Guarantors of any of their
obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements and filings under the Exchange Act referred to in Sections 4.06
and 5.05, if applicable, and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (iv) such assignee will, independently
and without reliance upon the Administrative Agent, such Bank or any other
Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee
appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement as are
<PAGE>
delegated to the Administrative Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vi) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be
performed by it as a Bank.
(c) THE REGISTER. The Administrative Agent shall maintain at its
address referred to in Section 10.02 a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the
recordation of the names and addresses of the Banks and the Commitments of,
and principal amount of the Advances owing to, each Bank from time to time
(the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent, the Issuing Banks, and the Banks may treat each
Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for inspection
by the Borrower or any Bank at any reasonable time and from time to time
upon reasonable prior notice.
(d) PROCEDURES. Upon its receipt of an Assignment and Acceptance
executed by a Bank and an Eligible Assignee, together with the Note subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of the
attached Exhibit B, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register, and (iii) give prompt
notice thereof to the Borrower. Within five Business Days after its
receipt of such notice, the Borrower, at its own expense, shall execute and
deliver to the Administrative Agent in exchange for the surrendered Note, a
new Note payable to the order of such Eligible Assignee in amount equal to,
respectively, the Commitment and the outstanding Advances assumed by it
pursuant to such Assignment and Acceptance, and if the assigning Bank has
retained any Commitment hereunder, a new Note payable to the order of such
Bank in an amount equal to, respectively, the Commitment and the
outstanding Advances retained by it hereunder. Such new Note shall be
dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of the attached Exhibit A.
(e) PARTICIPATIONS. Each Bank may sell participations to one or
more banks or other entities in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it, its participation
interest in the Letter of Credit Obligations, and the Notes held by it);
PROVIDED, HOWEVER, that (i) such Bank's obligations under this Agreement
(including, without limitation, its Commitment to the Borrower hereunder)
shall remain unchanged, (ii) such Bank shall remain solely responsible to
the other parties hereto for the performance of such obligations, (iii)
such Bank shall remain the holder of any such Note for all purposes of this
Agreement, (iv) the Borrower, the Administrative Agent, and the Issuing
Banks and the other Banks shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under this
Agreement, and (v) such Bank shall not require the participant's consent to
any matter under this Agreement, except for change in the principal amount
of any Note in which the participant has an interest, reductions in fees or
interest, or extending the Maturity Date except as permitted in this
Agreement. The Borrower hereby agrees that participants shall have the
same rights under Sections 2.08, 2.09, and 2.11(c) hereof as the Bank to
the extent of their respective participations, PROVIDED that no participant
shall be able to collect in excess of amounts payable to the Bank selling
to such participant under such Sections in respect of the interest sold to
such participant or to collect any such amounts from the Borrower.
<PAGE>
(f) CONFIDENTIALITY. Each Bank may furnish any information
concerning the Borrower and its Subsidiaries in the possession of such Bank
from time to time to assignees and participants (including prospective
assignees and participants);PROVIDED that, prior to any such disclosure,
the assignee or participant or proposed assignee or participant shall agree
in writing to preserve the confidentiality of any confidential information
relating to the Borrower and its Subsidiaries received by it from or on
behalf of such Bank in accordance with Section 10.20. Such Bank shall
promptly deliver a signed copy of any such confidentiality agreement to the
Administrative Agent.
SECTION 10.07 INDEMNIFICATION. The Borrower shall indemnify the
Administrative Agent, the Banks (in any capacity or title and including any
lender which was a Bank hereunder prior to any full assignment of its
Commitment), the Issuing Banks, and each affiliate thereof and their
respective directors, officers, employees and agents from, and discharge,
release, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject,
insofar as such losses, liabilities, claims or damages arise out of or
result from (i) any actual or proposed use by the Borrower or any Affiliate
of the Borrower of the proceeds of any Advance, (ii) any breach by the
Borrower or any Guarantor of any provision of this Agreement or any other
Credit Document, (iii) any investigation, litigation or other proceeding
(including any threatened investigation or proceeding) relating to the
foregoing, or (iv) any Environmental Claim or requirement of Environmental
Laws concerning or relating to the present or previously-owned or operated
properties, or the operations or business, of the Borrower or any of its
Subsidiaries, and the Borrower shall reimburse the Administrative Agent,
each Issuing Bank, and each Bank, and each affiliate thereof and their
respective directors, officers, employees and agents, upon demand for any
reasonable out-of-pocket expenses (including legal fees) incurred in
connection with any such investigation, litigation or other proceeding; and
expressly including any such losses, liabilities, claims, damages, or
expense incurred by reason of the Person being indemnified's own
negligence, but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct
of the Person to be indemnified.
SECTION 10.08 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the
same agreement.
SECTION 10.09 SURVIVAL OF REPRESENTATIONS, INDEMNIFICATIONS, ETC.
All representations, warranties contained in this Agreement or made in
writing by or on behalf of the Borrower in connection herewith shall
survive the execution and delivery of this Agreement and the Credit
Documents, the making of the Advances and any investigation made by or on
behalf of the Banks, none of which investigations shall diminish any Bank's
right to rely on such representations and warranties. All obligations of
the Borrower provided for in Sections 2.08, 2.09, 2.11(c), 9.05 and 10.07
shall survive any termination of this Agreement and repayment in full of
the Obligations.
SECTION 10.10 SEVERABILITY. In case one or more provisions of this
Agreement or the other Credit Documents shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions contained herein or
therein shall not be affected or impaired thereby.
SECTION 10.11 ENTIRE AGREEMENT. This Agreement, the Notes and the
other Credit Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersede any
prior agreements, written or oral, with respect thereto.
<PAGE>
SECTION 10.12 USURY NOT INTENDED. It is the intent of the Borrower
and each Bank in the execution and performance of this Agreement and the
other Credit Documents to contract in strict compliance with applicable
usury laws, including conflicts of law concepts, governing the Advances of
each Bank including such applicable laws of the State of New York and the
United States of America from time to time in effect. In furtherance
thereof, the Banks and the Borrower stipulate and agree that none of the
terms and provisions contained in this Agreement or the other Credit
Documents shall ever be construed to create a contract to pay, as
consideration for the use, forbearance or detention of money, interest at a
rate in excess of the Maximum Rate and that for purposes hereof "interest"
shall include the aggregate of all charges which constitute interest under
such laws that are contracted for, charged or received under this
Agreement; and in the event that, notwithstanding the foregoing, under any
circumstances the aggregate amounts taken, reserved, charged, received or
paid on the Advances, include amounts which by applicable law are deemed
interest which would exceed the Maximum Rate, then such excess shall be
deemed to be a mistake and each Bank receiving same shall credit the same
on the principal of its Notes (or if such Notes shall have been paid in
full, refund said excess to the Borrower). In the event that the maturity
of the Notes is accelerated by reason of any election of the holder thereof
resulting from any Event of Default under this Agreement or otherwise, or
in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include more than the
Maximum Rate and excess interest, if any, provided for in this Agreement or
otherwise shall be canceled automatically as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited on
the applicable Notes (or, if the applicable Notes shall have been paid in
full, refunded to the Borrower). In determining whether or not the
interest paid or payable under any specific contingencies exceeds the
Maximum Rate, the Borrower and the Banks shall to the maximum extent
permitted under applicable law amortize, prorate, allocate and spread in
equal parts during the period of the full stated term of the Notes all
amounts considered to be interest under applicable law at any time
contracted for, charged, received or reserved in connection with the
Obligations. The provisions of this Section shall control over all other
provisions of this Agreement or the other Credit Documents which may be in
apparent conflict herewith.
SECTION 10.13 GOVERNING LAW. ANY DISPUTE BETWEEN THE BORROWER, THE
ADMINISTRATIVE AGENT, THE ISSUING BANK, ANY BANK, OR ANY INDEMNITEE ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE
OTHER CREDIT DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS
(INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF
THE STATE OF NEW YORK.
SECTION 10.14 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY
TRIAL.
(a) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B),
EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE
OTHER CREDIT DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED
IN NEW YORK, NEW YORK, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK, NEW YORK. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT
PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
<PAGE>
(b) OTHER JURISDICTIONS. THE BORROWER AGREES THAT THE
ADMINISTRATIVE AGENT, ANY BANK OR ANY INDEMNITEE SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER THE BORROWER OR
(2) ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH
PERSON. THE BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. THE BORROWER WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH
PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION (B).
(c) SERVICE OF PROCESS. THE BORROWER WAIVES PERSONAL SERVICE OF
ANY PROCESS UPON IT AND IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF
ANY WRITS, PROCESS OR SUMMONSES IN ANY SUIT, ACTION OR PROCEEDING BY THE
MAILING THEREOF BY THE ADMINISTRATIVE AGENT OR THE BANKS BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER ADDRESSED AS PROVIDED
HEREIN. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF
THE ADMINISTRATIVE AGENT OR THE BANKS TO SERVE ANY SUCH WRITS, PROCESS OR
SUMMONSES IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW. THE BORROWER
IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH IN ANY JURISDICTION SET FORTH ABOVE.
(d) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED
WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM
IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE
PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) WAIVER OF BOND. THE BORROWER WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL
PROCESS OR PROCEEDING TO REALIZE ON THE COLLATERAL ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO ENFORCE BY SPECIFIC
PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT
INJUNCTION, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT.
(f) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH
OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY,
THE PROVISIONS OF THIS SECTION 10.14, WITH ITS COUNSEL.
SECTION 10.15 KNOWLEDGE OF BORROWER. For purposes of this
Agreement, "knowledge of the Borrower" means the actual knowledge of any of
the executive officers and all other Responsible Officers of the Parent.
SECTION 10.16 BANKS NOT IN CONTROL. None of the covenants or other
provisions contained in the Credit Documents shall or shall be deemed to,
give the Banks the rights or power to exercise control over the affairs
and/or management of the Borrower, any of its Subsidiaries or any
Guarantor, the power of the Banks being limited to the right to exercise
the remedies provided in the Credit Documents; provided, however, that if
any Bank becomes the owner of any stock, or other equity interest in, any
Person whether through foreclosure or otherwise, such Bank shall be
entitled (subject to requirements of law) to exercise such legal rights as
it may have by being owner of such stock, or other equity interest in, such
Person.
<PAGE>
SECTION 10.17 HEADINGS DESCRIPTIVE. The headings of the several
Sections and paragraphs of the Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any
provision of this Agreement.
SECTION 10.18 TIME IS OF THE ESSENCE. Time is of the essence under
the Credit Documents.
SECTION 10.19 SCOPE OF INDEMNITIES. THE BORROWER ACKNOWLEDGES AND
AGREES THAT CERTAIN OF ITS OBLIGATIONS AND INDEMNITIES UNDER THIS AGREEMENT
INCLUDE ANY CLAIMS RESULTING FROM THE NEGLIGENCE OR ALLEGED NEGLIGENCE OF
THE ADMINISTRATIVE AGENT, THE BANKS, OR ANY OTHER PERSON BEING INDEMNIFIED.
SECTION 10.20 CONFIDENTIALITY. The Administrative Agent, Issuing
Bank and each Bank severally agrees that it will use its best efforts not
to disclose without the prior written consent of the Parent or the Borrower
(other than to an Affiliate or such Person's or their Affiliate's
directors, officers, employees, auditors, regulators or counsel) any
information with respect to the Parent or the Borrower which is furnished
pursuant to this Agreement except that the Administrative Agent, Issuing
Bank and each Bank may disclose any such information (a) which is or
becomes generally available to the public other than by a breach of this
Section 10.20, (b) which is known by or becomes known by such Person from
another Person, (c) as may be required or appropriate in any report,
statement or testimony submitted to any Governmental Authority (whether in
the United States or elsewhere), (d) as may be required or appropriate in
response to any summons or subpoena or any law, order, regulation or ruling
applicable to such Agent, Issuing Bank or Bank and (e) to any prospective
participant or assignee in connection with any contemplated transfer
pursuant to Section 10.06 in accordance with the provisions of Section
10.06(f).
SECTION 10.21 HYATT BOSTON. The Borrower represents to the Banks
that the Borrower currently anticipates that (a) in order to refinance the
Hyatt Boston Existing Bonds the Hyatt Boston Issuer will issue the Hyatt
Boston Replacement Bonds, (b) that for a period of time (the "Hyatt Boston
Bond Overlap Period") currently anticipated to be less than sixty (60) days
(i) both the Hyatt Boston Existing Bonds and the Hyatt Boston Replacement
Bonds will be outstanding at the same time, and (ii) the Hyatt Boston
Replacement Bonds Proceeds will be deposited in an account and serve as
collateral for the Hyatt Boston Replacement Bonds and the Hyatt Boston
Replacement Bonds Credit Enhancement until such time as (A) such sums are
used to redeem the Hyatt Boston Existing Bonds and (B) the Hyatt Boston
Replacement Bonds and the Hyatt Boston Replacement Bonds Credit Enhancement
are secured by the Hyatt Boston and the Hyatt Boston Lease. For purposes
of the financial covenants set forth in Article 7, the definitions used in
such financial covenants, and the determination of the Leverage Ratio,
during the Hyatt Boston Bond Overlap Period, (a) the interest paid on the
Hyatt Boston Existing Bonds will be excluded up to an amount equal to the
interest earned from the Hyatt Boston Replacement Bonds Proceeds, (b)
except as provided in the preceding clause (a), the interest earned from
the Hyatt Boston Replacement Bonds Proceeds will be excluded, (c) the Hyatt
Boston Replacement Bonds will not be deemed Indebtedness of the Parent, the
Borrower or any of their Subsidiaries, and (d) the Hyatt Boston Replacement
Bonds Proceeds will not be deemed an asset of the Parent, the Borrower or
any of their Subsidiaries; PROVIDED that (i) no Default exists, (ii)
neither the Parent, nor the Borrower nor any of their Subsidiaries except
for the Hyatt Boston Lessee has any recourse liability for either the Hyatt
Boston Existing Bonds, the Hyatt Boston Existing Credit Enhancement, the
Hyatt Boston Replacement Bonds, or the Hyatt Boston Replacement Bonds
Credit Enhancement except for customary exceptions of non-recourse
Indebtedness, (iii) the Hyatt Boston Bond Overlap Period does not exceed
ninety (90) days, (iv) no event of default has been declared for any of the
Hyatt Boston Existing Bonds, the Hyatt Boston Existing Credit Enhancement,
the Hyatt Boston Replacement Bonds, or the Hyatt Boston Replacement Bonds
Credit Enhancement, and (v) the transactions contemplated by this Section
10.21 are completed pursuant to documentation reasonably acceptable to the
Administrative Agent.
<PAGE>
[SIGNATURE PAGE OF SENIOR UNSECURED CREDIT AGREEMENT]
EXECUTED as of the date first referenced above.
BORROWER:
LASALLE HOTEL OPERATING PARTNERSHIP, L.P.
By: LaSalle Hotel Properties,
its general partner
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
EXHIBIT (10)(iii)
-----------------
ENVIRONMENTAL INDEMNIFICATION AGREEMENT
This Environmental Indemnification Agreement (this "Agreement") is
made and entered into effective for all purposes as of the 13th day of
November, 2000, by the parties signatory hereto or to an Accession
Agreement (as hereinafter defined) (collectively, the "Indemnitor" whether
one or more), to and for the benefit of SOCIETE GENERALE, SOUTHWEST AGENCY,
as Joint Book Runner and Administrative Agent (the "Administrative Agent"),
BANK OF MONTREAL, CHICAGO BRANCH as Syndication Agent (the "Syndication
Agent"), DEUTSCHE BANC ALEX. BROWN, as Joint Book Runner and Documentation
Agent ("Documentation Agent"), and the banks and other lenders named in the
Credit Agreement herein described (the "Banks").
INTRODUCTION
WHEREAS, this Agreement is given in connection with that certain
Second Amended and Restated Senior Unsecured Credit Agreement dated as of
even date as this Agreement ("Credit Agreement"), among LASALLE HOTEL
OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the
"Borrower"), Administrative Agent, Syndication Agent, Documentation Agent
and the banks and other lenders party thereto (collectively the "Banks")
pursuant to which the Banks are making, subject
to future advances, a loan
in an amount up to $200,000,000.00 (the "Loan") to Borrower as more
specifically described therein;
WHEREAS, the Borrower and Subsidiaries of the Borrower now or
hereafter will own certain Hotel Properties which include without
limitation the Initial Properties, the Future Properties, the Permitted
Non-Eligible Properties and the properties owned by the Permitted Other
Subsidiaries (said properties together with all property owned by the
Participating Lessees in connection with such Hotel Properties, all rights
and appurtenances to such Hotel Properties and all improvements presently
located or hereafter constructed on such Hotel Properties are hereinafter
collectively called the "Properties", and each a "Property");
WHEREAS, the Borrower is the principal financing entity for capital
requirements of its Subsidiaries, and from time to time the Borrower has
made and will continue to make capital contributions and advances to its
Subsidiaries, including the Subsidiaries which are parties hereto. Other
than the Parent, each Indemnitor is a direct or indirect subsidiary of the
Borrower. Each Indemnitor will derive substantial direct and indirect
benefit from the transactions contemplated by the Credit Agreement; and
WHEREAS, the Banks have required the execution and delivery of this
Agreement as a condition precedent to the execution of the Credit
Agreement. The Banks would not be willing to execute the Credit Agreement
in the absence of the execution and delivery by Indemnitor of this
Agreement.
<PAGE>
AGREEMENT
---------
NOW, THEREFORE, Indemnitor, as an inducement to the Banks to make the
Loan, hereby covenants and agrees to and for the benefit of the Banks as
follows:
1. DEFINED TERMS. All terms used in this Agreement, but not
defined herein, shall have the meaning given such terms in the Credit
Agreement.
2. HAZARDOUS MATERIAL. As used in this Agreement, the term
"Hazardous Materials" shall mean any flammable explosives, radioactive
materials, hazardous wastes, hazardous materials, hazardous or toxic
substances, or related materials as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
(42 U.S.C. Section 9601 et. seq.), the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.), and in the
regulations adopted and publications promulgated pursuant thereto, and all
friable asbestos, petroleum derivatives, polychlorinated biphenyls, and
materials defined as hazardous materials under any federal, state or local
laws, ordinances, codes, rules, orders, regulations or policies governing
the use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal thereof (collectively, "Environmental
Laws").
3. REPRESENTATION. Except as set forth in the Environmental
Reports, Indemnitor warrants and represents to the Banks that it has no
knowledge of (a) the presence of any Hazardous Materials on any of the
Properties except for Permitted Hazardous Substances; or (b) any material
spills, releases, discharges or disposal of Hazardous Materials that have
occurred or are presently occurring off any of the Properties as a result
of any construction on or operation and use of any of the Properties. In
connection with the operation and use of any of the Properties, Indemnitor
warrants and represents that, as of the date of this Agreement, it has no
knowledge of any failure to comply in all material respects with all
applicable law, state and federal environmental laws, regulations,
ordinances and administrative and judicial orders relating to the
generation, recycling, reuse, sale, storage, handling, transport and
disposal of any Hazardous Materials other than as set forth in the
Environmental Reports.
4. COVENANT. Indemnitor covenants and agrees not to cause or
permit the presence, use, generation, release, discharge, storage, disposal
or transportation of any Hazardous Materials on, under, in, about, to or
from any of the Properties except for Permitted Hazardous Substances.
5. INDEMNIFICATION. Indemnitor shall exonerate, indemnify, pay
and protect, defend (with counsel approved pursuant to the Credit
Agreement) and save the Administrative Agent, the Syndication Agent, the
Documentation Agent, the Banks, and their respective directors, trustees,
beneficiaries, officers, shareholders, employees and agents of the Banks
(collectively, the "Indemnified Parties"), harmless from and against any
claims (including, without limitation, third party claims for personal
injury or real or personal property damage), actions, administrative
proceedings (including informal proceedings), judgments, damages, punitive
damages, penalties, fines, costs, taxes, assessments, liabilities
(including, without limitation, sums paid in settlements of claims),
interest or losses, including reasonable attorneys' fees and expenses
(including, without limitation, any such reasonable fees and expenses
incurred in enforcing this Agreement or collecting any sums due hereunder),
consultant fees, and expert fees, together with all other reasonable costs
and expenses of any kind or nature (collectively, the "Costs") that arise
directly or indirectly in connection with the presence, suspected presence,
release or suspected release of any Hazardous Materials in or into the air,
<PAGE>
soil, ground water, surface water or improvements at, on, about, under or
within any of the Properties, or any portion thereof, or elsewhere in
connection with the transportation of Hazardous Materials to or from any of
the Properties (any such release being referred to herein as a "Release");
provided however that Indemnitor shall not be so liable for any Costs
arising because of the gross negligence or willful misconduct of an
Indemnified Party or Costs arising because of a Release from or on a
Property after the Administrative Agent or the Administrative Agent's
nominee acquires title to such Property. INDEMNITOR'S OBLIGATION TO SO
INDEMNIFY THE INDEMNIFIED PARTIES SHALL INCLUDE INDEMNIFICATION FOR ANY OF
SUCH MATTERS CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE
INDEMNIFIED PARTIES. The indemnification provided in this Section shall
specifically apply to and include claims or actions brought by or on behalf
of tenants or employees of Indemnitor; Indemnitor hereby expressly waives
(with respect to any claims of the Indemnified Parties arising under this
Agreement) any immunity to which Indemnitor may otherwise be entitled under
any industrial or worker's compensation laws. In the event any of the
Indemnified Parties shall suffer or incur any such Costs, Indemnitor shall
pay to the Administrative Agent for the benefit of the Indemnified Party
the total of all such Costs suffered or incurred by such Indemnified Party
within ten (10) days after demand therefor, such payment to be disbursed by
the Administrative Agent in accordance with the Credit Agreement. Without
limiting the generality of the foregoing, the indemnification provided by
this Section 5 shall specifically cover Costs, including, without
limitation, capital, operating and maintenance costs, incurred in
connection with any investigation or monitoring of site conditions, any
clean-up, containment, remedial, removal or restoration work required or
performed by any federal, state or local governmental agency or political
subdivision ("Governmental Agency") or performed by any non-governmental
entity or person as required or requested, by any Governmental Agency
because of the presence, suspected presence, release or suspected release
of any Hazardous Materials in or into the air, soil, groundwater, surface
water or improvements at, on, under or within any of the Properties (or any
portion thereof), or elsewhere in connection with the transportation of
Hazardous Materials to or from any of the Properties, and any claims of
third parties for loss or damage due to such Hazardous Materials.
6. REMEDIAL WORK. In the event any investigation or monitoring of
site conditions or any clean-up, containment, restoration, removal or other
remedial work ("Remedial Work") is required (a) under any Environmental
Law, (b) by any judicial, arbitral or administrative order, (c) in order to
comply with any agreements affecting any of the Properties, or (d) to
maintain any of the Properties in a standard of environmental condition
which prevents the release or generation of any Hazardous Materials except
for Permitted Hazardous Substances, Indemnitor shall perform or cause to be
performed such Remedial Work; provided, that Indemnitor may withhold
commencement of such Remedial Work pending resolution of any good faith
contest regarding the application, interpretation or validity of any law,
regulation, order or agreement, subject to the requirements of Section 7
below. All Remedial Work shall be conducted (i) in a diligent and timely
fashion by a licensed environmental engineer, (ii) pursuant to a detailed
written plan for the Remedial Work approved by any Governmental Agency with
a legal or contractual right to such approval, (iii) with such insurance
coverage pertaining to liabilities arising out of the Remedial Work as is
then customarily maintained with respect to such activities and (iv) only
following receipt of all required permits, licenses or approvals. In
addition, Indemnitor shall submit to the Banks promptly upon receipt or
preparation, copies of any and all reports, studies, analyses,
correspondence, governmental comments or approvals, proposed removal or
other Remedial Work contracts and similar information prepared or received
by Indemnitor in connection with any Remedial Work or Hazardous Materials
relating to any of the Properties. All costs and expenses of such Remedial
Work shall be paid by Indemnitor, including, without limitation, the
charges of the Remedial Work contractors and the consulting environmental
engineer, any taxes or penalties assessed in connection with the Remedial
Work and the Banks' reasonable fees and costs incurred in connection with
monitoring or review of such Remedial Work. In the event Indemnitor should
<PAGE>
fail to commence or cause to be commenced such Remedial Work, in a timely
fashion, or fail diligently to prosecute to completion, such Remedial Work,
the Administrative Agent following consent of the Required Lenders
(following thirty (30) days written notice to Indemnitor) may, but shall
not be required to, cause such Remedial Work to be performed, and all costs
and expenses thereof, or incurred in connection therewith shall be Costs
within the meaning of Section 5 above. All such Costs shall be due and
payable to the Administrative Agent by Indemnitor upon thirty (30) days
after demand therefor, such payments to be disbursed by the Administrative
Agent in accordance with the Credit Agreement.
7. PERMITTED CONTESTS. Notwithstanding any provision of this
Agreement to the contrary, Indemnitor may contest by appropriate action any
Remedial Work requirement imposed by any Governmental Agency or similar
agency provided that (a) Indemnitor has given the Banks written notice that
Indemnitor is contesting or shall contest and Indemnitor does in fact
contest the application, interpretation or validity of the law, regulation,
order or agreement pertaining to the Remedial Work by appropriate legal or
administrative proceedings conducted in good faith and with due diligence
and dispatch, (b) such contest shall not subject any of the Indemnified
Parties nor any assignee of all or any portion of the Banks' interest in
the Loan nor any of the Properties to civil or criminal liability and does
not jeopardize any such party's lien upon or interest in any of the
Properties and (c) if the estimated cost of the Remedial Work is greater
than $1,000,000, Indemnitor shall give such security or assurances as may
be reasonably required by the Banks as determined pursuant to the Credit
Agreement to ensure ultimate compliance with all legal or contractual
requirements pertaining to the Remedial Work (and payment of all costs,
expenses, interest and penalties in connection therewith) and to prevent
any sale, forfeiture or loss by reason of nonpayment or non-compliance.
8. REPORTS AND CLAIMS. Indemnitor shall deliver to the Banks
copies of any reports, analyses, correspondence, notices, licenses,
approvals, orders or other written materials relating to the environmental
condition of any of the Properties promptly upon receipt, completion or
delivery thereof. Indemnitor shall give notice to the Banks of any claim,
action, administrative proceeding (including, without limitation, informal
proceedings) or other demand by any governmental agency or other third
party involving Costs or Remedial Action at the time such claim or other
demand first becomes known to Indemnitor. Receipt of any such notice shall
not be deemed to create any obligation on the Banks to defend or otherwise
respond to any claim or demand. All notices, approvals, consents, requests
and demands upon the respective parties hereto shall be in writing,
including telegraphic communication and delivered or teletransmitted to the
Administrative Agent, as set forth in the Credit Agreement and to each
Indemnitor, at the address set forth beneath such Indemnitor's signature or
in the Accession Agreement executed by such Indemnitor, or to such other
address as shall be designated by any Indemnitor or the Administrative
Agent in written notice to the other parties. All such notices and other
communications shall be effective when delivered or teletransmitted to the
above addresses.
9. BANKS AS OWNER. If for any reason, the Administrative Agent or
any of the Banks (or any successor or assign of such parties) becomes the
fee owner of any of the Properties and any claim, action, notice,
administrative proceeding (including, without limitation, informal
proceedings) or other demand is made by any governmental agency or other
third party which implicate Costs or Remedial Work, Indemnitor shall
cooperate with such party in any defense or other appropriate response to
any such claim or other demand; provided however that Indemnitor shall not
be so liable for any Costs arising because of the gross negligence or
willful misconduct of an Indemnified Party. Indemnitor's duty to cooperate
and right to participate in the defense or response to any such claim or
demand shall not be deemed to limit or otherwise modify Indemnitor's
obligations under this Agreement. Any party subject to a claim or other
proceeding referenced in the first sentence of this Section 9 shall give
notice to Indemnitor of any claim or demand governed by this Section 9 at
the time such claim or other demand first becomes known to such party.
<PAGE>
10. SUBROGATION OF INDEMNITY RIGHTS. If Indemnitor fails to fully
perform its obligations under Sections 5 and 6 above, the Indemnified
Parties shall be subrogated to any rights or claims Indemnitor may have
against any present, future or former owners, tenants or other occupants or
users of any of the Properties, any portion thereof or any adjacent or
proximate properties, relating to the recovery of Costs or the performance
of Remedial Work.
11. ASSIGNMENT BY AGENTS AND BANKS. No consent by Indemnitor shall
be required for any assignment or reassignment of the rights of the
Administrative Agent, the Syndication Agent, the Documentation Agent or the
Banks under this Agreement to any successor of such party or a purchaser of
the Loan or any interest in or portion of the Loan including participation
interests in accordance with the terms of the Credit Agreement.
12. MERGER, CONSOLIDATION OR SALE OF ASSETS. In the event
Indemnitor is dissolved, liquidated or terminated or all or substantially
all the assets of Indemnitor are sold or otherwise transferred to one or
more persons or other entities, the surviving entity or transferee of
assets, as the case may be, (i) shall be formed and existing under the laws
of a state, (ii) shall deliver to the Banks an acknowledged instrument in
recordable form assuming all obligations, covenants and responsibilities of
Indemnitor under this Agreement.
13. INDEPENDENT OBLIGATIONS; SURVIVAL. The obligations of
Indemnitor under this Agreement shall survive the consummation of the Loan
transaction described above and the repayment of the Loan. The obligations
of Indemnitor under this Agreement are separate and distinct from the
obligations of Indemnitor under the Credit Documents. This Agreement may
be enforced by the Banks without regard to or affecting any rights and
remedies the Administrative Agent and/or the Banks may have against
Indemnitor under the Credit Documents and without regard to any limitations
on the Administrative Agent's or Banks' recourse for recovery of the Loan
as may be provided in the Credit Documents. Enforcement of this Agreement
is not and shall not be deemed to constitute an action for recovery of the
indebtedness of the Loan.
14. DEFAULT INTEREST. In addition to all other rights and remedies
of the Banks against Indemnitor as provided herein, or under applicable
law, Indemnitor shall pay to the Administrative Agent, immediately upon
demand therefor, Default Interest (as defined below) on any Costs and other
payments required to be paid by Indemnitor to the Banks under this
Agreement which are not paid within ten (10) days after demand therefor,
such payments to be disbursed by the Administrative Agent in accordance
with the Credit Agreement. Default Interest shall be paid by Indemnitor
from the date such payment becomes delinquent through and including the
date of payment of such delinquent sums. "Default Interest" shall mean a
per annum interest rate equal to three percent (3%) above the Adjusted Base
Rate or reference rate for the then current calendar month, as of the first
day of such calendar month, which is publicly announced from time to time
by the Administrative Agent.
15. CONTRIBUTION. As a result of the transactions contemplated by
the Credit Agreement, each of the Indemnitors will benefit, directly and
indirectly, from the Obligations and in consideration thereof desire to
enter into a contribution agreement among themselves as set forth in this
Section 15 to allocate such benefits among themselves and to provide a fair
and equitable arrangement to make contributions in the event any payment is
made by any Indemnitor hereunder to the Administrative Agent, the
Syndication Agent, the Documentation Agent or the Banks (such payment being
referred to herein as a "Contribution," and for purposes of this Agreement,
includes any exercise of recourse by the Administrative Agent against any
Property of a Contributor and application of proceeds of the sale of such
Property in satisfaction of such Indemnitor's obligations under this
Agreement). The Indemnitors hereby agree as follows:
<PAGE>
15.1. CALCULATION OF CONTRIBUTION. In order to provide for
just and equitable contribution among the Indemnitors in the event any
Contribution is made by an Indemnitor (a "Funding Indemnitor"), such
Funding Indemnitor shall be entitled to a contribution from certain other
Indemnitors for all payments, damages and expenses incurred by that Funding
Indemnitor in discharging any of the obligations under this Agreement (the
"Obligations"), in the manner and to the extent set forth in this Section.
The amount of any Contribution under this Agreement shall be equal to the
payment made by the Funding Indemnitor to the Administrative Agent or any
other beneficiary pursuant to this Agreement and shall be determined as of
the date on which such payment is made.
15.2. BENEFIT AMOUNT DEFINED. For purposes of this Agreement,
the "Benefit Amount" of any Indemnitor as of any date of determination
shall be the net value of the benefits to such Indemnitor and all of its
Subsidiaries (including any Subsidiaries which may be Indemnitors) from
extensions of credit made by the Banks to the Borrower under the Credit
Agreement; provided, that in determining the contribution liability of any
Indemnitor which is a Subsidiary to its direct or indirect parent
corporation or of any Indemnitor to its direct or indirect Subsidiary, the
Benefit Amount of such Subsidiary and its Subsidiaries, if any, shall be
subtracted in determining the Benefit Amount of the parent corporation.
Such benefits shall include benefits of funds constituting proceeds of
Advances made to the Borrower by the Banks which are in turn advanced or
contributed by the Borrower to such Indemnitor or its Subsidiaries and
benefits of Letters of Credit issued pursuant to the Credit Agreement on
behalf of, or the proceeds of which are advanced or contributed or
otherwise benefit, directly or indirectly, such Indemnitor and its
Subsidiaries (collectively, the "Benefits"). In the case of any proceeds
of Advances or Benefits advanced or contributed to a Person (an "Owned
Entity") any of the equity interests of which are owned directly or
indirectly by an Indemnitor, the Benefit Amount of an Indemnitor with
respect thereto shall be that portion of the net value of the benefits
attributable to Advances or Benefits equal to the direct or indirect
percentage ownership of such Indemnitor in its Owned Entity.
15.3. CONTRIBUTION OBLIGATION. Each Indemnitor shall be liable
to a Funding Indemnitor in an amount equal to the greater of (A) the (i)
ratio of the Benefit Amount of such Indemnitor to the total amount of
Obligations, multiplied by (ii) the amount of Obligations paid by such
Funding Indemnitor and (B) 95% of the excess of the fair saleable value of
the property of such Indemnitor over the total liabilities of such
Indemnitor (including the maximum amount reasonably expected to become due
in respect of contingent liabilities) determined as of the date on which
the payment made by a Funding Indemnitor is deemed made for purposes of
this Agreement (giving effect to all payments made by other Funding
Indemnitors as of such date in a manner to maximize the amount of such
contributions).
15.4. ALLOCATION. In the event that at any time there exists
more than one Funding Indemnitor with respect to any Contribution (in any
such case, the "Applicable Contribution"), then payment from other
Indemnitors pursuant to this Agreement shall be allocated among such
Funding Indemnitors in proportion to the total amount of the Contribution
made for or on account of the Borrower by each such Funding Indemnitor
pursuant to the Applicable Contribution. In the event that at any time any
Indemnitor pays an amount under this Agreement in excess of the amount
calculated pursuant to clause (A) of Subsection 15.3 above, that Indemnitor
shall be deemed to be a Funding Indemnitor to the extent of such excess and
shall be entitled to contribution from the other Indemnitors in accordance
with the provisions of this Section.
<PAGE>
15.5. SUBSIDIARY PAYMENT. The amount of contribution payable
under this Section by any Indemnitor shall be reduced by the amount of any
contribution paid hereunder by a Subsidiary of such Indemnitor.
15.6. EQUITABLE ALLOCATION. If as a result of any
reorganization, recapitalization, or other corporate change in the Borrower
or any of its Subsidiaries, or as a result of any amendment, waiver or
modification of the terms and conditions of other Sections of this
Agreement or the Obligations, or for any other reason, the contributions
under this Section become inequitable as among the Indemnitors, the
Indemnitors shall promptly modify and amend this Section to provide for an
equitable allocation of contributions. Any of the foregoing modifications
and amendments shall be in writing and signed by all Indemnitors.
15.7. ASSET OF PARTY TO WHICH CONTRIBUTION IS OWING. The
Indemnitors acknowledge that the right to contribution hereunder shall
constitute an asset in favor of the Indemnitor to which such contribution
is owing.
15.8. SUBORDINATION. No payments payable by an Indemnitor
pursuant to the terms of this Section 15 shall be paid until all amounts
then due and payable by the Borrower to the Administrative Agent, the
Syndication Agent, the Documentation Agent, or any Bank, pursuant to the
terms of the Credit Documents, are paid in full in cash. Nothing contained
in this Section 15 shall affect the obligations of any Indemnitor to the
Administrative Agent, the Syndication Agent, the Documentation Agent, or
any Bank under the Credit Agreement or any other Credit Documents.
16. MISCELLANEOUS. If there shall be more than one Indemnitor
hereunder, or pursuant to any other indemnification of Banks relating to
Hazardous Materials arising out of or in connection with the Loan ("Other
Indemnitor"), each Indemnitor and Other Indemnitor agrees that (a) the
obligations of the Indemnitor hereunder, and each Other Indemnitor, are
joint and several, (b) a release of any one or more Indemnitors or Other
Indemnitors or any limitation of this Agreement in favor of or for the
benefit of one or more Indemnitors or Other Indemnitors shall not in any
way be deemed a release of or limitation in favor of or for the benefit of
any other Indemnitor or Other Indemnitor and (c) a separate action
hereunder may be brought and prosecuted against any or all Indemnitors or
Other Indemnitors. If any term of this Agreement or any application
thereof shall be invalid, illegal or unenforceable, the remainder of this
Agreement and any other application of such term shall not be affected
thereby. No delay or omission in exercising any right hereunder shall
operate as a waiver of such right or any other right. This Agreement shall
be binding upon, inure to the benefit of and be enforceable by Indemnitor
and the Banks, and their respective successors and assigns, including
(without limitation) any assignee or purchaser of all or any portion of the
Banks' interest in (i) the Loan, (ii) the Credit Documents, or (iii) any of
the Properties.
17. GOVERNING LAW. ANY DISPUTE BETWEEN THE INDEMNITOR, ANY AGENT,
ANY BANK, OR ANY INDEMNITEE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH,
THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH
THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICTS OF
LAWS PROVISIONS) OF THE STATE OF NEW YORK.
<PAGE>
18. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B),
EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE
OTHER CREDIT DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED
IN NEW YORK, NEW YORK, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK, NEW YORK. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT
PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. THE INDEMNITOR AGREES THAT ANY AGENT, ANY
BANK OR ANY INDEMNITEE SHALL HAVE THE RIGHT TO PROCEED AGAINST THE
INDEMNITOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON
TO (1) OBTAIN PERSONAL JURISDICTION OVER THE INDEMNITOR OR (2) ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE
INDEMNITOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN
ANY PROCEEDING BROUGHT BY SUCH PERSON TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF SUCH PERSON. THE INDEMNITOR WAIVES ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS SUBSECTION (B).
(C) SERVICE OF PROCESS. THE INDEMNITOR WAIVES PERSONAL SERVICE OF
ANY PROCESS UPON IT AND IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF
ANY WRITS, PROCESS OR SUMMONSES IN ANY SUIT, ACTION OR PROCEEDING BY THE
MAILING THEREOF BY ANY AGENT OR THE BANKS BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE INDEMNITOR ADDRESSED AS PROVIDED HEREIN. NOTHING
HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY AGENT OR THE
BANKS TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW. THE INDEMNITOR IRREVOCABLY WAIVES ANY
OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH
ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED
WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM
IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE
PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(E) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH
OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY,
THE PROVISIONS OF THIS SECTION 18, WITH ITS COUNSEL.
<PAGE>
19. AMENDMENTS/ACCESSION AGREEMENT. No waiver of any provision of
this Agreement nor consent to any departure by any Indemnitor therefrom
shall be effective unless the same shall be in writing and signed by the
Administrative Agent and the Required Lenders, and no amendment of this
Agreement shall be effective unless the same shall be in writing and signed
by the Administrative Agent, with the consent of the Required Lenders;
PROVIDED that any amendment or waiver releasing any Indemnitor from any
liability hereunder shall be signed by all the Banks; and PROVIDED FURTHER
that any waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. Notwithstanding the
foregoing, in the event that any Subsidiary or Affiliate of the Borrower
hereafter is required in accordance with the terms of the Credit Agreement
or otherwise agrees to become an Indemnitor under this Agreement, then such
Subsidiary or Affiliate may become a party to this Agreement by executing
an Accession Agreement ("Accession Agreement") in the form attached hereto
as ANNEX 1, and each Indemnitor and the Administrative Agent hereby agrees
that upon such Subsidiary's or Affiliate's execution of such Accession
Agreement, this Agreement shall be deemed to have been amended to make such
Person an Indemnitor hereunder for all purposes and a party hereto and no
signature is required on behalf of the other Indemnitors or the
Administrative Agent to make such an amendment to this Agreement effective.
[INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, Indemnitor has caused this Agreement to be
executed as of the day and year first written above.
INDEMNITORS:
LASALLE HOTEL OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: LASALLE HOTEL PROPERTIES, a Maryland
real estate investment trust,
its general partner
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Address: 4800 Montgomery Lane, Suite M25
Bethesda, Maryland 20814
Attn: Mr. Hans S. Weger
SIGNATURE PAGE OF ENVIRONMENTAL INDEMNIFICATION AGREEMENT
<PAGE>
LASALLE HOTEL PROPERTIES,
a Maryland real estate investment trust
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Address: 4800 Montgomery Lane, Suite M25
Bethesda, Maryland 20814
Attn: Mr. Hans S. Weger
LHO MISSION BAY HOTEL, L.P.,
a California limited partnership
By: LaSalle Hotel Operating Partnership, L.P.,
a Delaware limited partnership,
its general partner
By: LaSalle Hotel Properties,
its general partner
By:
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Name:
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Title:
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Address: 4800 Montgomery Lane, Suite M25
Bethesda, Maryland 20814
Attn: Mr. Hans S. Weger
Signature Page of Environmental Indemnification Agreement
<PAGE>
ANNEX 1
to Environmental Indemnification Agreement
ACCESSION AGREEMENT
_______________________ [NAME OF ENTITY], a [limited partnership/corpora-
tion] (the "Company"), hereby agrees with (i) SOCIETE GENERALE, SOUTHWEST
AGENCY, as Joint Book Runner and Administrative Agent (the "Administrative
Agent") under the Second Amended and Restated Senior Unsecured Credit
Agreement dated as of __________, 2000 (the "Credit Agreement") among
LASALLE HOTEL OPERATING PARTNERSHIP, L.P., a Delaware limited partnership,
as the Borrower, the Administrative Agent, BANK OF MONTREAL, CHICAGO BRANCH
as Syndication Agent, DEUTSCHE BANC ALEX. BROWN, as Joint Book Runner and
Documentation Agent, and the Banks; (ii) the parties to the Environmental
Indemnity and Agreement (the "Environmental Indemnity") dated as of
__________, 2000 executed in connection with the Credit Agreement, (iii)
the parties to the Guaranty and Contribution Agreement (the "Guaranty")
dated as of __________, 2000 executed in connection with the Credit
Agreement, as follows:
The Company hereby agrees and confirms that, as of the date hereof,
it (a) intends to be a party to the Environmental Indemnity and the
Guaranty and undertakes to perform all the obligations expressed therein,
respectively, of an Indemnitor and a Guarantor (as defined in the
Environmental Indemnity and the Guaranty, respectively), (b) agrees to be
bound by all of the provisions of the Environmental Indemnity and the
Guaranty as if it had been an original party to such agreements, (c)
confirms that the representations and warranties set forth in the
Environmental Indemnity and the Guaranty, respectively, with respect to the
Company, a party thereto, are true and correct in all material respects as
of the date of this Accession Agreement and (d) has received and reviewed
copies of each of the Environmental Indemnity and the Guaranty.
For purposes of notices under the Environmental Indemnity and the
Guaranty the address for the Company is as follows:
Attention:
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Telephone:
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Telecopy:
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This Accession Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF this Accession Agreement was executed and
delivered as of the ___ day of ___________________, 20___.
[NAME OF ENTITY]
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By:
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Title:
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EXHIBIT (10)(iv)
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GUARANTY AND CONTRIBUTION AGREEMENT
This Guaranty and Contribution Agreement (this "Agreement") is made
and entered into effective for all purposes as of the 13th day of November,
2000, by the parties signatory hereto or to an Accession Agreement (as
hereinafter defined) (collectively, the "Guarantor" whether one or more) to
and for the benefit of SOCIETE GENERALE, SOUTHWEST AGENCY, as Joint Book
Runner and Administrative Agent (the "Administrative Agent"), BANK OF
MONTREAL, CHICAGO BRANCH as Syndication Agent (the "Syndication Agent"),
DEUTSCHE BANC ALEX. BROWN, as Joint Book Runner and Documentation Agent
("Documentation Agent"), and the banks and other lenders named in the
Credit Agreement herein described.
INTRODUCTION
WHEREAS, this Agreement is given in connection with that certain
Second Amended and Restated Senior Unsecured Credit Agreement dated as of
even date as this Agreement ("Credit Agreement"), among LASALLE HOTEL
OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the
"Borrower"), Administrative Agent, Syndication Agent, Documentation Agent
and the banks and other lenders party thereto (collectively the "Banks");
WHEREAS, pursuant to the Credit Agreement the Banks are making a
loan
(the "Loan") to Borrower as more specifically described therein;
WHEREAS, the Borrower is the principal financing entity for capital
requirements of its Subsidiaries, and from time to time the Borrower has
made and will continue to make capital contributions and advances to its
Subsidiaries, including the Subsidiaries which are or will become parties
hereto. Other than the Parent, each Guarantor is a direct or indirect
subsidiary of the Borrower. Each Guarantor will derive substantial direct
and indirect benefit from the transactions contemplated by the Credit
Agreement; and
WHEREAS, the Banks have required the execution and delivery of this
Agreement as a condition precedent to the execution of the Credit
Agreement. The Banks would not be willing to execute the Credit Agreement
in the absence of the execution and delivery by Guarantor of this
Agreement.
AGREEMENT
---------
NOW, THEREFORE, in order to induce the Banks to make the Advances and
the Issuing Bank to issue its Letters of Credit, each Guarantor hereby
agrees as follows:
SECTION 1. DEFINED TERMS. All terms used in this Agreement, but not
defined herein, shall have the meaning given such terms in the Credit
Agreement.
<PAGE>
SECTION 2. GUARANTY. Each Guarantor hereby unconditionally and
irrevocably guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of the Borrower
now or hereafter existing under the Credit Agreement, the Notes and any
other Credit Document, whether for principal, interest, fees, expenses, or
otherwise (such obligations being the "Guaranteed Obligations") and any and
all expenses (including reasonable counsel fees and expenses) incurred by
the Administrative Agent, the Syndication Agent, the Documentation Agent,
or any Bank in enforcing any rights under this Agreement. Each Guarantor
agrees that its guaranty obligation under this Agreement is a guarantee of
payment, not of collection and that such Guarantor is primarily liable for
the payment of the Guaranteed Obligations.
SECTION 3. LIMIT OF LIABILITY. Each Guarantor that is a Subsidiary
of the Borrower shall be liable under this Agreement with respect to the
Guaranteed Obligations only for amounts aggregating up to the largest
amount that would not render its guaranty obligation hereunder subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provisions of any state law.
SECTION 4. GUARANTY ABSOLUTE. Each Guarantor guarantees that the
Guaranteed Obligations will be paid and performed strictly in accordance
with the terms of the Credit Agreement, the other Credit Documents and the
Participating Leases, as applicable, regardless of any law, regulation, or
order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of the Administrative Agent, the Syndication Agent, the
Documentation Agent, the Banks or the Participating Lessees with respect
thereto. The liability of each Guarantor under this Agreement shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Credit Agreement,
any other Credit Document, any Participating Lease or any other agreement
or instrument relating thereto;
(b) any change in the time, manner, or place of payment of, or in
any other term of, any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from the Credit
Agreement, any Credit Document or any Participating Lease;
(c) any exchange, release, or nonperfection of any collateral, if
applicable, or any release or amendment or waiver of or consent to
departure from any other agreement or guaranty, for any of the Guaranteed
Obligations; or
(d) any other circumstances which might otherwise constitute a
defense available to, or a discharge of the Borrower or a Guarantor.
SECTION 5. CONTINUATION AND REINSTATEMENT, ETC. Each Guarantor
agrees that, to the extent that the Borrower makes payments to the
Administrative Agent, the Syndication Agent, the Documentation Agent or any
Bank or the Administrative Agent, the Syndication Agent, the Documentation
Agent or any Bank receives any proceeds of any property of Borrower or any
Guarantor and such payments or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside, or otherwise required to be repaid, then to the extent of such
repayment the Guaranteed Obligations shall be reinstated and continued in
full force and effect as of the date such initial payment or collection of
proceeds occurred. The Guarantor shall defend and indemnify the
Administrative Agent, the Syndication Agent, the Documentation Agent and
each Bank from and against any claim or loss under this Section 5
(including reasonable attorneys' fees and expenses) in the defense of any
such action or suit.
<PAGE>
SECTION 6. CERTAIN WAIVERS.
6.01 NOTICE. Each Guarantor hereby waives promptness, diligence,
notice of acceptance, notice of acceleration, notice of intent to
accelerate and any other notice with respect to any of the Guaranteed
Obligations and this Agreement.
6.02 OTHER REMEDIES. Each Guarantor hereby waives any requirement
that the Administrative Agent, the Syndication Agent, the Documentation
Agent or any Bank protect, secure, perfect, or insure any Lien or any
Property subject thereto or exhaust any right or take any action against
the Borrower or any other Person or any collateral, if any, including any
action required pursuant to a Legal Requirement.
6.03 WAIVER OF SUBROGATION.
(a) Each Guarantor hereby irrevocably waives, until payment in full
of all Guaranteed Obligations and termination of all Commitments, any claim
or other rights which it may acquire against the Borrower that arise from
such Guarantor's obligations under this Agreement or any other Credit
Document, including, without limitation, any right of subrogation
(including, without limitation, any statutory rights of subrogation under
Section 509 of the Bankruptcy Code, 11 U.S.C. Section 509, or otherwise),
reimbursement, exoneration, contribution, indemnification, or any right to
participate in any claim or remedy of the Administrative Agent, the
Syndication Agent, the Documentation Agent or any Bank against the Borrower
or any collateral which the Administrative Agent, the Syndication Agent,
the Documentation Agent or any Bank now has or acquires. If any amount
shall be paid to any Guarantor in violation of the preceding sentence and
the Guaranteed Obligations shall not have been paid in full and all of the
Commitments terminated, such amount shall be held in trust for the benefit
of the Administrative Agent, the Syndication Agent, the Documentation Agent
or any Bank and shall promptly be paid to the Administrative Agent for the
benefit of Administrative Agent, the Syndication Agent, the Documentation
Agent and the Banks to be applied to the Guaranteed Obligations, whether
matured or unmatured, as the Administrative Agent may elect. Each
Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by the Credit Agreement and
that the waiver set forth in this Section 6.03(a) is knowingly made in
contemplation of such benefits.
(b) Each Guarantor further agrees that it will not enter into any
agreement providing, directly or indirectly, for any contribution,
reimbursement, repayment, or indemnity by the Borrower or any other Person
on account of any payment by such Guarantor to the Administrative Agent,
the Syndication Agent, the Documentation Agent or the Banks under this
Agreement.
SECTION 7. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby
represents and warrants as follows:
7.01 CORPORATE AUTHORITY. Such Guarantor is either a corporation,
limited liability company, limited partnership or trust duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization. The execution, delivery and performance by such
Guarantor of this Agreement are within such Guarantor's organizational
powers, have been duly authorized by all necessary organizational action
and do not contravene (a) such Guarantor's organizational authority or
(b) any law or material contractual restriction affecting such Guarantor or
its Property.
7.02 GOVERNMENT APPROVAL. No authorization or approval or other
action by and no notice to or filing with, any Governmental Authority is
required for the due execution, delivery and performance by such Guarantor
of this Agreement.
<PAGE>
7.03 BINDING OBLIGATIONS. This Agreement is the legal, valid and
binding obligation of such Guarantor enforceable against such Guarantor in
accordance with its terms subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium, or similar law
affecting creditors' rights (whether considered in a proceeding at law or
in equity).
SECTION 8. COVENANTS. Each Guarantor will comply with all covenant
provisions of Article V and Article VI of the Credit Agreement to the
extent such provisions are applicable.
8.01 ADDITIONAL COVENANT. As soon as possible and in any event
within five days after the incurrence of any Indebtedness by the Parent or
any Subsidiary of the Parent other than the Obligations or any other
Indebtedness permitted under the Credit Agreement, the Parent shall notify
the Administrative Agent in writing of such incurrence.
SECTION 9. CONTRIBUTION. As a result of the transactions
contemplated by the Credit Agreement, each of the Guarantors will benefit,
directly and indirectly, from the Guaranteed Obligations and in
consideration thereof desire to enter into a contribution agreement among
themselves as set forth in this Section 9 to allocate such benefits among
themselves and to provide a fair and equitable arrangement to make
contributions in the event any payment is made by any Guarantor hereunder
to the Administrative Agent, the Syndication Agent, the Documentation Agent
or the Banks (such payment being referred to herein as a "Contribution,"
and for purposes of this Agreement, includes any exercise of recourse by
the Administrative Agent against any Property of a Guarantor and
application of proceeds of such Property in satisfaction of such
Guarantor's obligations under this Agreement). The Guarantors hereby agree
as follows:
9.01 CALCULATION OF CONTRIBUTION. In order to provide for just and
equitable contribution among the Guarantors in the event any Contribution
is made by a Guarantor (a "Funding Guarantor"), such Funding Guarantor
shall be entitled to a contribution from certain other Guarantors for all
payments, damages and expenses incurred by that Funding Guarantor in
discharging any of the Guaranteed Obligations, in the manner and to the
extent set forth in this Section. The amount of any Contribution under
this Agreement shall be equal to the payment made by the Funding Guarantor
to the Administrative Agent or any other beneficiary pursuant to this
Agreement and shall be determined as of the date on which such payment is
made.
9.02 BENEFIT AMOUNT DEFINED. For purposes of this Agreement, the
"Benefit Amount" of any Guarantor as of any date of determination shall be
the net value of the benefits to such Guarantor and all of its Subsidiaries
(including any Subsidiaries which may be Guarantors) from extensions of
credit made by the Banks to the Borrower under the Credit Agreement and the
benefit of entering into the Participating Leases; provided, that in
determining the contribution liability of any Guarantor which is a
Subsidiary to its direct or indirect parent corporation or of any Guarantor
to its direct or indirect Subsidiary, the Benefit Amount of such Subsidiary
and its Subsidiaries, if any, shall be subtracted in determining the
Benefit Amount of the parent corporation. Such benefits shall include
benefits of funds constituting proceeds of Advances made to the Borrower by
the Banks which are in turn advanced or contributed by the Borrower to such
Guarantor or its Subsidiaries and benefits of Letters of Credit issued
pursuant to the Credit Agreement on behalf of, or the proceeds of which are
advanced or contributed or otherwise benefit, directly or indirectly, such
Guarantor and its Subsidiaries (collectively, the "Benefits"). In the case
of any proceeds of Advances or Benefits advanced or contributed to a Person
(an "Owned Entity") any of the equity interests of which are owned directly
or indirectly by a Guarantor, the Benefit Amount of a Guarantor with
respect thereto shall be that portion of the net value of the benefits
attributable to Advances or Benefits equal to the direct or indirect
percentage ownership of such Guarantor in its Owned Entity.
<PAGE>
9.03 CONTRIBUTION OBLIGATION. Each Guarantor shall be liable to a
Funding Guarantor in an amount equal to the greater of (A) the (i) ratio of
the Benefit Amount of such Guarantor to the total amount of Guaranteed
Obligations, multiplied by (ii) the amount of Guaranteed Obligations paid
by such Funding Guarantor and (B) 95% of the excess of the fair saleable
value of the property of such Guarantor over the total liabilities of such
Guarantor (including the maximum amount reasonably expected to become due
in respect of contingent liabilities) determined as of the date on which
the payment made by a Funding Guarantor is deemed made for purposes of this
Agreement (giving effect to all payments made by other Funding Guarantors
as of such date in a manner to maximize the amount of such contributions).
9.04 ALLOCATION. In the event that at any time there exists more
than one Funding Guarantor with respect to any Contribution (in any such
case, the "Applicable Contribution"), then payment from other Guarantors
pursuant to this Agreement shall be allocated among such Funding Guarantors
in proportion to the total amount of the Contribution made for or on
account of the Borrower by each such Funding Guarantor pursuant to the
Applicable Contribution. In the event that at any time any Guarantor pays
an amount under this Agreement in excess of the amount calculated pursuant
to clause (A) of Subsection 9.03 above, that Guarantor shall be deemed to
be a Funding Guarantor to the extent of such excess and shall be entitled
to contribution from the other Guarantors in accordance with the provisions
of this Section.
9.05 SUBSIDIARY PAYMENT. The amount of contribution payable under
this Section by any Guarantor shall be reduced by the amount of any
contribution paid hereunder by a Subsidiary of such Guarantor.
9.06 EQUITABLE ALLOCATION. If as a result of any reorganization,
recapitalization, or other corporate change in the Borrower or any of its
Subsidiaries, or as a result of any amendment, waiver or modification of
the terms and conditions of other Sections of this Agreement or the
Guaranteed Obligations, or for any other reason, the contributions under
this Section become inequitable as among the Guarantors, the Guarantors
shall promptly modify and amend this Section to provide for an equitable
allocation of contributions. Any of the foregoing modifications and
amendments shall be in writing and signed by all Guarantors.
9.07 ASSET OF PARTY TO WHICH CONTRIBUTION IS OWING. The Guarantors
acknowledge that the right to contribution hereunder shall constitute an
asset in favor of the Guarantor to which such contribution is owing.
9.08 SUBORDINATION. No payments payable by a Guarantor pursuant to
the terms of this Section 9 shall be paid until all amounts then due and
payable by the Borrower to any Bank, pursuant to the terms of the Credit
Documents, are paid in full in cash. Nothing contained in this Section 9
shall affect the obligations of any Guarantor to any Bank under the Credit
Agreement or any other Credit Documents.
<PAGE>
SECTION 10. MISCELLANEOUS.
10.01 ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing, including telegraphic
communication and delivered or teletransmitted to the Administrative Agent,
as set forth in the Credit Agreement and to each Guarantor, at the address
set forth under such Guarantor's signature hereto or in the Accession
Agreement executed by such Guarantor, or to such other address as shall be
designated by any Guarantor or the Administrative Agent in written notice
to the other parties. All such notices and other communications shall be
effective when delivered or teletransmitted to the above addresses.
10.02 AMENDMENTS, ETC. No waiver of any provision of this Agreement
nor consent to any departure by any Guarantor therefrom shall be effective
unless the same shall be in writing and signed by the Administrative Agent,
the Required Lenders and the Borrower and no amendment of this Agreement
shall be effective unless the same shall be in writing and signed by each
Guarantor and the Administrative Agent, with the consent of the Required
Lenders; PROVIDED that any amendment or waiver releasing any Guarantor from
any liability hereunder shall be signed by all the Banks; and PROVIDED
FURTHER that any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. Notwithstanding the
foregoing, in the event that any Subsidiary or Affiliate of the Borrower
hereafter is required in accordance with the terms of the Credit Agreement
or otherwise agrees to become a guarantor of the Borrower's obligations
under the Credit Documents, then such Subsidiary or Affiliate may become a
party to this Agreement by executing an Accession Agreement ("Accession
Agreement") in the form attached hereto as ANNEX 1 and each Guarantor and
the Administrative Agent hereby agrees that upon such Subsidiary's or
Affiliate's execution of such Accession Agreement, this Agreement shall be
deemed to have been amended to make such Person a Guarantor hereunder for
all purposes and a party hereto and no signature is required on behalf of
the other Guarantors or the Administrative Agent to make such an amendment
to this Agreement effective.
10.03 NO WAIVER; REMEDIES. No failure on the part of Administrative
Agent, the Syndication Agent, the Documentation Agent or any Bank to
exercise, and no delay in exercising, any right hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
10.04 RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, the Administrative Agent, the
Syndication Agent, the Documentation Agent and the Banks are hereby
authorized at any time, to the fullest extent permitted by law, to set off
and apply any deposits (general or special, time or demand, provisional or
final) and other indebtedness owing by the Administrative Agent, the
Syndication Agent, the Documentation Agent or the Banks to the account of
any Guarantor against any and all of the obligations of such Guarantor
under this Agreement, irrespective of whether or not the Administrative
Agent, the Syndication Agent, the Documentation Agent or the Banks shall
have made any demand under this Agreement and although such obligations may
be contingent and unmatured. The Administrative Agent, the Syndication
Agent, the Documentation Agent and the Banks agree promptly to notify each
Guarantor affected by any such set-off after any such set-off and
application made by the Administrative Agent, the Syndication Agent, the
Documentation Agent or the Banks provided that the failure to give such
notice shall not affect the validity of such set-off and application. The
rights of the Administrative Agent, the Syndication Agent, the
Documentation Agent and the Banks under this Section 10.04 are in addition
to other rights and remedies (including, without limitation, other rights
of set-off) which the Administrative Agent, the Syndication Agent, the
Documentation Agent and the Banks may have.
<PAGE>
10.05 CONTINUING GUARANTY; TRANSFER OF INTEREST. This Agreement
shall create a continuing guaranty and shall (a) remain in full force and
effect until payment in full and termination of the Guaranteed Obligations,
(b) be binding upon each Guarantor, its successors and assigns, and
(c) inure, together with the rights and remedies of the Administrative
Agent hereunder, to the benefit of the Administrative Agent, the
Syndication Agent, the Documentation Agent and the Banks and their
respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause, when any Bank assigns or otherwise
transfers any interest held by it under the Credit Agreement or other
Credit Document to any other Person pursuant to the terms of the Credit
Agreement or other Credit Document, that other Person shall thereupon
become vested with all the benefits held by such Bank under this Agreement.
Upon the payment in full and termination of the Guaranteed Obligations, the
guaranties granted hereby shall terminate and all rights hereunder shall
revert to each Guarantor to the extent such rights have not been applied
pursuant to the terms hereof. Upon any such termination, the
Administrative Agent will, at each Guarantor's expense, execute and deliver
to such Guarantor such documents as such Guarantor shall reasonably request
and take any other actions reasonably requested to evidence or effect such
termination.
10.06 GOVERNING LAW. ANY DISPUTE BETWEEN THE GUARANTOR, ANY AGENT,
ANY BANK, OR ANY INDEMNITEE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH,
THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH
THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICTS OF
LAWS PROVISIONS) OF THE STATE OF NEW YORK.
10.07 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B),
EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE
OTHER CREDIT DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED
IN NEW YORK, NEW YORK, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK, NEW YORK. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT
PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. THE GUARANTOR AGREES THAT ANY AGENT, ANY
BANK OR ANY INDEMNITEE SHALL HAVE THE RIGHT TO PROCEED AGAINST THE
GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON
TO (1) OBTAIN PERSONAL JURISDICTION OVER THE GUARANTOR OR (2) ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE
GUARANTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN
ANY PROCEEDING BROUGHT BY SUCH PERSON TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF SUCH PERSON. THE GUARANTOR WAIVES ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS SUBSECTION (B).
(C) SERVICE OF PROCESS. THE GUARANTOR WAIVES PERSONAL SERVICE OF
ANY PROCESS UPON IT AND IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF
ANY WRITS, PROCESS OR SUMMONSES IN ANY SUIT, ACTION OR PROCEEDING BY THE
MAILING THEREOF BY ANY AGENT OR THE BANKS BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE GUARANTOR ADDRESSED AS PROVIDED HEREIN. NOTHING
HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY AGENT OR THE
BANKS TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW. THE GUARANTOR IRREVOCABLY WAIVES ANY
OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR
<PAGE>
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH
ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED
WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM
IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE
PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(E) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH
OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY,
THE PROVISIONS OF THIS SECTION 10.08, WITH ITS COUNSEL.
[INTENTIONALLY BLANK]
<PAGE>
Each Guarantor has caused this Agreement to be duly executed as of
the date first above written.
GUARANTORS:
LASALLE HOTEL PROPERTIES,
a Maryland real estate investment trust
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
Address: 4800 Montgomery Lane, Suite M25
Bethesda, Maryland 20814
Attn: Mr. Hans S. Weger
LHO VIKING HOTEL, L.L.C.,
a Delaware limited liability company
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
Address: 4800 Montgomery Lane, Suite M25
Bethesda, Maryland 20814
Attn: Mr. Hans S. Weger
LHO MISSION BAY HOTEL, L.P.,
a California limited partnership
By: LaSalle Hotel Operating Partnership,
L.P., a Delaware limited partnership,
its general partner
By: LaSalle Hotel Properties,
its general partner
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Address: 4800 Montgomery Lane, Suite M25
Bethesda, Maryland 20814
Attn: Mr. Hans S. Weger
SIGNATURE PAGE OF GUARANTY AND CONTRIBUTION AGREEMENT
<PAGE>
ANNEX 1
Guaranty and Contribution Agreement
ACCESSION AGREEMENT
______________________________________________ [NAME OF ENTITY], a [limited
partnership/corporation] (the "Company"), hereby agrees with (i) SOCIETE
GENERALE, SOUTHWEST AGENCY, as Administrative Agent (the "Administrative
Agent") under the Second Amended and Restated Senior Unsecured Credit
Agreement dated as of __________, 2000 (the "Credit Agreement") among
LASALLE HOTEL OPERATING PARTNERSHIP, L.P., a Delaware limited partnership,
as the Borrower, the Administrative Agent, BANK OF MONTREAL, CHICAGO BRANCH
as Syndication Agent, DEUTSCHE BANC ALEX. BROWN, as Joint Book Runner and
Documentation Agent, and the Banks; (ii) the parties to the Environmental
Indemnity Agreement (the "Environmental Indemnity") dated as of __________,
2000 executed in connection with the Credit Agreement, (iii) the parties to
the Guaranty and Contribution Agreement (the "Guaranty") dated as of
__________, 2000 executed in connection with the Credit Agreement, as
follows:
The Company hereby agrees and confirms that, as of the date hereof,
it (a) intends to be a party to the Environmental Indemnity and the
Guaranty and undertakes to perform all the obligations expressed therein,
respectively, of an Indemnitor and a Guarantor (as defined in the
Environmental Indemnity and the Guaranty, respectively), (b) agrees to be
bound by all of the provisions of the Environmental Indemnity and the
Guaranty as if it had been an original party to such agreements, (c)
confirms that the representations and warranties set forth in the
Environmental Indemnity and the Guaranty, respectively, with respect to the
Company, a party thereto, are true and correct in all material respects as
of the date of this Accession Agreement and (d) has received and reviewed
copies of each of the Environmental Indemnity and the Guaranty.
For purposes of notices under the Environmental Indemnity and the
Guaranty the address for the Company is as follows:
Attention:
----------------------------------------
Telephone:
----------------------------------------
Telecopy:
----------------------------------------
This Accession Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF this Accession Agreement was executed and
delivered as of the ___ day of ___________________, 2000.
[NAME OF ENTITY]
By:
------------------------------
Title:
------------------------------
EXHIBIT (10)(v)
---------------
----------------------------------------------------------------------
TERMINATION AND SERVICES AGREEMENT
Dated as of December 28, 2000
between
LASALLE HOTEL PROPERTIES
and
LASALLE HOTEL ADVISORS, INC.
and
LASALLE INVESTMENT MANAGEMENT, INC.
Relating to
the Amended and Restated Advisory Agreement dated January 1, 2000
and
the Employee Lease Agreement dated January 1, 2000
----------------------------------------------------------------------
<PAGE>
TERMINATION AND SERVICES AGREEMENT
This TERMINATION AND SERVICES AGREEMENT (this "Agreement") is dated
as of December [ ], 2000, and is between LaSalle Hotel Properties, a
Maryland real estate investment trust ("LHO"), LaSalle Hotel Advisors,
Inc., a Maryland corporation (the "Advisor") and LaSalle Investment
Management, Inc., a Maryland corporation, ("LIM").
W I T N E S S E T H:
WHEREAS, LHO is an externally advised real estate investment trust
that wishes to convert to a self managed real estate investment trust;
WHEREAS, pursuant to the terms of the Amended and Restated Advisory
Agreement dated January 1, 2000 and the Employee Lease Agreement dated
January 1, 2000 (collectively, the "Advisory Agreement"), the Advisor
provides inter alia services consisting of acquisition, leasing, investment
management, financing, ownership and disposition of LHO's properties and
the lease of employees;
WHEREAS, the Advisor
is an affiliate of LIM;
WHEREAS, the Advisory Agreement is automatically renewed each year
for an additional one year unless either LHO or the Advisor provides the
other with notice of termination 180 days prior to the expiration of the
then current term; and
WHEREAS, LHO and the Advisor are desirous to terminate the Advisory
Agreement and for LIM and the Advisor to provide services to LHO to aid the
transition to an internally managed real estate investment trust pursuant
to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth in
this Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
1. TERMINATION OF ADVISORY AGREEMENT.
1.1. TERMINATION
Notwithstanding the language in the Advisory Agreement, the parties
hereby agree to immediately and completely terminate the Advisory Agreement
and all of their continuing rights and obligations thereunder, with the
exception of the indemnification provisions pursuant to Section 7.2 of the
said agreement, effective as of 12.01a.m., January 1, 2001 (the
"Termination Date").
This Agreement shall not affect any party's rights obligations or
liabilities under or pursuant to the Advisory Agreement which have already
accrued up to the Termination Date, including, but not limited to, LIM's
right to receive fees (including any incentive fees) earned in 2000 but to
be paid in 2001.
1.2. TERMINATION PAYMENT.
In consideration for the termination of the Advisory Agreement prior
to the end of the requisite 180 day notice period, the services to be
provided and the execution of this Agreement, LHO shall pay LIM $600,000.00
(the "Termination Payment") by wire transfer or by company check.
<PAGE>
The Termination Payment shall be paid by LHO upon the earlier of the
date upon which the Services (as hereinafter defined) are substantially
completed to the reasonable satisfaction of LHO or March 30, 2001, provided
however that should the Services not be so completed by March 30, 2001, LHO
shall make such payment as in its reasonable opinion reflects the Services
provided to date and shall only be obliged to pay the remainder of the
Termination Payment when the Services have been so completed.
The parties acknowledge and agree that the Termination Payment shall
be paid in lieu of any other payments which may otherwise be deemed to be
payable in respect of the termination of the Advisory Agreement.
2. OBLIGATIONS OF LIM AND THE ADVISOR.
2.1. PROVISION OF SERVICES
LIM and the Advisor shall promptly and expeditiously and in any event
prior to the March 30, 2001 provide to LHO services to facilitate the
transition from an externally advised real estate investment trust to an
internally managed real estate investment trust as are more particularly
set out in Exhibit A to this Agreement (the "Services").
2.2. BEST EFFORTS
LIM and the Advisor shall use their reasonable best efforts in the
provision of the Services.
2.3. EXPENSES AND PAYABLES
LIM will be responsible for all of the Advisor's expenses and
payables for activities pursuant to the Advisory Agreement prior to the
Termination Date.
2.4. ACCRUED EMPLOYEE COMPENSATION
LIM will be responsible for all accrued employee compensation and
benefits for work done prior to the Termination Date, including bonuses
earned in 2000 but scheduled to be paid in 2001 per the current
understanding between LHO's management and LIM's management.
2.5. PAYMENT FOR ADVISORY SERVICES
LIM shall reimburse LHO the payments more particularly set out in
Section 3.5 below, being the costs associated with LHO allowing its
employees to provide the Advisory Services.
2.6. REPRESENTATIONS
LIM and the Advisor represent that all of the furniture, fixtures and
equipment to be transferred to LHO and/or LaSalle Hotel Operating
Partnership, L.P., a Delaware limited partnership (the "Partnership")
pursuant to Section 3.1 and 3.2 below, shall be free of all liens and
encumbrances not expressly assumed by LHO, and have been paid for in full,
without deduction or setoff.
3. OBLIGATIONS OF LHO
3.1. FIXTURES AND FITTINGS ETC.
On or before January 15, 2001 LHO will, or will cause the Partnership
to, buy the furniture, fixtures and equipment currently used by the Advisor
in the Bethesda office and leasehold improvements of the office for
$301,994.
<PAGE>
3.2. ACCOUNTING SERVER
On or before January 15, 2001 LHO shall pay LIM $50,000, being the
cost of installing a new accounting server in the Bethesda office.
3.3. LEASE OF 4800 MONTGOMERY LANE
LHO shall assume the lease of the office space located at
4800 Montgomery Lane, Suite M25, Bethesda, MD at the stated price of the
lease, effective as of the Termination Date.
3.4. EMPLOYEES OF THE ADVISOR
Prior to the Termination Date, LHO shall offer employment to all
current employees of the Advisor effective January 1, 2001.
3.5. ADVISORY SERVICES
Effective as of the Termination Date, LHO shall make its employees
available for the purpose of the said employees providing advisory services
to LIM and its clients for:
(i) the Peabody Hotel in Orlando, Fl, for $266,000 per year
together with any third party expenses incurred by LHO which would be
reimbursable under the terms of the Advisory Agreement; and
(ii) the Holiday Inn on the Hill in Washington, DC for $129,000 per
year (the "Advisory Services").
The Advisory Services shall continue in respect of each hotel until
that hotel is sold by LIM's clients.
These amounts to be paid quarterly in arrears and shall be increased
on each anniversary of the Termination Date by an amount equal to the
Consumer Price Index on that date should the said separate agreements be
then continuing. Should any period be less than a quarter then the payment
due shall be pro-rated accordingly.
4. MISCELLANEOUS
4.1. CONFIDENTIALITY
Confidential or proprietary information disclosed by the parties
hereto shall be considered confidential information (the "Confidential
Information"). Confidential Information shall not include any information
which (i) is publicly available at the time of disclosure to the receiving
party or thereafter becomes publicly available not as a result of a breach
of any duty of confidentiality to any party hereunder, (ii) was known to
the party charged with a confidentiality obligation hereunder before
disclosure from another party hereto on a confidential basis, (iii) was
obtained from a source acting in good faith which the receiving party
reasonably believed owed no duty of confidentiality to any party hereunder,
or (iv) that is required to be disclosed pursuant to applicable law, a
court order, a judicial proceeding, or the enforcement hereof, provided
that the disclosing party is provided with reasonable prior written notice
so that the disclosing party may contest such disclosure. The Confidential
Information shall not be disclosed by any party to this Agreement to any
third party.
4.2. JURY WAIVER
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO WAIVE
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS AGREEMENT OR ANY OF THE TRANSACTIONS OR AGREEMENTS
CONTEMPLATED HEREBY.
<PAGE>
4.3. PUBLICITY
None of the parties hereto shall issue any press release or make any
public disclosure regarding the transaction contemplated hereby unless such
press release or public disclosure is approved by those parties expressly
mentioned by name in the press release in advance. Notwithstanding the
foregoing, each of the parties hereto may, in documents required to be
filed by it with the Securities and Exchange Commission or other regulatory
bodies, make such statements with respect to the transactions contemplated
hereby as each may be advised by counsel as legally necessary or advisable
and may make such disclosure as it is advised by its counsel as required by
law.
4.4. EXPENSES
Each party hereto shall pay its own expenses incident to this
Agreement, including all legal and accounting fees and disbursements.
4.5. ASSIGNMENT
No party to this Agreement shall assign its rights and obligations
under this Agreement, in whole or in part, whether by operation of law or
otherwise, without the prior written consent of the other party, and any,
such assignment contrary to the terms hereof shall be null and void and of
no force and effect. In no event shall the assignment by the parties
hereto of their rights or obligations under this Agreement, release that
party from their respective liabilities and obligations hereunder.
4.6. INDEPENDENT CONTRACTORS
It is understood and agreed by and between the parties hereto that
LIM [and the Advisor], in the performance of the Services, shall act as,
and be an independent contractor and not an agent or employee of LHO.
All such acts of LIM and the Advisor, its agents, officers and
employees and all other actions on behalf of LHO relating to the
performance of the Services, shall be performed as independent contractors
not as agents, officers, or employees of LHO.
4.7. ENTIRE AGREEMENT; AMENDMENT
This Agreement, including the Exhibits and other documents referred
to herein or furnished pursuant hereto, constitutes the entire agreement
among the parties hereto with respect to the transaction contemplated
herein, and it supersedes all prior oral or written agreements, commitments
or understandings with respect to the matters provided for herein. No
amendment or modification of this Agreement shall be valid or binding
unless set forth in writing and duly executed and delivered by the parties
hereto.
4.8. WAIVER
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Agreement or under any other documents
furnished in connection with or pursuant to this Agreement shall impair any
such right, power or privilege or be construed as a waiver of any default
or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto unless made
in writing and signed by the party against whom enforcement of such waiver
is sought and then only to the extent expressly specified therein.
<PAGE>
4.9. SEVERABILITY
If any part of any provision of this Agreement or any other agreement
or document given pursuant to or in connection with this Agreement shall be
invalid or unenforceable in any respect, such part shall be ineffective to
the extent of such invalidity or unenforceability only, without in any way
affecting the remaining parts of such provision or the remaining provisions
of this Agreement.
4.10. GOVERNING LAW
This Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed
in accordance with the laws of the State of New York (excluding the
conflicts of law principles thereof).
4.11. NOTICES
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered
or certified mail, return receipt requested, postage prepaid, or
transmitted by telegram, telecopy, addressed as follows:
(i) If to LHO:
4800 Montgomery Lane
Suite M25
Bethesda, Maryland 20814
Attn: President
Fax #: (301) 941-1553
with a copy (which shall not constitute notice) to:
Brown & Wood LLP
555 California Street
San Francisco, California 94104
Attn: Michael F. Taylor
Fax #: (415) 397-4621
(ii) If to LIM:
22 Hanover Square
London W1A 2BN
United Kingdom
Attn: Stuart L. Scott
Fax #: 011-44-20-7399-5757
with a copy (which shall not constitute notice) to:
Hagan & Associates
200 East Randolph Drive
Suite 4322
Chicago, Illinois 60601
Attn: Dean Hagan
Fax #: (312) 228-0982
Each party may designate by notice in writing a new address, to which
any notice, demand, request or communication may thereafter be so given,
served or sent. Each notice, demand, request, or communication which shall
be hand delivered, sent, mailed or telecopied in the manner described
above, shall be deemed sufficiently given, served, sent, received or
delivered for all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt, or (with respect to a
telecopy) the answerback or confirmation being deemed conclusive, but not
exclusive, evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.
<PAGE>
4.12. HEADINGS
Section headings contained in this Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
4.13. EXECUTION IN COUNTERPARTS
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required. It shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it
shall be sufficient that the signature of, or on behalf of, each party, or
that the signatures of the persons required to bind any party, appear on
one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of
this Agreement to produce or account for more than a number of counterparts
containing the respective signatures of or on behalf of, all of the parties
hereto.
4.14. BINDING EFFECT
Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above
LASALLE HOTEL PROPERTIES
By:
------------------------------
LASALLE HOTEL ADVISORS, INC
By:
------------------------------
LASALLE INVESTMENT MANAGEMENT, INC.
By:
------------------------------
<PAGE>
EXHIBIT A
The Services to be provided by LIM and the Advisor are as follows:
. Migrating all of LHO's accounting and tax records, workpapers
and worksheets and similar from LIM's and the Advisor's servers to LHO's
servers;
. Providing information technology support and the migration of
management information systems to LHO's own servers (including the usage of
LIM's systems through the first quarter of 2001 to facilitate the orderly
transfer of LHO's accounting books and records);
. Providing the necessary tax accounting assistance for the
preparation of LHO's tax return and related real estate investment trust (
"REIT") tax accounting for the calendar year 2000;
. Assigning the lease of the office space at 4800 Montgomery
Lane, Suite M25, Bethesda, Maryland, 20814 currently leased by the Advisor
to LHO;
. Providing LHO with accounting assistance to institute an
employee payroll system;
. Providing LHO with human resources assistance for employees,
including instituting benefit plans and other matters necessary for
employee transition;
. Assisting in the placement of a master property insurance
program for all properties; and
. Such other assistance as may be required to facilitate LHO's
transition from an externally advised to a self-managed REIT.
EXHIBIT 10(vi)
-------------
REVOLVING CREDIT NOTE
$5,000,000.00 Cincinnati, Ohio
January 03, 2001
FOR VALUE RECEIVED, LASALLE HOTEL LESSEE, INC., with its principal
place of business at 4800 Montgomery Lane, Suite M25, Bethesda, Maryland
20814 ("Borrower"), promises to pay, to the order of FIRSTAR BANK, NATIONAL
ASSOCIATION ("Lender"), at its office located at 425 Walnut Street,
Cincinnati, Ohio 45202 or such other location as Lender may from time to
time designate, the principal sum of FIVE MILLION DOLLARS (the "Total
Facility") or such lesser amount as may be advanced and outstanding
hereunder, together with interest thereon as provided below from the date
of disbursement thereof until paid, all in lawful money of the United
States of America and in immediately available funds.
1. DEFINITIONS. For purposes hereof:
1.1 Adjusted Base Rate will have the meaning set forth in the
Senior Unsecured Credit Facility.
1.2 "Adjusted Base Rate Advance" will have the meaning set forth in
the Senior Unsecured Credit Facility.
1.3 "Advance" will mean a disbursement under this Note.
1.4 "Business Day" will mean any day other than Saturday, Sunday
and any other day on which banks are required or authorized to close in
Ohio, and, if the applicable Business Day relates
to a Libor Rate Advance,
other than any day on which dealings are not carried on in dollar deposits
in the London interbank market.
1.5 "Conversion" will mean the change from one Interest Rate to
another for a particular Advance in accordance with the terms of this Note.
1.6 "Default" will mean any event or condition that with notice or
lapse of time or both would constitute an event of Default.
1.7 "Default Rate" will mean two percent (2%) per annum in excess
of the then current rate of interest in effect under this Note, but not
more than the highest rate permitted by law.
1.8 "Eurocurrency Liabilities" has the meaning given to that term
in Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
1.9 "Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for any such day on such transactions received by
the Administrative Agent from three Federal funds brokers of recognized
standing selected by it.
1
<PAGE>
1.10 "Guarantor" will mean any present or future guarantor of all or
any part of this Note. Initially, LaSalle Hotel Properties and LaSalle
Hotel Operating Partnership, L.P., are Guarantors.
1.11 "Interest Period" means for each Libor Rate Advance one
calendar month.
1.12 "Interest Rate" will mean, as applicable, the Adjusted Base
Rate or Libor Rate, all subject to the applicability of the Default Rate.
All Interest Rate determinations and calculations by Lender hereunder will
be conclusive and binding absent manifest error.
1.13 "Leverage Ratio" will have the meaning set forth in the Senior
Unsecured Credit Facility.
1.14 "Libor" will have the meaning set forth in the Senior Unsecured
Credit Facility.
1.15 "Libor Rate Advance" will mean any Advance that bears interest
based upon Libor.
1.16 "Libor Reserve Requirement" will have the meaning set forth in
the Senior Unsecured Credit Facility.
1.17 "Loan Documents" will mean this note, the guarantees executed
by the Guarantors in favor of Lender and any other document executed in
connection with this Note.
1.18 "Maturity date" has the meaning given such term in Section 4 of
this Note entitled "Payments and Application of Payments".
1.19 "Parent" means LaSalle Hotel Properties, a Maryland trust.
1.20 "Prime Rate" will have the meaning set forth in the Senior
Unsecured Credit Facility.
1.21. "Senior Unsecured Credit Agreement" will mean the Second
Amended and Restated Senior Unsecured Credit Agreement dated as of November
13, 2000 among LaSalle Hotel Operating Partnership, L.P., as the borrower,
Societe Generale, Southwest Agency, as Administrative Agent and the Lenders
named therein, and all amendments thereto and restatements thereof.
2. RATE OF INTEREST.
2.1 Subject to the applicability of the Default Rate as provided
below, the outstanding principal balance of each Advance will bear interest
at a rate per annum as follows: (i) in the case of an Adjusted Base Rate
Advance, at a fluctuating rate per annum equal to the Adjusted Base Rate
Applicable Margin (as defined in Section 2.3, below) plus the Adjusted Base
Rate in effect from time to time; or (ii) in the case of a Libor Rate
Advance, at a rate per annum equal to Libor Rate Applicable Margin (as
defined in Section 2.3, below) plus the Libor Rate for the applicable
Interest Period. All interest calculations under this Note will be made
based on (i) for Adjusted Base Rate Advances, a year of 365 days for the
actual number of days elapsed in each Interest Period, and (ii) for Libor
Advances, a year of 360 days for the actual number of days in each Interest
Period. In no event will the rate of interest hereunder exceed 25% per
annum or the equivalent rate for a shorter or longer period.
2
<PAGE>
2.2 The Interest Rate for Advances will be as designated in writing
by Borrower to Lender from time to time. If Borrower fails to so designate
an Interest Rate for an Advance, such advance will be deemed to be an
Adjusted Base Rate Advance until and unless a proper designation is made by
Borrower pursuant to this Note.
2.3 The initial Adjusted Base Rate Applicable Margin will be .50
and the initial Libor Rate Applicable Margin will be 2.00%. Beginning with
the fiscal quarter of the Borrower ending March 31, 2001, the Adjusted Base
Rate Applicable Margin and the Libor Rate Applicable Margin will be
adjusted 45 days after the end of each fiscal quarter of the Borrower based
on the Leverage Ratio of Parent for the immediately preceding four fiscal
quarters as follows, all as determined under the Senior Unsecured Credit
Agreement:
ABR LIBOR Unused
Spread Spread Fee
Leverage Ratio (bps) (bps) (bps)
-------------- ------ ------ ------
Less than or equal to 35% 25 175.0 20
Greater than 35% but
less than or equal to 40% 37.5 187.0 25
Greater than 40% but
less than or equal to 45% 50.0 200.0 25
Greater than 45% but
less than or equal to 50% 62.5 212.5 25
3. ADVANCES AND FEES.
3.1 Upon the execution of this Note, Borrower will pay Lender a fee
of $32,500. In addition Borrower will pay Lender an Unused Fee computed
from the date hereof through the Maturity Date on the average daily amount
by which the Total Facility exceeds the outstanding amount of Advances
times the per annum rate set forth above in Section 2.3 under the chart
heading "Unused Fee" based on a year of 360 days. Such fees will be due
and payable quarterly in arrears 30 days after the last Business Day of
each calendar quarter and on the Maturity Date.
3.2 Advances will be made hereunder pursuant to the Treasury
Management Services Master Agreement and other agreements related thereto
between Borrower and Lender. Initially, the target balance under the
Treasury Management Service Agreement and related documents will be
$100,000 and will be adjusted from time to time as agreed to by Borrower
and Lender. In the event of any conflict between terms of this Note and
the Treasury Management Services Master Agreement and such other agreements
related thereto, the terms of this Note will control.
3.3 Borrower may on any Business Day elect to convert all or any
portion of any Advance into an Advance or Advances having a different
Interest Rate ("Conversion") upon delivering to Lender of a written notice
requesting such Conversion not later than 11 o'clock a.m. (Cincinnati time)
on the Business Day of the proposed Conversion; provided, however, that any
Conversion of any Libor Rate Advance will be made effective only on the
last day of the Interest Period applicable thereto prior to Lender's
receipt of such request for Conversion.
3
<PAGE>
3.4 Borrower may borrow, repay and reborrow under this Note subject
to the terms, conditions and limits set forth herein. Lender is authorized
to record in its books and records the date and amount of each Advance and
payment hereunder, Interest Rate of each Advance and other information
related thereto, which books and records will constitute PRIMA FACIE
evidence of the accuracy of the information so recorded; PROVIDED, however,
that failure of Lender to record, or any error in recording, any such
information will not relieve Borrower of any of its obligations under this
Note or any of the other Loan Documents.
3.5 Lender hereby is authorized, at any time and from time to time,
to make an advance under this Note for the payment on behalf of Borrower of
any principal, interest, fees or other sums due under this Note or any of
the Loan Documents. Notwithstanding the foregoing, Lender is not obligated
to make any such Advance.
3.6 Each request of Borrower for a Conversion or an Advance will be
subject to all of the terms and conditions of this Note and the Loan
Documents. Without limiting the generality of the foregoing, Lender will
have no duty to make any Advance or allow any Conversion if after giving
effect thereto the aggregate outstanding principal balance under this Note
would exceed the Total Facility, or any other maximum amount limits set
forth herein or in any of the Loan Documents, or if any other term or
condition applicable hereunder or thereunder is not satisfied; and Borrower
also will not be entitled to any Advance or Conversion under this Note
after (i) maturity (whether by stated maturity, acceleration or otherwise),
(ii) any Event of Default, or (iii) any Default.
3.7 If at any time or times Lender determines (which determination
will be conclusive and binding) that (i) by reason of circumstances
affecting the interbank eurodollar market, adequate and reasonable means do
not exist for ascertaining the Libor Rate, or (ii) that the Libor Rate will
not adequately and fairly reflect the cost to Lender of maintaining or
funding Libor Rate Advances, Lender promptly will give notice of such
determination and the basis therefor to Borrower. If such notice is given,
and until such notice has been withdrawn by Lender, no additional Libor
Rate Advances will be made and no additional Conversions to Libor Rate
Advances will be permitted.
3.8 Notwithstanding any other provisions herein, if any law,
treaty, rule or regulation, or determination of a court, governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof (whether or not having the force
of law), or any change therein or in the interpretation or application
thereof, makes it unlawful or impossible for Lender to make or maintain
Libor Rate Advances, no additional Libor Rate Advances will be made, no
additional Conversions thereto will be permitted and outstanding Libor Rate
Advances will be converted to Adjusted Base Rate Advances on either (i) the
last day of the applicable Interest Period for such Advance if Lender may
continue to maintain such Advance until such day or (ii) immediately if
Lender may not continue to maintain such Advances.
4
<PAGE>
4. PAYMENTS AND APPLICATION OF PAYMENTS.
4.1 Accrued interest will be due and payable the first day of each
month and will be paid by a debit to Borrower's checking account with
Lender if sufficient funds are available; and if sufficient funds are not
available, amounts due will be paid by an Advance hereunder provided such
Advance will not cause the principal outstanding hereunder to exceed the
Total Facility.
4.2 The entire outstanding principal balance of all Advances and
all accrued and unpaid interest thereon will be due and payable on December
31, 2003 (the "Maturity Date").
4.3 Payments received will be applied in the following order: (i)
to repayment of any amounts owed to Lender for charges, fees and expenses
under this Agreement (including reasonable attorneys' fees), (ii) to
accrued interest, and (iii) to principal.
4.4 Prepayments of Advances in full or in part may be made under
this Note at any time; provided that each such payment will be applied in
the foregoing order and, to the extent applied to principal, will be
applied to the net balance of principal due at maturity.
5. LATE PAYMENTS. If Borrower fails to make any payment of principal,
interest or other amount coming due pursuant to the provisions of this Note
within 5 calendar days of the date due and payable, Borrower also shall pay
to Lender a late charge equal to the greater 2% of the amount of such
payment or $50.00 (the "Late Charge").
6. PROCEEDS. Borrower acknowledges that the proceeds of this Note will
be used exclusively for business or commercial purposes and no portion of
such proceeds will be used for personal, family, educational, or household
purposes.
6.1 EVENTS CAUSING NOTE TO BECOME DUE. The occurrence of any of
the following events will be deemed to be an "Event of Default" under this
Note: (i) the non-payment of any sums when due under this Note within all
applicable grace periods; (ii) the occurrence of any Event of Default (as
defined in any of the following) or a default under any of the following
that does not have a defined set of "Events of Default" and the lapse of
any notice or cure period provided with respect to such default in any of
the following: any other debt, liability or obligation to Lender of
Borrower or any Guarantor, including but not limited to any of the
foregoing arising under the Loan Documents or any other documents now or in
the future securing the obligations of Borrower or any Guarantor to Lender;
(iii) the revocation or attempted revocation, in whole or in part, of any
guarantee by any Guarantor; (iv) any representation or warranty made by
Borrower or any Guarantor to Lender in any document, including but not
limited to the Loan, is false or erroneous in any material respect; (v) the
failure of Borrower or any Guarantor to observe or perform any covenant or
other agreement with Lender contained in any document, including but not
limited to the Loan Documents and (vi) the occurrence of an Event of
Default (as defined therein) under the Senior Unsecured Credit Agreement
regardless of whether or not such event of Default is waived by the Lenders
under the Senior Unsecured Credit Agreement or whether or note the Senior
Unsecured Credit Agreement is terminated or no longer in effect.
Immediately and automatically upon any Event of Default relating to a
bankruptcy filing by or against Borrower,
5
<PAGE>
or, at the option of Lender upon the occurrence of any other
Event of Default hereunder, in either case without demand or notice of any
kind (which are hereby expressly waived): (a) the outstanding principal
balance hereunder together with all accrued and unpaid interest thereon,
and any additional amounts secured by the Loan Documents, will be
accelerated and become immediately due and payable, (b) Borrower will pay
to Lender all reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Lender in connection with Lender's efforts to
collect the indebtedness evidenced hereby, (c) Lender may offset any apply
to all or any part of the indebtedness evidenced hereby all monies, credits
and other property of any nature whatsoever of Borrower now or hereafter in
the possession of, in transit to or from, under the control or custody of
or on deposit with (whether held by Borrower individually or jointly with
another party), Lender or any affiliate of Lender, and (d) Lender may
exercise from time to time any of the rights and remedies available to
Lender under the Loan Documents or applicable law. Upon and after the
occurrence of any Event of Default or the maturity of this Note (by
acceleration or otherwise), the principal balance of this Note, together
with any arrearage of interest, will bear interest until paid in full,
whether before or after judgment, at a rate per annum equal to the Default
Rate. Borrower, all other makers, co-signers and indorser waive
presentment, demand, protest, and notice of demand, protest, non-payment
and dishonor. Borrower also waives all defenses based on suretyship or
impairment of collateral.
7. MISCELLANEOUS.
7.1 Both the Late Charge and the Default Rate are imposed as
liquidated damages for the purpose of defraying Lender's expenses incident
to the handling of delinquent payments, but are in addition to, and not in
lieu of, Lender's exercise of any rights and remedies hereunder, under the
other Loan Documents or under applicable law, and any fees and expenses of
any agents or any reasonable fees and charges of any attorneys which Lender
may employ. In addition, the Default Rate reflects the increased credit
risk to Lender of carrying a loan that is in default. Borrower agrees that
the Late Charge and Default Rate are reasonable forecasts of just
compensation for anticipated and actual harm incurred by Lender, and that
the actual harm incurred by Lender cannot be estimated with certainty and
without difficulty.
7.2 Nothing contained in this Note regarding late charges or the
Default Rate will be construed in any way to extend the due date of any
payment or waive any payment default, and each such right is in addition
to, and not in lieu of, the other any other rights and remedies of Lender
hereunder, under any of the Loan Documents or under applicable law
(including, without limitation, the right to interest, reasonable
attorneys' fees and other expenses).
7.3 This Note will bind Borrower and the heirs, executors,
administrators, successors and assigns of Borrower, and the benefits hereof
will inure to the benefit of Lender and its successors and assigns. All
references herein to the "Borrower" and "Lender" will include the
respective heirs, administrators, successors and assigns thereof; provided,
however, that Borrower may not assign this Note in whole or in part without
the prior written consent of Lender and Lender at any time may assign this
Note in whole or in part (but no assignment by the Lender of less than all
of this Note will operate to relieve Borrower from any duty to Lender with
respect to the unassigned portion of this Note).
6
<PAGE>
7.4 If any provision of this Note is prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision and without invalidating any other provision in this Note;
provided however, that if the provision that is the subject of such
invalidity or prohibition pertains to repayment of this Note, then, at the
option of Lender, all of the obligations hereunder will become immediately
due and payable.
7.5 Without limiting the generality of the foregoing, if from any
circumstances whatsoever the fulfillment of any provision of this Note
involves transcending the limit of validity prescribed by any applicable
usury statute or any other applicable law with regard to obligations of
like character and amount, then the obligation to be fulfilled will be
reduced to the limit of such validity as provided in such statute or law,
so that in no event will any exaction of interest be possible under this
Note in excess of the limit of such validity and the right to demand any
such excess is hereby expressly waived by Lender. As used in this
paragraph, "applicable usury statute" and "applicable law" mean such
statute and law in effect on the date hereof, subject to any change therein
that results in a higher permissible rate of interest.
7.6 No delay or failure on the part of Lender to exercise any
right, remedy or power hereunder, under any of the Loan Documents or under
applicable law will impair or waive any such right, remedy or power (or any
other right, remedy or power), be considered a waiver of or an acquiescence
in any breach, Default or Event of Default or affect any other or
subsequent breach, Default or Event of Default of the same or a different
nature. No waiver of any breach, Default or Event of Default, nor any
modification, waiver, discharge or termination of any provision of this
Note, nor consent to any departure by Borrower therefrom, will be
established by conduct, custom or course of dealing; and no modification,
waiver, discharge, termination or consent will in any event be effective
unless the same is in writing, signed by Lender and specifically refers to
this Note, and then such modification, waiver, discharge or termination or
consent will be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on Borrower in
any case will entitle Borrower to any other or further notice or demand in
the same or any similar or other circumstance.
7.7 No single or partial exercise of any right or remedy by Lender
will preclude any other or further exercise thereof or the exercise of any
other right or remedy. All remedies hereunder, under any Loan Document or
any other instrument or document now or hereafter evidencing, securing,
guaranteeing or relating to this Note, or now or hereafter existing at law
or in equity are cumulative and none of them will be exclusive of the
others or of any other right or remedy. All such rights and remedies may
be exercised separately, successively, concurrently, independently or
cumulatively from time to time and as often and in such order as Lender may
deem appropriate.
7
<PAGE>
7.8 If any ant time all or any part of any payment or transfer of
any kind received by Lender with respect to all or any part of this Note is
repaid, set aside or invalidated by reason of any judgment, decree or order
of any court or administrative body, or by reason of any agreement,
settlement or compromise of any claim made at any time with respect to the
repayment, recovery, setting aside or invalidation of all or any part of
such payment or transfer, Borrower's obligations under this Note will
continue (and/or be reinstated) and Borrower will be and remain liable, and
will indemnify, defend and hold harmless Lender for, the amount or amounts
so repaid, recovered, set aside or invalidated and all other claims,
demands, liabilities, judgments, losses, damages, costs and expenses
incurred in connection therewith. The provisions of this Section will be
and remain effective notwithstanding any contrary action which may have
been taken by Borrower in reliance upon such payment or transfer, and any
such contrary action so taken will be without prejudice to Lender's rights
hereunder and will be deemed to have been conditioned upon such payment or
transfer having become final and irrevocable. The provisions of this
Section will survive any termination, cancellation or discharge of this
Note.
7.9 Time is of the essence in the performance of this Note.
7.10 This Note has been delivered and accepted at and will be deemed
to have been made at Cincinnati, Ohio and will be interpreted and the
rights and liabilities of the parties hereto determined in accordance with
the laws of the State of Ohio, without regard to conflicts of law
principles.
7.11 Borrower hereby irrevocably agrees and submits to the exclusive
jurisdiction of any state or federal court located within Hamilton County,
Ohio, or, at the option of Lender in its sole discretion, of any state or
federal court(s) located within any other county, state or jurisdiction in
which Lender at any time or from time to time chooses in its sole
discretion to bring an action or otherwise exercise a right or remedy, and
Borrower waives any objection based on FORUM NON CONVENIENS and any
objection to venue of any such action or proceeding. Borrower hereby
irrevocably consents that all service of process be made by certified mail
directed to Borrower at its address set forth herein for notices and
service so made will be deemed to be completed the earlier of Borrower's
actual receipt thereof or five (5) business days after the same has been
deposited in U.S. Mails, postage prepaid. Nothing contained herein will
prevent Lender from serving process in any other manner permitted by law.
Borrower and Lender each waive any right to trial by jury in any action or
proceeding relating to this Note, the Loan Documents, the collateral
described therein, or any actual or proposed transaction or other matter
contemplated in or relating to any of the foregoing.
8
<PAGE>
LASALLE HOTEL LESSEE, INC.
By: /s/ Hans S. Weger
-------------------------------
Print Name: Hans S. Weger
Title: Chief Financial Officer
STATE OF MARYLAND )
) ss.:
COUNTY OF MONTGOMERY )
On the 3rd day of January, 2001, before me, the undersigned, a Notary
Public in and for said State, personally appeared Hans S. Weger, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by
his signature on the instrument, the individuals, or the persons upon
behalf of which the individual acted, executed the instrument.
/s/ Susan K. Wojciechowski
------------------------------
Susan K. Wojciechowski
Notary Public
Montgomery County
Maryland
9
EXHIBIT 10(vii)
--------------
GUARANTY
(Commercial Real Estate)
In consideration of the extension of credit by FIRSTAR BANK, NATIONAL
ASSOCIATION, a national banking association under the laws of the United
States of America ("Lender"), whose mailing address is c/o Commercial Real
Estate Department, 425 Walnut Street, Cincinnati, Ohio 45202, to LASALLE
HOTEL LESSEE, INC. ("Borrower"), and other good and valuable consideration,
the receipt of which is acknowledged, the undersigned, jointly and
severally if more than one, hereby guarantees to Lender the prompt
performance and payment of all indebtedness, interest, principal,
liabilities and obligations of Borrower to Lender pursuant to Borrower's
note ("Note") in the principal amount of $5,000,000 of even date herewith
and all amendments thereto and restatements and extensions thereof
(hereinafter collectively referred to as the "Obligations"). This is a
Guaranty of payment and performance and not of collection. Without
limiting the foregoing, the undersigned, absolutely, irrevocably and
unconditionally indemnifies and saves Lender harmless from and against all
liabilities, suits, proceedings, actions, claims, assertions, charges,
demands, delays, injuries, expenses (including
reasonable attorney fees and
disbursements) which are incurred by Lender as a result of any allegation
or determination that the Obligations involve a fraudulent conveyance,
transfer or obligation under federal or state law.
This is an absolute, irrevocable, unconditional and continuing
Guaranty of the Obligations. This Guaranty will extend to and cover
renewals of the Obligations and any number of extensions of time for
payment thereof and will not be affected by any surrender, exchange,
acceptance, or release by Lender of any other guarantee or any security
held by it for any of the Obligations. Notice of acceptance of this
Guaranty, notice of extensions of credit to the Borrower from time to time,
notice of default, diligence, presentment, protest, demand for payment,
notice of demand or protest, and any defense based upon a failure of Lender
to comply with the notice requirements of the applicable version of Uniform
Commercial Code Section 9-504 are hereby waived. Lender at any time and
from time to time, without the consent of the undersigned, may change the
manner, place or terms of payment of or interest rates on, or change or
extend the time of payment, or renew or alter, any of the Obligations,
without impairing or releasing the liabilities of the undersigned
hereunder. Lender in its sole discretion may determine the reasonableness
of the period which may elapse prior to the making of demand for any
payment upon the undersigned, but in no event shall such period be less
than fifteen (15) days. Lender need not pursue any of its remedies against
said Borrower before having recourse against the undersigned under this
Guaranty.
The undersigned hereby grants the Lender a security interest in all
deposits and account balances and credits of the undersigned or other sums
credited by or due from the Lender to the undersigned in the possession of
or in transit to Lender, now existing or hereafter arising or coming due
(including without limitation certificates of deposit, repurchase
agreements and securities in transit), and such amounts and all proceeds
thereof may at all times be held and treated as collateral security
hereunder ("Collateral"), it being understood that, unless and until an
Event of Default has occurred under the Note, no restrictions, setoff, or
similar provisions shall be enforced against the Collateral, or the
undersigned's use, transfer or replacement of the Collateral. Further,
undersigned agrees at any time at the Lender's request, to sign financing
statements, trust receipts, security agreements or other documents deemed
by Lender as reasonably necessary to evidence, perfect, secure, preserve,
protect and/or enforce this Guaranty and existing or additional security
interests in the Collateral created in Lender hereunder or otherwise.
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<PAGE>
To the extent the Obligations are due and payable, and unpaid, and at
any time thereafter, Lender shall have all the rights and remedies as
against the Collateral of a secured party and further, Lender may apply or
set-off such Collateral against the Obligations as the Lender deems
appropriate, and/or refuse to honor orders to pay or withdraw the
Collateral or sums represented thereby, all at Lender's sole and absolute
discretion.
The undersigned is presently informed of the financial condition of
the Borrower and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of non-payment or performance of the
Obligations.
If any demand is made at any time upon Lender for the repayment or
recovery of any amount or amounts received by it in payment or on account
of any of the Obligations and if Lender repays all or any part of such
amount or amounts by reason of any judgment, decree or order of any court
or administrative body or by reason of any settlement or compromise of any
such demand, the undersigned will be and remain liable hereunder for the
amount or amounts so repaid or recovered to the same extent as if such
amount or amounts had never been received originally by Lender.
Unless and until Lender shall consent in writing to a modification,
the undersigned shall have no right of subrogation against Borrower by
reason of any payments or acts of performance by the undersigned in
compliance with the obligations of the undersigned hereunder. The
undersigned hereby irrevocably waives all legal and equitable rights to
recover from Borrower any sums paid by the undersigned under the terms of
this Guaranty. Undersigned further agrees not to transfer any of its
assets without fair and adequate consideration, except for gifts made in
the ordinary course to spouse or children, or as otherwise agreed to in
writing by Lender.
The undersigned shall pay to Lender all reasonable attorneys' fees
and costs of litigation in connection with the enforcement of the terms of
this Guaranty.
The undersigned will provide Lender with current financial statements
annually within 90 days after the end of each calendar year, or upon
request, in form and detail reasonably satisfactory to Lender and all in
compliance with the terms of the Mortgage. This Guaranty shall be binding
upon the undersigned and the personal representatives, heirs, successors
and assigns thereof and inure to the benefit of Lender and its successors
and assigns.
Upon sale, transfer, or assignment of the above stated Note by Lender
to any third party (the "Third Party"), this Guaranty may also be assigned
by Lender to the Third Party and the undersigned acknowledges liability
under this Guaranty to such Third Party.
This Guaranty may not be changed orally, and no obligation of the
undersigned can be released or waived by Lender, except in writing signed
by a duly authorized officer of Lender.
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<PAGE>
This Guaranty shall be construed and enforced pursuant to the laws of
the State of Ohio.
WAIVER OF JURY TRIAL: GUARANTOR AND LENDER HEREBY JOINTLY AND SEVERALLY
WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
RELATING TO THIS INSTRUMENT AND TO ANY OF THE LOAN DOCUMENTS, THE
OBLIGATIONS HEREUNDER OR THEREUNDER, ANY COLLATERAL SECURING THE
OBLIGATIONS, OR ANY TRANSACTION ARISING THEREFROM OR CONNECTED THERETO.
GUARANTOR AND LENDER EACH REPRESENTS TO THE OTHER THAT THIS WAIVER IS
KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.
Signed this 3rd day of January, 2001
GUARANTOR:
LASALLE HOTEL OPERATING PARTNERSHIP, L.P.
By: LaSalle Hotel Properties, its General Partner
By: /s/ Hans Weger
-----------------------------------
Hans Weger, Chief Financial Officer
LASALLE HOTEL PROPERTIES
By: /s/ Hans Weger
-----------------------------------
Hans Weger, Chief Financial Officer
NOTICE ADDRESS FOR EACH GUARANTOR SHALL BE:
4800 Montgomery Lane
Suite M25
Bethesda, Maryland 20814
3
<PAGE>
STATE OF MARYLAND )
) ss.:
COUNTY OF MONTGOMERY )
On the 3rd day of January, 2001, before me, the undersigned, a Notary
Public in and for said State, personally appeared Hans S. Weger, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by
his signature on the instrument, the individuals, or the persons upon
behalf of which the individual acted, executed the instrument.
/s/ Susan K. Wojciechowski
------------------------------
Susan K. Wojciechowski
Notary Public
Montgomery County
Maryland
4
