Exhibit 4.02
CONFORMED COPY
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COMPETITIVE ADVANCE AND
MULTI-CURRENCY CREDIT FACILITIES AGREEMENT
Dated as of October 15, 1997
among
CHOICE HOTELS INTERNATIONAL, INC.,
as Borrower,
THE LENDERS NAMED HEREIN,
and
THE CHASE MANHATTAN BANK, as Agent
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[CS&M Ref. No. 6700-462]
TABLE OF CONTENTS
ARTICLE I
Definitions Page
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SECTION 1.01. Defined Terms........................................... 2
SECTION 1.02 Classification of Loans and
Borrowings............................................ 26
SECTION 1.03. Terms Generally......................................... 26
ARTICLE II
The Credits
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SECTION 2.01. Commitments............................................. 26
SECTION 2.02. Loans................................................... 27
SECTION 2.03. Competitive Bid Procedure............................... 30
SECTION 2.04. Term Borrowing and Standby Borrowing
Procedures............................................ 33
SECTION 2.05. Refinancings............................................ 34
SECTION 2.06. Fees.................................................... 35
SECTION 2.07. Evidence of Indebtedness;
Repayment of Loans.................................... 36
SECTION 2.08. Interest on Loans....................................... 37
SECTION 2.09. Default Interest........................................ 38
SECTION 2.10. Alternate Rate of Interest.............................. 38
SECTION 2.11. Termination and Reduction of
Commitments........................................... 40
SECTION 2.12. Prepayment; Amortization of Term Loans.................. 41
SECTION 2.13. Reserve Requirements;
Change in Circumstances............................... 41
SECTION 2.14. Change in Legality...................................... 44
SECTION 2.15. Indemnity............................................... 45
SECTION 2.16. Pro Rata Treatment...................................... 46
SECTION 2.17. Sharing of Setoffs...................................... 46
SECTION 2.18. Payments................................................ 47
SECTION 2.19. Taxes................................................... 48
SECTION 2.20. Letters of Credit....................................... 51
SECTION 2.21. Currency Fluctuations, etc. ............................ 56
ARTICLE III
Representations And Warranties
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SECTION 3.01. Organization; Powers.................................... 57
SECTION 3.02. Authorization........................................... 57
i
SECTION 3.03. Enforceability.......................................... 58
SECTION 3.04. Governmental Approvals.................................. 58
SECTION 3.05. Financial Statements.................................... 58
SECTION 3.06. No Material Adverse Change.............................. 59
SECTION 3.07. Title to Properties; Possession Under Leases........... 59
SECTION 3.08. Subsidiaries............................................ 60
SECTION 3.09. Litigation; Compliance with Laws........................ 60
SECTION 3.10. Agreements.............................................. 60
SECTION 3.11. Federal Reserve Regulations............................. 61
SECTION 3.12. Investment Company Act;
Public Utility Holding Company Act.................... 61
SECTION 3.13. Use of Proceeds......................................... 61
SECTION 3.14. Tax Returns............................................. 61
SECTION 3.15. No Material Misstatements............................... 61
SECTION 3.16. Employee Benefit Plans.................................. 61
SECTION 3.17. Environmental Matters................................... 62
SECTION 3.18. Solvency................................................ 62
SECTION 3.19. Spin-Off................................................ 63
ARTICLE IV
Conditions Of Lending
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SECTION 4.01. All Credit Events....................................... 63
SECTION 4.02. First Credit Event...................................... 64
ARTICLE V
Affirmative Covenants
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SECTION 5.01. Existence; Businesses and Properties.................... 68
SECTION 5.02. Insurance............................................... 68
SECTION 5.03. Obligations and Taxes................................... 68
SECTION 5.04. Financial Statements, Reports, etc. .................... 69
SECTION 5.05. Litigation and Other Notices............................ 70
SECTION 5.06. ERISA................................................... 70
SECTION 5.07. Maintaining Records;
Access to Properties and
Inspections........................................... 71
SECTION 5.08. Use of Proceeds......................................... 72
SECTION 5.09. Subsidiaries............................................ 72
ii
ARTICLE VI
Negative Covenants
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SECTION 6.01. Indebtedness............................................ 72
SECTION 6.02. Liens................................................... 74
SECTION 6.03. Sale and Lease-Back Transactions........................ 75
SECTION 6.04. Investments, Loans and Advances......................... 75
SECTION 6.05. Mergers and Consolidations.............................. 76
SECTION 6.06. Asset Sales............................................. 76
SECTION 6.07. Transactions with Affiliates............................ 77
SECTION 6.08. Business of Borrower and Subsidiaries................... 77
SECTION 6.09. Subsidiary Indebtedness................................. 77
SECTION 6.10. Agreements.............................................. 78
SECTION 6.11. Fiscal Year Accounting Practices........................ 78
SECTION 6.12. No Further Negative Pledges............................. 78
SECTION 6.13. Minimum Consolidated Net Worth.......................... 78
SECTION 6.14. Consolidated Leverage Ratio............................. 78
SECTION 6.15. Consolidated Interest Coverage Ratio.................... 79
ARTICLE VII
Events of Default
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ARTICLE VIII
The Agent
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ARTICLE IX
Miscellaneous
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SECTION 9.01. Notices................................................. 86
SECTION 9.02. Survival of Agreement................................... 87
SECTION 9.03. Binding Effect.......................................... 87
SECTION 9.04. Successors and Assigns.................................. 87
SECTION 9.05. Expenses; Indemnity..................................... 91
SECTION 9.06. Right of Setoff......................................... 93
SECTION 9.07. Applicable Law.......................................... 94
SECTION 9.08. Waivers; Amendment...................................... 94
SECTION 9.09. Interest Rate Limitation................................ 95
SECTION 9.10. Entire Agreement........................................ 95
SECTION 9.11. Waiver of Jury Trial;
Punitive Damages...................................... 96
SECTION 9.12. Severability............................................ 96
SECTION 9.13. Counterparts............................................ 96
SECTION 9.14. Headings................................................ 96
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.....................................................
SECTION 9.15. Jurisdiction; Consent to Service
of Process; Judgment Currency......................... 97
SECTION 9.16. Confidentiality......................................... 98
SECTION 9.17. European Monetary Union................................. 99
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Exhibits
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Exhibit A-1 Form of Competitive Bid Request
Exhibit A-2 Form of Notice of Competitive Bid Request
Exhibit A-3 Form of Competitive Bid
Exhibit A-4 Form of Competitive Bid Accept/Reject Letter
Exhibit A-5 Form of Borrowing Request
Exhibit B Form of Administrative Questionnaire
Exhibit C Form of Assignment and Acceptance
Exhibit D Form of Opinion of Counsel
Exhibit E Form of Issuing Bank Agreement
Exhibit F Form of Guarantee Agreement
Exhibit G Form of Indemnity, Subrogation and Contribution
Agreement
Schedules
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Schedule 1.01 Hotel Properties
Schedule 2.01 Commitments
Schedule 3.07 Leased Hotel Properties
Schedule 3.08 Subsidiaries
Schedule 6.01(a) Indebtedness
Schedule 6.02 Existing Liens
Schedule 6.04 Existing Investments
Schedule 6.06 European Hotel Properties
v
COMPETITIVE ADVANCE AND MULTI-CURRENCY CREDIT
FACILITIES AGREEMENT dated as of October 15, 1997, among
CHOICE HOTELS INTERNATIONAL, INC., a Delaware corporation
(the "Borrower"), the Lenders referred to herein and THE
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CHASE MANHATTAN BANK, a New York banking corporation, as
agent for the Lenders (in such capacity, the "Agent").
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The Borrower has requested the Lenders to extend credit to the
Borrower in order to enable it to borrow (a) on a term basis on the Effective
Date (as herein defined) a principal amount not in excess of $150,000,000 and
(b) on a standby revolving credit basis on and after the Effective Date and at
any time and from time to time prior to the Revolving Maturity Date (as herein
defined) a principal amount not in excess of $150,000,000 at any time
outstanding. The Borrower has requested that up to $50,000,000 of such
revolving credit borrowings be available to the Borrower in Alternative
Currencies (as herein defined). The Borrower has also requested the Lenders to
provide a procedure pursuant to which the Borrower may invite the Lenders to bid
on an uncommitted basis on short-term borrowings by the Borrower. The Borrower
has requested the Issuing Bank (as herein defined) to issue letters of credit,
in an aggregate face amount at any time outstanding not in excess of
$10,000,000, to support payment obligations incurred in the ordinary course of
business by the Borrower and its Subsidiaries (as herein defined). The proceeds
of the borrowings hereunder shall be used for the refinancing of existing
Indebtedness, the funding of a subordinated loan in the amount of $115,000,000
to Sunburst (as herein defined), stock repurchases, capital contributions to
joint ventures and general corporate purposes of the Borrower and the
Subsidiaries, including working capital, capital expenditures and certain
acquisitions. The Lenders are willing to extend such credit to the Borrower and
the Issuing Bank is willing to issue letters of credit for the account of the
Borrower on the
terms and subject to the conditions herein set forth. Accordingly, the parties
hereto agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
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following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
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"ABR Loan" shall mean any Loan denominated in dollars bearing interest
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at a rate determined by reference to the Alternate Base Rate in accordance with
the provisions of Article II.
"ABR Standby Loan" shall mean any Standby Loan denominated in dollars
----------------
bearing interest at a rate determined by reference to the Alternate Base Rate in
accordance with the provisions of Article II.
"Adjusted CD Rate" shall mean, with respect to any CD Borrowing for
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any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/100 of 1%) equal to the sum of (a) a rate per annum equal to the
product of (i) the Fixed CD Rate in effect for such Interest Period and (ii)
Statutory Reserves, plus (b) the Assessment Rate. For purposes hereof, the term
"Fixed CD Rate" shall mean the arithmetic average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the prevailing rates per annum bid at or
about 10:00 a.m., New York City time, to the Agent on the first Business Day of
the Interest Period applicable to such CD Borrowing by three New York City
negotiable certificate of deposit dealers of recognized national standing
selected by the Agent for the purchase at face value of negotiable certificates
of deposit of major United States money center banks in a principal amount
approximately equal to the Reference Bank's portion of such CD Borrowing and
with a maturity comparable to such Interest Period.
"Administrative Questionnaire" shall mean an Administrative
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Questionnaire in the form of Exhibit B.
"Affiliate" shall mean, when used with respect to a specified person,
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another person that directly, or indirectly through one or more intermediaries,
Controls or
2
is Controlled by or is under common Control with the person specified. Following
the Spin-Off, the Borrower and the Subsidiaries shall not be deemed to be
Affiliates of Sunburst or its subsidiaries merely by virtue of such companies'
having common shareholders or directors as a result of the Spin-Off.
"Agent and Administrative Fees" shall have the meaning assigned to
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such term in Section 2.06(b).
"Aggregate Principal Amount Outstanding" shall mean, at any time, the
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sum of (i) the aggregate principal amount at such time of all outstanding
Revolving Loans denominated in dollars and (ii) the aggregate Equivalent Dollar
Amount at such time of the principal amounts of all outstanding Eurocurrency
Revolving Loans.
"Aggregate Standby Exposure" shall mean the aggregate amount of the
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Lenders' Standby Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per annum
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(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such
day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest
per annum publicly announced from time to time by the Agent as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate
shall be effective on the date such change is publicly announced as effective.
"Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment Rate.
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Agent from the New York City negotiable certificate of
3
deposit dealers of recognized national standing selected by it. "Federal Funds
Effective Rate" shall mean, for any day, 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 on the next succeeding 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
the day of such transactions received by the Agent from three Federal funds
brokers of recognized national standing selected by it. If for any reason the
Agent shall have determined that it is unable to ascertain the Base CD Rate or
the Federal Funds Effective Rate or both for any reason, including the inability
or failure of the Agent to obtain sufficient quotations in accordance with the
terms thereof, the Alternate Base Rate shall be determined without regard to
clauses (b) or (c) of the first sentence of this definition, as appropriate,
until the circumstances giving rise to such inability no longer exist. Any
change in the Alternate Base Rate due to a change in the Prime Rate, the Three
Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective
on the effective date of such change in the Prime Rate, the Three Month
Secondary CD Rate or the Federal Funds Effective Rate, respectively.
"Alternative Currency" shall mean Sterling, French Francs, Deutsche
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Marks, any European common currency referred to in Section 9.17 and any other
freely available currency (other than any "basket" currency such as the ECU)
that is freely transferable and freely convertible into dollars and in which
dealings in deposits are carried on in the London interbank market, which shall
be requested by the Borrower and approved by the Lenders.
"Applicable Percentage" shall mean, with respect to any Eurodollar
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Standby Loan, CD Loan or ABR Loan or with respect to the Facility Fees, as the
case may be, the applicable percentage set forth in the table below under the
caption "LIBOR Margin", "CD Margin", "ABR Margin" or "Facility Fee Percentage",
as the case may be, based upon the Consolidated Leverage Ratio as of the end of
and for the most recent period of four consecutive fiscal quarters for
which financial statements of the Borrower are required to have been delivered
under Section 5.04(a) or (b), whether or
4
not financial statements in respect of any subsequent period shall have been
delivered:
Revolving Loans
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Consolidated LIBOR ABR Facility Fee
Leverage Ratio Margin CD Margin Margin Percentage
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Category 1 Less than or
equal to 0.50 to
1.00 .200% .325% 0% .100%
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Category 2 Greater than 0.50
to 1.00, but less
than or equal to
1.50 to 1.00 .225% .350% 0% .125%
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Category 3 Greater than 1.50
to 1.00, but less
than or equal to
2.50 to 1.00 .275% .400% 0% .175%
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Category 4 Greater than 2.50
to 1.00, but less
than or equal to
3.00 to 1.00 .425% .550% 0% .200%
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Category 5 Greater than 3.00
to 1.00 .575% .700% 0% .300%
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Term Loans
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=================================================================
Consolidated LIBOR ABR
Leverage Ratio Margin CD Margin Margin
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Category 1 Less than or
equal to 0.50 to
1.00 .300% .425% 0%
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Category 2 Greater than 0.50
to 1.00, but less
than or equal to
1.50 to 1.00 .350% .475% 0%
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Category 3 Greater than 1.50
to 1.00, but less
than or equal to
2.50 to 1.00 .450% .575% 0%
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Category 4 Greater than 2.50
to 1.00, but less
than or equal to
3.00 to 1.00 .625% .750% 0%
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Category 5 Greater than 3.00
to 1.00 .875% 1.000% 0%
=================================================================
5
;provided that the Applicable Percentage for the period commencing on the date
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hereof and ending on the date that financial statements for the period ending on
December 31, 1997, are required to be delivered under Section 5.04(a) or (b),
shall be determined by reference to Category 4; provided further that at any
----------------
time when financial statements required to have been delivered under Section
5.04(a) or (b) have not been delivered, the Applicable Percentage shall be
determined by reference to Category 5.
"Assessment Rate" shall mean for any date the annual rate (rounded
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upwards, if necessary, to the next 1/100 of 1%) identified by the Agent (or, if
need be, reasonably estimated by the Agent) as the then current net annual
assessment rate that will be employed in determining amounts payable by the
Agent to the Federal Deposit Insurance Corporation (or any successor) for
insurance by such Corporation (or such successor) of time deposits made in
dollars at the Agent's domestic offices.
"Asset Sale" shall mean, with respect to the Borrower or any
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Subsidiary, any sale, transfer or other disposition of any assets or other
properties (including individual business assets, patents, trademarks and other
intangibles) of the Borrower or such Subsidiary, including the sale, transfer or
disposition of any capital stock of or any merger or consolidation involving any
Subsidiary and any issuance or sale by any Subsidiary of shares of its capital
stock, other than (i) sales of inventory and used equipment in the ordinary
course of business of the person (whether the Borrower or a Subsidiary) owning
and selling such inventory or used equipment; (ii) sales, transfers and other
dispositions of any tangible assets by the Borrower or any Subsidiary if the
Borrower or such Subsidiary enters into a purchase or construction agreement
with a third party to replace such assets with comparable assets as soon as
practicable (and in no event later than three months) after the disposition and,
pending such replacement, diligently pursues the replacement thereof, and the
fair market value of the replacement assets is substantially equivalent to or
exceeds that of the assets so disposed of; (iii) sales, transfers and other
dispositions of any assets to the Borrower or any Subsidiary; (iv) Sale and
Lease-Back Transactions; and (v) sales by the Borrower or Subsidiaries of assets
acquired from persons other than the Borrower or other Subsidiaries, which sales
occur not more than 12 months after the respective dates on which such assets
were acquired.
6
"Assignment and Acceptance" shall mean an assignment and acceptance
-------------------------
entered into by a Lender and an assignee, and accepted by the Agent, in the form
of Exhibit C.
"Baron Entities" shall mean the collective reference to Baron Capital
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Group, Inc., Baron Capital, Inc., BAMCO, Inc., Baron Capital Management Inc.,
Baron Asset Fund and ▇▇▇▇▇▇ ▇▇▇▇▇.
"Board" shall mean the Board of Governors of the Federal Reserve
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System of the United States.
"Borrower" shall mean Choice Hotels International, Inc. (formerly
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Choice Hotels Franchising, Inc.), a Delaware corporation, as renamed following
the Spin-Off.
"Borrowing" shall mean a group of Loans of the same Class and Type
---------
made by the Lenders (or, in the case of a Competitive Borrowing, by the Lender
or Lenders whose Competitive Bids have been accepted pursuant to Section 2.03)
on a single date and as to which a single Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrower in accordance
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with the terms of Section 2.04.
"Business Day" shall mean any day (other than a day which is a
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Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City; provided, however, that (i) when used in
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connection with a Eurodollar Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in dollar deposits in the
London interbank market and (ii) when used in connection with a Eurocurrency
Loan, "Business Day" shall also exclude any day on which commercial banks are
not open for foreign exchange business in London or, if such reference relates
to the date on which any amount is to be paid or made available in an
Alternative Currency, in the principal financial center in the country of such
Alternative Currency.
"Calculation Date" shall mean the last Business Day of each fiscal
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quarter of the Borrower.
"Capital Lease Obligations" of any person shall mean the obligations
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of such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be
7
classified and accounted for as capital leases on a balance sheet of such person
under GAAP applied on a consistent basis and, for the purposes of this
Agreement, the amount of such obligations at any time shall be the capitalized
amount thereof at such time determined in accordance with GAAP applied on a
consistent basis.
"CD Borrowing" shall mean a Borrowing comprised of CD Loans.
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"CD Loan" shall mean any Loan bearing interest at a rate determined by
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reference to the Adjusted CD Rate in accordance with the provisions of Article
II.
"CD Standby Borrowing" shall mean a Borrowing composed of CD Standby
--------------------
Loans.
"CD Standby Loan" shall mean any Standby Loan bearing interest at a
---------------
rate determined by reference to the Adjusted CD Rate in accordance with the
provisions of Article II.
A "Change in Control" shall be deemed to have occurred if (a) any
-----------------
person or group (within the meaning of Rule 13d-5 of the Securities and Exchange
Commission as in effect on the date hereof) other than ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and his
family shall own directly or indirectly, beneficially or of record, shares
representing more than 15% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Borrower, except that such a
person or group may own directly or indirectly, beneficially or of record,
shares representing not more than 20%, or 33% in the case of the Baron Entities,
of the aggregate voting power represented by the issued and outstanding capital
stock of the Borrower if and so long as such person or group reports and
continues to report such ownership on Schedule 13G (filed pursuant to Rule 13d-
1(b), Rule 13d-1(c), or, in the case of amendments, Rule 13d-2(b), of the
Securities and Exchange Commission as in effect on the date hereof); (b) a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower shall at any time have been occupied by persons who were neither (i)
nominated by the management of the Borrower or by the Nominating Committee of
the Borrower's board of directors in connection with an annual meeting of the
stockholders of the Borrower, nor (ii) appointed by directors so nominated; or
(c) any person or group other than ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and his family shall otherwise
directly or indirectly Control the Borrower. Notwithstanding the foregoing, if
a trust or foundation or other entity
8
established by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or his family holds shares representing in excess
of 15% of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of the Borrower and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or his family
Controls such trust or foundation or such other entity and the vote of such
shares held by such trust or foundation or such other entity and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
and his family remain in Control of the Borrower, there shall be no Change in
Control for purposes of this Agreement; provided, however, that any transfer
-------- -------
of such shares by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, such trust or such foundation or such other
entity shall stand on its own merits for purposes of this Agreement.
"Class", when used in reference to any Loan or Borrowing, shall refer
-----
to whether such Loan, or the Loans comprising such Borrowing, are Revolving
Loans or Term Loans and, when used in reference to any Commitment, shall refer
to whether such Commitment is a Revolving Commitment or a Term Commitment.
"Code" shall mean the Internal Revenue Code of 1986, as the same may
----
be amended from time to time.
"Commitment" shall mean a Revolving Commitment or a Term Commitment,
----------
or any combination thereof (as the context requires).
"Competitive Bid" shall mean an offer by a Lender to make a
---------------
Competitive Loan pursuant to Section 2.03.
"Competitive Bid Accept/Reject Letter" shall mean a notification made
------------------------------------
by the Borrower pursuant to Section 2.03(d) in the form of Exhibit A-4.
"Competitive Bid Rate" shall mean, as to any Competitive Bid made by a
--------------------
Lender pursuant to Section 2.03(b), (i) in the case of a Eurodollar Competitive
Loan, the Competitive Margin, and (ii) in the case of a Fixed Rate Loan, the
fixed rate of interest offered by the Lender making such Competitive Bid.
"Competitive Bid Request" shall mean a request made pursuant to
-----------------------
Section 2.03 in the form of Exhibit A-1.
"Competitive Borrowing" shall mean a borrowing consisting of a
---------------------
Competitive Loan or concurrent Competitive Loans from the Lender or Lenders
whose Competitive Bids for such Borrowing have been accepted by the Borrower
under the bidding procedure described in Section 2.03.
9
"Competitive Loan" shall mean a Loan from a Lender to the Borrower
----------------
pursuant to the bidding procedure described in Section 2.03. Each Competitive
Loan shall be a Eurodollar Competitive Loan or a Fixed Rate Loan.
"Competitive Margin" shall mean, as to any Eurodollar Competitive
------------------
Loan, the margin (expressed as a percentage rate per annum in the form of a
decimal to no more than four decimal places) to be added to or subtracted from
the LIBO Rate in order to determine the interest rate applicable to such Loan,
as specified in the Competitive Bid relating to such Loan.
"Consolidated EBITDA" shall mean, for any period, without duplication,
-------------------
the sum for such period of (a) Consolidated Net Income, (b) depreciation and
amortization expense, (c) Consolidated Interest Expense, (d) provisions for
income tax expense, (e) restructuring charges incurred in connection with the
Spin-Off and (f) non-cash charges related to the impairment of assets (pursuant
to FAS 121), all as determined in accordance with GAAP consistently applied.
"Consolidated Funded Indebtedness" means, as of any date of
--------------------------------
determination, all obligations accounted for as indebtedness on a consolidated
balance sheet of the Borrower on such date, in accordance with GAAP consistently
applied, whether such obligations are classified as long-term or short-term.
"Consolidated Interest Coverage Ratio" shall mean, for any period, the
------------------------------------
ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest
Expense for such period.
"Consolidated Interest Expense" shall mean, for any period, gross
-----------------------------
total expenses of the Borrower and its consolidated Subsidiaries accounted for
as interest expense (including capitalized interest determined in accordance
with GAAP consistently applied) for such period, including (i) the portion of
rental payments under Capital Lease Obligations deemed to represent interest in
accordance with GAAP consistently applied, (ii) the amortization of debt
discounts, (iii) the amortization of all fees (including fees with respect to
interest rate protection agreements) payable in connection with the incurrence
of Indebtedness to the extent included in interest expense, all as determined on
a consolidated basis in accordance with GAAP consistently applied. For purposes
of the foregoing, gross interest expense shall be determined after giving effect
to any net
10
payments made or received with respect to interest rate protection agreements
entered in to as a hedge against interest rate exposure.
"Consolidated Leverage Ratio" shall mean the ratio of Consolidated
---------------------------
Funded Indebtedness to Consolidated EBITDA. In the event the Borrower shall
complete, directly or through a Subsidiary, an acquisition or divestiture of any
Person or business unit during any period, the Consolidated Leverage Ratio as of
the end of and for such period shall thereafter be determined on a pro forma
basis as if such acquisition or divestiture had been completed on the first day
of such period.
"Consolidated Net Income" shall mean, for any period, the net income
-----------------------
(or loss) of the Borrower and its consolidated Subsidiaries for such period, as
determined on a consolidated basis in accordance with GAAP consistently applied;
provided, however, non-cash interest income on the Sunburst Subordinated Note
-------- -------
shall not be included in the determination of Consolidated Net Income.
"Consolidated Net Worth" shall mean, as at any date of determination,
----------------------
the consolidated stockholders' equity of the Borrower and its consolidated
Subsidiaries, as determined on a consolidated basis in accordance with GAAP
consistently applied.
"Consolidated Total Assets" shall mean, as at any date of
-------------------------
determination, the total assets of the Borrower and its consolidated
Subsidiaries at such time, as determined on a consolidated basis in accordance
with GAAP consistently applied.
"Control" shall mean the possession, directly or indirectly, of the
-------
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto; provided, however, the existence of a management contract by the
-------- -------
Borrower or one of its Affiliates to manage another entity shall not be deemed
to be Control.
"Credit Event" shall have the meaning assigned to such term in Section
------------
4.01.
"Default" shall mean any event or condition which upon notice, lapse
-------
of time or both would constitute an Event of Default.
11
"Denomination Date" shall mean, in relation to any Eurocurrency
-----------------
Borrowing, the date that is three Business Days before the date of such
Borrowing.
"Deutsche Marks" shall mean the lawful money of the Federal Republic
--------------
of Germany.
"Distribution Agreement" shall mean the Distribution Agreement dated
----------------------
as of October 15, 1997, by and between Sunburst and the Borrower.
"dollars" or "$" shall mean lawful money of the United States of
------- -
America.
"Effective Date" shall mean the date on and as of which each of the
--------------
conditions set forth in Section 4.02 shall have been satisfied.
"Equivalent Dollar Amount" shall mean, with respect to an amount of
------------------------
any Alternative Currency on any date, the amount of dollars that may be
purchased with such amount of such Alternative Currency at the Spot Exchange
Rate on such date.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
---------------
incorporated) that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.
"Eurocurrency" when used in reference to any Loan or Borrowing shall
------------
refer to whether such Loan, or Loans comprising such Borrowing, denominated in
an Alternative Currency are bearing interest at a rate determined by reference
to the LIBO Rate in accordance with the provisions of Article II.
"Eurocurrency Sublimit" shall mean $50,000,000.
---------------------
"Eurodollar", when used in reference to any Loan or Borrowing shall
----------
refer to whether such Loan, or Loans comprising such Borrowing, denominated in
dollars are bearing interest at a rate determined by reference to the LIBO Rate
in accordance with the provisions of Article II (or, in the case of a
Competitive Loan, the LIBO Rate).
12
"Event of Default" shall have the meaning assigned to such term in
----------------
Article VII.
"Existing Credit Agreements" shall mean (a) the US $100MM Competitive
--------------------------
Advance and Revolving Credit Facility Agreement dated as of October 30, 1996,
among Choice Hotels International, Inc. (formerly Choice Hotels Holdings, Inc.),
the lenders party thereto and the Agent, as agent thereunder and (b) the
Agreement dated as of May 5, 1997, between Choice Hotels International, Inc. and
The Chase Manhattan Bank, as lender, in each case as amended.
"Facility Fee" shall have the meaning assigned to such term in Section
------------
2.06(a).
"Fees" shall mean the Facility Fee, the Agent and Administrative Fees,
----
the L/C Participation Fees and the Issuing Bank Fees.
"Financial Officer" of any corporation shall mean the chief financial
-----------------
officer, principal accounting officer, Treasurer or Controller of such
corporation.
"Fixed Rate Borrowing" shall mean a Borrowing comprised of Fixed Rate
--------------------
Loans.
"Fixed Rate Loan" shall mean any Competitive Loan bearing interest at
---------------
a fixed percentage rate per annum (expressed in the form of a decimal to no more
than four decimal places) specified by the Lender making such Loan in its
Competitive Bid.
"Foreign Subsidiary" shall mean any Subsidiary that is organized under
------------------
the laws of a jurisdiction other than the United States of America or any State
thereof or the District of Columbia.
"Form 10" shall mean the registration statement on Form 10 under the
-------
Securities Exchange Act of 1934 of the Borrower filed with the Securities and
Exchange Commission on September 10, 1997, as amended and distributed to the
Lenders prior to the date hereof.
"French Francs" shall mean the lawful money of the Republic of France.
-------------
"GAAP" shall mean generally accepted accounting principles.
----
13
"Governmental Authority" shall mean any Federal, state, local or
----------------------
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantee" of or by any person shall mean any obligation, contingent
---------
or otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase property, securities or services for the purpose
of assuring the owner of such Indebtedness of the payment of such Indebtedness
or (c) to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness; provided, however, that the term Guarantee
-------- -------
shall not include endorsements for collection or deposit, in either case in the
ordinary course of business.
"Guarantee Agreement" shall mean the Guarantee Agreement,
-------------------
substantially in the form of Exhibit F, between the Subsidiary Loan Parties and
the Agent.
"Hotel Properties" shall mean the properties set forth on Schedule
----------------
1.01 and any hotel properties acquired or constructed after the date hereof,
including fixtures and personalty associated therewith.
"Indebtedness" of any person shall mean, without duplication, (a) all
------------
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services, (f)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (g) all Guarantees by such person
of Indebtedness of others, (h) all Capital Lease Obligations of such person, (i)
all obligations of such
14
person in respect of interest rate protection agreements, foreign currency
exchange agreements or other interest or exchange rate hedging arrangements and
(j) all obligations of such person as an account party in respect of letters of
credit (other than (x) documentary letters of credit (including commercial and
trade letters of credit) issued to secure payment obligations in respect of
goods and services in the ordinary course of business and (y) letters of credit
and surety bonds with respect to obligations of such person that are fully
accounted for as liabilities in the financial records of such person) and
bankers' acceptances. The Indebtedness of any person shall not include current
accounts payable incurred in the ordinary course of business. The Indebtedness
of any person shall include the Indebtedness of any partnership in which such
person is a general partner.
"Information Memorandum" shall mean the Confidential Information
----------------------
Memorandum dated September 1997 distributed by the Borrower to the Lenders.
"Interest Payment Date" shall mean, with respect to any Loan, the last
---------------------
day of the Interest Period applicable thereto and, in the case of a Eurocurrency
Loan or Eurodollar Loan with an Interest Period of more than three months'
duration or a Fixed Rate Loan or a CD Loan with an Interest Period of more than
90 days' duration, each day that would have been an Interest Payment Date for
such Loan had successive Interest Periods of three months' duration or 90 days'
duration, as the case may be, been applicable to such Loan and, in addition, the
date of any refinancing or conversion of such Loan with or to a Loan of a
different Type.
"Interest Period" shall mean (a) as to any Eurocurrency Borrowing or
---------------
Eurodollar Borrowing, the period commencing on the date of such Borrowing and
ending on the numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6
months thereafter, as the Borrower may elect, (b) as to any CD Borrowing, a
period of 30, 60, 90 or 180 days' duration, as the Borrower may elect,
commencing on the date of such Borrowing, (c) as to any ABR Borrowing, the
period commencing on the date of such Borrowing and ending on the date 90 days
thereafter or, if earlier, on the Maturity Date or the date of prepayment of
such Borrowing and (d) as to any Fixed Rate Borrowing, the period commencing on
the date of such Borrowing and ending on the date specified in the Competitive
Bids in which the offer to make the Fixed Rate Loans comprising such Borrowing
15
were extended, which shall not be earlier than seven days after the date of such
Borrowing or later than 360 days after the date of such Borrowing; provided,
--------
however, that if any Interest Period would end on a day other than a Business
-------
Day, such Interest Period shall be extended to the next succeeding Business Day
unless, in the case of Eurocurrency Loans and Eurodollar Loans only, such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Interest Rate Determination Date" shall mean, with respect to a
--------------------------------
Eurocurrency Borrowing or Eurodollar Borrowing, the date which is two Business
Days prior to the commencement of any Interest Period for such Borrowing.
"Issuing Bank" shall mean, as the context may require, (a) The Chase
------------
Manhattan Bank, or (b) any other Lender that may become an Issuing Bank pursuant
to Section 2.20(h), with respect to Letters of Credit issued by such Lender.
"Issuing Bank Agreement" shall mean an agreement in substantially the
----------------------
form of Exhibit E.
"Issuing Bank Fees" shall have the meaning assigned to such term in
-----------------
Section 2.06(c).
"L/C Commitment" shall mean, with respect to any Issuing Bank, the
--------------
commitment of such Issuing Bank to issue Letters of Credit pursuant to Section
2.20.
"L/C Disbursement" shall mean a payment or disbursement made by an
----------------
Issuing Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate
------------
undrawn amount of all outstanding Letters of Credit at such time, plus (b) the
aggregate principal amount of all L/C Disbursements that have not yet been
reimbursed at such time. The L/C Exposure of any Lender at any time shall mean
its Pro Rata Percentage (based upon the Revolving Commitments) of the aggregate
L/C Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to such term
---------------------
in Section 2.06(c)(i).
16
"Lender" shall mean a person listed on Schedule 2.01 and any other
------
person that shall become a party hereto pursuant to an Assignment and
Acceptance, other than such person that ceases to be a party hereto pursuant to
an Assignment and Acceptance.
"Letter of Credit" shall mean any letter of credit issued pursuant to
----------------
Section 2.20, as permitted hereby.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
---------
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the Agent from
time to time for purposes of providing quotations of interest rates applicable
to dollar deposits in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for dollar deposits with a maturity comparable to such
Interest Period. In the event that such rate is not available at such time for
any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for
---------
such Interest Period shall be the rate at which dollar deposits of $5,000,000
and for a maturity comparable to such Interest Period are offered by the
principal London office of the Agent in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
----
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or similar right of a
third party (excluding rights of first refusal) with respect to such securities.
"Loans" shall mean the loans made by the Lenders to the Borrower
-----
pursuant to this Agreement.
"Loan Documents" shall mean this Agreement, the Letters of Credit,
--------------
each Issuing Bank Agreement, the Guarantee Agreement and, if requested by a
Lender pursuant to Section 2.07(e), each Note.
17
"Loan Parties" shall mean the Borrower and the Subsidiary Loan
------------
Parties.
"Margin Stock" shall have the meaning given such term under
------------
Regulation U.
"Material Adverse Effect" shall mean a materially adverse effect on
-----------------------
the business, assets, property or condition, financial or otherwise, of the
Borrower and the Subsidiaries taken as a whole.
"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc.
-------
"Multiemployer Plan" shall mean a multiemployer plan as defined in
------------------
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"Obligations" shall mean (a) the Borrower's obligations in respect of
-----------
the due and punctual payment of principal of and interest on the Loans and
reimbursement of the L/C Disbursements, in each case when and as due whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (b) all Fees, expenses, indemnities, reimbursements and other
obligations, monetary or otherwise, of the Borrower under this Agreement or any
other Loan Document, (c) all obligations, monetary or otherwise, of each
Subsidiary under each Loan Document to which it is a party and (d) unless
otherwise agreed upon in writing by the applicable Lender party thereto, all
obligations of the Borrower, monetary or otherwise, under each interest rate
protection agreement entered into with a counterparty that was a Lender (or an
Affiliate thereof) at the time such interest rate protection agreement was
entered into.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
----
and defined in ERISA.
"Permitted Investments" shall mean:
---------------------
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
18
backed by the full faith and credit of the United States of America);
(b) investments in commercial paper having credit ratings of at least
A-2 from S&P and P-2 from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, any domestic office of any
commercial bank organized under the laws of the United States of America or
any State thereof which has a combined capital and surplus and undivided
profits of not less than $200,000,000;
(d) investments in the ordinary course of business in customary
repurchase agreements with respect to freely marketable, short-term
securities of the type customarily subject to repurchase agreements; and
(e) other readily marketable debt and equity securities traded on
national securities exchanges or on other nationally recognized markets,
including over-the-counter markets.
"person" shall mean any natural person, corporation, business trust,
------
joint venture, association, company, limited liability company, partnership or
government, or any agency or political subdivision thereof.
"Plan" shall mean any pension plan (other than a Multiemployer Plan)
----
subject to the provisions of Title IV of ERISA or Section 412 of the Code which
is maintained for employees of the Borrower or any ERISA Affiliate.
"Proceeds" shall mean, with respect to any Asset Sale, (a) the gross
--------
amount of consideration or other amounts payable to or receivable by the
Borrower or a Subsidiary in respect of such Asset Sale, less (b) the amount, if
any, of all estimated taxes payable with respect to such Asset Sale whether or
not payable during the taxable year in which such Asset Sale shall have
occurred, and less (c) reasonable and customary fees, commissions, costs and
other expenses (other than those payable to the Borrower or a Subsidiary or
Affiliate of the Borrower or to Sunburst or a subsidiary or affiliate of
Sunburst) which are incurred in connection with such Asset Sale and are payable
by the seller or the transferor of the assets or property to which such Asset
Sale relates, but only to the extent not already deducted in arriving at the
amount referred to in clause (a) above. For
19
purposes of determining Proceeds, the value of all noncash consideration payable
or receivable by the Borrower or any Subsidiary, as the case may be, shall be
the fair market value of such noncash consideration as determined in good faith
by the Borrower and the Borrower shall provide to the Agent a certificate of a
Financial Officer of the Borrower with respect to the fair market value of such
consideration, in form and substance reasonably satisfactory to the Agent.
"Pro Rata Percentage" of any Lender at any time shall mean the
-------------------
percentage of the total Term Commitment or Total Revolving Commitment
represented by such Lender's Term Commitment or Revolving Commitment. In the
event such Commitments shall have expired or been terminated, the Pro Rata
Percentages shall be determined on the basis of applicable Commitments most
recently in effect (giving effect to any assignments under Section 9.04).
"Quality Hotels" shall mean Quality Hotels Europe, Inc., a Subsidiary.
--------------
"Reference Bank" shall mean the Agent or, if the Agent's Commitment is
--------------
not the largest of the Lenders' Commitments, the Lender possessing the largest
Commitment.
"Register" shall have the meaning given such term in Section 9.04(d).
--------
"Regulation D" shall mean Regulation D of the Board as from time to
------------
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation G" shall mean Regulation G of the Board as from time to
------------
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" shall mean Regulation U of the Board as from time to
------------
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
------------
time in effect and all official rulings and interpretations thereunder or
thereof.
"Reportable Event" shall mean any reportable event as defined in
----------------
Section 4043(c) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate which is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code).
20
"Required Lenders" shall mean, at any time, Lenders having Commitments
----------------
representing at least a majority of the aggregate Commitments or, if the
Commitments have been terminated, Lenders holding Loans and L/C Exposures
representing at least a majority of the sum of the aggregate amount of L/C
Exposures and aggregate principal amount of the Loans then outstanding.
"Responsible Officer" of any corporation shall mean any executive
-------------------
officer or Financial Officer of such corporation and any other officer or
similar official thereof responsible for the administration of the obligations
of such corporation in respect of this Agreement.
"Revolving Availability Period" shall mean the period from and
-----------------------------
including the Effective Date to but excluding the earlier of the Revolving
Maturity Date and the date of termination of the Revolving Commitments.
"Revolving Commitment" shall mean, with respect to each Lender, the
--------------------
commitment, if any, of such Lender to make Revolving Loans and to acquire
participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's Revolving Credit
Exposure hereunder, as such commitment may be (a) reduced from time to time
pursuant to Section 2.11 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 9.04. The initial
amount of each Lender's Revolving Commitment is set forth on Schedule 2.01, or
in the Assignment and Acceptance pursuant to which such Lender shall have
assumed its Revolving Commitment, as applicable. The initial aggregate amount
of the Lenders' Revolving Commitments is $150,000,000.
"Revolving Lender" shall mean a Lender with a Revolving Commitment or,
----------------
if the Revolving Commitments have terminated or expired, a Lender with a Standby
Exposure.
"Revolving Loan" shall mean a Standby Loan or a Competitive Loan.
--------------
"Revolving Maturity Date" shall mean October 15, 2002.
-----------------------
"Sale and Lease-Back Transaction" shall mean any arrangement, directly
-------------------------------
or indirectly, with any person whereby such person shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such
21
property or other property which it intends to use for substantially the same
purpose or purposes as the property being sold or transferred.
"Secured Parties" shall mean (a) the Lenders, (b) the Agent, (c) the
---------------
Issuing Bank, (d) each counterparty to an interest rate protection agreement
entered into with the Borrower if such counterparty was a Lender at the time the
interest rate protection agreement was entered into and if the Borrower's
obligations under such interest rate protection agreement constitute
Obligations, (e) the beneficiaries (other than any Loan Party) of each
indemnification obligation undertaken by any Loan Party under any Loan Document
and (f) the successors and assigns of each of the foregoing.
"Significant Subsidiary" shall mean at any time (a) any Subsidiary of
----------------------
the Borrower with revenues during the fiscal year of the Borrower most recently
ended greater than or equal to 5% of the total revenues of the Borrower and its
Subsidiaries during such year, computed and consolidated in accordance with GAAP
consistently applied ("Consolidated Revenues"), (b) any Subsidiary of the
---------------------
Borrower with assets as of the last day of the Borrower's most recently ended
fiscal year greater than or equal to 5% of the total assets of the Borrower and
its Subsidiaries at such date, computed and consolidated in accordance with GAAP
consistently applied ("Consolidated Assets"), (c) any Subsidiary with
-------------------
stockholder's equity as of the last day of the Borrower's most recently ended
fiscal year greater than or equal to 5% of the stockholder's equity of the
Borrower and the Subsidiaries at such date, computed and consolidated in
accordance with GAAP consistently applied ("Net Stockholders' Equity"), (d) any
------------------------
Subsidiary designated in writing by the Borrower as a Significant Subsidiary,
(e) any Subsidiary created or acquired by the Borrower after the date hereof
that falls within or that comes to meet one of clauses (a) through (d), (f) any
Subsidiary in existence on the date hereof which comes to meet one of clauses
(a) through (d) after the date hereof or (g) any Subsidiary that directly or
indirectly owns any capital stock of a Significant Subsidiary; provided,
--------
however, that if at any time (x) the aggregate revenues of all Subsidiaries that
-------
are Significant Subsidiaries during any fiscal year of the Borrower shall not
equal or exceed 90% of Consolidated Revenues for such fiscal year, (y) the
aggregate assets of all Subsidiaries that are Significant Subsidiaries as of the
last day of any fiscal year of the Borrower shall not equal or exceed 90% of
Consolidated Assets at such date, or (z) the aggregate stockholders' equity of
all Subsidiaries
22
that are Significant Subsidiaries as of the last day of any fiscal year of the
Borrower shall not equal or exceed 90% of Net Stockholders' Equity at such date,
then the term Significant Subsidiary shall be deemed to include such
Subsidiaries (as determined pursuant to the next following sentence) of the
Borrower as may be required so that none of clauses (x), (y) and (z) above shall
continue to be true. For purposes of the proviso to the next preceding sentence,
the Subsidiaries which shall be deemed to be Significant Subsidiaries shall be
determined based on the percentage that the assets of each such Subsidiary are
of Consolidated Assets, with the Subsidiary with the highest such percentage
being selected first, and each other Subsidiary required to satisfy the
requirements set forth in such proviso being selected in descending order of
such percentage.
"S&P" shall mean Standard & Poor's Ratings Group, a division of
---
▇▇▇▇▇▇-▇▇▇▇, Inc.
"Spin-Off" shall mean the distribution by Sunburst to its shareholders
--------
of all the shares of capital stock of the Borrower and the other related
transactions contemplated by the Form 10 in the manner, on the terms and with
the results set forth in the Form 10.
"Spot Exchange Rate" shall mean, on any day, with respect to any
------------------
Alternative Currency, the spot rate at which dollars are offered on such day by
The Chase Manhattan Bank in London for such Alternative Currency at
approximately 11:00 A.M. (London time).
"Standby Borrowing" shall mean a Revolving Borrowing consisting of
-----------------
simultaneous Standby Loans from each of the Revolving Lenders.
"Standby Borrowing Request" shall mean a request made pursuant to
-------------------------
Section 2.04 in the form of Exhibit A-5.
"Standby Exposure" shall mean with respect to any Lender at any time,
----------------
the sum of the outstanding principal amount of such Lender's Standby Loans
denominated in dollars, plus the Equivalent Dollar Amount at such time of the
outstanding principal amount at such time of such Lender's Standby Loans that
are Alternative Currency Loans and its L/C Exposure at such time.
"Standby Loans" shall mean the Loans made by the Lenders to the
-------------
Borrower pursuant to clause (b) of Section 2.01 and to Section 2.04. Each
Standby Loan shall
23
be a Eurocurrency Loan, a Eurodollar Standby Loan, a CD Loan or an ABR Loan.
"Statutory Reserves" shall mean a fraction (expressed as a decimal),
------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority to which the Agent is
subject for new negotiable nonpersonal time deposits in dollars of over $100,000
with maturities approximately equal to the applicable Interest Period.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
"Sterling" or "(Pounds)" shall mean the lawful money of the United
-------- --------
Kingdom.
"Subordinated Indebtedness" shall mean Indebtedness of the Borrower
-------------------------
that is subordinated in right of payment to any of the Obligations.
"subsidiary" shall mean, with respect to any person (herein referred
----------
to as the "parent"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or more
than 50% of the general partnership interests are, at the time any determination
is being made, owned, controlled or held, or (b) which is, at the time any
determination is made, otherwise Controlled by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.
"Subsidiary" shall mean any subsidiary of the Borrower.
----------
"Subsidiary Loan Party" shall mean (a) any Subsidiary of the Borrower
---------------------
that has assets greater than or equal to 10% of Consolidated Total Assets (other
than any Foreign Subsidiary) and (b) any Subsidiary that directly or indirectly
owns any capital stock of any Subsidiary referred to in clause (a).
"Sunburst" shall mean Sunburst Hospitality Corporation (formerly
--------
Choice Hotels International, Inc.), a Delaware corporation, as renamed following
the Spin-Off.
24
"Sunburst Subordinated Note" shall mean the $115,000,000 Sunburst
--------------------------
Subordinated Note due October 15, 2002.
"Term Commitment" shall mean, with respect to each Lender, the
---------------
commitment, if any, of such Lender to make a Term Loan hereunder on the
Effective Date, as such commitment may be (a) reduced from time to time pursuant
to Section 2.11 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount
of each Lender's Term Commitment is set forth on Schedule 2.01, or in the Assign
ment and Acceptance pursuant to which such Lender shall have assumed its Term
Commitment, as applicable. The initial aggregate amount of the Lenders' Term
Commitments is US$150,000,000.
"Term Lender" shall mean a Lender with a Term Commitment or an
-----------
outstanding Term Loan.
"Term Loan" shall mean a Loan made pursuant to clause (a) of
---------
Section 2.01.
"Term Maturity Date" shall mean October 15, 2002.
------------------
"Total Revolving Commitment" shall mean at any time the aggregate
--------------------------
amount of the Lenders' Revolving Commitments, as in effect at such time.
"Transactions" shall have the meaning assigned to such term in
------------
Section 3.02.
"Type", when used in respect of any Loan or Borrowing, shall refer to
----
the Rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined and the currency in which such Loan or the Loans
comprising such Borrowing are denominated. For purposes hereof, "Rate" shall
include the LIBO Rate, the Adjusted CD Rate, the Alternate Base Rate and the
Fixed Rate, and "currency" shall include Dollars, French Francs, Deutsche Marks,
Sterling and any other Alternative Currency permitted hereunder.
"Wholly Owned Subsidiary" shall mean a Subsidiary all the capital
-----------------------
stock or other ownership interest of which is owned by the Borrower or a Wholly
Owned Subsidiary of the Borrower (including any Subsidiary that would be wholly
owned but for directors' qualifying shares or similar matters).
25
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
--------------------
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes
---------------------------------------
of this Agreement, Loans may be classified and referred to by Class (e.g., a
----
"Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type
----
(e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and
-----
referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a
---- ----
"Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving
----
Borrowing").
SECTION 1.03. Terms Generally. The definitions herein shall apply
----------------
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". All
references herein to Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and Schedules to, this
Agreement unless the context shall oth erwise require. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP consistently applied, as in effect from
time to time; provided, however, that, for purposes of determining compliance
-------- -------
with any covenant set forth in Article VI, such terms shall be construed in
accordance with GAAP as in effect on the date of this Agreement applied on a
basis consistent with the application used in preparing the Borrower's audited
financial statements referred to in Section 3.05.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments. Subject to the terms and conditions and
------------
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, (a) to make a Term Loan to the Borrower on
the Effective Date in a principal amount not exceeding its Term Commitment and
(b) to make Standby Loans (including Eurocurrency Loans) to the Borrower, at any
time and from time to time during the Revolving Availability Period, in an
aggregate principal amount at any time outstanding that will not result in such
Lender's Standby Exposure exceeding such Lender's Revolving Commitment minus the
amount by which the
26
Competitive Loans outstanding at such time shall be deemed to have used such
Commitment pursuant to Section 2.16, subject, however, to the conditions that
(i) at no time shall any Loan be made if, immediately after giving effect
thereto and to the application of the proceeds thereof, the Aggregate Principal
Amount Outstanding would exceed the Total Revolving Commitment minus the L/C
Exposure, (ii) at no time shall any Loan be made if, immediately after giving
effect thereto and to the application of the proceeds thereof, the aggregate
Equivalent Dollar Amount of all outstanding Eurocurrency Loans would exceed the
Eurocurrency Sublimit and (iii) at all times the outstanding aggregate principal
amount of all Standby Loans made by each Lender shall equal the product of
(x) the percentage which its Revolving Commitment represents of the Total
Revolving Commitment times (y) the outstanding aggregate principal amount of all
Standby Loans. Within the foregoing limits, the Borrower may borrow, pay or
prepay and reborrow Standby Loans hereunder, on and after the Effective Date and
prior to the Revolving Maturity Date, subject to the terms, conditions and
limitations set forth herein. Amounts repaid in respect of Term Loans may not be
reborrowed.
SECTION 2.02. Loans. (a) Each Loan shall be made as part of a
------
Borrowing consisting of Loans of the same Class and Type made by the Lenders
ratably in accordance with their respective Commitments of the applicable Class;
provided, however, that the failure of any Lender to make any Loan shall not in
-------- -------
itself relieve any other Lender of its obligation to lend hereunder (it being
understood, however, that no Lender shall be responsible for the failure of any
other Lender to make any Loan required to be made by such other Lender). Each
Competitive Loan shall be made in accordance with the procedures set forth in
Section 2.03. Except for Loans deemed made pursuant to Section 2.02(e), the
Standby Loans or Competitive Loans comprising any Revolving Borrowing shall be
(i) in the case of Competitive Loans, in an aggregate principal amount which is
an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) in the
case of Standby Loans, in an aggregate principal amount which is an integral
multiple of $1,000,000 and not less than $5,000,000 (or an aggregate principal
amount equal to the remaining balance of the available Revolving Commitments);
provided, however, that if the Equivalent Dollar Amount of any Eurocurrency
-------- -------
Revolving Loan at the end of the Interest Period applicable thereto does not
exceed by more than 5%, and is not less than 95% of, the Equivalent Dollar
Amount of such Revolving Loan on the relevant Denomination Date, then the
Borrower may (notwithstanding clauses (i) and (ii) above) refinance such
Revolving Loan
27
with a new Revolving Loan denominated in the same Alternative Currency and with
the same principal amount (in such Alternative Currency) at the end of such
Interest Period, notwithstanding that the Equivalent Dollar Amount of the new
Revolving Loan is not an integral multiple of $1,000,000. For purposes of this
Section, any Eurocurrency Revolving Borrowing shall be deemed to be in an amount
equal to the Equivalent Dollar Amount of such Eurocurrency Revolving Borrowing
determined as of its Denomination Date.
(b) Subject only to Section 2.10, (i) each Term Borrowing shall be
comprised entirely of Eurodollar Term Loans, ABR Loans or CD Loans as the
Borrower may request pursuant to Section 2.04, (ii) each Standby Borrowing shall
be comprised entirely of Eurocurrency Loans, Eurodollar Standby Loans, CD Loans
or ABR Loans as the Borrower may request pursuant to Section 2.04 and (iii) each
Competitive Borrowing shall be comprised entirely of Eurodollar Competitive
Loans or Fixed Rate Loans as the Borrower may request pursuant to Section 2.03.
Each Lender may at its option make any Eurocurrency Loan or Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided, however, that (i) any exercise of such option shall not affect
-------- -------
the obligation of the Borrower to repay such Loan in accordance with the terms
of this Agreement and (ii) in exercising such option, the Lender shall use its
reasonable efforts to minimize any increased costs to the Borrower resulting
therefrom (which obligation of the Lender shall not require it to take, or
refrain from taking, actions that it determines would result in increased costs
for which it will not be compensated hereunder or that it determines would be
otherwise disadvantageous to it and in the event of such request for costs for
which compensation is provided under this Agreement, the provisions of Section
2.13(c) shall apply). Borrowings of more than one Type may be outstanding at the
same time; provided, however, that the Borrower shall not be entitled to request
-------- -------
any Borrowing which, if made, would result in (A) an aggregate of more than
fifteen separate Standby Loans of any Lender being outstanding hereunder at any
one time, (B) there being Loans outstanding in an aggregate of more than six
currencies or (C) there being more than 30 Eurocurrency Borrowings having an
Interest Period of one month during any twelve-month period. For purposes of
the foregoing, Loans having different Interest Periods, regardless of whether
they commence on the same date, shall be considered separate Loans.
(c) Subject to Section 2.05 and except with respect to Loans made
pursuant to Section 2.02(e), each
28
Lender shall make each Loan to be made by it hereunder on the proposed date
thereof by wire transfer of immediately available funds to such account as the
Agent may designate, not later than 12:00 noon, New York City time, or, in the
case of funds in an Alternative Currency, 12:00 noon, London time, and the Agent
shall by 3:00 p.m., New York City time, or, in the case of funds in an
Alternative Currency, 3:00 p.m., London time, credit the amounts so received to
an account designated by the Borrower with the Agent or, if a Borrowing shall
not occur on such date because any condition precedent herein specified shall
not have been met, return the amounts so received to the respective Lenders.
Competitive Loans shall be made by the Lender or Lenders whose Competitive Bids
therefor are accepted pursuant to Section 2.03 in the amounts so accepted and
Standby Loans shall be made by the Lenders pro rata in accordance with Section
2.16. Unless the Agent shall have received notice from a Lender prior to (or, in
the case of an ABR Borrowing, on) the date of any Borrowing that such Lender
shall not make available to the Agent such Lender's portion of such Borrowing,
the Agent may assume that such Lender has made such portion available to the
Agent on the date of such Borrowing in accordance with this Section 2.02(c) and
the Agent may, in reliance upon such assumption, make available to the Borrower
on such date a corresponding amount. If the Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Agent, such Lender and the Borrower severally agree to repay to
the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent at (i) in the case of
the Borrower, the interest rate applicable at the time to the Loans comprising
such Borrowing and (ii) in the case of such Lender, a rate determined by the
Agent to represent its cost of overnight or short-term funds in the relevant
currency (which determination shall be conclusive absent manifest error). If
such Lender shall repay to the Agent such corresponding amount, such amount
shall constitute such Lender's Loan as part of such Borrowing for purposes of
this Agreement.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date.
(e) If the Issuing Bank shall not have received from the Borrower the
payment required to be made by Section 2.20(e) in respect of any L/C
Disbursement within
29
the time specified in such Section, the Issuing Bank will promptly notify the
Agent of the L/C Disbursement and the Agent will promptly notify each Lender of
such L/C Disbursement and its Pro Rata Percentage thereof. Each Lender shall pay
by wire transfer of immediately available funds to the Agent not later than
2:00 p.m., New York City time, on such date (or, if such Lender shall have
received such notice later than 12:00 (noon), New York City time, on any day,
not later than 10:00 a.m., New York City time, on the immediately following
Business Day), an amount equal to such Lender's Pro Rata Percentage of such L/C
Disbursement (it being understood that such amount shall be deemed to constitute
an ABR Loan of such Lender and such payment shall be deemed to have reduced the
L/C Exposure), and the Agent will promptly pay to the Issuing Bank amounts so
received by it from the Lenders. The Agent will promptly pay to the Issuing Bank
any amounts received by it from the Borrower pursuant to Section 2.20(e) prior
to the time that any Lender makes any payment pursuant to this paragraph (e);
any such amounts received by the Agent thereafter will be promptly remitted by
the Agent to the Lenders that shall have made such payments and to the Issuing
Bank, as their interests may appear. If any Lender shall not have made its Pro
Rata Percentage of such L/C Disbursement available to the Agent as provided
above, such Lender and the Borrower severally agree to pay interest on such
amount, for each day from and including the date such amount is required to be
paid in accordance with this paragraph to but excluding the date such amount is
paid, to the Agent for the account of the Issuing Bank at (i) in the case of the
Borrower, the Alternate Base Rate plus the Applicable Percentage and (ii) in the
case of such Lender, for the first such day, the Federal Funds Effective Rate,
and for each day thereafter, the Alternate Base Rate.
SECTION 2.03. Competitive Bid Procedure. (a) In order to request
--------------------------
Competitive Bids, the Borrower shall hand deliver or telecopy to the Agent a
duly completed Competitive Bid Request in the form of Exhibit A-1, to be
received by the Agent (i) in the case of a Eurodollar Competitive Borrowing, not
later than 10:00 a.m., New York City time, four Business Days before a proposed
Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later
than 10:00 a.m., New York City time, one Business Day before a proposed
Competitive Borrowing. No Eurocurrency Loan, CD Loan or ABR Loan shall be
requested in, or made pursuant to, a Competitive Bid Request. A Competitive Bid
Request that does not conform substantially to the format of Exhibit A-1 may be
rejected in the Agent's sole discretion, and the Agent shall promptly notify the
30
Borrower of such rejection by telecopier. Such request shall in each case refer
to this Agreement and specify (x) whether the Borrowing then being requested is
to be a Eurodollar Borrowing or a Fixed Rate Borrowing, (y) the date of such
Borrowing (which shall be a Business Day) and the aggregate principal amount
thereof which shall be in a minimum principal amount of $5,000,000 and in an
integral multiple of $1,000,000, and (z) the Interest Period with respect
thereto (which may not end after the Maturity Date). Promptly after its receipt
of a Competitive Bid Request that is not rejected as aforesaid, the Agent shall
invite by telecopier (in the form of Exhibit A-2) the Lenders to bid, on the
terms and conditions of this Agreement, to make Competitive Loans pursuant to
such Competitive Bid Request.
(b) Each Lender may, in its sole discretion, make one or more
Competitive Bids to the Borrower responsive to a Competitive Bid Request. Each
Competitive Bid by a Lender must be received by the Agent via telecopier, in the
form of Exhibit A-3, (i) in the case of a Eurodollar Competitive Borrowing, not
later than 9:30 a.m., New York City time, three Business Days before a proposed
Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later
than 9:30 a.m., New York City time, on the day of a proposed Competitive
Borrowing. Multiple bids shall be accepted by the Agent. Competitive Bids that
do not conform substantially to the format of Exhibit A-3 may be rejected by the
Agent after conferring with, and upon the instruction of, the Borrower, and the
Agent shall notify the Lender making such nonconforming bid of such rejection as
soon as practicable. Each Competitive Bid shall refer to this Agreement and
specify (x) the principal amount (which shall be in a minimum principal amount
of $5,000,000 and in an integral multiple of $1,000,000 and which may equal the
entire principal amount of the Competitive Borrowing requested by the Borrower)
of the Competitive Loan or Loans that the Lender is willing to make to the
Borrower, (y) the Competitive Bid Rate or Rates at which the Lender is prepared
to make the Competitive Loan or Loans and (z) the Interest Period and the last
day thereof. If any Lender shall elect not to make a Competitive Bid, such
Lender shall so notify the Agent via telecopier (I) in the case of Eurodollar
Competitive Loans, not later than 9:30 a.m., New York City time, three Business
Days before a proposed Competitive Borrowing and (II) in the case of Fixed Rate
Loans, not later than 9:30 a.m., New York City time, on the day of a proposed
Competitive Borrowing; provided, however, that failure by any Lender to give
-------- -------
such notice shall not cause such Lender to be obligated to make any Competitive
Loan as part of such Competitive Borrowing. A Competitive
31
Bid submitted by a Lender pursuant to this Section 2.03(b) shall be irrevocable.
(c) The Agent shall promptly notify the Borrower by telecopier of all
the Competitive Bids made, the Competitive Bid Rate and the principal amount of
each Competitive Loan in respect of which a Competitive Bid was made and the
identity of the Lender that made each bid. The Agent shall send a copy of all
Competitive Bids to the Borrower for its records as soon as practicable after
completion of the bidding process set forth in this Section.
(d) The Borrower may in its sole and absolute discretion, subject
only to the provisions of this Section 2.03(d), accept or reject any Competitive
Bid referred to in Section 2.03(c). The Borrower shall notify the Agent by
telephone, confirmed by telecopier in the form of a Competitive Bid
Accept/Reject Letter substantially in the form set forth in Exhibit A-4, whether
and to what extent it has decided to accept or reject any of or all the bids
referred to in Section 2.03(c), (y) in the case of a Eurodollar Competitive
Borrowing, not later than 10:30 a.m., New York City time, three Business Days
before a proposed Competitive Borrowing and (z) in the case of a Fixed Rate
Borrowing, not later than 10:30 a.m., New York City time, on the day of a
proposed Competitive Borrowing; provided, however, that (i) the failure by the
-------- -------
Borrower to give such notice shall be deemed to be a rejection of all the bids
referred to in Section 2.03(c), (ii) the Borrower shall not accept a bid made at
a particular Competitive Bid Rate if the Borrower has decided to reject a bid
made at a lower Competitive Bid Rate, (iii) the aggregate amount of the
Competitive Bids accepted by the Borrower shall not exceed the principal amount
specified in the Competitive Bid Request, (iv) if the Borrower shall accept a
bid or bids made at a particular Competitive Bid Rate but the amount of such bid
or bids shall cause the total amount of bids to be accepted by the Borrower to
exceed the amount specified in the Competitive Bid Request, then the Borrower
shall accept a portion of such bid or bids in an amount equal to the amount
specified in the Competitive Bid Request less the amount of all other
Competitive Bids accepted with respect to such Competitive Bid Request, which
acceptance, in the case of multiple bids at such Competitive Bid Rate, shall be
made pro rata in accordance with the amount of each such bid at such Competitive
Bid Rate, and (v) except pursuant to clause (iv) above, no bid shall be accepted
for a Competitive Loan unless such Competitive Loan is in a minimum principal
amount of $5,000,000 and an integral multiple of $1,000,000; provided further,
----------------
however, that if a
-------
32
Competitive Loan must be in an amount less than $5,000,000 because of the
provisions of clause (iv) above, such Competitive Loan may be for a minimum of
$1,000,000 or any integral multiple thereof, and in calculating the pro rata
allocation of acceptances of portions of multiple bids at a particular
Competitive Bid Rate pursuant to clause (iv) above the amounts shall be rounded
to integral multiples of $1,000,000 in a manner which shall be in the discretion
of the Borrower. A notice given by the Borrower pursuant to this Section 2.03(d)
shall be irrevocable.
(e) The Agent shall promptly notify each bidding Lender whether or
not its Competitive Bid has been accepted (and if so, in what amount and at what
Competitive Bid Rate) by telecopier sent by the Agent, and each successful
bidder shall thereupon become bound, subject to the other applicable conditions
hereof, to make the Competitive Loan in respect of which its bid has been
accepted.
(f) A Competitive Bid Request shall not be made within three Business
Days after the date of any previous Competitive Bid Request.
(g) If the Agent shall elect to submit a Competitive Bid in its
capacity as a Lender, it shall submit such bid directly to the Borrower one
quarter of an hour earlier than the latest time at which the other Lenders are
required to submit their bids to the Agent pursuant to Section 2.03(b).
(h) All Notices required by this Section shall be given in accordance
with Section 9.01.
SECTION 2.04. Term Borrowing and Standby Borrowing Procedures. In
------------------------------------------------
order to request a Borrowing (other than a Competitive Borrowing or a deemed
Borrowing pursuant to Section 2.02(e), as to which this Section 2.04 shall not
apply), the Borrower shall hand deliver or telecopy to the Agent a duly
completed Borrowing Request in the form of Exhibit A-5 (a) in the case of a
Eurocurrency Borrowing, not later than 10:30 a.m., London time, three Business
Days before a proposed borrowing, (b) in the case of a Eurodollar Borrowing, not
later than 10:30 a.m., New York City time, three Business Days before a proposed
borrowing, (c) in the case of a CD Borrowing, not later than 10:30 a.m., New
York City time, one Business Day before a proposed borrowing and (d) in the case
of an ABR Borrowing, not later than 10:30 a.m., New York City time, on the day
of a proposed borrowing. No Fixed Rate Loan shall be requested or made pursuant
to a Borrowing Request. Such notice shall
33
be irrevocable and shall in each case specify (i) whether the Borrowing then
being requested is to be a Term Borrowing or a Standby Borrowing; (ii) whether
such Borrowing is to be a Eurocurrency Borrowing, a Eurodollar Borrowing, a CD
Borrowing or an ABR Borrowing; (iii) the date of such Borrowing (which shall be
a Business Day) and the amount thereof, which, in the case of a Eurocurrency
Borrowing, shall be expressed in the Equivalent Dollar Amount; (iv) if such
Borrowing is to be a Eurocurrency Borrowing, the Alternative Currency in which
such Borrowing is to be denominated and the number and location of the account
to which funds are to be disbursed; and (v) if such Borrowing is to be a
Eurocurrency Borrowing, Eurodollar Borrowing or CD Borrowing, the Interest
Period with respect thereto. If no election as to the Type of Borrowing is
specified in any such notice, then the requested Borrowing shall be an ABR
Borrowing. If no Interest Period with respect to any Eurocurrency Borrowing,
Eurodollar Borrowing or CD Borrowing is specified in any such notice, then the
Borrower shall be deemed to have selected an Interest Period of one month's
duration, in the case of a Eurocurrency Borrowing or a Eurodollar Borrowing, or
30 days' duration, in the case of a CD Borrowing. If the Borrower shall not have
given notice in accordance with this Section of its election to refinance a
Borrowing denominated in dollars prior to the end of the Interest Period in
effect for such Borrowing, then the Borrower shall (unless such Borrowing is
repaid at the end of such Interest Period) be deemed to have given notice of an
election to refinance such Borrowing with an ABR Borrowing. The Agent shall
promptly advise the Lenders of any notice given pursuant to this Section and of
each Lender's portion of the requested Borrowing.
SECTION 2.05. Refinancings. The Borrower may refinance all or any
-------------
part of any Borrowing with a Borrowing of the same or a different Type made
pursuant to Section 2.03 or Section 2.04, subject to the conditions and
limitations set forth herein and elsewhere in this Agreement, including
refinancings of Competitive Borrowings with Standby Borrowings and Standby
Borrowings with Competitive Borrowings. Any Borrowing or part thereof so
refinanced with a Borrowing denominated in the same currency shall be deemed to
be repaid in accordance with Section 2.07 with the proceeds of a new Borrowing
hereunder and the proceeds of the new Borrowing, to the extent they do not
exceed the principal amount of the Borrowing being refinanced, shall not be paid
by the Lenders to the Agent or by the Agent to the Borrower pursuant to Section
2.02(c); provided, however, that (i) if the principal amount extended by a
-------- -------
Lender in a refinancing is greater than the principal
34
amount extended by such Lender in the Borrowing being refinanced, then such
Lender shall pay such difference to the Agent for distribution to the Lenders
described in (ii) below, (ii) if the principal amount extended by a Lender in
the Borrowing being refinanced is greater than the principal amount being
extended by such Lender in the refinancing, the Agent shall return the
difference to such Lender out of amounts received pursuant to (i) above, and
(iii) to the extent any Lender fails to pay the Agent amounts due from it
pursuant to (i) above, any Loan or portion thereof being refinanced shall not be
deemed repaid in accordance with Section 2.07 and shall be payable by the
Borrower.
SECTION 2.06. Fees. (a) The Borrower agrees to pay to each Lender,
-----
through the Agent, on the last day of March, June, September and December of
each year, on the date on which the Revolving Commitment of such Lender shall be
terminated as provided herein and on the Revolving Maturity Date, a facility fee
(a "Facility Fee") equal to the Applicable Percentage per annum in effect from
------------
time to time on the amount of the Revolving Commitment of such Lender, whether
used or unused, in effect from time to time during the preceding quarter (or
shorter period commencing with the date hereof or ending with the Revolving
Maturity Date or any date on which the Revolving Commitment of such Lender shall
be terminated). The Facility Fees shall be computed on the basis of the actual
number of days elapsed in a year of 360 days. The Facility Fee due to each
Lender shall commence to accrue on the date hereof and shall cease to accrue on
the earlier of (i) the termination of the Revolving Commitment of such Lender
and (ii) the Revolving Maturity Date.
(b) The Borrower shall pay to the Agent, for its own account, agent
and administrative fees (the "Agent and Administrative Fees") at the times and
-----------------------------
in the amounts agreed upon in the letter agreement dated August 26, 1997,
between the Borrower and the Agent.
(c) The Borrower agrees to pay (i) to each Lender, through the Agent,
on the last day of March, June, September and December of each year and on the
date on which the Revolving Commitment of such Lender shall be terminated as
provided herein, a fee (an "L/C Participation Fee") calculated on such Lender's
---------------------
Pro Rata Percentage (based on the Revolving Commitments) of the average daily
aggregate L/C Exposure (excluding the portion thereof attributable to
unreimbursed L/C Disbursements) during the preceding quarter (or shorter period
commencing with the date hereof or ending with the Revolving Maturity Date or
the date on which all
35
Letters of Credit have been canceled or have expired and the Revolving
Commitments of all Lenders shall have been terminated) at a rate equal to the
Applicable Percentage from time to time used to determine the interest rate on
Standby Borrowings comprised of Eurodollar Standby Loans pursuant to Section
2.08, and (ii) to the Issuing Bank with respect to each Letter of Credit the
fronting, issuance and drawing fees, specified in the Issuing Bank Agreement
(the "Issuing Bank Fees"). All L/C Participation Fees and Issuing Bank Fees
-----------------
shall be computed on the basis of the actual number of days elapsed in a year of
360 days.
(d) All Fees shall be paid on the dates due, in immediately available
funds, to the Agent for distribution, if and as appropriate, among the Lenders
except that the Issuing Bank Fees shall be paid directly to the Issuing Bank.
Once paid, none of the Fees shall be refundable under any circumstances unless
such Fees were paid in error.
SECTION 2.07. Evidence of Indebtedness; Repayment of Loans. (a) The
---------------------------------------------
Borrower hereby unconditionally promises to pay (i) to the Agent for the account
of each Lender the then unpaid principal amount of each Term Loan of such Lender
as provided in Section 2.12 and (ii) to the Agent for the account of each Lender
the then unpaid principal amount of each Revolving Loan on the last day of the
Interest Period applicable thereto.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Agent shall maintain accounts in which it shall record (i)
the amount of each Loan made hereunder, the Class and Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Agent hereunder for
the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) of this Section shall be prima facie evidence of the
----- -----
existence and amounts of the obligations recorded therein; provided that the
--------
failure of any Lender or the Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation
36
of the Borrower to properly repay the Loans in accordance with the terms of this
Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Agent.
SECTION 2.08. Interest on Loans. (a) Subject to the provisions of
------------------
Section 2.09, the Loans comprising each Eurocurrency Borrowing and Eurodollar
Borrowing shall bear interest (computed on the basis of the actual number of
days elapsed over a year of 360 days) at a rate per annum equal to (i) in the
case of each Eurocurrency Loan, Eurodollar Standby Loan or Eurodollar Term Loan,
the LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Percentage, and (ii) in the case of each Eurodollar Competitive Loan,
the LIBO Rate for the Interest Period in effect for such Borrowing plus the
Competitive Margin offered by the Lender making such Loan and accepted by the
Borrower pursuant to Section 2.03. Interest on each Eurocurrency Borrowing and
Eurodollar Borrowing shall be payable on each applicable Interest Payment Date.
The LIBO Rate for each Interest Period shall be determined by the Agent in
accordance with the definition of LIBO Rate herein. The Agent shall promptly
advise the Borrower and each Lender, as appropriate, of such determination.
(b) Subject to the provisions of Section 2.09, the Loans comprising
each CD Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to the
Adjusted CD Rate for the Interest Period in effect for such Borrowing plus the
Applicable Percentage. Interest on each CD Borrowing shall be payable on each
applicable Interest Payment Date. The Adjusted CD Rate for each Interest Period
shall be determined by the Agent in accordance with the definition of Adjusted
CD Rate herein. The Agent shall promptly advise the Borrower and each Lender of
such determination.
(c) Subject to the provisions of Section 2.09, the Loans comprising
each ABR Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of (i) 365 or 366 days, as the case may be,
during any period in which the Alternate Base Rate is based on the Prime Rate,
and (ii) 360 days, during any period in which the Alternate Base Rate is based
on the Base CD Rate
37
or the Federal Funds Effective Rate) at a rate per annum equal to the Alternate
Base Rate plus the Applicable Percentage. Interest on each ABR Borrowing shall
be payable on each applicable Interest Payment Date. The Alternate Base Rate
shall be determined by the Agent in accordance with the definition of Alternate
Base Rate herein.
(d) Subject to the provisions of Section 2.09, each Fixed Rate Loan
shall bear interest at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to the fixed rate of
interest offered by the Lender making such Loan and accepted by the Borrower
pursuant to Section 2.03. Interest on each Fixed Rate Loan shall be payable on
the Interest Payment Dates applicable to such Loan except as otherwise provided
in this Agreement.
SECTION 2.09. Default Interest. If the Borrower shall default in the
-----------------
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, whether by scheduled maturity, notice of prepayment, acceleration
or otherwise, the Borrower shall on demand from time to time from the Agent pay
interest, to the extent permitted by law, on such defaulted amount up to (but
not including) the date of actual payment (after as well as before judgment) at
a rate per annum (computed on the basis of the actual number of days elapsed
over a year of 360 days) equal to the Alternate Base Rate plus the Applicable
Percentage plus 2%.
SECTION 2.10. Alternate Rate of Interest. (a) In the event, and on
---------------------------
each occasion, that on the day two Business Days prior to the commencement of
any Interest Period for a Eurocurrency Borrowing or a Eurodollar Borrowing the
Agent shall have determined (i) that deposits in the principal amounts of the
Loans comprising such Borrowing and in the currency in which such Loan is to be
denominated are not generally available in the relevant market, or that the
rates at which such deposits are being offered will not adequately and fairly
reflect the cost to any Lender of making or maintaining its Eurocurrency Loan or
Eurodollar Loan, as applicable, during such Interest Period, or that reasonable
means do not exist for ascertaining the LIBO Rate, or (ii) in the case of a
Eurocurrency Borrowing, that there shall have occurred any change in national or
international financial, political or economic conditions (including the
imposition of or any change in exchange controls) or currency exchange rates
which would make it impracticable to make Loans denominated in the applicable
Alternative Currency, the Agent shall, as promptly as
38
practicable, give written telecopy notice of such determina tion to the Borrower
and the Lenders. In the event of any such determination, until the Agent shall
have advised the Borrower and the Lenders that the circumstances giving rise to
such notice no longer exist, (A) any request by the Borrower for a Eurodollar
Competitive Borrowing pursuant to Section 2.03 shall be of no force and effect
and shall be denied by the Agent, (B) any request by the Borrower for a
Eurodollar Standby Borrowing pursuant to Section 2.04 shall be deemed to be a
request for an ABR Borrowing and (C) any request by the Borrower for a
Eurocurrency Borrowing pursuant to Section 2.04 shall be deemed to be a request
by the Borrower for an ABR Borrowing.
(b) In the event, and on each occasion, that on or before the day on
which the Adjusted CD Rate for a CD Borrowing is to be determined the Agent
shall have determined that such Adjusted CD Rate cannot be determined for any
reason, including the inability of the Agent to obtain sufficient bids in
accordance with the terms of the definition of Fixed CD Rate, or the Agent shall
determine that the Adjusted CD Rate for such CD Borrowing will not adequately
and fairly reflect the cost to any Lender of making or maintaining its CD Loan
during such Interest Period, the Agent shall, in a timely manner, give written
or telecopy notice of such determination to the Borrower and the Lenders. In
the event of any such determination, any request by the Borrower for a CD
Borrowing pursuant to Section 2.04 shall, until the Agent shall have advised the
Borrower and the Lenders that the circumstances giving rise to such notice no
longer exist, be deemed to be a request for an ABR Borrowing.
SECTION 2.11. Termination and Reduction of Commitments. (a) Unless
-----------------------------------------
previously terminated, (i) the Term Commitments shall terminate at 5:00 p.m.,
New York City time, on the Effective Date, (ii) the Revolving Commitments shall
terminate on the Revolving Maturity Date and (iii) the LC Commitment shall
terminate on the date 30 days prior to the Revolving Maturity Date.
(b) Upon at least five Business Days' prior irrevocable written or
telecopy notice to the Agent, the Borrower may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Commitments of
any Class; provided, however, that (i) each partial reduction of the Commitments
-------- -------
of any Class shall be in an integral multiple of $1,000,000 and in a minimum
principal amount of $10,000,000 and (ii) no such termination or reduction shall
be made which would reduce the Revolving
39
Commitments to an amount less than the aggregate outstanding principal amount of
the Revolving Loans plus the L/C Exposure. If, following any partial reduction
of the Revolving Commitments, the Revolving Commitments (as so reduced) shall be
less than the Eurocurrency Sublimit, the Eurocurrency Sublimit shall be
automatically reduced so as to equal the total Revolving Commitments.
(c) Each reduction in the Commitments of any Class hereunder shall be
made ratably among the Lenders in accordance with their respective Commitments
of such Class. The Borrower shall pay to the Agent for the accounts of the
Lenders, on the date of each termination or reduction, the Facility Fees on the
amount of the Commitments so terminated or reduced accrued through the date of
such termination or reduction.
SECTION 2.12. Prepayment; Amortization of Term Loans. (a) The
---------------------------------------
Borrower shall have the right at any time and from time to time to prepay any
Borrowing (other than a Competitive Borrowing), in whole or in part, upon giving
written or telecopy notice (or telephone notice promptly confirmed by written or
telecopy notice) to the Agent before 10:00 a.m., New York City time (or, in the
case of any Eurocurrency Borrowing, 10:00 a.m., London time), three Business
Days prior to prepayment; provided, however, that each partial prepayment shall
-------- -------
be in an amount which is (or the Equivalent Dollar Amount of which, determined
as of the Denomination Date for the relevant Loan or Loans, is) an integral
multiple of $1,000,000 and not less than $1,000,000. The Borrower shall not
have the right to prepay any Competitive Borrowing.
(b) On the date of any termination or reduction of the Revolving
Commitments pursuant to Section 2.11, the Borrower shall pay or prepay so much
of the Standby Borrowings as shall be necessary in order that the Aggregate
Revolving Credit Exposure shall not exceed the Total Revolving Commitment after
giving effect to such termination or reduction.
(c) Each notice of prepayment shall specify the prepayment date and
the principal amount of each Borrowing (or portion thereof) to be prepaid, shall
be irrevocable and shall commit the Borrower to prepay such Borrowing (or
portion thereof) by the amount stated therein on the date stated therein. All
prepayments under this Section shall be subject to Section 2.15 but otherwise
without premium or penalty and shall be applied ratably to the Loans included in
the prepaid Borrowing. All prepayments under this
40
Section shall be accompanied by accrued interest on the principal amount being
prepaid to the date of payment.
(d) Subject to adjustment pursuant to paragraph (f) of this Section,
the Borrower shall repay Term Borrowings on each date set forth below in the
aggregate principal amount set forth opposite such date:
Date Amount
------------------- -----------
May 31, 1998 $ 5,000,000
August 31, 1998 $ 5,000,000
November 30, 1998 $ 5,000,000
February 28, 1999 $ 5,000,000
May 31, 1999 $ 5,000,000
August 31, 1999 $ 5,000,000
November 30, 1999 $ 7,500,000
February 29, 2000 $ 7,500,000
May 31, 2000 $ 7,500,000
August 31, 2000 $ 7,500,000
November 30, 2000 $10,000,000
February 28, 2001 $10,000,000
May 31, 2001 $10,000,000
August 31, 2001 $10,000,000
November 30, 2001 $12,500,000
February 28, 2002 $12,500,000
May 31, 2002 $12,500,000
October 15, 2002 $12,500,000
(e) To the extent not previously paid, all Term Loans shall be
due and payable on the Term Maturity Date.
(f) If the initial aggregate amount of the Lenders' Term Commitments
of any Class exceeds the aggregate principal amount of Term Loans of such Class
that are made on the Effective Date, then the scheduled repayments of Term
Borrowings of such Class to be made pursuant to this Section shall be reduced
ratably by an aggregate amount equal to such excess. Any prepayment of a Term
Borrowing of either Class shall be applied to reduce the subsequent scheduled
repayments of the Term Borrowings of such Class to be made pursuant to this
paragraph (f) ratably.
SECTION 2.13. Reserve Requirements; Change in Circumstances. (a)
----------------------------------------------
Notwithstanding any other provision herein, if after the date of this Agreement
any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender or Issuing
Bank of the
41
principal of or interest on any Eurocurrency Loan, Eurodollar Loan, CD Loan or
Fixed Rate Loan made by such Lender or any Fees or other amounts payable
hereunder (other than changes in respect of taxes imposed on the overall net
income of such Lender or Issuing Bank by any jurisdiction or any political
subdivision thereof) or shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of or credit extended by such Lender or such Issuing Bank (except
any such reserve requirement which is already reflected in the definition of the
applicable Rate), or shall impose on such Lender or such Issuing Bank or the
London interbank market any other condition affecting this Agreement or any
Eurocurrency Loan, Eurodollar Loan, CD Loan or Fixed Rate Loan made by such
Lender or any Letter of Credit or participation therein, and the result of any
of the foregoing shall be to increase the cost to such Lender or Issuing Bank of
making or maintaining any Eurocurrency Loan, Eurodollar Loan, CD Loan or Fixed
Rate Loan or increase the cost to any Lender of issuing or maintaining any
Letter of Credit or purchasing or maintaining a participation therein or to
reduce the amount of any sum received or receivable by such Lender or such
Issuing Bank hereunder (whether of principal, interest or otherwise) by an
amount deemed by such Lender or such Issuing Bank to be material, then the
Borrower shall pay to such Lender or such Issuing Bank, as the case may be, upon
demand such additional amount or amounts as will compensate such Lender or such
Issuing Bank, as the case may be, for such additional costs incurred or
reduction suffered. Notwithstanding the foregoing, no Lender shall be entitled
to request compensation under this paragraph with respect to any Competitive
Loan if it should have been aware of the change giving rise to such request at
the time of submission of the Competitive Bid pursuant to which such Competitive
Loan shall have been made.
(b) If any Lender or Issuing Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation or guideline
regarding capital adequacy, or any change in any of the foregoing or in the
interpretation or administration of any of the foregoing by any Governmental
Authority charged with the interpretation or administration thereof, or
compliance by any Lender (or any lending office of such Lender) or any Issuing
Bank or any Lender's or Issuing Bank's holding company with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, has or would have the effect of reducing the
rate of return on such Lender's or Issuing Bank's capital or on
42
the capital of such Lender's or Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made or participations in Letters of
Credit purchased by such Lender pursuant hereto or the Letters of Credit issued
by such Issuing Bank pursuant hereto to a level below that which such Lender or
Issuing Bank or such Lender's or Issuing Bank's holding company could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or Issuing Bank's policies and the policies of such Lender's or
Issuing Bank's holding company with respect to capital adequacy) by an amount
deemed by such Lender or Issuing Bank to be material, then from time to time the
Borrower shall pay to such Lender or Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or Issuing Bank or
such Lender's or Issuing Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or Issuing Bank setting forth such
amount or amounts as shall be necessary to compensate such Lender or Issuing
Bank, as applicable, as specified in paragraph (a) or (b) above, as the case may
be, shall be delivered to the Borrower. The Borrower shall pay each Lender or
Issuing Bank the amount shown as due on any such certificate delivered by it
within 10 days after the receipt of the same. In the event any Lender delivers
such a certificate, the Borrower may, at its sole expense and effort, require
such Lender to transfer and assign, without recourse (in accordance with Section
9.04) all its interests, rights and obligations under this Agreement to an
assignee which shall assume such assigned obligations (which assignee may be
another Lender, if a Lender accepts such assignment); provided, however, that
-------- -------
(i) such assignment shall not conflict with any law, rule or regulation or order
of any Governmental Authority, (ii) the Borrower shall have received a written
consent of the Agent in the case of an assignee that is not a Lender, which
consent shall not unreasonably be withheld, and (iii) the Borrower or such
assignee shall have paid to the assigning Lender in immediately available funds
the principal of and interest accrued to the date of such payment on the Loans
made by it hereunder and all other amounts owed to it hereunder.
(d) Failure on the part of any Lender or the Issuing Bank to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period shall
not constitute a waiver of such Lender's or Issuing Bank's right to demand
compensation with respect to such period or any other period.
43
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section shall
survive the payment in full of the principal of and interest on all Loans made
hereunder.
SECTION 2.14. Change in Legality. (a) Notwithstanding any other
-------------------
provision herein, if any change in any law or regulation or in the
interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurocurrency Loan or Eurodollar Loan or to give effect
to its obligations as contemplated hereby with respect to any Eurocurrency Loan
or Eurodollar Loan, then, by written notice to the Borrower and to the Agent,
such Lender may:
(i) declare that Eurocurrency Loans or Eurodollar Loans, as the case
may be, shall not thereafter be made by such Lender hereunder, whereupon
such Lender shall not submit a Competitive Bid in response to a request for
Eurodollar Competitive Loans and any request by the Borrower for a
Eurocurrency Loan or Eurodollar Standby Borrowing, as the case may be,
shall, as to such Lender only, be deemed a request for an ABR Loan to the
Borrower unless such declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurocurrency Loans or Eurodollar
Loans, as the case may be, made by it be converted to ABR Loans, in which
event all such Eurocurrency Loans or Eurodollar Loans, as the case may be,
shall be automatically converted to ABR Loans as of the effective date of
such notice as provided in paragraph (b) below (such conversion to be made,
in the case of a Eurocurrency Loan, into dollars at the applicable Spot
Exchange Rate).
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the Eurocurrency Loans or Eurodollar Loans, as the case may be, that would
have been made by such Lender or the converted Eurocurrency Loans or Eurodollar
Loans of such Lender shall instead be applied to repay the ABR Loans made by
such Lender in lieu of, or resulting from the conversion of, such Eurocurrency
Loans or Eurodollar Loans.
(b) For purposes of this Section, a notice to the Borrower by any
Lender shall be effective as to each
44
Eurocurrency Loan or Eurodollar Loan, as the case may be, if lawful, on the last
day of the Interest Period then applicable to such Eurocurrency Loan or
Eurodollar Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrower.
SECTION 2.15. Indemnity. The Borrower shall indemnify each Lender
----------
against any loss or expense which such Lender may sustain or incur as a
consequence of (a) any failure by the Borrower to fulfill on the date of any
borrowing hereunder the applicable conditions set forth in Article IV, (b) any
failure by the Borrower to borrow or to refinance any Loan hereunder after
irrevocable notice of such borrowing or refinancing has been given pursuant to
Section 2.03 or 2.04, (c) any payment, prepayment, assignment pursuant to
Section 2.13(c), conversion of a Eurocurrency Loan or Eurodollar Loan pursuant
to Section 2.14(a) or conversion of a Eurocurrency Loan, Eurodollar Loan, CD
Loan or Fixed Rate Loan required by any other provision of this Agreement or
otherwise made or deemed made on a date other than the last day of the Interest
Period applicable thereto, (d) any default in payment or prepayment of the
principal amount of any Loan or any part thereof or interest accrued thereon, as
and when due and payable at the due date thereof (whether by scheduled maturity,
acceleration, irrevocable notice of prepayment or otherwise) or (e) the
occurrence of any Event of Default, including, in each such case, any loss or
reasonable expense sustained or incurred or to be sustained or incurred in
liquidating or employing deposits from third parties acquired to effect or
maintain such Loan or any part thereof as a Eurocurrency Loan, Eurodollar Loan,
CD Loan or Fixed Rate Loan. Such loss or reasonable expense shall include an
amount equal to the excess, if any, as reasonably determined by such Lender, of
(i) its cost of obtaining the funds for the Loan being paid, prepaid, assigned,
converted or not borrowed (based on the LIBO Rate or Adjusted CD Rate or, in the
case of a Fixed Rate Loan, the fixed rate of interest applicable thereto) for
the period from the date of such payment, prepayment, assignment, conversion or
failure to borrow to the last day of the Interest Period for such Loan (or, in
the case of a failure to borrow, the Interest Period for such Loan which would
have commenced on the date of such failure) over (ii) the amount of interest (as
reasonably determined by such Lender) that would be realized by such Lender in
reemploying the funds so paid, prepaid, assigned, converted or not borrowed for
such period or Interest Period, as the case may be. A certificate of any Lender
setting forth any amount or amounts which such Lender is entitled to receive
pursuant to this Section and
45
evidencing a loss suffered by such Lender of such amount or amounts shall be
delivered to the Borrower.
SECTION 2.16. Pro Rata Treatment. Except as required under Section
-------------------
2.14, each Term Borrowing, each Standby Borrowing, each payment or prepayment of
principal of any Term Borrowing or Standby Borrowing, each payment of interest
on the Term Loans or Standby Loans, each payment of the Facility Fees and L/C
Participation Fees, each reduction of the Commitments and each refinancing of
any Borrowing of any Class, shall be allocated pro rata among the Lenders in
accordance with their respective Commitments of the applicable Class (or, if
such Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of their outstanding Standby Loans or Term Loans,
as the case may be). Each payment of principal of any Competitive Borrowing
shall be allocated pro rata among the Lenders participating in such Borrowing in
accordance with the respective principal amounts of their outstanding
Competitive Loans comprising such Borrowing. Each payment of interest on any
Competitive Borrowing shall be allocated pro rata among the Lenders
participating in such Borrowing in accordance with the respective amounts of
accrued and unpaid interest on their outstanding Competitive Loans comprising
such Borrowing. For purposes of determining the available Commitments of the
Lenders at any time, each outstanding Competitive Borrowing shall be deemed to
have utilized the Commitments of the Lenders (including those Lenders which
shall not have made Loans as part of such Competitive Borrowing) pro rata in
accordance with such respective Commitments. Each Lender agrees that in
computing such Lender's portion of any Borrowing to be made hereunder, the Agent
may, in its discretion, round each Lender's percentage of such Borrowing to the
next higher or lower whole dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it
-------------------
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Borrower , or pursuant to a secured claim under Section 506 of Title
11 of the United States Code or other security or interest arising from, or in
lieu of, such secured claim, received by such Lender under any applicable
bankruptcy, insolvency or other similar law or otherwise, or by any other means
(other than an assignment pursuant to Section 2.13(c) or 9.04), obtain payment
(voluntary or involuntary) in respect of any Term Loan, Standby Loan or L/C
Disbursement as a result of which the unpaid principal portion of its Term
Loans, Standby Loans and participations in L/C Disbursements shall be
proportionately less than the unpaid principal portion of
46
the Term Loans, Standby Loans and participations in L/C Disbursements of any
other Lender, it shall be deemed simultaneously to have purchased from such
other Lender at face value, and shall promptly pay to such other Lender the
purchase price for, a participation in the Term Loans, Standby Loans and L/C
Exposure of such other Lender, so that the aggregate unpaid principal amount of
the Term Loans, Standby Loans and L/C Exposure and participations in the Term
Loans, Standby Loans and L/C Exposure held by each Lender shall be in the same
proportion to the aggregate unpaid principal amount of all Term Loans, Standby
Loans and L/C Exposure then outstanding as the principal amount of its Term
Loans, Standby Loans and L/C Exposure prior to such exercise of banker's lien,
setoff or counterclaim or other event was to the principal amount of all Term
Loans, Standby Loans or LC Exposure, as the case may be, outstanding prior to
such exercise of banker's lien, setoff or counterclaim or other event; provided,
--------
however, that, if any such purchase or purchases or adjustments shall be made
-------
pursuant to this Section and the payment giving rise thereto shall thereafter be
recovered, such purchase or purchases or adjustments shall be rescinded to the
extent of such recovery and the purchase price or prices or adjustment restored
without interest. The Borrower expressly consents to the foregoing arrangements
and agrees that any Lender holding a participation in a Term Loan, Standby Loan
or L/C Disbursement deemed to have been so purchased may exercise any and all
rights of banker's lien, setoff or counterclaim with respect to any and all
moneys owing by the Borrower to such Lender by reason thereof as fully as if
such Lender had made a Term Loan or Standby Loan directly to the Borrower in the
amount of such participation.
SECTION 2.18. Payments. (a) The Borrower shall make each payment
---------
(including principal of or interest on the Loans or any L/C Disbursement or any
Fees or other amounts) hereunder and under any other Loan Document to such
account of the Agent as the Agent shall have specified, not later than 10:30
a.m., local time, at the place of payment, on the date when due, in the currency
in which such Loan was made and in federal funds or such other immediately
available funds as may then be customary for the settlement of international
transactions in the relevant currency at such place.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may (except as otherwise provided in the definition
of "Interest Period") be made on the next
47
succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest or Fees, if applicable.
SECTION 2.19. Taxes. (a) Any and all payments by the Borrower
------
hereunder shall be made, in accordance with Section 2.18, free and clear of and
without deduction for any and all present or future taxes, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding
---------
taxes imposed on the Agent's or any Lender's or any Issuing Bank's (or any
transferee's or assignee's, including a participation holder's (any such entity
a "Transferee")) net income and franchise taxes imposed on the Agent or any
----------
Lender or any Issuing Bank (or Transferee) by any jurisdiction or any political
subdivision thereof (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 hereunder to the Lenders or any Issuing Bank (or any
Transferee) or the Agent, (i) the sum payable shall be increased by the amount
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) such Lender or such
Issuing Bank (or Transferee) or the Agent (as the case may be) shall receive an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower shall 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 hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "Other Taxes").
-----------
(c) The Borrower shall indemnify each Lender and Issuing Bank (or
Transferee) and the Agent for the full amount of Taxes and Other Taxes
(including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section) paid by such Lender or such Issuing Bank (or
Transferee) or the Agent, as the case may be, and any liability (including
penalties, interest and reasonable out-of-pocket expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted by the relevant taxing
48
authority or other Governmental Authority. Such indemnification shall be made
within 30 days after the date any Lender or Issuing Bank (or Transferee) or the
Agent, as the case may be, makes written demand therefor, which demand may be
made after such Lender, Issuing Bank (or Transferee) or the Agent, in its sole
discretion (reasonably exercised) and at the sole expense of the Borrower,
determines to challenge or contest such assertion of Taxes or Other Taxes. After
the Borrower makes full payment to the Lender, Issuing Bank (or Transferee) or
the Agent with respect to such indemnification for Taxes or Other Taxes
asserted, if such Lender, Issuing Bank (or Transferee) or the Agent believes in
its sole discretion that reasonable grounds exist to challenge or contest the
Taxes or Other Taxes imposed, then such Lender, Issuing Bank (or Transferee) or
the Agent, as the case may be, shall so contest or challenge in good faith the
Taxes or Other Taxes asserted, which contest or challenge shall be at the sole
expense of the Borrower. If a Lender, Issuing Bank (or Transferee) or the Agent
shall become aware that it is entitled to receive a refund in respect of Taxes
or Other Taxes, it shall promptly notify the Borrower of the availability of
such refund and shall, within 30 days after receipt of a request by the
Borrower, apply for such refund at the Borrower's reasonable out-of-pocket
expense. If any Lender, Issuing Bank (or Transferee) or the Agent receives a
refund in respect of any Taxes or Other Taxes for which such Lender, Issuing
Bank (or Transferee) or the Agent has received payment from the Borrower
hereunder it shall promptly notify the Borrower of such refund and shall
promptly upon receipt repay such refund to the Borrower, net of all out-of-
pocket expenses of such Lender or Issuing Bank and without interest; provided,
--------
however, that the Borrower, upon the request of such Lender, Issuing Bank (or
-------
Transferee) or the Agent, agrees to return such refund (plus penalties, interest
or other charges) to such Lender, Issuing Bank (or Transferee) or the Agent in
the event such Lender, Issuing Bank (or Transferee) or the Agent is required to
repay such refund.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by the Borrower in respect of any payment to any Lender, Issuing
Bank (or Transferee) or the Agent, the Borrower will furnish to the Agent, at
its address referred to in Section 9.01, the original or a certified copy of a
receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section shall
survive the
49
payment in full of the principal of and interest on all Loans made hereunder.
(f) On or before the date it becomes a party to this Agreement and
from time to time thereafter upon any change in status rendering any certificate
or documents previously delivered pursuant to this Section 2.19(f) invalid or
inaccurate, each Lender, Issuing Bank or Transferee that is organized outside
the United States shall (but (x) in the case of a Transferee or (y) in the case
of a Lender or Issuing Bank with respect to any change in status, only if
legally able to do so) upon written request of the Borrower, deliver to the
Borrower such certificates, documents or other evidence, as specified by the
Borrower and, as the case may be, required by, in the case of a non-United
States Lender or Issuing Bank, the Code or Treasury Regulations issued pursuant
thereto, properly completed and duly executed by such Lender (or Transferee)
establishing that such payment is, as the case may be, (i) not subject to
withholding under the Code because such payment is effectively connected with
the conduct by such Lender, Issuing Bank or Transferee of a trade or business in
the United States or (ii) totally exempt from United States tax under a
provision of an applicable tax treaty. Unless the Borrower and the Agent have
received forms or other docu ments satisfactory to them indicating that
payments here under are not subject to United States withholding tax, as the
case may be, or are subject to such tax at a rate reduced by an applicable tax
treaty, the Borrower or the Agent shall withhold taxes from such payments at the
appli cable statutory rate in the case of payments to or for any Lender,
Issuing Bank or Transferee or assignee organized under the laws of a
jurisdiction outside the United States or Germany, as the case may be.
(g) The Borrower shall not be required to pay any additional amounts
to any Lender, Issuing Bank or Transferee in respect of United States
withholding tax pursuant to Section 2.19(a) if the obligation to pay such
additional amounts would not have arisen but for a failure by such Lender,
Issuing Bank or Transferee to comply with the provisions of Section 2.19(f)
unless such failure results from (i) a change in applicable law, regulation or
official interpretation thereof or (ii) an amendment, modification or revocation
of any applicable tax treaty or a change in official position regarding the
application or interpretation thereof, in each case after the Effective Date
(and, in the case of a Transferee, after the date of assignment or transfer,
unless as a result of such change, amendment, modification or revocation
withholding taxes were
50
or would have been imposed on amounts payable to the transferor); provided,
--------
however, that the Borrower shall be required to pay those amounts to any Lender,
-------
Issuing Bank or Transferee that it was required to pay hereunder prior to the
failure of such Lender, Issuing Bank or Transferee to comply with the provisions
of Section 2.19(f).
(h) Any Lender, Issuing Bank or Transferee claiming any additional
amounts payable pursuant to this Section shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any certificate or
document in a timely manner requested by the Borrower or to change the
jurisdiction of its applicable lending office if the making of such a filing or
change would avoid the need for or reduce the amount of any such additional
amounts which may thereafter accrue and would not, in the sole and reasonable
determination of such Lender, Issuing Bank or Transferee be otherwise
disadvantageous to such Lender, Issuing Bank or Transferee.
SECTION 2.20. Letters of Credit. (a) General. The Borrower may
------------------ --------
request the issuance of a Letter of Credit for its own account, in a form
reasonably acceptable to the Agent and the Issuing Bank, at any time and from
time to time while the Revolving Commitments remain in effect. Each Letter of
Credit shall be denominated in dollars. This Section shall not be construed to
impose an obligation upon the Issuing Bank to issue any Letter of Credit that is
inconsistent with the terms and conditions of this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
----------------------------------------------------------
Conditions. In order to request the issuance of a Letter of Credit (or to
-----------
amend, renew or extend an existing Letter of Credit), the Borrower shall hand
deliver or telecopy to the Issuing Bank and the Agent (reasonably in advance of
the requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, the date of issuance, amendment,
renewal or extension, the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) below), the amount of such Letter of
Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare such Letter of Credit. Following
receipt of such notice and prior to the issuance of the requested Letter of
Credit or the applicable amendment, renewal or extension, the Agent shall notify
the Borrower and the Issuing Bank of the amount of the Aggregate Standby
Exposure and the aggregate
51
principal amount of the outstanding Competitive Borrowings after giving effect
to (i) the issuance, amendment, renewal or extension of such Letter of Credit,
(ii) the issuance or expiration of any other Letter of Credit that is to be
issued or will expire prior to the requested date of issuance of such Letter of
Credit and (iii) the borrowing or repayment of any Standby Loans or Competitive
Loans that (based upon notices delivered to the Agent by the Borrower) are to be
borrowed or repaid prior to the requested date of issuance of such Letter of
Credit. A Letter of Credit shall be issued, amended, renewed or extended only
if, and upon issuance, amendment, renewal or extension of each Letter of Credit
the Borrower shall be deemed to represent and warrant that, after giving effect
to such issuance, amendment, renewal or extension (A) the L/C Exposure shall not
exceed $10,000,000 and (B) the sum of the Aggregate Standby Exposure and the
aggregate principal amount of outstanding Competitive Borrowings shall not
exceed the Total Revolving Commitment. The Agent shall notify the Lenders of any
issuance of a Letter of Credit.
(c) Expiration Date. Each Letter of Credit shall expire at the close
----------------
of business on the earlier of the date one year after the date of the issuance
of such Letter of Credit and the date that is 30 days prior to the Revolving
Maturity Date, unless such Letter of Credit expires by its terms on an earlier
date.
(d) Participations. By the issuance of a Letter of Credit and
---------------
without any further action on the part of the Issuing Bank or the Lenders, the
Issuing Bank hereby grants to each Lender, and each such Lender hereby acquires
from the Issuing Bank, a participation in such Letter of Credit equal to such
Lender's Pro Rata Percentage of the aggregate amount available to be drawn under
such Letter of Credit, effective upon the issuance of such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees to pay to the Agent, for the account of the Issuing
Bank, such Lender's Pro Rata Percentage of each L/C Disbursement made by such
Issuing Bank and not reimbursed by the Borrower forthwith on the date due as
provided in Section 2.02(e). Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or an Event of Default or the termination of the Revolving Commitments, and that
each such payment shall be made without any offset, abatement, withholding or
reduction whatsoever.
52
(e) Reimbursement. If an Issuing Bank shall make any L/C
--------------
Disbursement in respect of a Letter of Credit, the Borrower shall pay to the
Agent an amount equal to such L/C Disbursement not later than two hours after
the Borrower shall have received notice from such Issuing Bank that payment of
such draft will be made, or, if the Borrower shall have received such notice
later than 10:00 a.m., New York City time, on any Business Day, not later than
10:00 a.m., New York City time, on the immediately following Business Day.
(f) Obligations Absolute. The Borrower's obligations to reimburse
---------------------
L/C Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit or
this Agreement, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or this Agreement;
(iii) the existence of any claim, setoff, defense or other right that
the Borrower, any other party guaranteeing, or otherwise obligated with,
the Borrower, any Subsidiary or other Affiliate thereof or any other person
may at any time have against the beneficiary under any Letter of Credit,
any Issuing Bank, the Agent or any Lender or any other person, whether in
connection with this Agreement or any other related or unrelated agreement
or transaction;
(iv) any draft or other document presented under a 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;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of any
Issuing Bank, the Lenders, the Agent or any other person or any other event
or circumstance whatsoever, whether or not similar to any of the
53
foregoing, that might, but for the provisions of this Section, constitute a
legal or equitable discharge of the Borrower's obligations hereunder.
Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of the
Borrower hereunder to reimburse L/C Disbursements will not be excused by the
negligence or misconduct of any Issuing Bank. However, the foregoing shall not
be construed to excuse any Issuing Bank from liability to the Borrower to the
extent of any damages (as opposed to consequential damages, claims in respect of
which are hereby waived by the Borrower to the extent permitted by applicable
law) suffered by the Borrower that are caused by such Issuing Bank's negligence
or misconduct in determining whether drafts and other documents presented under
a Letter of Credit comply with the terms thereof; it is understood that each
Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary and, in making any payment under any Letter of
Credit (i) an Issuing Bank's exclusive reliance on the documents presented to it
under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary thereunder equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be insufficient in any respect, if such document on
its face appears to be in order, and whether or not any other statement or any
other document presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (ii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute misconduct or negligence of an Issuing
Bank.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
------------------------
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. Such Issuing Bank shall as
promptly as possible give telephonic notification, confirmed by telecopy, to the
Agent and the Borrower of such demand for payment and whether such Issuing Bank
has made or will make an L/C Disbursement thereunder; provided that any failure
--------
to give or delay in giving such notice shall not relieve the Borrower of its
obligation to reimburse the Issuing Bank and
54
the Lenders with respect to any such L/C Disbursement. The Agent shall promptly
give each Lender notice thereof.
(h) Resignation or Removal of an Issuing Bank. An Issuing Bank may
------------------------------------------
resign at any time by giving 180 days' prior written notice to the Agent, the
Lenders and the Borrower, and may be removed at any time by the Borrower by
notice to the Issuing Bank, the Agent and the Lenders. Subject to the next
succeeding paragraph, upon the acceptance of any appointment as an Issuing Bank
hereunder by a Lender that shall agree to serve as successor Issuing Bank, such
successor shall succeed to and become vested with all the interests, rights and
obligations of the retiring Issuing Bank and the retiring Issuing Bank shall be
discharged from its obligations to issue additional Letters of Credit hereunder.
At the time such removal or resignation shall become effective, the Borrower
shall pay all accrued and unpaid fees pursuant to Section 2.06(c)(ii). The
acceptance of any appointment as an Issuing Bank hereunder by a successor Lender
shall be evidenced by an agreement entered into by such successor, in a form
satisfactory to the Borrower and the Agent, and, from and after the effective
date of such agreement, (i) such successor Lender shall have all the rights and
obligations of the previous Issuing Bank under this Agreement and (ii)
references herein to the term "Issuing Bank" shall be deemed to refer to such
successor or to any previous Issuing Bank, or to such successor and all previous
Issuing Banks, as the context shall require. After the resignation or removal
of an Issuing Bank hereunder, the retiring Issuing Bank shall remain a party
hereto and shall continue to have all the rights and obligations of an Issuing
Bank under this Agreement with respect to Letters of Credit issued by it prior
to such resignation or removal, but shall not be required to issue additional
Letters of Credit.
(i) Cash Collateralization. If any Event of Default (other than an
-----------------------
Event of Default described in clause (g) or (h) of Article VII) shall occur and
be continuing, the Borrower shall, on the Business Day it receives notice from
the Agent or the Required Lenders (or, if the maturity of the Loans has been
accelerated, Lenders holding participations in outstanding Letters of Credit
representing greater than 50% of the aggregate undrawn amount of all outstanding
Letters of Credit) thereof and of the amount to be deposited, or, if an Event of
Default described in clause (g) or (h) of Article VII shall occur, on the
Business Day of such occurrence, deposit in an account with the Agent, for the
benefit of the Lenders, an amount in cash equal to the L/C Exposure as of such
date. Such deposit shall be
55
held by the Agent as collateral for the payment and performance of the
obligations of the Borrower under this Agreement. The Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
account. Other than any interest earned on the investment of such deposits in
Permitted Investments, which investments shall be made at the option and sole
discretion of the Agent, such deposits shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys in
such account shall (i) automatically be applied by the Agent to reimburse the
Issuing Bank for L/C Disbursements for which they have not been reimbursed, (ii)
be held for the satisfaction of the reimbursement obligations of the Borrower
for the L/C Exposure at such time and (iii) if the maturity of the Loans has
been accelerated (but subject to the consent of Lenders holding participations
in outstanding Letters of Credit representing greater than 50% of the aggregate
undrawn amount of all outstanding Letters of Credit), be applied to satisfy
other obligations of the Borrower under this Agreement. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived.
SECTION 2.21. Currency Fluctuations, etc. (a) Not later than 1:00
---------------------------
p.m., New York City time, on each Calculation Date, the Agent shall (i)
determine the Spot Exchange Rate as of such Calculation Date with respect to
each Eurocurrency Borrowing and (ii) give notice thereof to the Lenders and the
Borrower. The Spot Exchange Rates so determined shall become effective on the
first Business Day immediately following the relevant Calculation Date(a "Reset
-----
Date") and shall remain effective until the next succeeding Reset Date.
----
(b) Not later than 5:00 p.m., New York City time, on each Reset Date,
the Agent shall (i) determine the Equivalent Dollar Amount of the Eurocurrency
Loans then outstanding (after giving effect to any Eurocurrency Loans to be made
or repaid on such date) and (ii) notify the Lenders and the Borrower of the
results of such determination.
(c) If on any Reset Date with respect to Eurocurrency Loans
outstanding the Equivalent Dollar Amount of all Loans outstanding exceeds 110%
of the Eurocurrency Sublimit the Borrower shall on such day prepay Eurocurrency
56
Loans in an aggregate amount such that, after giving effect thereto, the
Equivalent Dollar Amount of all such Eurocurrency Loans shall be equal to or
less than the Eurocurrency Sublimit. If any such prepayment occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to the Lenders such amounts, if any, which may
be required pursuant to Section 2.15.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each of the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrower and the
---------------------
Subsidiaries (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) has all requisite power
and authority to own its property and assets and to carry on its business as now
conducted and as proposed to be conducted, (c) is qualified to do business in
every juris diction where such qualification is required, except where the
failure so to qualify would not result in a Material Adverse Effect, and (d) in
the case of each Loan Party, has the power and authority to execute, deliver and
perform its obligations under each Loan Document to which it is party and each
other agreement or instrument contemplated thereby and in the case of the
Borrower, to borrow and incur other obligations hereunder.
SECTION 3.02. Authorization. The execution, delivery and performance
--------------
by each Loan Party of the Loan Documents to which it is to be a party and in the
case of the Borrower the borrowings of the Loans, the use of proceeds thereof
and the Letters of Credit hereunder (collectively, the "Transactions") (a) have
------------
been duly authorized by all requisite action, including approval of such Loan
Party's Board of Directors and if required, stockholder action on the part of
such Loan Party and (b) will not (i) violate (A) any provision of law, statute,
rule or regulation, or of the certificate or articles of incorporation or other
constitutive documents or by-laws of the Borrower or any Subsidiary, (B) any
order of any Govern mental Authority or (C) any provision of any indenture,
agreement or other instrument to which the Borrower or any Subsidiary is a party
or by which any of them or any of their property is or may be bound, (ii) be in
conflict with, result in a breach of or constitute (alone or with notice or
lapse of time or both) a default under any such indenture,
57
agreement or other instrument or (iii) result in the crea tion or imposition of
any Lien upon or with respect to any property or assets now owned or hereafter
acquired by the Borrower or any Subsidiary.
SECTION 3.03. Enforceability. This Agreement has been duly executed
---------------
and delivered by the Borrower and constitutes, and each other Loan Document
when executed and delivered by the Loan Parties party thereto will constitute, a
legal, valid and binding obligation of the Borrower and the other Loan Parties
enforceable against the Borrower and the other Loan Parties in accordance with
its terms.
SECTION 3.04. Governmental Approvals. No action, consent or approval
-----------------------
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except
such as have been made or obtained and are in full force and effect.
SECTION 3.05. Financial Statements. (a) The Borrower has heretofore
---------------------
furnished to the Lenders (i) the combined balance sheets and statements of
income and cash flow of Sunburst and its combined Subsidiaries pre-Spin-Off as
of and for the fiscal year ended May 31, 1997, audited by and accompanied by the
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., independent public accountants, (ii) the
combined balance sheets and statements of income and cash flow of the Borrower
and its combined Subsidiaries post-Spin-Off as of and for the fiscal year ended
May 31, 1997, audited and accompanied by the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co.,
independent public accountants and (iii) the unaudited combined balance sheets
and statements of income and cash flow of the Sunburst and its combined
Subsidiaries pre-Spin-Off as of and for the fiscal quarter ended August 31,
1997, each certified by the chief financial officer (or, in the absence of such
a position, comptroller) of the Borrower or Sunburst. Such financial statements
present fairly the financial condition and results of operations of the Borrower
and its combined Subsidiaries as of such dates and for such periods. Such
balance sheets and the notes thereto disclose all material liabilities, direct
or contingent, of the Borrower and its combined subsidiaries as of the dates
thereof. Such financial statements and monthly summaries of pretax income or
loss were prepared in accordance with GAAP applied on a consistent basis.
(b) The Borrower has heretofore furnished to the Lenders its pro
forma consolidated balance sheet as of October 15, 1997 prepared giving effect
to the Spin-Off as if the Spin-Off had occurred on such date. Such pro forma
58
consolidated balance sheet (i) has been prepared in good faith based on the same
assumptions used to prepare the pro forma financial statements included in the
Form 10 (which assumptions are believed by the Borrower and Sunburst to be
reasonable), (ii) is based on the best information available to the Borrower and
Sunburst after due inquiry, (iii) accurately reflects all adjustments necessary
to give effect to the Spin-Off, (iv) presents fairly, in all material respects,
the pro forma financial position of the Borrower and its consolidated
Subsidiaries as of the date of such balance sheet as if the Spin-Off had
occurred on such date and (v) is not materially inconsistent with the forecasts
previously provided to the Lenders by the Borrower.
SECTION 3.06. No Material Adverse Change. As of the date hereof,
---------------------------
there has been no material adverse change in the business, assets, operations,
property, condition, financial or otherwise, contingent liabilities or material
agreements of the Borrower and the Subsidiaries, taken as a whole, since May 31,
1997 (it being understood that changes in general economic conditions shall not
be deemed to constitute such a material adverse change).
SECTION 3.07. Title to Properties; Possession Under Leases. (a)
---------------------------------------------
Each of the Borrower and the Subsidiar ies has good and marketable title to, or
valid leasehold interests in, all its material properties and assets, except for
minor defects in title that do not interfere with its ability to conduct its
business as currently conducted or to utilize such properties and assets for
their intended pur poses. All such material properties and assets are free and
clear of Liens, other than Liens expressly permitted by Section 6.02.
(b) Each of the Borrower and the Subsidiaries has complied with all
material obligations under all material leases to which it is a party and all
such leases are in full force and effect. Each of the Borrower and the
Subsidiaries enjoys peaceful and undisturbed possession under all such material
leases.
(c) On and as of the date of the initial Credit Event under this
Agreement, the Borrower will own, or have a valid leasehold interest in, all of
the assets, business and operations currently conducted by that portion of the
pre-Spin-Off operations that will be conducted by the Borrower post-Spin-Off (as
described in the Distribution Agreement), (other than assets since disposed of
prior to the date of such Borrowing in the ordinary course of business and
assets described on Schedule 3.07).
59
SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the date
-------------
hereof and as of the Effective Date a list of all Subsidiaries of the Borrower
and the percentage ownership interest of the Borrower therein. Except as set
forth on Schedule 3.08, as of the date hereof and the Effective Date no
Subsidiary has assets greater than or equal to 10% of Consolidated Total Assets.
SECTION 3.09. Litigation; Compliance with Laws. (a) There are not
---------------------------------
any actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any Subsidiary or any business,
property or rights of any such person (i) which involve any Loan Document, the
Transactions or the Spin-Off (excluding any such actions, suits or proceedings
threatened by the Lenders or the Agent) or (ii) as to which there is a
reasonable probability of an adverse determination and which, if such probable
adverse determination occurred, could, individually or in the aggregate,
reasonably be anticipated to result in a Material Adverse Effect.
(b) To the best knowledge of the Borrower, neither the Borrower nor
any of the Subsidiaries is in vio lation of any law, rule or regulation, or in
default with respect to any judgment, writ, injunction or decree of any
Governmental Authority, where such violation or default could reasonably be
anticipated to result in a Material Adverse Effect.
SECTION 3.10. Agreements. (a) Neither the Borrower nor any of the
-----------
Subsidiaries is a party to any agreement or instrument or subject to any
corporate or other restriction that has resulted or could reasonably be
anticipated to result in a Material Adverse Effect.
(b) Neither the Borrower nor any of its Subsidi aries is in default
in any manner under any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its proper ties or
assets are or may be bound, where such default could reasonably be anticipated
to result in a Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) Neither the Borrower
----------------------------
nor any of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock.
60
(b) Following application of the proceeds of each Loan, not more than
25 percent of the value of the assets of the Borrower subject to the provisions
of Section 6.02 or paragraph (f) of Article VII will be Margin Stock.
SECTION 3.12. Investment Company Act; Public Utility Holding Company
------------------------------------------------------
Act. Neither the Borrower nor any Subsidiary is (a) an "investment company" as
----
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of
----------------
the Loans and will request the issuance of Letters of Credit only for the
purposes specified in the preamble to this Agreement.
SECTION 3.14. Tax Returns. Each of the Borrower and the Subsidiaries
------------
has filed or caused to be filed all Federal, state, local and foreign tax
returns required to have been filed by it and has paid or caused to be paid all
taxes shown to be due and payable on such returns or on any assessments received
by it, except taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary shall have set aside
on its books adequate reserves.
SECTION 3.15. No Material Misstatements. No information, report,
--------------------------
financial statement, exhibit or sched ule furnished by or on behalf of the
Borrower to the Agent or any Lender in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto contained,
contains or will contain any material misstate ment of fact or omitted, omits
or will omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were, are or will be
made, not misleading.
SECTION 3.16. Employee Benefit Plans. Each of the Plans, the
-----------------------
Borrower and its ERISA Affiliates is in compliance in all material respects with
the applicable provisions of ERISA and the regulations and published
interpretations thereunder. No Reportable Event has occurred as to which the
Borrower or any ERISA Affiliate was required to file a report with the PBGC, and
the present value of all benefit liabilities under each Plan (based on those
assumptions used to fund such Plan) did not, as of the last annual valuation
date applicable thereto, exceed by more than $5,000,000 the value of the assets
of such Plan.
61
Neither the Borrower nor any ERISA Affiliate has incurred any Withdrawal
Liability or any other liability under Title IV of ERISA (other than premiums
not yet due) that remains unpaid and that could result in a Material Adverse
Effect. Neither the Borrower nor any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and to the best knowledge of
the Borrower no Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated, where such reorganization or termination has
resulted or could reason ably be expected to result, through increases in the
contri butions required to be made to such Plan or otherwise, in a Material
Adverse Effect. Neither the Borrower nor any ERISA Affiliate has received any
notice from the PBGC regarding the funded status of any plan.
SECTION 3.17. Environmental Matters. The Borrower and each
----------------------
Subsidiary has complied in all material respects with all Federal, state, local
and other statutes, ordinances, orders, judgments, rulings and regulations
relating to environmental pollution or to environmental regulation or control or
to employee health or safety. Neither the Borrower nor any Subsidiary has
received notice of any failure so to comply. The Borrower's and the Subsid
iaries' facilities do not manage any hazardous wastes, hazardous substances,
hazardous materials, toxic substances, toxic pollutants or substances similarly
denominated, as those terms or similar terms are used in the Resource
Conservation and Recovery Act, the Comprehensive Environ mental Response
Compensation and Liability Act, the Hazard ous Materials Transportation Act,
the Toxic Substance Control Act, the Clean Air Act, the Clean Water Act or any
other applicable law, in material violation of any such law or any regulations
promulgated pursuant thereto.
SECTION 3.18. Solvency. As of the Effective Date and after
---------
giving effect to the Spin-Off:
(a) The fair salable value of the assets of the Borrower and each
Significant Subsidiary will exceed the amount that will be required to be
paid on or in respect of the existing debts and other liabilities of the
Borrower or Significant Subsidiary as such debts and liabilities become
absolute and mature.
(b) Except in the case of a refinancing of a Standby Borrowing with a
new Standby Borrowing that does not increase the aggregate principal amount
of the Loans of any Lender outstanding, the assets of the
62
Borrower and each Significant Subsidiary will not constitute unreasonably
small capital for the Borrower or Significant Subsidiary to carry out its
businesses as now conducted and as proposed to be conducted including the
capital needs of the Borrower or Significant Subsidiary, taking into
account the particular capital requirements of the business conducted by
the Borrower or Significant Subsidiary and projected capital requirements
and capital availability thereof.
(c) Neither the Borrower nor any Significant Subsidiaries intends to
incur debts or liabilities beyond its ability to pay such debts and
liabilities as they mature, taking into account the timing and amounts of
cash to be received by it, and of amounts to be payable on or in respect of
its debts and liabilities. The cash flow of the Borrower and each
Significant Subsidiary, after taking into account all anticipated uses of
the cash of the Borrower or such Significant Subsidiary, will at all times
be sufficient to pay all such amounts on or in respect of debt and
liabilities of the Borrower or such Significant Subsidiary when such
amounts are required to be paid.
SECTION 3.19. Spin-Off. As of the Effective Date, the Spin-Off will
---------
have been effected in a manner that (a) is not materially different from the
description thereof in the Form 10 (including but not limited to the tax
consequences of the Spin-Off) and (b) will not materially adversely affect the
rights or interests of the Lenders or the creditworthiness of the Borrower.
ARTICLE IV. CONDITIONS OF LENDING
The effectiveness of this Agreement and the obligations of the Lenders
to make Loans and of the Issuing Bank to issue, extend or renew Letters of
Credit hereunder are subject to the satisfaction of the following conditions:
SECTION 4.01. All Credit Events. On the date of each Borrowing or
------------------
issuance, extension or renewal of a Letter of Credit (each such event being
called a "Credit Event"):
(a) The Agent shall have received a notice of such Credit Event as
required by Section 2.03, Section 2.04 or Section 2.20, as the case may be
(or such notice shall have been deemed given in accordance with Section
2.04).
63
(b) Except in the case of a refinancing of a Standby Borrowing with a
new Standby Borrowing that does not increase the aggregate principal amount
of the Loans of any Lender outstanding, the representations and warranties
set forth in Article III hereof shall be true and correct in all material
respects on and as of the date of such Credit Event with the same effect as
though made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date.
(c) Each Loan Party shall be in compliance with all the terms and
provisions set forth herein and in each other Loan Document on its part to
be observed or performed, and at the time of and immediately after such
Credit Event, no Event of Default or Default shall have occurred and be
continuing.
Each Credit Event shall be deemed to constitute a representation and warranty by
the Borrower on the date of such Credit Event as to the matters specified in
paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. First Credit Event. On the Effective Date:
-------------------
(a) All legal matters incident to this Agreement and the borrowings
hereunder and the other Loan Documents shall be satisfactory to the Lenders
and their counsel and to the Issuing Bank and to Cravath, Swaine & ▇▇▇▇▇,
counsel for the Agent.
(b) The Agent shall have received (i) a copy of the certificate or
articles of incorporation (or analogous documents) and all amendments
thereto of each Loan Party certified as of a recent date by the Secre tary
of State (or other appropriate Governmental Authority) of the state (or
country) of its organization or such other evidence as is reasonably
satisfactory to the Agent; (ii) a certificate as to the good standing (or
other analogous certification to the extent available) of each Loan Party
as of a recent date, from the appropriate Secretary of State (or other
appropriate Governmental Authority) or such other evidence as is reasonably
satisfactory to the Agent; (iii) a certificate of the Secretary or
Assistant Secretary of each Loan Party dated the Effective Date and
certifying (A) that attached thereto is a true and complete copy of the by-
laws (or such other analogous documents to the extent available) of such
Loan Party
64
as in effect on the Effective Date and at all times since a date prior to
the date of the resolutions described in clause (B) below, (B) that
attached thereto is a true and complete copy of resolutions duly adopted by
the Board of Directors of such Loan Party authorizing the execution,
delivery and performance of the Loan Documents to which it is party, and in
the case of the Borrower, the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full
force and effect, (C) that the certificate or articles of incorporation (or
analogous documents) of such Loan Party have not been amended since the
date of the last amendment thereto shown on the certificate of good
standing (or other analogous certification or such other evidence
reasonably satisfactory to the Agent) furnished pursuant to clause (i) or
(ii) above, and (D) as to the incumbency and specimen signature of each
officer executing any Loan Document or any other document delivered in
connection herewith on behalf of such Loan Party; (iv) a certificate of
another officer as to the incumbency and specimen signature of the
Secretary or Assistant Secretary executing the certificate pursuant to
(iii) above; and (v) such other documents as the Lenders or their counsel,
the Issuing Bank or Cravath, Swaine & ▇▇▇▇▇, counsel for the Agent, may
reasonably request.
(c) The Agent shall have received a certificate of the Borrower,
dated the Effective Date and signed by a Financial Officer of the Borrower
confirming compliance with the conditions precedent set forth in paragraphs
(b) and (c) of Section 4.01.
(d) The Agent shall have received all Fees and other amounts due and
payable on or prior to the Effective Date.
(e) The Agent shall have received a favorable written opinion of the
General Counsel of the Borrower, dated the Effective Date and addressed to
the Lenders and the Issuing Bank, to the effect set forth in Exhibit D, and
the Borrower hereby instructs such counsel to deliver such opinion to the
Agent.
(f) The Agent shall have received evidence of the receipt by the
Borrower of all governmental and third party approvals, if any, necessary
or advisable in connection with the Spin-Off and the other transactions
contemplated by this Agreement and of the expiry of any
65
applicable waiting or appeal periods, and there shall be no governmental or
judicial action, actual or threatened, that could reasonably be expected to
restrain, prevent or impose burdensome conditions on the Spin-Off or the
other transactions contemplated hereby.
(g) The Lenders shall have received copies of the Form 10 and of the
Distribution Agreement and other agreements governing the post Spin-Off
relationship between the Borrower and Sunburst attached as exhibits
thereto, which agreements shall have been executed by the parties thereto
and shall be in full force and effect.
(h) The Spin-Off shall have been consummated in accordance with
applicable law and in a manner and with consequences not materially
different from the description thereof in the Form 10, and, after giving
effect to the Spin-Off, the Lenders shall be satisfied with the corporate
and capital structure of the Borrower and the Subsidiaries, all legal, tax
and accounting matters relating to the Spin-Off, all arrangements and
agreements between the Borrower and Sunburst governing their post Spin-Off
relationship and the sufficiency of amounts available hereunder to meet the
ongoing working capital requirements of the Borrower and the Subsidiaries.
(i) After giving effect to the Spin-Off, neither the Borrower nor any
of its Subsidiaries shall have outstanding any shares of preferred stock or
any Indebtedness, other than (i) Indebtedness incurred under the Loan
Documents and (ii) other Indebtedness permitted under Section 6.01 and
outstanding on the Effective Date. The terms and conditions of all
Indebtedness to remain outstanding after the Effective Date shall be
satisfactory in all respects to the Lenders.
(j) (i) The Existing Credit Agreements and all commitments thereunder
to lend shall have been terminated, all letters of credit issued thereunder
shall have been terminated, all amounts outstanding thereunder shall have
been paid in full and all Liens, if any, securing any obligations
thereunder or under any related agreement shall have been permanently
released and (ii) the Agent shall have received evidence satisfactory in
form and substance to it demonstrating such termination, payment and
release.
66
(k) After giving effect to the Spin-Off, the Borrower shall be in pro
forma compliance as of May 31, 1997 and for the period of four fiscal
quarters then ended with Sections 6.13, 6.14 and 6.15 (assuming for such
purpose that the Spin-Off occurred on such date or at the beginning of such
period, as the case may be).
(l) The Agent shall have received, (i) a copy of the solvency opinion
from American Appraisal Associates in the form delivered to the Board of
Directors of Sunburst on the date of the Spin-Off and (ii) a certificate
from the Financial Officer of the Borrower as to the solvency of the
Borrower and the Subsidiaries on a consolidated basis after giving effect
to the Spin-Off.
(m) The Lenders shall have received a pro forma consolidated balance
sheet of the Borrower as of the Effective Date, after giving effect to the
Spin-Off and the consummation of the other transactions contemplated
hereby, which shall not be materially inconsistent with the forecasts
previously provided to the Lenders.
(n) The Agent shall have received a counterpart of the Guarantee
Agreement signed on behalf of each Subsidiary Loan Party.
The Agent shall notify the Borrower and the Lenders of the Effective
Date, and such notices shall be conclusive and binding. Notwithstanding the
foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank
to issue Letters of Credit hereunder shall not become effective unless each of
the foregoing conditions is satisfied (or waived pursuant to Section 9.08) at or
prior to 3:00 p.m., New York City time, on October 15, 1997 (and, in the event
such conditions are not so satisfied or waived, the Commitments shall terminate
at such time).
ARTICLE V. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so long as
this Agreement shall remain in effect or the principal of or interest on any
Loan, any Fees or any other expenses or amounts payable under any Loan Document
shall be unpaid, and until all Letters of Credit have been canceled or have
expired and all amounts drawn thereunder have been reimbursed in full, unless
the Required Lenders
67
shall otherwise consent in writing, the Borrower shall, and shall cause each of
the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause
-------------------------------------
to be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as otherwise expressly permitted under
Section 6.05.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; maintain and operate such business in
substantially the manner in which it is presently conducted and operated (except
for the Spin-Off); comply in all material respects with all applicable laws,
rules, regulations and orders of any Governmental Authority, whether now in
effect or hereafter enacted; and at all times maintain and preserve all property
material to the conduct of such business and keep such property in good repair,
working order and condition and from time to time make, or cause to be made, all
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times.
SECTION 5.02. Insurance. Keep its insurable properties adequately
----------
insured at all times by financially sound and reputable insurers; maintain such
other insurance, to such extent and against such risks, including fire and other
risks insured against by extended coverage, as is customary with companies in
the same or similar businesses, including public liability insurance against
claims for personal injury or death or property damage occurring upon, in, about
or in connection with the use of any properties owned, occupied or controlled by
it; and maintain such other insurance as may be required by law.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other
----------------------
obligations promptly and in accordance with their terms and pay and discharge
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become delinquent or in default, as well as all lawful and
valid claims for labor, materials and supplies or otherwise which, if unpaid,
might give rise to a Lien upon such properties or any part thereof; provided,
--------
however, that such payment and
-------
68
discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the Borrower or such
Subsidiary shall have set aside on its books adequate reserves with respect
thereto.
SECTION 5.04. Financial Statements, Reports, etc. In the case of
-----------------------------------
the Borrower, furnish to the Agent and each Lender:
(a) within 100 days after the end of each fiscal year, its audited
consolidated balance sheets and related statements of income and cash flow,
showing the financial condition of the Borrower and its consolidated
subsidiaries as of the close of such fiscal year and the results of its
operations and the operations of such subsidiaries during such year, all
audited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. or other independent public accountants of
recognized national standing acceptable to the Required Lenders and
accompanied by an opinion of such accountants (which shall not be qualified
in any material respect) to the effect that such consolidated financial
statements fairly present the financial condition and results of operations
of the Borrower on a consolidated basis in accordance with GAAP
consistently applied;
(b) within 50 days after the end of each of the first three fiscal
quarters of each fiscal year, its unaudited consolidated balance sheets and
related statements of income and cash flow, showing the ▇▇▇▇▇ cial
condition of the Borrower and its consolidated subsidiaries as of the close
of such fiscal quarter and the results of its operations and the operations
of such subsidiaries during such fiscal quarter and the then elapsed
portion of the fiscal year, all certified by the Financial Officer of the
Borrower as fairly presenting the financial condition and results of
operations of the Borrower on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of the accounting firm or the
Financial Officer of the Borrower opining on or certifying such statements
(which certificate, when furnished by an accounting firm, may be limited to
accounting matters and disclaim responsibility for legal interpretations)
69
(i) certifying that no Event of Default or Default has occurred or, if such
an Event of Default or Default has occurred, specifying the nature and
extent thereof and any corrective action taken or proposed to be taken with
respect thereto and (ii) setting forth computations in reasonable detail
satisfactory to the Agent demonstrating compliance with the covenants
contained in Sections 6.06, 6.13, 6.14 and 6.15;
(d) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
it with the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of or all the functions of said Commission, or
with any national securities exchange, or distributed to its shareholders,
as the case may be; and
(e) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Borrower or any
Subsidiary, or compliance with the terms of any Loan Document, as the Agent
or any Lender may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the Agent, the
-----------------------------
Issuing Bank and each Lender prompt written notice of the following:
(a) any Event of Default or Default, specifying the nature and extent
thereof and the corrective action (if any) proposed to be taken with
respect thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against the Borrower or any Affiliate thereof as to which there
is a reasonable probability of an adverse determination and which, if such
probable adverse determination occurred, could reasonably be anticipated to
result in a Material Adverse Effect; and
(c) any development that has resulted in, or could reasonably be
anticipated to result in, a Material Adverse Effect.
SECTION 5.06. ERISA. (a) Comply in all material respects with the
------
applicable provisions of ERISA and (b) furnish to the Agent and each Lender (i)
as soon as
70
possible, and in any event within 30 days after any Responsible Officer of the
Borrower or any ERISA Affiliate either knows or has reason to know that any
Reportable Event has occurred that alone or together with any other Reportable
Event could reasonably be expected to result in liability of the Borrower or any
ERISA Affiliate in an aggregate amount exceeding $5,000,000, a statement of a
Financial Officer of the Borrower setting forth details as to such Reportable
Event and the action proposed to be taken with respect thereto, together with a
copy of the notice, if any, of such Reportable Event given to the PBGC, (ii)
promptly after receipt thereof, a copy of any notice the Borrower or any ERISA
Affiliate may receive from the PBGC relating to the funded status of any Plan or
to the intention of the PBGC to terminate any Plan or Plans (other than a Plan
maintained by an ERISA Affiliate which is considered an ERISA Affiliate only
pursuant to subsection (m) or (o) of Section 414 of the Code) or to appoint a
trustee to administer any Plan or Plans, (iii) within 10 days after the due date
for filing with the PBGC pursuant to Section 412(n) of the Code of a notice of
failure to make a required installment or other payment with respect to a Plan,
a statement of a Financial Officer of the Borrower setting forth details as to
such failure and the action proposed to be taken with respect thereto, together
with a copy of such notice given to the PBGC and (iv) promptly and in any event
within 30 days after receipt thereof by the Borrower or any ERISA Affiliate from
the sponsor of a Multiemployer Plan, a copy of each notice received by the
Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal
Liability in excess of $500,000 or (B) a determination that a Multiemployer Plan
is, or is expected to be, terminated or in reorganization, in each case within
the meaning of Title IV of ERISA.
SECTION 5.07. Maintaining Records; Access to Properties and
---------------------------------------------
Inspections. Maintain all financial records in accordance with GAAP
------------
consistently applied and upon reasonable notice by any Lender permit any
representatives designated by such Lender, subject to Section 9.17 of this
Agreement, to visit and inspect the financial records and the properties of the
Borrower or any Subsidiary at reasonable times and as often as requested and to
make extracts from and copies of such financial records, and permit any
representatives designated by any Lender to discuss the affairs, finances and
condition of the Borrower or any Subsidiary with the officers thereof and
independent accountants therefor.
71
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and
----------------
request the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.
SECTION 5.09. Subsidiaries. If any additional Subsidiary is formed
------------
or acquired after the Effective Date, the Borrower will notify the Agent and the
Lenders thereof. If any Subsidiary has or acquires assets greater than or equal
to 10% of Consolidated Total Assets, the Borrower will (a) cause such Subsidiary
to become a party to the Guarantee Agreement within three Business Days after
such Subsidiary (i) is formed or acquired or (ii) acquires the requisite amount
of assets, as applicable, and (b) enter into and cause each Subsidiary Loan
Party to become a party to an Indemnity, Subrogation and Contribution Agreement
substantially in the form of Exhibit G.
ARTICLE VI. NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender, the Issuing Bank
and the Agent that, so long as this Agreement shall remain in effect or the
principal of or interest on any Loan, any Fees or any other expenses or amounts
payable under any Loan Document shall be unpaid, and until all Letters of Credit
have been canceled or have expired and all amounts drawn thereunder have been
reimbursed in full, unless the Required Lenders shall otherwise consent in
writing, the Borrower shall not, and shall not cause or permit any of the
Subsidiaries to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist
-------------
any Indebtedness, except (without duplication):
(a) Indebtedness of the Borrower existing on the date hereof and set
forth in Schedule 6.01(a) and any extensions, renewals or replacements of
existing mortgages and Capital Lease Obligations included in such
Indebtedness; provided, however, that (x) the principal amount of any such
-------- -------
extension, renewal or replacement shall not exceed the principal amount of
the mortgage or Capital Lease Obligation so extended, renewed or replaced,
(y) the mortgage or Capital Lease Obligation so extended, renewed or
replaced shall not be secured by any property or asset that was not already
pledged to secure the existing mortgage or Capital Lease Obligation, and
(z) such extension, renewal or replacement shall not be on terms materially
72
more restrictive to the Borrower or its Subsidiaries or materially less
favorable to the Lenders than the mortgage or Capital Lease Obligation so
extended, renewed or replaced;
(b) Indebtedness outstanding under the Loan Documents;
(c) Indebtedness incurred upon the acquisition of any property or
asset after the Effective Date secured by Liens on such property or asset
in accordance with Section 6.02(b); provided, however, that the amount of
-------- -------
such Indebtedness shall not exceed the purchase price of any such property
or asset;
(d) unsecured Indebtedness of Subsidiaries existing at the time they
are acquired by the Borrower and not incurred in contemplation of such
acquisition;
(e) other Indebtedness of Subsidiaries not prohibited by Section 6.09;
(f) Indebtedness of (i) the Borrower to any Wholly Owned Subsidiary;
(ii) any Wholly Owned Subsidiary to the Borrower; and (iii) any Subsidiary
to the Borrower or any Wholly Owned Subsidiary;
(g) Indebtedness represented by notes or letters of credit issued for
the account of the Borrower or any Subsidiary in connection with insurance
policies and in a form substantially similar to the notes or letters of
credit previously issued for the account of the Borrower or any Subsidiary
issued in connection with insurance policies of the Borrower or such
Subsidiary;
(h) Indebtedness of the Borrower consisting of Guarantees in
connection with pension and deferred compensation arrangements arising in
connection with the Spin-Off; provided, however, that the aggregate amount
-------- -------
of such Indebtedness shall not exceed $20,000,000; and
(i) other unsecured Indebtedness of the Borrower in an aggregate
principal amount at any one time outstanding not to exceed $50,000,000;
provided, however, that the covenants and events of default contained in
-------- -------
any such Indebtedness with an aggregate principal amount in excess of
$10,000,000 shall not be more restrictive of the Borrower and its
Subsidiaries than those in this Agreement; and provided further,
-------- -------
73
that the aggregate amount of Guarantees by the Borrower permitted by this
paragraph (other than Guarantees in respect of certain non-qualified
employee benefit plans) may not exceed $20,000,000.
SECTION 6.02. Liens. Create, incur, assume or permit to exist any
------
Lien on any property or assets (including stock or other securities of any
person, including any Subsidiary) now owned or hereafter acquired by it or on
any income or revenues or rights (excluding rights of first refusal) in respect
of any thereof, except (without duplication):
(a) Liens on property or assets of the Borrower and its Subsidiaries
existing on the date hereof and set forth in Schedule 6.02; provided,
--------
however, that such Liens shall secure only those obligations which they
-------
secure on the date hereof except as otherwise permitted hereunder;
(b) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary; provided, however,
-------- -------
that (i) such Lien is not created in contemplation of or in connection with
such acquisition and (ii) such Lien does not apply to any other property or
assets of the Borrower or any Subsidiary;
(c) Liens for taxes not yet due or which are being contested in
compliance with Section 5.03;
(d) carriers', warehousemen's, mechanic's, materialmen's, repairmen's
or other like Liens arising in the ordinary course of business and securing
obligations that are not due or which are being contested in compliance
with Section 5.03;
(e) statutory liens of landlords in respect of property leased by the
Borrower or any Subsidiary;
(f) pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other
social security laws or regulations;
(g) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases (other than Capital Lease Obligations),
statutory obligations, surety and appeal bonds, performance bonds
74
and other obligations of a like nature incurred in the ordinary course of
business;
(h) zoning restrictions, easements, rights-of-way, restrictions on use
of real property and other similar encumbrances incurred in the ordinary
course of business which, in the aggregate, are not substantial in amount
and do not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries;
(i) Liens created under the Loan Documents; and
(j) other Liens to secure Indebtedness of the Borrower; provided,
--------
however, that the aggregate principal amount of the Indebtedness so secured
-------
at any time, when added to the net book value of all property the subject
of Sale and Lease-Back Transactions at such time, does not exceed 5% of
Consolidated Total Assets at such time.
SECTION 6.03. Sale and Lease-Back Transactions. Enter into any Sale
---------------------------------
and Lease-Back Transaction unless immediately thereafter the net book value
(determined as of the time of sale) of all property the subject of Sale and
Lease-Back Transactions, when added to the aggregate principal amount of
Indebtedness of the Borrower or any Subsidiary secured at such time by Liens
permitted only under Section 6.02(j), does not exceed 5% of Consolidated Total
Assets at such time.
SECTION 6.04. Investments, Loans and Advances. Purchase, hold or
--------------------------------
acquire any capital stock, comparable ownership interests, evidences of
indebtedness or other securities of, make or permit to exist any loans or
advances to, or make or permit to exist any investment or any other interest in,
any other person, except:
(a) the investments and guarantees existing on the date hereof set
forth on Schedule 6.04 and investments by the Borrower or any Subsidiary in
the capital stock or comparable ownership interests of the Subsidiaries,
including by means of contributions by any Subsidiary of Hotel Properties
to the Borrower or a Subsidiary; provided that a Subsidiary Loan Party may
--------
not invest in the capital stock or comparable ownership interests of any
Subsidiary that is not a Subsidiary Loan Party;
75
(b) loans or advances by the Borrower to Subsidiaries or by
Subsidiaries to the Borrower or other Subsidiaries, in each case to the
extent permitted under Section 6.01;
(c) subordinated loan by the Borrower to Sunburst in a principal
amount not to exceed $115,000,000;
(d) Guarantees permitted under Section 6.01(h);
(e) Permitted Investments; and
(f) other investments, capital contributions, loans and advances
not to exceed at any time 15% of Consolidated Total Assets at such time.
SECTION 6.05. Mergers and Consolidations. Merge into or consolidate
---------------------------
with any other person, or permit any other person to merge into or consolidate
with it, or sell, transfer, lease or otherwise dispose of (in one transaction or
in a series of transactions) all or substantially all its assets whether now
owned or hereafter acquired, except that:
(a) (i) the Borrower may merge or consolidate with a Subsidiary or
(ii) a Subsidiary may merge or consolidate with the Borrower, in each case
so long as the Borrower is the surviving entity;
(b) any Subsidiary may merge or consolidate with any Subsidiary; and
(c) the Borrower or any Subsidiary may merge or consolidate with
another person; provided, however, that:
-------- -------
(i) the Borrower or such Subsidiary is the surviving entity;
(ii) no Event of Default or event which, with notice or the
passage of time or both, would constitute an Event of Default exists
after giving effect to such merger or consolidation; and
(iii) the Agent shall receive a certificate signed by a Financial
Officer of the Borrower confirming compliance with clause (ii) above.
SECTION 6.06. Asset Sales. Consummate any Asset Sale, other than (a)
------------
sales of receivables for collection (and not for financing or factoring
purposes) in the
76
ordinary course of business, (b) Asset Sales resulting in Proceeds which, when
added to the Proceeds from all other Asset Sales previously consummated in the
same fiscal year, would not exceed 5% of Consolidated Total Assets as of the end
of the preceding fiscal year, and (c) Asset Sales, in a single transaction or
series of transactions, of the European hotels listed in Schedule 6.06;
provided that no Asset Sale referenced in clause (c) above shall be permitted
--------
if a Default has occurred or would occur after giving effect to such Asset Sale.
SECTION 6.07. Transactions with Affiliates. Sell or transfer any
-----------------------------
property or assets to, or purchase or acquire any property or assets from, or
otherwise engage in any other transactions with, any of its Affiliates, except
that as long as no Default or Event of Default shall have occurred and be
continuing, the Borrower or any Subsidiary may (a) consummate the Spin-Off or
(b) engage in any of the foregoing transactions (i) in the ordinary course of
business at prices and on terms and conditions not less favorable to the
Borrower or such Subsidiary than could be obtained on an arm's-length basis from
unrelated third parties or (ii) between or among the Borrower and its Wholly
Owned Subsidiaries; provided that a Subsidiary Loan Party may not engage in the
--------
foregoing transactions with any Subsidiary that is not a Subsidiary Loan Party
unless such transaction complies with clause (i) above.
SECTION 6.08. Business of Borrower and Subsidiaries. Engage at any
--------------------------------------
time in any business or business activity other than the business currently
conducted by it or related or collateral activities in the hospitality, European
hotel operation or franchise-related industries.
SECTION 6.09. Subsidiary Indebtedness. Permit any Subsidiary to
-----------------------
create, incur, assume or permit to exist any Indebtedness except:
(a) any Indebtedness permitted by Section 6.01 (other than clause (e)
thereof); and
(b) other unsecured Indebtedness of any Subsidiary; provided, however,
-------- -------
that the aggregate principal amount (the "Subsidiary Debt Amount")
----------------------
outstanding of all such other Indebtedness of all Subsidiaries (excluding
amounts permitted under clause (a) above) may not exceed 5% of Consolidated
Total Assets at such time.
77
SECTION 6.10. Agreements. Permit any Subsidiary to enter into any
-----------
agreement or incur any obligation the terms of which would impair the ability of
any Subsidiary to pay dividends, to make intercompany loans or advances or to
make distributions (it being agreed that this Section shall not be breached by
any such agreement or obligation binding upon a Subsidiary at the time it
becomes a Subsidiary and not incurred in contemplation of its becoming a
Subsidiary).
SECTION 6.11. Fiscal Year and Accounting Practices. Change its
------------------------------------
fiscal year end or accounting practices from those in effect at May 31, 1996,
other than as required by GAAP; provided, however, the Borrower may change its
-------- -------
fiscal year end to December 31.
SECTION 6.12. No Further Negative Pledges. Except with respect to
---------------------------
prohibitions against other encumbrances on specific property encumbered to
secure payment of particular Indebtedness (which Indebtedness relates solely to
such specific property, and improvements and accretions thereto, and is
otherwise permitted hereby), enter into any agreement prohibiting the creation
or assumption of any Lien upon the properties or assets of the Borrower or any
Subsidiary, whether now owned or hereafter acquired, or requiring an obligation
to be secured if some other obligation is secured.
SECTION 6.13. Minimum Consolidated Net Worth. In the case of the
------------------------------
Borrower, permit its Consolidated Net Worth at any time to be less than the sum
of (x) $40,000,000, (y) 50% of the Borrower's Consolidated Net Income accrued
during the period (treated as one accounting period) commencing on the last day
of the month in which the Spin-Off occurs and ending on the last day of the most
recent fiscal quarter for which financial statements have been delivered
pursuant to Section 5.04 (which amount shall not include Consolidated Net Income
for any fiscal quarter in which the Borrower's Consolidated Net Income is
negative) and (z) the aggregate net cash proceeds received by the Borrower from
the issuance or sale of its capital stock since the date hereof.
SECTION 6.14. Consolidated Leverage Ratio. In the case of the
----------------------------
Borrower, permit the Consolidated Leverage Ratio as of the last day of and for
any period of four fiscal quarters ending during the period from and including
the date hereof through the Maturity Date to exceed (i) 3.50 to 1.0 for any
period ending prior to August 31, 1998, or (ii) 3.00 thereafter. The
Consolidated Leverage Ratio shall be calculated as of the end of each fiscal
quarter based on
78
the period of the four consecutive fiscal quarters ending on such date.
SECTION 6.15. Consolidated Interest Coverage Ratio. In the case of
-------------------------------------
the Borrower, permit its Consolidated Interest Coverage Ratio for any period of
four fiscal quarters ending during the period from and including the date hereof
through the Term Maturity Date and the Revolving Maturity Date to be less than
3.75 to 1.00.
ARTICLE VII. EVENTS OF DEFAULT
In case of the happening of any of the following events ("Events
------
of Default"):
----------
(a) any representation or warranty made or deemed made (such
representation or warranty being deemed made as provided in Section 2.20(b)
and Section 4.01) in or in connection with any Loan Document or the
borrowings or issuances of Letters of Credit hereunder, or any
representation, warranty, statement or information contained in any report,
certificate, financial statement or other instrument furnished in
connection with or pursuant to any Loan Document, shall prove to have been
false or misleading in any material respect when so made, deemed made or
furnished;
(b) default shall be made in the payment of any principal of any Loan
or the reimbursement with respect to any L/C Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan
or any Fee or L/C Disbursement or any other amount (other than an amount
referred to in clause (b) above) due under any Loan Document, when and as
the same shall become due and payable, and such default shall continue
unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by the
Borrower of any covenant, condition or agreement contained in Section
5.01(a), 5.05 or 5.09 or in Article VI;
(e) default shall be made in the due observance or performance by the
Borrower of any covenant, condition
79
or agreement contained in any Loan Document (other than those specified in
clauses (b), (c) and (d) above) and such default shall continue unremedied
for a period of five Business Days after notice thereof from the Agent or
any Lender to the Borrower;
(f) the Borrower or any Subsidiary shall (i) fail to pay any principal
or interest, regardless of amount, due in respect of any Indebtedness in an
aggregate principal amount in excess of $10,000,000, when and as the same
shall become due and payable, or (ii) fail to observe or perform any other
term, covenant, condition or agreement contained in any agreement or
instrument evidencing or governing any Indebtedness in an aggregate
principal amount in excess of $10,000,000, or permit any other event to
occur, if the effect of any failure or event referred to in this clause
(ii) is to cause, or to permit the holder or holders of such Indebtedness
or a trustee on its or their behalf (with or without the giving of notice,
the lapse of time or both) to cause, such Indebtedness to become due prior
to its stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of the Borrower or any Subsidiary, other than Quality
Hotels Jena GmbH, or of a substantial part of the property or assets of the
Borrower or a Subsidiary, other than Quality Hotels Jena GmbH, under Title
11 of the United States Code, as now constituted or hereafter amended, or
any other Federal, state or foreign bankruptcy, insolvency, receivership or
similar law, (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any
Subsidiary other than Quality Hotels Jena GmbH, or for a substantial part
of the property or assets of the Borrower or a Subsidiary other than
Quality Hotels Jena GmbH, or (iii) the winding-up or liquidation of the
Borrower or any Subsidiary, other than Quality Hotels Jena GmbH; and such
proceeding or petition shall continue undismissed for 60 days or an order
or decree approving or ordering any of the foregoing shall be entered;
(h) the Borrower or any Subsidiary, other than Quality Hotels Jena
GmbH, shall (i) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code, as now constituted
or hereafter amended, or any other Federal,
80
state or foreign bankruptcy, insolvency, receivership or similar law, (ii)
consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described
in clause (g) above, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary or for a substantial part of the
property or assets of the Borrower or any Subsidiary, (iv) file an answer
admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action for
the purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $10,000,000 shall be rendered against the Borrower, any
Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 60 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of the Borrower or any
Subsidiary to enforce any such judgment;
(j) a Reportable Event or Reportable Events, or a failure to make a
required installment or other payment (within the meaning of Section
412(n)(l) of the Code), shall have occurred with respect to any Plan or
Plans that reasonably could be expected to result in liability of the
Borrower to the PBGC or to a Plan in an aggregate amount exceeding
$5,000,000 and, within 30 days after the reporting of any such Reportable
Event to the Agent or after the receipt by the Agent of the statement
required pursuant to Section 5.06, the Agent shall have notified the
Borrower in writing that (i) the Required Lenders have made a determination
that, on the basis of such Reportable Event or Reportable Events or the
failure to make a required payment, there are reasonable grounds (A) for
the termination of such Plan or Plans by the PBGC, (B) for the appointment
by the appropriate United States District Court of a trustee to administer
such Plan or Plans or (C) for the imposition of a lien in favor of a Plan
or the PBGC and (ii) as a result thereof an Event of Default exists
hereunder; or a trustee shall be appointed by a United States District
Court to
81
administer any such Plan or Plans; or the PBGC shall institute proceedings
to terminate any Plan or Plans;
(k) (i) the Borrower or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan, (ii) the Borrower or such ERISA
Affiliate does not have reasonable grounds for contesting such Withdrawal
Liability or is not in fact contesting such Withdrawal Liability in a
timely and appropriate manner and (iii) the amount of the Withdrawal
Liability specified in such notice, when aggregated with all other amounts
required to be paid to Multiemployer Plans in connection with Withdrawal
Liabilities (determined as of the date or dates of such notification),
exceeds $5,000,000 or requires payments exceeding $1,000,000 in any year;
(l) the Borrower or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, if solely as a result of such reorganization or termination the
aggregate annual contributions of the Borrower and its ERISA Affiliates to
all Multiemployer Plans that are then in reorganization or have been or are
being terminated have been or will be increased over the amounts required
to be contributed to such Multiemployer Plans for their most recently
completed plan years by an amount exceeding $1,000,000; or
(m) there shall have occurred a Change in Control;
then, and in every such event (other than an event with respect to the Borrower
described in clause (g) or (h) above), and at any time thereafter during the
continuance of such event, the Agent, at the request of the Required Lenders,
shall, by notice to the Borrower, take any or all of the following actions, at
the same or different times: (i) terminate forthwith the Commitments or L/C
Commitments, (ii) declare the Loans then outstanding to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans so declared to
be due and payable, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of the Borrower accrued hereunder and
under any other Loan Document, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrower, anything contained herein or in any
other Loan Document to the contrary notwithstanding and
82
(iii) require cash collateral as contemplated by Section 2.20(i); and in any
event with respect to the Borrower described in clause (g) or (h) above, the
Commitments and L/C Commitments shall automatically terminate and the principal
of the Loans then outstanding, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder
and under any other Loan Document, shall automatically become due and payable,
and the Borrower shall automatically be required to provide cash collateral in
respect of outstanding Letters of Credit, without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding.
ARTICLE VIII. THE AGENT
In order to expedite the transactions contemplated by this Agreement,
The Chase Manhattan Bank is hereby appointed to act as Agent on behalf of the
Lenders and the Issuing Bank. Each of the Lenders hereby irrevocably authorizes
the Agent to take such actions on behalf of such Lender or Issuing Bank and to
exercise such powers as are specifically delegated to the Agent by the terms and
provi sions hereof, together with such actions and powers as are reasonably
incidental thereto. The Agent is hereby expressly authorized by the Lenders and
the Issuing Bank, without hereby limiting any implied authority, (a) to receive
on behalf of the Lenders and the Issuing Bank all payments of principal of and
interest on the Loans, all payments in respect of L/C Disbursements and all
other amounts due to the Lenders hereunder, and promptly to distribute to each
Lender or Issuing Bank its proper share of each payment so received; (b) to give
notice on behalf of each of the Lenders to the Borrower of any Event of Default
specified in this Agreement of which the Agent has actual knowledge acquired in
connection with its agency hereunder; and (c) to distribute to each Lender
copies of all notices, financial statements and other materials delivered
pursuant to this Agreement as received by the Agent.
Neither the Agent nor any of its directors, offi cers, employees or
agents shall be liable to the Lenders as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connec tion herewith (other than any
statement, representation or
83
warranty relating to the Agent or relating to the functions of the Agent
hereunder), or be required to ascertain or to make any inquiry concerning the
performance or observance by the Borrower of any of the terms, conditions,
covenants or agreements contained in any Loan Document. The Agent shall not be
responsible to the Lenders for the due execution, genuineness, validity,
enforceability or effectiveness of this Agreement or any other Loan Documents or
other instruments or agreements. The Agent may deem and treat the payee of any
note referred to in Section 2.07 as the owner thereof for all purposes hereof
until it shall have received from the payee of such note notice, given as
provided herein, of the transfer thereof. The Agent shall in all cases be fully
protected in acting, or refraining from acting, in accordance with written
instructions signed by the Required Lenders and, except as otherwise
specifically provided herein, such instructions and any action or inac tion
pursuant thereto shall be binding on all the Lenders. The Agent shall, in the
absence of knowledge to the contrary, be entitled to rely on any instrument or
document believed by it in good faith to be genuine and correct and to have been
signed or sent by the proper person or persons. Neither the Agent nor any of its
directors, officers, employees or agents shall have any responsibility to the
Borrower on account of the failure of or delay in performance or breach by any
Lender or Issuing Bank of any of its obligations hereunder or to any Lender or
Issuing Bank on account of the failure of or delay in performance or breach by
any other Lender or Issuing Bank or the Borrower of any of their respective
obligations hereunder or under any other Loan Document or in connection herewith
or therewith. The Agent may execute any and all duties here under by or through
agents or employees and shall be enti tled to rely upon the advice of legal
counsel selected by it with respect to all matters arising hereunder and shall
not be liable for any action taken or suffered in good faith by it in accordance
with the advice of such counsel.
The Lenders hereby acknowledge that the Agent shall be under no duty
to take any discretionary action per mitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.
Subject to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by notifying the Lenders and
the Borrower. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor subject to the written consent of the Borrower to
such successor (which consent will not be
84
unreasonably withheld). If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Agent gives notice of its resignation, then the retiring Agent may,
on behalf of the Lenders, appoint a successor Agent which shall be a bank with
offices in New York, New York and London, England, having a combined capital and
surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the
acceptance of any appointment as Agent hereunder by a successor bank, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent and the retiring Agent shall be dis
charged from its duties and obligations hereunder. After the Agent's resignation
hereunder, the provisions of this Article and Section 9.05 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Agent.
With respect to the Loans made by it hereunder, the Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not the Agent, and
the Agent and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not the Agent.
Each Lender agrees (i) to reimburse the Agent, on demand, in the
amount of its pro rata share (based on its Commitment hereunder or, if the
Commitments shall have been terminated, on its Commitment most recently in
effect) of any expenses incurred for the benefit of the Lenders by the Agent,
including counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, which the Borrower shall be
obligated to reimburse under Section 9.05 but which shall not have been
reimbursed by the Borrower and (ii) to indemnify and hold harmless the Agent and
any of its directors, officers, employees or agents, on demand, in the amount of
such pro rata share, from and against any and all liabilities, taxes,
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 it in its capacity as the Agent or any of
them in any way relating to or arising out of the Agent's role under this
Agreement or any other Loan Document or any action taken or omitted by it or any
of them under this Agreement or any other Loan Document, to the extent the same
shall not have been reimbursed by the Borrower; provided, however, that no
-------- -------
Lender shall be liable to the Agent for any
85
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or wilful misconduct of the Agent or any of its directors, officers,
employees or agents.
Each Lender acknowledges that it has, indepen dently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and deci
sion to enter into this Agreement. Each Lender also acknow ledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall from time to time deem
appropri ate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement or any other Loan Document, any related
agreement or any document furnished hereunder or thereunder.
The Co-Agent shall not have any responsibilities or obligations
as Co-Agent under any of the Loan Documents.
ARTICLE IX. MISCELLANEOUS
SECTION 9.01. Notices. Notices and other commu nications provided
--------
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by telex, graphic scanning or other telegraphic
communications equipment of the sending party, as follows:
(a) if to the Borrower, at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention of General Counsel, with a copy to the Chief
Financial Officer of the Borrower (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇);
(b) if to the Agent, to it at The Chase Manhattan Bank, Agent Bank
Services Group, One Chase ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇. Attention of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇), with a
copy to The Chase Manhattan Bank, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇) and
Chase Manhattan International Limited, Trinity Tower, 9 ▇▇▇▇▇▇ ▇▇▇▇ Street,
London, England E19YT, Attention of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (Telecopy No. 011 44 71
777 2360); and
(c) if to a Lender, to it at its address (or telecopy number) set
forth in Schedule 2.01 or in the
86
Assignment and Acceptance pursuant to which such Lender became a party
hereto.
Except as otherwise provided in Section 9.15(c), all notices and other
communications given to any party hereto in accordance with the provisions of
this Agreement shall be deemed to have been given on the date of receipt, in
each case delivered, sent or mailed (properly addressed) to such party as
provided in this Section 9.01 or in accordance with the latest unrevoked
direction from such party given in accordance with this Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
----------------------
representations and warranties made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated.
SECTION 9.03. Binding Effect. This Agreement shall become effective
---------------
when it shall have been executed by the Borrower and the Agent and when the
Agent shall have received copies hereof which, when taken together, bear the
signatures of each Lender, and thereafter shall be binding upon and inure to the
benefit of the Borrower, the Agent and each Lender and their respective
successors and assigns, except that the Borrower may not assign or delegate its
rights or obligations hereunder or any interest herein without the prior consent
of all the Lenders.
SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement
-----------------------
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Borrower, the Agent, the Issuing Bank or
the Lenders that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and assigns.
87
(b) Each Lender may assign to one or more assignees all or a portion
of its interests, rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans at the time owing to it); provided,
--------
however, that (i) except in the case of an assignment to a Lender or an
-------
Affiliate of such Lender, the Borrower (unless an Event of Default has occurred
and is continuing, in which case the Borrower's consent to such assignment shall
not be required) and the Agent (and, in the case of any assignment of a
Commitment, the Issuing Bank) must give their prior written consent to such
assignment (which consent shall not be unreasonably withheld), (ii) the amount
of the Commitment of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Agent) shall not be less than $5,000,000 and the
amount of the Commitment of such Lender remaining after such assignment shall
not be less than $5,000,000 or shall be zero, (iii) except in the case of an
assignment to an Affiliate on the Effective Date, the parties to each such
assignment shall execute and deliver to the Agent an Assignment and Acceptance,
together with a processing and recordation fee of $2,000 and (iv) except in the
case of an assignment to an Affiliate on the Effective Date, the assignee, if it
shall not be a Lender, shall deliver to the Agent an Administrative
Questionnaire. Upon acceptance and recording pursuant to Section 9.04(e), from
and after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the execution thereof,
(A) the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement and (B) the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto (but shall continue to be entitled to the
benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as to any Fees accrued
for its account hereunder and not yet paid)).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free
88
and clear of any adverse claim and that its Commitment, and the outstanding
balances of its Loans, in each case without giving effect to assignments thereof
which have not become effective, are as set forth in such Assignment and
Acceptance, (ii) except as set forth in (i) above, such assigning Lender 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 or value of this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto or the financial condition of
the Borrower or any Subsidiary or the performance or observance by the Borrower
or any Subsidiary of any of its obligations under this Agreement, any other Loan
Document or any other instrument or document furnished pursuant hereto; (iii)
such assignee represents and warrants that it is legally authorized to enter
into such Assignment and Acceptance; (iv) such assignee confirms that it has
received a copy of this Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 5.04 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; (v) such assignee will
independently and without reliance upon the Agent, such assigning Lender or any
other Lender 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; (vi) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(d) The Agent shall maintain at one of its offices in The City of New
York a copy of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Lenders, and the Commitment
of, and principal amount of the Loans owing to, each Lender pursuant to the
terms hereof from time to time (the "Register"). The entries in the Register
--------
shall be conclusive in the absence of manifest error and the Borrower, the
Agent, the Issuing Bank and the Lenders may treat each person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement. The Register shall be available
89
for inspection by the Borrower, the Issuing Bank and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee together with an Administrative
Questionnaire completed in respect of the assignee (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee referred to
in Section 9.04(b) and, if required, the written consent of the Borrower, the
Issuing Bank and the Agent to such assignment, the Agent shall (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Lenders and the Issuing
Bank.
(f) Each Lender may without the consent of the Borrower, the Issuing
Bank or the Agent sell participations to one or more banks or other entities in
all or a portion of its rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans owing to it); provided,
--------
however, that (i) such Lender's obligations under this Agreement shall remain
-------
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the participating banks or
other entities shall be entitled to the benefit of the cost protection
provisions contained in Sections 2.13, 2.15 and 2.19 to the same extent as if
they were Lenders but not in excess of those cost protections to which the
Lender from which it purchased its participation would be entitled to under
Sections 2.13, 2.15 and 2.19 and (iv) the Borrower, the Agent, the Issuing Bank
and the other Lenders shall continue to deal solely and directly with such
Lender (and shall not be required to deal with any participating bank or other
entity, notwithstanding any other provision contained herein) in connection with
such Lender's rights and obligations under this Agreement, and such Lender shall
retain the sole right to enforce the obligations of the Borrower relating to the
Loans or L/C Disbursements and to approve any amendment, modification or waiver
of any provision of this Agreement (other than amendments, modifications or
waivers decreasing any fees payable hereunder, increasing the Commitment of such
Lender or decreasing the amount of principal of or the rate at which interest is
payable on the Loans of such Lender, extending any scheduled principal payment
date or date fixed for the payment of interest on the Loans of such Lender or
releasing any Subsidiary Loan Party from its Guarantee under the
90
Guarantee Agreement (except as expressly provided in the Guarantee Agreement) or
limiting any Subsidiary Loan Party's liability in respect of its Guarantee).
(g) Any Lender or participant may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Section 9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Borrower; provided, however, that, prior to any such
-------- -------
disclosure of information designated by the Borrower as confidential, each such
assignee or participant or proposed assignee or participant shall execute an
agreement whereby such assignee or participant shall agree to preserve the
confidentiality of such confidential information (subject to those exceptions
set forth in Section 9.16). It is understood that confidential information
relating to the Borrower would not ordinarily be provided in connection with
assignments or participations of Competitive Loans.
(h) Any Lender may at any time assign all or any portion of its
rights under this Agreement to a Federal Reserve Bank; provided, however, that
-------- -------
no such assignment shall release a Lender from any of its obligations hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay
--------------------
all reasonable out-of-pocket expenses incurred by each of the Agent and the
Issuing Bank and its Affiliates in connection with the preparation of this Agree
ment and the other Loan Documents and the syndication of the facilities provided
for herein or in connection with any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions hereby
contemplated shall be consummated) or incurred by the Agent or any Lender in
connection with the enforcement or protec tion of their rights (as such rights
may relate to the Borrower or any Subsidiary) in connection with this Agree
ment and the other Loan Documents or in connection with the Loans made or
Letters of Credit issued hereunder and under the Issuing Bank Agreements, as
applicable, including the reasonable fees and disbursements of Cravath, Swaine &
▇▇▇▇▇, counsel for the Agent, and, in connection with any "work-out" or any
enforcement or protection of the rights of the Lenders or the Agent hereunder,
any other counsel for the Agent and counsel for any Lender, including the
allocated costs of in-house counsel.
91
(b) The Borrower agrees to indemnify the Agent, each Lender, and the
Issuing Bank, and their respective directors, officers, employees, agents and
Affiliates (each such person being called an "Indemnitee") against, and to hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities
and related expenses, including reasonable counsel fees and expenses, incurred
by or asserted against any Indemnitee arising out of, in any way connected with,
or as a result of (i) the execution or delivery of this Agreement or any other
Loan Document or any agreement or instrument contemplated thereby, the perform
ance by the parties thereto of their respective obligations thereunder or the
consummation of the Transactions, the Spin-Off and the other transactions
contemplated thereby, (ii) the use of the proceeds of the Loans or issuance of
Letters of Credit, or (iii) any claim, litigation, investi gation or proceeding
relating to any of the foregoing, whether or not any Indemnitee is a party
thereto; provided, however, that such indemnity shall not, as to any Indem
-------- -------
▇▇▇▇▇, be available to the extent that such losses, claims, damages, liabilities
or related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the negligence or misconduct of
such Indemnitee. Promptly after receipt by an Indemnitee of notice of any
complaint or the commencement of any action or proceeding with respect to which
indemnification is being sought hereunder, such person shall notify the Borrower
of such complaint or of the commencement of such action or pro ceeding, but
failure so to notify the Borrower will relieve the Borrower from any liability
which the Borrower may have hereunder only if and to the extent that such
failure results in the forfeiture by the Borrower of substantial rights and
defenses, and shall not in any event relieve the Borrower from any other
obligation or liability that the Borrower may have to any Indemnitee otherwise
than under this Agreement. If the Borrower so elects or is requested by such
Indemnitee, the Borrower shall assume the defense of such action or proceeding,
including the employment of counsel reasonably satisfactory to the Indemnitee
and the payment of the reasonable fees and disbursements of such counsel. In
the event, however, such Indemnitee reasonably determines in its judgment that
having common counsel would present such counsel with a conflict of interest or
if the defendant in, or targets of, any such action or proceeding include both
the Indemnitee and the Borrower, and such Indemnitee reasonably concludes that
there may be legal defenses available to it or other Indemnitees that are
different from or in addition to those available to the Borrower or if the
Borrower fails to assume the defense of the action or proceeding or to employ
counsel reasonably
92
satisfactory to such Indemnitee, in either case in a timely manner, then the
Indemnitee may employ separate counsel to represent or defend it in any such
action or proceeding and the Borrower shall pay the reasonable fees and
disbursements of such counsel. In any action or proceeding the defense of which
the Borrower assumes, the Indemnitee shall have the right to participate in such
litigation and to retain its own counsel at the Indemnitee's own expense. The
Borrower further agrees that it shall not, without the prior written consent of
the Indemnitee, settle or compromise or consent to the entry of any judgment in
any pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not an Indemnitee is an
actual or potential party to such claim, action, suit or proceeding) unless such
settlement, compro mise or consent includes (i) an unconditional release of each
Indemnitee hereunder from all liability arising out of such claim, action, suit
or proceeding or (ii) a covenant not to ▇▇▇ each Indemnitee, or another similar
alternative which is consented to by each Indemnitee party to such claim,
action, suit or proceeding, which covenant not to ▇▇▇ or other approved
alternative has the effect of an uncondi tional release of each Indemnitee
hereunder from all liabil ity arising out of such claim, action, suit or
proceeding.
(c) The provisions of this Section shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the expiration of any Letter of Credit, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Agent or any Lender
or any Issuing Bank. All amounts due under this Section shall be payable on
written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall have
----------------
occurred and be continuing, each Lender 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 indebted ness at any time owing by such Lender to or
for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of
93
setoff) which such Lender may have (it being assumed for purposes of this
Section that such Lender shall convert any amount so setoff into the relevant
currency on the date of such setoff).
SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
---------------
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ITS CONFLICTS OF LAWS PRINCIPLES OR PROVISIONS. EACH LETTER OF
CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS
OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE
DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993
REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM
CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF
THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No fail ure or delay of the
-------------------
Agent or any Lender or any Issuing Bank in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Agent, the Issuing Bank and the Lenders hereunder and under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies which
they would otherwise have. No waiver of any provision of this Agreement or any
other Loan Document or consent to any departure by the Borrower therefrom shall
in any event be effective unless the same shall be permitted by Section 9.08(b),
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or, in the case of any
other Loan Document, pursuant to an agreement or agreements in writing entered
into by the Agent and the Loan Party or Loan Parties that are parties thereto,
in each case with the consent of the Required Lenders; provided, however, that
-------- -------
no such agreement shall (i) decrease the principal amount of, or extend the
maturity of or any scheduled
94
principal payment date or date for the payment of any interest on any Loan or
any date for reimbursement of an L/C Disbursement, or Fees, or waive or excuse
any such payment or any part thereof, or decrease the rate of interest on any
Loan or L/C Disbursement, without the prior written consent of each Lender
affected thereby, (ii) increase the Commitment or change the Facility Fees of
any Lender without the prior written consent of such Lender, (iii) release any
Subsidiary Loan Party from its Guarantee under the Guarantee Agreement (except
as expressly provided in the Guarantee Agreement) or limit any Subsidiary Loan
Party's liability in respect of its Guarantee, without the written consent of
each Lender, or (iv) amend or modify the provisions of Sec tion 2.16, the
provisions of this Section, the definition of the "Required Lenders" or the
provisions of Section 9.03, without the prior written consent of each
affected Lender; provided further that no such agreement shall amend, modify
----------------
or otherwise affect the rights or duties of the Agent or any Issuing Bank
hereunder without the prior written consent of the Agent or such Issuing Bank.
(c) Notwithstanding the foregoing, any Issuing Bank Agreement may be
waived, amended or modified by the parties thereto with the written approval of
the Agent if and to the extent that such waiver, amendment or modification would
be permitted in connection with the execution and delivery of a replacement of
such agreement.
SECTION 9.09. Interest Rate Limitation. Notwith standing anything
-------------------------
herein to the contrary, if at any time the applicable interest rate on any Loan
or participation in any L/C Disbursement, together with all fees and charges
which are treated as interest or such Loan or participation in any L/C
Disbursement under applicable law (collectively the "Charges"), as provided for
-------
herein or in any other document executed in connection herewith, or otherwise
contracted for, charged, received, taken or reserved by any Lender, shall exceed
the maximum lawful rate (the "Maximum Rate") which may be contracted for,
------------
charged, taken, received or reserved by such Lender in accordance with
applicable law, together with all Charges payable to such Lender, shall be
limited to the Maximum Rate.
SECTION 9.10. Entire Agreement. This Agreement and the other Loan
-----------------
Documents and the letter agreement referred to in Section 2.06(b) constitute the
entire con tract between the parties relative to the subject matter hereof.
Any previous agreement among the parties with respect to the subject matter
hereof is superseded by this Agreement and the other Loan Documents. Nothing in
this
95
Agreement or in the other Loan Documents, expressed or implied, is intended to
confer upon any party other than the parties hereto and thereto any rights,
remedies, obligations or liabilities under or by reason of this Agreement or the
other Loan Documents.
SECTION 9.11. Waiver of Jury Trial; Punitive Damages. Each party
---------------------------------------
hereto hereby waives, to the fullest extent permitted by applicable law, (a) any
right it may have to a trial by jury in respect of any litigation direct ly or
indirectly arising out of, under or in connection with this Agreement or any of
the other Loan Documents and (b) any claims for punitive damages (to the extent
such claims arise from the use of proceeds of the Loans for the purpose of
acquisitions). Each party hereto (i) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the foregoing
waiver and (ii) acknowledges that it and the other parties hereto have been
induced to enter into this Agreement and the other Loan Documents, as
applicable, by, among other things, the mutual waivers and certifications in
this Section.
SECTION 9.12. Severability. In the event any one or more of the
-------------
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall
endeavor in good-faith negotia tions to replace the invalid, illegal or
unenforceable pro visions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in two or
-------------
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract, and shall become effec
tive as provided in Section 9.03.
SECTION 9.14. Headings. Article and Section headings and the Table
---------
of Contents used herein are for con venience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
96
SECTION 9.15. Jurisdiction; Consent to Service of Process; Judgment
-----------------------------------------------------
Currency. (a) The Borrower hereby irrevocably and unconditionally submits, for
---------
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
court or, to the extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the Agent, any Issuing Bank, or any Lender may otherwise
have to bring any action or proceeding relating to this Agreement or the other
Loan Documents against the Borrower or its proper ties in the courts of any
jurisdiction.
(b) The Borrower hereby irrevocably and uncondi tionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or here after have to the laying of venue of any suit, action or
proceeding arising out of or relating to this agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) The Borrower and each other party hereto consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
(d) If for the purpose of obtaining judgment in any court it is
necessary to convert a sum due hereunder in one currency into another currency,
the parties hereto agree, to the fullest extent that they may effectively do so
under applicable law, that the rate of exchange used shall be the spot rate at
which in accordance with normal banking procedures the first currency could be
purchased in New York City with such other currency by the person obtaining such
judgment on the Business Day preceding that on which final judgment is given.
97
(e) The parties agree, to the fullest extent that they may
effectively do so under applicable law, that the obligations of the Borrower to
make payments in any currency of the principal of and interest on the Loans of
the Borrower and any other amounts due from the Borrower hereunder to the Agent
as provided in Section 2.16 (i) shall not be discharged or satisfied by any
tender, or any recovery pursuant to any judgment (whether or not entered in
accordance with Section 9.15(d)), in any currency other than the relevant
currency, except to the extent that such tender or recovery shall result in the
actual receipt by the Agent at its relevant office as provided in Section 2.16
on behalf of the Lenders of the full amount of the relevant currency expressed
to be payable in respect of the principal of and interest on the Loans and all
other amounts due hereunder (it being assumed for purposes of this clause (i)
that the Agent will convert any amount tendered or recovered into the relevant
currency on the date of such tender or recovery), (ii) shall be enforceable as
an alternative or additional cause of action for the purpose of recovering in
the relevant currency the amount, if any, by which such actual receipt shall
fall short of the full amount of the relevant currency so expressed to be
payable and (iii) shall not be affected by an unrelated judgment being obtained
for any other sum due under this Agreement.
SECTION 9.16. Confidentiality. Unless otherwise agreed to in writing
----------------
by the Borrower, the Issuing Bank, the Agent and each Lender, each of the
Borrower, the Issuing Bank, the Agent and the Lenders hereby agrees to keep all
Proprietary Information (as defined below) confidential and not to disclose or
reveal any Proprietary Information to any person other than the Agent's or such
Lender's directors, officers, employees, Affiliates and agents and to actual or
potential assignees and participants, and then only on a confidential basis;
provided, however, that the Agent, the Issuing Bank or any Lender may disclose
-------- -------
Proprietary Information (a) as required by law, rule, regulation or judicial
process, (b) to its attorneys and accountants, (c) as requested or required by
any state or Federal or foreign authority or examiner regulating banks or
banking or (d) subject to appropriate confidentiality protections, in any legal
proceedings between the Agent, the Issuing Bank or such Lender and the Borrower
arising out of this Agreement. For purposes of this Agreement, the term
"Proprietary Information" shall include all information about the Borrower or
any of their Affiliates which has been furnished by the Borrower or any of its
Affiliates, whether furnished before or after the date hereof, and regardless of
the manner in which it is furnished; provided, however, that
-------- -------
98
Proprietary Information does not include information which (x) is or becomes
generally available to the public other than as a result of a disclosure by the
Agent, the Issuing Bank or any Lender not permitted by this Agreement, (y) was
obtained or otherwise became available to the Agent, the Issuing Bank or any
Lender on a nonconfidential basis prior to its disclosure to the Agent, the
Issuing Bank or such Lender by the Borrower or any of its Affiliates or (z)
becomes available to the Agent, the Issuing Bank or any Lender on a
nonconfidential basis from a person other than the Borrower or its Affiliates
who, to the best knowledge of the Agent, the Issuing Bank or such Lender, as the
case may be, is not otherwise bound by a confidentiality agreement with the
Borrower or any of its Affiliates, or is not otherwise prohibited from
transmitting the information to the Agent, the Issuing Bank or such Lender.
SECTION 9.17. European Monetary Union. (a) If, as a result of the
------------------------
implementation of European monetary union, (i) any currency ceases to be lawful
currency of the nation issuing the same and is replaced by a European common
currency, or (ii) any currency and a European common currency are at the same
time recognized by the central bank or comparable authority of the nation
issuing such currency as lawful currency of such nation and the Agent or the
Required Lenders shall so request in a notice delivered to the Borrower, then
any amount payable hereunder by any party hereto in such currency shall instead
be payable in the European common currency and the amount so payable shall be
determined by translating the amount payable in such currency to such European
common currency at the exchange rate recognized by the European Central Bank for
the purpose of implementing European monetary union. Prior to the occurrence of
the event or events described in clause (i) or (ii) of the preceding sentence,
each amount payable hereunder in any currency will continue to be payable only
in that currency.
(b) The Borrower agrees, at the request of any Lender, to compensate
such Lender for any loss, cost, expense or reduction in return that shall be
incurred or sustained by such Lender as a result of the implementation of
European monetary union and that would not have been incurred or sustained but
for the transactions provided for herein. A certificate of a Lender setting
forth the amount or amounts necessary to compensate such Lender shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.
99
(c) The Borrower agrees, at the request of the Required Lenders, at
the time of or at any time following the implementation of European monetary
union, to enter into an agreement amending this Agreement in such manner as the
Required Lenders shall reasonably request in order to reflect the implementation
of such monetary union and to place the parties hereto in the position they
would have been in had such monetary union not been implemented.
IN WITNESS WHEREOF, the Borrower, the Agent, the Issuing Bank and the
Lenders have caused this Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
CHOICE HOTELS INTERNATIONAL, INC.,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice
President & Secretary
THE CHASE MANHATTAN BANK, individually and as
Issuing Bank and Agent,
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
BANK OF TOKYO - MITSUBISHI TRUST COMPANY,
by /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
CRESTAR BANK,
by /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
100
THE DAI-ICHI KANGYO BANK, LTD.,
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Assistant Vice President
FIRST NATIONAL BANK OF MARYLAND,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
FIRST UNION NATIONAL BANK,
by /s/ ▇▇▇▇▇▇▇ ▇. Angel
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Angel
Title: Vice President
THE FUJI BANK, LIMITED,
by /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President &
Manager
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
NEW YORK BRANCH,
by /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Joint General Manager
THE LONG TERM CREDIT BANK OF JAPAN, LTD.,
NEW YORK BRANCH,
by /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Deputy General Manager
101
MELLON BANK, N.A.,
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
NATIONSBANK, N.A.,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
THE SANWA BANK, LIMITED,
NEW YORK BRANCH,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
SUMMIT BANK,
by /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
THE TOYO TRUST & BANKING COMPANY, LTD.,
NEW YORK BRANCH,
by /s/ Tahashi Mihumo
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Name: Tahashi Mihumo
Title: Vice President
by /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
Title: Vice President
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