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EXHIBIT 10.5
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (as amended, restated or otherwise
modified, this "Agreement"), dated as of October 21, 1998, is made by SHOLODGE,
INC., a corporation organized under the laws of Tennessee ("ShoLodge"), and the
Subsidiaries of ShoLodge party hereto (the "Subsidiary Pledgors", and together
with ShoLodge, the "Pledgors"), in favor of FIRST UNION NATIONAL BANK, a
national banking association (the "Administrative Agent"), as Administrative
Agent for the ratable benefit of the Administrative Agent and the financial
institutions (the "Lenders") as are, or may from time to time become, parties to
the Credit Agreement (as defined below).
STATEMENT OF PURPOSE
Pursuant to the Credit Agreement dated as of April 30, 1997 (as
supplemented by the Joinder Agreement No. 1 dated as of June 11, 1997, as
supplemented by the Consent and Waiver Letter dated November 14, 1997, as
amended by the First Amendment to Credit Agreement dated as of January 16, 1998,
as supplemented by the Consent Letter dated as of July 16, 1998, as supplemented
by the Consent and Waiver Letter dated as of August 13, 1998, as amended by the
Second Amendment and Waiver Agreement to Credit Agreement of even date herewith,
and as further amended, restated, supplemented or otherwise modified, the
"Credit Agreement"), by and among ShoLodge and certain of its Subsidiaries party
thereto, as Borrowers (the "Borrowers"), the Lenders, the Administrative Agent
and NationsBank of Tennessee, N.A., as Co-Agent, the Lenders have extended
certain credit facilities to the Borrowers as more specifically described in the
Credit Agreement.
The Pledgors are the legal and beneficial owners of the indebtedness
described on Schedule I hereto (as more fully defined hereinafter, the "Pledged
Debt"). Payment of the Pledged Debt is secured by the liens or other security
interests granted to the Pledgors pursuant to those certain security agreements,
mortgages, financing statements and other instruments described on Schedule II
hereto (as more fully defined hereinafter, the "Pledged Security").
In connection with the transactions contemplated by the Credit Agreement
and as a condition precedent to the Second Amendment and Waiver Agreement to
Credit Agreement of even date herewith (the "Second Amendment"), the Lenders
have requested that the Pledgors execute this Agreement, and the Pledgors have
agreed to do so pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Second Amendment and to
continue to make available Loans pursuant to the Credit Agreement, the Pledgors
hereby agree with the Administrative Agent for the ratable benefit of the
Administrative Agent and the Lenders as follows:
SECTION 1. Defined Terms. Capitalized terms used and not otherwise defined
in this Agreement, including the preambles and recitals hereof shall have the
meaning assigned thereto in the Credit Agreement. In the event of a conflict
between capitalized terms defined herein and in the Credit Agreement, the Credit
Agreement shall control. The following terms shall have the following meanings:
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"Agreement" means this Pledge Agreement, as further amended,
restated or otherwise modified.
"Code" means the Uniform Commercial Code from time to time in effect
in the State of North Carolina.
"Collateral" means the Pledged Debt, the Pledged Security and the
Collateral Account (including, without limitation, all cash deposited
therein from time to time, and the investments made pursuant to Section 5
hereof).
"Collateral Account" means a cash collateral account established by
the Pledgors with the Administrative Agent, in the name and under the
exclusive dominion and control of the Administrative Agent, pursuant to
Section 5 hereof).
"Pledged Debt" means the indebtedness evidenced by the promissory
notes described on Schedule I, and all payments of principal and interest
and other amounts from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
indebtedness, together with all other rights of any nature whatsoever with
respect thereto that may be issued or granted by the obligors named
therein while this Agreement is in effect, and all Proceeds therefrom.
"Pledged Security" means all liens or other security interests
granted to the Pledgors as security for the Pledged Debt pursuant to the
security documents, mortgages and other agreements described on Schedule
II, including, without limitation, the security interests in, the deposit
accounts and shares of capital stock described therein, and all Proceeds
therefrom.
"Proceeds" means all "proceeds" as such term is defined in Section
9-306(1) of the Code on the date hereof and, in any event, shall include,
without limitation, all principal, interest and other amounts due with
respect to the Pledged Debt, proceeds of sale thereof or distributions
with respect thereto.
"Secured Obligations" means the Obligations as defined in the Credit
Agreement and any renewals or extensions of any of such Obligations.
SECTION 2. Pledge and Grant of Security Interests.
(a) The Pledgors hereby deliver to the Administrative Agent, for the
ratable benefit of the Administrative Agent and the Lenders, all promissory
notes evidencing the Pledged Debt and hereby grant to the Administrative Agent,
for the ratable benefit of the Administrative Agent and the Lenders, a first
priority security interest in such promissory notes and the Pledged Debt
evidenced thereby, together with all other Collateral, as collateral security
for the prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the Secured Obligations.
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(b) To the extent that the Pledged Security is comprised of any shares of
capital stock or mortgage instruments, the Pledgors hereby deliver to the
Administrative Agent, for the ratable benefit of the Administrative Agent and
the Lenders, the certificates evidencing such shares of capital stock (and the
stock powers related thereto) and, to the extent received by the applicable
Pledgor from the applicable filing office as of the date hereof, the original of
such mortgage instruments (provided that to the extent the original of any such
mortgage instrument has not been received by the applicable Pledgor from the
applicable filing office as of the date hereof, the Pledgors shall deliver the
original of any such mortgage instrument immediately upon its receipt thereof).
With respect to the certificates evidencing such shares of capital stock (and
the stock powers related thereto), the Administrative Agent shall hold such
certificates (and the stock powers related thereto) for the benefit of itself
and the Lenders and as bailee for the Pledgors for the purpose of perfecting the
security interest of the Administrative Agent, on behalf of itself and the
Lenders, and the Pledgors therein.
SECTION 3. Representations and Warranties. To induce the Administrative
Agent and the Lenders to enter into the Second Amendment and to continue to make
available Loans pursuant to the Credit Agreement and accept the security
contemplated hereby, the Pledgors hereby represent and warrant that:
(a) each Pledgor has the corporate, company or partnership power,
authority and legal right, as applicable, to execute and deliver, to
perform its obligations under, and to grant the Lien on the Collateral
pursuant to, this Agreement and has taken all necessary corporate, company
or partnership action to authorize its execution, delivery and performance
of, and grant of the Lien on the Collateral pursuant to, this Agreement;
(b) this Agreement constitutes a legal, valid and binding obligation
of each Pledgor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies;
(c) the execution, delivery and performance of this Agreement will
not violate any provision of any Applicable Law or contractual obligation
of any Pledgor and will not result in the creation or imposition of any
Lien on any of the properties or revenues of any Pledgor pursuant to any
Applicable Law or contractual obligation, except as contemplated hereby;
(d) no consent or authorization of, filing with, or other act by or
in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder, member,
partner or other owner or creditor of any Pledgor or any obligor), is
required in connection with the execution, delivery, performance, validity
or enforceability of this Agreement;
(e) the jurisdictions in which each chief executive office of each
Pledgor is located is set forth on Schedule III;
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(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
any Pledgor, threatened by or against any Pledgor or against any of its
properties or revenues with respect to this Agreement or any of the
transactions contemplated hereby;
(g) the Pledged Debt is outstanding in the principal amount
indicated on Schedule I and the Pledged Security constitutes all of the
collateral or other security interests granted as security for the Pledged
Debt and is evidenced by the security agreements, mortgages, financing
statements and other instruments set forth on Schedule II;
(h) each Pledgor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Debt listed on Schedule I and the
Pledged Security listed on Schedule II (other than the Pledged Security
directly related to the Non-Pledged Notes), free of any and all Liens or
options in favor of, or claims (other than the existing claim of the
holders of the Non-Pledged Notes) of, any other Person, except the Liens
created by this Agreement; and
(i) upon the filing of properly completed financing statements and
mortgage assignments with respect to the Pledged Security (other than the
Pledged Security directly related to the Non-Pledged Notes) in the
necessary jurisdictions, the Lien granted pursuant to this Agreement will
constitute a valid, perfected first priority Lien on the Pledged Security
(other than the Pledged Security directly related to the Non-Pledged
Notes), enforceable as such against all creditors of any Pledgor and any
Persons purporting to purchase any of the Pledged Security (other than the
Pledged Security directly related to the Non-Pledged Notes) from any
Pledgor.
SECTION 4. Certain Covenants. The Pledgors covenant and agree with the
Administrative Agent, for the ratable benefit of the Administrative Agent and
the Lenders, that, from and after the date of this Agreement until the Secured
Obligations are paid in full and the Commitments are terminated:
(a) No Pledgor will, without thirty (30) days' prior written notice
to the Administrative Agent, change its name, identity or corporate
structure so as to make any financing or other statement filed as provided
herein become seriously misleading. The Pledgors will, upon request of the
Administrative Agent, execute such financing statements, notices of lien,
notices of assignment and continuations or amendments to any of the
foregoing, and other documents (and pay the costs of filing or recording
the same in all public offices deemed necessary by the Administrative
Agent) and do such other acts and things, all as the Administrative Agent
may from time to time request to establish and maintain a valid perfected
pledge and security interest in the Collateral. Each Pledgor hereby
constitutes and appoints the Administrative Agent (and any of its
officers) as its attorney-in-fact with full power and authority to execute
and deliver all documents necessary to perfect and keep perfected the
security interests created hereby. This power of attorney hereby granted
is a special power of attorney coupled with an interest and shall be
irrevocable by each Pledgor.
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(b) Each Pledgor shall notify each obligor in respect of the Pledged
Debt that the Pledged Debt has been assigned to the Administrative Agent
hereunder and, upon the occurrence and during the continuance of any Event
of Default, upon request of the Administrative Agent, each Pledgor will
promptly notify (and each Pledgor hereby authorizes the Administrative
Agent so to notify) each obligor in respect of the Pledged Debt that the
Pledged Debt has been assigned to the Administrative Agent hereunder and
that all payments due or to become due in respect of the Pledged Debt are
to be made directly to the Administrative Agent or its designee.
(c) (i) Each Pledgor shall use all reasonable efforts to cause to be
collected from the obligors of the Pledged Debt, as and when due, any and
all amounts owing under or on account of the Pledged Debt. (ii) Each
Pledgor will perform and comply with all of its obligations in respect of
the Pledged Debt and the exercise by the Administrative Agent of any of
its rights hereunder shall not release such Pledgor from any of its duties
or obligations. (iii) No Pledgor will (A) fail to exercise promptly and
diligently each and every material right which it may have under each
agreement giving rise to the Pledged Debt or (B) fail to deliver to the
Administrative Agent a copy of each material demand, notice or document
received by it relating in any way to any agreement giving rise to the
Pledged Debt.
(d) Without the prior written consent of the Administrative Agent,
the Pledgors will not (i) modify, sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the Collateral,
or (ii) create, incur or permit to exist any Lien or option in favor of,
or any claim of any Person (other than the existing claim of the holders
of the Non-Pledged Notes) with respect to, any of the Collateral, or any
interest therein, except for the Lien provided for by this Agreement. The
Pledgors will defend the right, title and interest of the Administrative
Agent in and to the Collateral against the claims and demands of all
Persons (other than the existing claims of the holders of the Non-Pledged
Notes) whomsoever.
(e) Without the prior written consent of the Administrative Agent,
no Pledgor will (A) amend, modify, terminate or waive any material
provision of any agreement giving rise to the Pledged Debt in any manner
which could reasonably be expected to materially adversely affect the
value of the Pledged Debt as Collateral, (B) grant any extension of the
time of payment of any of the Pledged Debt or (C) compromise, compound or
settle any of the Pledged Debt for less than the full amount thereof,
release, wholly or partially, any Person liable for the payment thereof,
or allow any credit or discount whatsoever thereon.
(f) The Pledgors will advise the Administrative Agent promptly, in
reasonable detail, (i) of any Lien or claim (other than the existing claim
of the holders of the Non-Pledged Notes) made or asserted against any
material part of the Collateral, (ii) of any material change in the
composition of the Collateral, and (iii) of the occurrence of any other
event relating specifically to any Pledgor or its assets which could
reasonably be expected to have a material adverse effect on the aggregate
value of the Collateral or on the security interests created hereunder.
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(g) In the event any amounts due and owing in excess of $100,000
individually or $250,000 in the aggregate are in dispute between any
obligor on the Pledged Debt and any Pledgor, such Pledgor shall provide
the Administrative Agent with written notice thereof promptly after such
Pledgor's learning thereof, explaining in detail the reason for the
dispute, all claims related thereto and the amount in controversy. In
addition, the Pledgors will promptly upon, but in no event later than five
(5) Business Days after: (A) any Pledgor's learning thereof, inform the
Administrative Agent, in writing, of any material delay in such Pledgor's
performance of any of its obligations to any obligor on the Pledged Debt
and of any assertion of any claims, offsets or counterclaims by any such
obligor and of any allowances, credits and/or other monies granted by such
Pledgor to any such obligor, in each case involving amounts in excess of
$100,000 individually or $250,000 in the aggregate; and (B) any Pledgor's
receipt or learning thereof, furnish to and inform the Administrative
Agent of all adverse information relating to the financial condition of
any obligor with respect to the Pledged Debt exceeding $100,000
individually or $250,000 in the aggregate.
(h) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of the Pledgors, the
Pledgors (i) will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purposes of obtaining
or preserving the full benefits of this Agreement and of the rights and
powers herein granted (including, without limitation, any instruments of
transfer or any assignments in blank reasonably requested by the
Administrative Agent in connection with this Agreement) and (ii) will
promptly deliver such instruments and documents respecting the Pledged
Debt and the Pledged Security as the Administrative Agent reasonably
requests (including, without limitation, any security agreements, any
mortgages, any financing statements, any title insurance policies, any
surveys and any other documents or certificates relating thereto). If any
amount payable under or in connection with any of the Collateral shall be
or become evidenced by any promissory note, other instrument or chattel
paper, such note, instrument or chattel paper shall be immediately
delivered to the Administrative Agent, duly endorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral
pursuant to this Agreement.
(i) Each Pledgor agrees to pay, and to save the Administrative Agent
and the Lenders harmless from, any and all liabilities, costs and expenses
(including, without limitation, legal fees and expenses) (i) with respect
to, or resulting from, any and all stamp, excise, sales or other taxes
which may be payable or determined to be payable with respect to any of
the Collateral, (ii) with respect to, or resulting from, complying with
any Applicable Law applicable to any of the Collateral or (iii) in
connection with any of the transactions contemplated by this Agreement. In
any suit, proceeding or action brought by the Administrative Agent under
the Pledged Debt for any sum owing thereunder, or to enforce any
provisions of the Pledged Debt, each Pledgor will save, indemnify and keep
the Administrative Agent and the Lenders harmless from and against all
expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction or liability whatsoever of any
obligor thereunder, arising out of a breach by any Pledgor of any
obligation thereunder or arising out of any other agreement, indebtedness
or liability at any
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time owing to or in favor of any obligor or its successors from any
Pledgor. The obligations of the Pledgors under this Section 4(h) shall
survive the termination of the other provisions of this Agreement.
SECTION 5. Collateral Account.
(a) There is hereby established with the Administrative Agent a Collateral
Account in the name and under the exclusive dominion and control of the
Administrative Agent. There shall be deposited from time to time into such
account the cash proceeds of the Collateral required to be delivered to the
Administrative Agent pursuant to subsection (b) of this Section 5. Any income
received by the Administrative Agent with respect to the balance from time to
time standing to the credit of the Collateral Account, including any interest or
capital gains on investments of amounts on deposit in the Collateral Account,
shall remain, or be deposited, in the Collateral Account together with any
investments from time to time made pursuant to subsection (c) of this Section 5,
shall vest in the Administrative Agent, shall constitute part of the Collateral
hereunder and shall not constitute payment of the Secured Obligations until
applied thereto as hereinafter provided.
(b) Upon the occurrence and during the continuance of an Event of Default,
if requested by the Administrative Agent, each Pledgor shall instruct all
obligors on the Pledged Debt and other Persons obligated in respect of the
Pledged Debt to make all payments in respect of the Pledged Debt either (i)
directly to the Administrative Agent (by instructing that such payments be
remitted to a post office box which shall be in the name and under the exclusive
dominion and control of the Administrative Agent) or (ii) to one or more other
banks in any state in the United States (by instructing that such payments be
remitted to a post office box which shall be in the name and under the exclusive
dominion and control of such bank) under a Lockbox Letter substantially in the
form of Annex I hereto duly executed by each Pledgor and such bank or under
other arrangements, in form and substance satisfactory to the Administrative
Agent, pursuant to which each Pledgor shall have irrevocably instructed such
other bank (and such other bank shall have agreed) to remit all proceeds of such
payments directly to the Administrative Agent for deposit into the Collateral
Account or as the Administrative Agent may otherwise instruct such bank, and
thereafter if the proceeds of any Collateral shall be received by any of the
Pledgors, each Pledgor will promptly deposit such proceeds into the Collateral
Account and until so deposited, all such proceeds shall be held in trust by each
Pledgor for and as the property of the Administrative Agent, for the benefit of
itself and the Lenders, and shall not be commingled with any other funds or
property of any Pledgor. At any time after the occurrence and during the
continuance of an Event of Default, the Administrative Agent may itself so
instruct the obligors on the Pledged Debt. All such payments made to, or as
directed by, the Administrative Agent shall be deposited in the Collateral
Account.
(c) Amounts on deposit in the Collateral Account shall be promptly
liquidated and applied to the payment of the Secured Obligations in the manner
specified in Section 13 hereof.
SECTION 6. Cash Payments. Unless an Event of Default shall have occurred
and be continuing and the Administrative Agent shall have given notice to the
Pledgors of the Administrative Agent's intent to exercise its rights pursuant to
Section 7 below or the remedies pursuant to Section 8 below, the Pledgors shall
be permitted to receive all payments of principal and interest paid in respect
of the Collateral; provided that in connection with any payments of principal
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with respect to the Collateral, the Aggregate Commitment under the Credit
Agreement shall be reduced pursuant to Section 2.6 thereof.
SECTION 7. Rights of the Administrative Agent.
(a) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice to the Pledgors of its intent to exercise
any of the following rights, (i) the Administrative Agent shall have the right
to receive any and all payments in respect of the Collateral and make
application thereof to the Secured Obligations, in the order set forth in
Section 4.5 of the Credit Agreement and (ii) the Administrative Agent or its
nominee may exercise any and all rights, privileges or options pertaining to the
Collateral as if it were the absolute owner thereof, all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to the Pledgors to exercise any such right, privilege
or option and shall not be responsible for any failure to do so or delay in so
doing.
(b) The rights of the Administrative Agent and the Lenders hereunder shall
not be conditioned or contingent upon the pursuit by the Administrative Agent or
any Lender of any right or remedy against the Pledgors or against any other
Person which may be or become liable in respect of all or any part of the
Secured Obligations or against any collateral security therefor, guarantee
therefor or right of offset with respect thereto. Neither the Administrative
Agent nor any Lender shall be liable for any failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so, nor
shall the Administrative Agent be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgors or any other Person
or to take any other action whatsoever with regard to the Collateral or any part
thereof.
SECTION 8. Remedies. If an Event of Default shall occur and be continuing,
the Administrative Agent may exercise, on behalf of itself and the Lenders, (i)
all rights and remedies granted in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations and (ii)
all rights and remedies of a secured party under the Code. In addition, the
Administrative Agent may withdraw all cash, if any, in the Collateral Account
and investments made with amounts on deposit in the Collateral Account, and
apply such monies, investments and other cash, if any, then held by it as
Collateral as specified in Section 13 hereof. Without limiting the generality of
the foregoing with regard to the scope of the Administrative Agent's remedies,
the Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Pledgor, any Borrower or any
other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels at public or private sale or
sales at any office of the Administrative Agent or any Lender or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Administrative Agent or any Lender shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in any Pledgor,
which right or equity is
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hereby waived or released. The Administrative Agent shall apply any Proceeds
from time to time held by it and the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred in respect thereof or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
Lenders hereunder, including, without limitation, reasonable attorneys' fees and
disbursements of counsel thereto, to the payment in whole or in part of the
Secured Obligations, in the order set forth in Section 4.5 of the Credit
Agreement, and only after such application and after the payment by the
Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to any Pledgor. To the
extent permitted by applicable law, the Pledgors waive all claims, damages and
demands they may acquire against the Administrative Agent or any Lender arising
out of the exercise by them of any rights hereunder. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such sale
or other disposition.
SECTION 9. Amendments, etc. With Respect to the Secured Obligations. The
Pledgors shall remain obligated hereunder, and the Collateral shall remain
subject to the Lien granted hereby, notwithstanding that, without any
reservation of rights against the Pledgors, and without notice to or further
assent by the Pledgors, any demand for payment of any of the Secured Obligations
made by the Administrative Agent or any Lender may be rescinded by the
Administrative Agent or such Lender, and any of the Secured Obligations
continued, and the Secured Obligations, or the liability of the Pledgors or any
other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered, or released by the Administrative Agent or any
Lender, and the Credit Agreement, the Notes, any other Loan Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or part, as the Lenders (or the
Required Lenders, as the case may be) may deem advisable from time to time, and
any guarantee, right of offset or other collateral security at any time held by
the Administrative Agent or any Lender for the payment of the Secured
Obligations may be sold, exchanged, waived, surrendered or released. Neither the
Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any other Lien at any time held by it as security for
the Secured Obligations or any property subject thereto. The Pledgors waive any
and all notice of the creation, renewal, extension or accrual of any of the
Secured Obligations and notice of or proof of reliance by the Administrative
Agent or any Lender upon this Agreement; the Secured Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred
in reliance upon this Agreement; and all dealings between the Pledgors, on the
one hand, and the Administrative Agent and the Lenders, on the other, shall
likewise be conclusively presumed to have been had or consummated in reliance
upon this Agreement. The Pledgors waive diligence, presentment, protest, demand
for payment and notice of default or nonpayment to or upon the Pledgors with
respect to any of the Secured Obligations.
SECTION 10. No Subrogation. Notwithstanding any payment or payments made
by the Pledgors hereunder, or any setoff or application of funds of the Pledgors
by the Administrative Agent, or the receipt of any amounts by the Administrative
Agent with respect to
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any of the Collateral, the Pledgors shall not be entitled to be subrogated to
any of the rights of the Administrative Agent against any Borrower or any
guarantor or against any other collateral security held by the Administrative
Agent for the payment of the Secured Obligations, nor shall the Pledgors seek
any reimbursement from any Borrower or any guarantor in respect of payments made
by the Pledgors in connection with the Collateral, or amounts realized by the
Administrative Agent in connection with the Collateral, until all amounts owing
to the Administrative Agent and the Lenders on account of the Secured
Obligations are paid in full and the Credit Agreement is terminated. If any
amount shall be paid to the Pledgors on account of such subrogation rights at
any time when all of the Secured Obligations shall not have been paid in full,
such amount shall be held by the Pledgors in trust for the Administrative Agent,
segregated from other funds of the Pledgors, and shall, forthwith upon receipt
by the Pledgors, be turned over to the Administrative Agent in the exact form
received by the Pledgors (duly indorsed by the Administrative Agent, if
required) to be applied against the Secured Obligations, whether matured or
unmatured, in such order as set forth in the Credit Agreement.
SECTION 11. Irrevocable Authorization and Instruction to Obligors. The
Pledgors hereby authorize and instruct each obligor under the Collateral to
comply with any instruction received by it from the Administrative Agent in
writing that (a) states that an Event of Default has occurred and is continuing
and (b) is otherwise in accordance with the terms of this Agreement, without any
other or further instructions from the Pledgors, and the Pledgors agree that
such obligors shall be fully protected in so complying.
SECTION 12. Limitation on Duties Regarding Collateral. The Administrative
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession shall be to deal with it in the
same manner as the Administrative Agent deals with similar securities and
property for its own account. Neither the Administrative Agent, any Lender nor
any of their respective directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Pledgors or otherwise.
SECTION 13. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Administrative Agent in accordance with the terms of Section 4.5 of the Credit
Agreement. The Administrative Agent may make distribution hereunder in cash or
in kind or, on a ratable basis, in any combination thereof.
SECTION 14. Concerning the Administrative Agent. The provisions of Article
XII of the Credit Agreement shall inure to the benefit of the Administrative
Agent in respect of this Agreement and shall be binding upon the Pledgors and
the Lenders. In furtherance and not in derogation of the rights, privileges and
immunities of the Administrative Agent therein set forth:
(a) The Administrative Agent is authorized to take all such action
as is provided to be taken by it as Administrative Agent hereunder and all
other action incidental thereto. As to any matters not expressly provided
for herein, the Administrative Agent may request instructions from the
Lenders and shall act or refrain from acting in accordance with written
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instructions from the Required Lenders (or, when expressly required by
this Agreement or the Credit Agreement, all the Lenders) or, in the
absence of such instructions, in accordance with its discretion.
(b) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the security interests
therein purported to be granted by this Agreement, whether impaired by
operation of law or by reason of any action or omission to act on its part
(other than any such action or inaction constituting gross negligence or
willful misconduct). The Administrative Agent shall have no duty to
ascertain or inquire as to the performance or observance of any of the
terms of this Agreement by the Pledgor.
SECTION 15. Notices. All notices and communications hereunder shall be
given to the addresses and otherwise made in accordance with Section 13.1 of the
Credit Agreement.
SECTION 16. Rights and Remedies Cumulative; Non-Waiver, etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrowers, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default. This Agreement is a Loan Document
executed pursuant to the Credit Agreement.
SECTION 17. Successors and Assigns. This Agreement is for the benefit of
the Administrative Agent and the Lenders and their permitted successors and
assigns. This Agreement shall be binding on the Pledgors and their successors
and assigns; provided that the Pledgors may not assign any of their rights or
obligations hereunder without the prior written consent of the Administrative
Agent and the Lenders.
SECTION 18. Amendments, Waivers and Consents. No term, covenant, agreement
or condition of this Agreement may be amended or waived, nor may any consent be
given, except in the manner set forth in Section 13.11 of the Credit Agreement.
SECTION 19. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
SECTION 20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE
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LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR
CHOICE OF LAW PRINCIPLES THEREOF.
SECTION 21. Consent to Jurisdiction. The Pledgors hereby irrevocably
consent to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of or any dispute in connection with this Agreement, any rights or
obligations hereunder, or the performance of such rights and obligations. The
Pledgors hereby irrevocably consent to the service of a summons and complaint
and other process in any action, claim or proceeding brought by the
Administrative Agent or any Lender in connection with this Agreement, any rights
or obligations hereunder, or the performance of such rights and obligations, on
behalf of themselves or their property, in the manner provided in Section 13.1
of the Credit Agreement. Nothing in this Section 21 shall affect the right of
the Administrative Agent or any Lender to serve legal process in any other
manner permitted by Applicable Law or affect the right of the Administrative
Agent or any Lender to bring any action or proceeding against the Pledgors and
their properties in the courts of any other jurisdictions.
SECTION 22. Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party, whether made
before or after institution of any judicial proceeding, any dispute, claim
or controversy arising out of, connected with or relating to the Notes or
any other Loan Documents ("Disputes"), between or among parties to the
Notes or any other Loan Documents shall be resolved by binding arbitration
as provided herein. Institution of a judicial proceeding by a party does
not waive the right of that party to demand arbitration hereunder.
Disputes may include, without limitation, tort claims, counterclaims,
claims brought as class actions, claims arising from supplements to this
Agreement executed in the future, or claims concerning any aspect of the
past, present or future relationships arising out of or connected with the
Loan Documents. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules")
of the American Arbitration Association and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Charlotte, North Carolina. The
expedited procedures set forth in Rule 51, et seq. of the Arbitration
Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A judgment
upon the award may be entered in any court having jurisdiction. The panel
from which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall be
a retired judge from the highest court of general jurisdiction, state or
federal, of the state where the hearing will be conducted.
(b) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, THE
ADMINISTRATIVE AGENT, EACH LENDER, AND EACH PLEDGOR, BY THEIR ACCEPTANCE
OF THIS AGREEMENT OR THE BENEFITS HEREOF, HEREBY IRREVOCABLY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR
OTHER PROCEEDING ARISING OUT OF OR ANY DISPUTE IN CONNECTION WITH THIS
AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH
RIGHTS AND OBLIGATIONS.
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(c) Preservation of Certain Remedies. Notwithstanding the preceding
binding arbitration provisions, the parties hereto preserve, without
diminution, certain remedies that such Persons may employ or exercise
freely, either alone, in conjunction with or during a Dispute. Each such
Person shall have and hereby reserves the right to proceed in any court of
proper jurisdiction or by self help to exercise or prosecute the following
remedies: (i) all rights to foreclose against any real or personal
property or other security by exercising a power of sale granted in this
Agreement or under applicable law or by judicial foreclosure and sale,
(ii) all rights of self help including peaceful occupation of property and
collection of rents, set off, and peaceful possession of property, (iii)
obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and in
filing an involuntary bankruptcy proceeding, and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does
not limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
SECTION 23. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible; and (b) the invalidity or unenforceability of any
provisions hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
SECTION 24. Headings. The various headings of this Agreement are inserted
for convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
SECTION 25. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
[Signature Pages Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers, all as of the day and
year first written above.
SHOLODGE, INC.
[CORPORATE SEAL]
By: /s/ Xxxx Xxxxx
--------------------------------
Name: Xxxx Xxxxx
Title: President
SHONEY'S INN, INC.
[CORPORATE SEAL]
By: /s/ Xxxx Xxxxx
--------------------------------
Name: Xxxx Xxxxx
Title: President
THE HOTEL GROUP, INC.
[CORPORATE SEAL]
By: /s/ Xxxx Xxxxx
--------------------------------
Name: Xxxx Xxxxx
Title: President
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SCHEDULE I
(to Pledge and Security Agreement)
DESCRIPTION OF PLEDGED DEBT
Original
Debtor Date Principal Amount Maturity Date Description of Debt
------ ---- ---------------- ------------- -------------------
[TO INCLUDE ALL PROMISSORY NOTES HELD BY OR TO BE HELD
BY THE PLEDGORS].
16
SCHEDULE II
(to Pledge and Security Agreement)
DESCRIPTION OF PLEDGED SECURITY
[TO INCLUDE ALL A DETAILED DESCRIPTION OF EACH MORTGAGE
DOCUMENT, PLEDGE AGREEMENT, SECURITY AGREEMENT,
FINANCING STATEMENT AND OTHER AGREEMENT OR INSTRUMENT
(I.E., PARTIES, PARTIES, LOCATION, FILING INFORMATION,
ETC. RELATING TO THE PLEDGED SECURITY]
17
SCHEDULE III
(to Pledge and Security Agreement)
JURISDICTIONS
18
ANNEX I
(to Pledge Agreement)
[FORM OF LOCKBOX LETTER]
_______________, 19___
[Name and Address of Lockbox Bank)
Re: [CORPORATION]
Ladies and Gentlemen:
We hereby notify you that effective __________, 19__, we have transferred
exclusive ownership and control of our lock-box account(s) no[s].
_____________________ (the "Lockbox Account[s]") maintained with you under the
terms of the [Lockbox Agreement] attached hereto as Exhibit A (the "Lockbox
Agreement[s]") to First Union National Bank, as Administrative Agent (the
"Administrative Agent").
We hereby irrevocably instruct you to make all payments to be made by you
out of or in connection with the Lockbox Account(s) (i) to the Administrative
Agent for credit to account no. ________ maintained by it at its office at
________________________ or (ii) as you may otherwise be instructed by the
Administrative Agent.
We also hereby notify you that the Administrative Agent shall be
irrevocably entitled to exercise any and all rights in respect of or in
connection with the Lockbox Account(s), including, without limitation, the right
to specify when payments are to be made out of or in connection with the Lockbox
Account(s).
All funds deposited into the Lockbox Account(s) will not be subject to
deduction, set-off, banker's lien or any other right in favor of any other
person than the Administrative Agent, except that you may set-off against the
Lockbox Account(s) the face amount of any check deposited in and credited to
such Lockbox Account(s) which is subsequently returned for any reason. Your
compensation for providing the service contemplated herein shall be mutually
agreed between you and us from time to time and we will continue to pay such
compensation.
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Please confirm your acknowledgment of and agreement to the foregoing
instructions by signing in the space provided below
Very truly yours,
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Acknowledged and agreed
to as of this ________ day
of ____________, 19___.
[LOCKBOX BANK]
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
20
Exhibit A
to
Lockbox Agreement
Form of Lockbox Agreement
[To Be Attached As Applicable]
