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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ____________TO ____________
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COMMISSION FILE NUMBER 1-13719
PROMUS HOTEL CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE I.R.S. NO. 62-1716020
(State of Incorporation) (I.R.S. Employer Identification No.)
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755 CROSSOVER LANE
MEMPHIS, TENNESSEE 38117
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 374-5000
---------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Capital Stock, Par Value $0.01 per share* NEW YORK STOCK EXCHANGE
CHICAGO STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
PHILADELPHIA STOCK EXCHANGE
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* Common Capital Stock also has special stock purchase rights listed on each of
the same exchanges
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant based upon the closing price of $48.375 for the Common Stock as
reported on the New York Stock Exchange Composite Tape on March 16, 1998, is
$3,890,436,261.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 16, 1998.
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Common Capital Stock........................................ 86,890,233 Shares
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement, prepared and mailed to
stockholders in accordance with Section 14 of the Securities Exchange Act of
1934 (the Exchange Act) and the rules and regulations of the Securities and
Exchange Commission (the Commission) thereunder, for the Annual Meeting of
Stockholders of the Company to be held on May 1, 1998 (the Proxy Statement), are
incorporated by reference in Part III hereof.
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
On December 19, 1997, Doubletree Corporation (Doubletree) and Promus Hotel
Corporation (PHC) merged in accordance with the Agreement and Plan of Merger
(the Merger Agreement) by and among Doubletree, PHC and Parent Holding Corp., a
newly formed corporation jointly owned by Doubletree and PHC (the Merger).
Concurrent with the Merger, PHC was renamed Promus Operating Company, Inc (POC)
and Parent Holding Corp. was renamed Promus Hotel Corporation (Promus or the
Company).
As a result of the Merger Agreement, (i) Doubletree and PHC became
wholly-owned subsidiaries of Promus; (ii) each outstanding share of common stock
of Doubletree was converted into one share of common stock of Promus; and (iii)
each outstanding share of PHC common stock was converted into .925 of a share of
common stock of Promus.
The principal assets of Promus are the shares of Doubletree and POC, whose
principal asset is the stock of Promus Hotels, Inc. (PHI). Doubletree and PHI
directly or indirectly through their subsidiaries, hold substantially all of the
assets of the Company's businesses. The principal corporate offices of Promus
are located at 755 Crossover Lane, Memphis, Tennessee 38117, telephone (901)
374-5000.
Operating data for the three most recent years, together with interest
expense, dividend income, and interest and other income, including information
as to assets is set forth herein.
For information on operating results and a discussion of those results, see
"Performance Statistics", "Management's Discussion and Analysis", and the
consolidated financial statements herein.
GENERAL
Through its wholly-owned subsidiaries, the Company franchises and manages
hotels with the following brands: Club Hotel by Doubletree, Doubletree,
Doubletree Guest Suites, Embassy Suites, Hampton Inn, Hampton Inn & Suites, and
Homewood Suites. Promus may also own all or a portion of these hotels or lease
these hotels from others. In addition, Promus leases and manages some hotels
that are not Promus-branded. As of December 31, 1997, Promus franchised 866
hotels and operated 333 hotels, of which 172 hotels were managed, 53 hotels were
wholly-owned, 22 were partially-owned through joint ventures and 86 were leased
from third parties. These 1,199 hotels include almost 179,000 rooms and are
located in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin
Islands and six foreign countries. The Company also operates and licenses
vacation interval ownership systems under the Embassy Vacation Resort and
Hampton Vacation Resort names.
The Company's primary focus is to develop, grow and support its franchise
and management business for all brands. The Company's main sources of revenues
are from the operations of owned and leased hotels, franchise royalty fees and
management fees.
Club Hotel by Doubletree hotels are moderately-priced hotels with food and
beverage facilities primarily targeted at individual business travelers. There
were 22 Club Hotels in operation as of December 31, 1997.
Doubletree hotels are upscale full service hotels targeted toward business
and leisure travelers. There were 105 Doubletree hotels in operation as of
December 31, 1997.
Doubletree Guest Suites hotels, of which there were 42 in operation as of
December 31, 1997, are full service all-suite hotels geared toward business
travelers, group meetings and leisure travelers who have a need or desire for
greater space than what is typically provided at traditional upscale hotels.
Embassy Suites hotels, of which there were 141 hotels in operation as of
December 31, 1997, appeal to the business and leisure traveler who has a need or
desire for greater space and more focused services than are available in
traditional upscale hotels.
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Hampton Inn hotels are moderately priced hotels designed to attract the
business and leisure traveler desiring quality accommodations at affordable
prices. There were 726 Hampton Inn hotels in operation as of December 31, 1997.
Hampton Inn & Suites hotels offer both traditional hotel room
accommodations and apartment-style suites within one property. There were 31
Hampton Inn & Suites hotels in operation as of December 31, 1997.
Homewood Suites hotels, of which there were 51 in operation on December 31,
1997, appeal to the upscale extended stay market and target the traveler who
stays five or more consecutive nights, as well as the traditional business and
leisure traveler.
The Company also operates 81 hotels that are non-Promus branded.
Promus vacation resort properties, of which there were six as of December
31, 1997, feature a high quality interval ownership system available to the
public.
All of the Company's hotel brands are managed by a single senior management
team. Although the Company's growth strategy emphasizes obtaining new franchise
or management contracts, the Company also constructs, owns and operates its own
hotels. Owned hotels are sold from time to time to realize the value of the
underlying assets and to increase the Company's return on investment. Following
such sales, the hotels typically are either operated by the Company under
management contracts and/or franchise licenses or by their purchasers under
franchise licenses from the Company.
Each of the Company's hotel brands currently use an integrated computerized
system that includes centralized reservations and marketing systems, along with
local property management and revenue management systems. The Company is in the
process of implementing System 21, its proprietary, fully integrated
windows-based system, to all its hotel brands. System 21 is a sophisticated
business system which provides seamless, integrated property management, revenue
maximization, marketing, decision support and reservations systems linked to the
Promus network, a communications network which will connect all Promus hotels to
the Company's reservation offices and more than 300,000 travel agents worldwide.
All of the Company's brands' reservation modules will receive reservation
requests entered on terminals located at all of their respective hotels,
interval ownership properties and reservation centers, major domestic and
international airlines via their global distribution systems, and direct from
consumers via computer access to each brand's Internet website and various third
party travel services websites. The systems immediately confirm reservations or
indicate accommodations available at alternate Promus properties. Reservations
are transmitted automatically to the property for which the reservation is made.
The Company's data centers that house all of the satellite and reservation,
marketing and revenue management computers are located in Memphis, Tennessee.
The Company operates three central reservations offices, located in Memphis,
Tennessee, Tampa, Florida, and Vancouver, Washington. See "Management's
Discussion and Analysis, Capital Spending - Investment in Franchise System."
A major element of the Company's business strategy and culture is an
unconditional 100% guarantee of service satisfaction. This guarantee, which is
currently utilized by the Embassy Suites, Hampton Inn, Hampton Inn & Suites and
Homewood Suites brands, will be implemented in the Club Hotel by Doubletree,
Doubletree and Doubletree Guest Suites brands over the next six to eighteen
months. If guests are not satisfied with their stay, they are not expected to
pay. All of the Company's hotel brands offer suites/rooms exclusively for
non-smoking guests.
HOTEL OPERATIONS
Licensing
The Company's revenues from licensing operations for all Club Hotel by
Doubletree, Doubletree, Doubletree Guest Suites, Embassy Suites, Hampton Inn,
Hampton Inn & Suites, and Homewood Suites hotels consist of initial license
application fees and continuing royalties. The license agreements generally
provide for a four percent royalty based upon gross rooms revenues and also
provide for a separate marketing and reservation contribution.
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The Company earns license fees for the vacation resort brands based on a
percentage of net interval sales and gross rental pool revenues, including
additional fees for revenues booked through central reservations.
In screening applicants for license agreements, the Company evaluates the
character, operations ability, experience and financial responsibility of each
applicant or its principals; the Company's prior business dealings, if any, with
the applicant; suitability of the proposed hotel location and other factors. The
license agreement establishes requirements for service and quality of
accommodations. The Company provides certain training for licensee management
and makes regular inspections of all hotels.
License agreements for new hotels generally have a 20-year term. The
Company may terminate a license agreement if the licensee fails to cure a breach
of the license agreement in a timely manner. In certain instances, a license
agreement may be terminated by the licensee, but such termination generally
requires a payment to the Company.
Management Contracts
The Company's revenues from management contracts consist primarily of
management fees which are based on a percentage of gross revenues, operating
profits, cash flow, or a combination thereof. The contract terms governing
management fees vary depending on the size and location of the hotel and other
factors relative to such hotel property.
Under the Company's management contracts, the Company, as the manager,
operates or supervises all aspects of a hotel's operations. The owner of the
hotel property is generally responsible for all costs, expenses and liabilities
incurred in connection with operating the hotel, including the expenses and
salaries of all hotel employees. The Company either requires each such owner to
enter into a separate license agreement and pay the royalty, marketing and
reservation contributions as provided in the license agreement or includes such
payments in the management contract. In addition, the hotel owner is often
required to set aside a certain percentage of hotel revenues for capital
replacement. The Company's form of management contract typically has a term of
ten years, although, many contracts acquired in the past have substantially
longer terms, and most give the Company specified renewal rights. The management
contract may be terminated by either party due to an uncured default by the
other party. Management contracts may contain termination provisions upon a sale
of the hotel, but in such cases generally require a payment to the Company.
The Company also acts as the manager for three of its vacation resort
properties pursuant to management contracts with generally similar terms and
responsibilities as its hotel management contracts. Fees for the management of
vacation resort properties consist of a percentage of rental pool revenue and
homeowner assessments.
See "Franchise and Management Fees" within the Consolidated Statement of
Operations, for revenues from licensing and management contract operations.
Owned Hotels
As of December 31, 1997, the Company owned 53 hotels, representing 10,076
rooms, all of which it manages. The Company is responsible for all aspects of
these hotels, including, without limitation, all of the costs associated with
their operation. The Company also receives substantially all of the revenues
generated by its owned hotels.
The Company is subject to varying degrees of risk generally related to
owning real estate. In addition to general risks related to the lodging
industry, these risks include, among others, changes in national, regional and
local economic conditions, inflation and its effect on operating costs, local
real estate market conditions, changes in interest rates and in the
availability, cost and terms of financing, the potential for uninsured casualty
and other losses, the impact of present or future labor and environmental
legislation and compliance with labor and environmental laws, and adverse
changes in zoning laws and other regulations, many of which are beyond the
control of the Company. Moreover, real estate investments are relatively
illiquid, which means that the ability of the Company to vary its portfolio of
hotels in response to changes in economic and other conditions may be limited.
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Promus' primary focus is to grow its franchise and management businesses,
while limiting its ownership of real estate. It is the Company's goal not to be
a long-term owner of real estate. The Company owns a mix of Promus-brand hotels
that can enhance its role as manager and franchisor for its brands, but
periodically sells hotels as opportunities arise to realize a hotel's
appreciated value.
Leases
As of December 31, 1997, the Company leased 86 hotels with 14,408 rooms.
Under the Company's leases, the Company leases the hotel from its owner and is
responsible for all aspects of the hotel's operations, including guest services,
staffing at the hotel, sales and marketing, accounting functions, purchasing and
budgeting. As the lessee of a hotel, the Company recognizes all revenues and
substantially all expenses associated with the hotel's operations. Typically,
other than real estate taxes, casualty insurance costs, maintenance of
underground utilities, structural elements costs, and other capital improvements
costs, each of which are the landlord's obligation, the Company is required to
pay all of the costs associated with operating the hotel, including rent,
personal property taxes, utility costs, employee liability costs, liability
insurance costs and the like. Although, in general, furniture, fixtures and
equipment replacement is the landlord's responsibility, certain leases obligate
the Company to maintain and replace these items. The Company is entitled to
retain all revenues derived from the operation of a leased hotel, subject to the
payment of its obligations under the lease, including rent. Lease terms
typically require the payment of a fixed monthly base rent regardless of the
performance of the hotel leased and a variable rent based on a percentage of
revenues. There can be no assurance that any particular lease will be profitable
for the Company after the payment of its obligations under the lease.
In addition, most of the Company's leases typically provide that the
Company indemnify its landlord against certain liabilities resulting from the
leasing, operation or use of the hotel. Examples of these liabilities may
include (i) injury to persons or property at the hotel, (ii) environmental
liability caused by the Company and (iii) liability resulting from the sale of,
or consumption of alcoholic beverages at the hotel.
As of December 31, 1997, the Company leased 61 hotels, representing 8,706
rooms, pursuant to substantially similar leases (the Percentage Leases) with RFS
Hotel Investors, Inc., a real estate investment trust (RHI). Four of the hotels
leased pursuant to Percentage Leases are managed by third parties. The
Percentage Leases generally have an initial term of not less than 15 years from
the date of inception (with expiration dates ranging from 2003 to 2015), are
subject to early termination upon the occurrence of certain contingencies and
require the monthly payment of base rent and the quarterly payment of percentage
rent.
During 1997, the base rent component of the Percentage Leases was
approximately 43.0% of total Percentage Leases expense. Top percentage rents
ranged from 50.0% to 76.5% of incremental room revenue. For the year ended
December 31, 1997, room revenue for each of the hotels subject to the Percentage
Leases exceeded the amount required to trigger the top tier of percentage rent.
If RHI enters into an agreement to sell a hotel, it may terminate a Percentage
Lease and either (i) pay the Company the fair market value of Promus' leasehold
interest or (ii) offer to lease to the Company a substitute hotel on terms that
would create an equivalent value. The Percentage Leases provide that RHI may
terminate the Percentage Leases upon certain events of default defined in the
Percentage Leases.
As of December 31, 1997, the Company leased 17 hotels, representing 3,987
rooms, pursuant to a long-term lease with RLH Partnership (the Partnership
Lease), which was entered into in 1995. The initial term of the Partnership
Lease expires in 2010, subject to earlier termination by the partnership upon
the occurrence of one or more Events of Default (as defined in the Partnership
Lease). In addition, the Company has the option to extend the Partnership Lease
on a hotel-by-hotel basis for five additional five year periods on the same
terms. Rental payments under the Partnership Lease consist of base rent, payable
quarterly, and additional rent payable annually, if applicable. The base rent
for all of the hotels is $15.0 million per year. The additional rent for the
hotels is equal to 7.5% of the amount, if any, by which the aggregate Operating
Revenues (as defined in the Partnership Lease) for all of the hotels for the
given year exceeds the aggregate Operating Revenues for all such hotels for the
twelve month period ended September 30, 1996 (the Base Year). This
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long-term arrangement allows the Company to retain all of the benefit from any
increase in operating income from these properties during the term of the
Partnership Lease, subject to the payment of Additional Rent.
As of December 31, 1997, the Company leased eight hotels, pursuant to
leases other than the Percentage Leases and the Partnership Lease. Such leases
contain varying terms, but are generally "triple net" leases, the terms of which
are in substantial conformity to the general description above in "Hotel
Operations - Leases".
Joint Ventures
The Company participates in various non-controlling joint ventures with
ownership ranging from less than 1% to 50%. In addition, the Company has a
controlling interest in joint ventures which own six hotels with 1,936 rooms.
In addition to its ownership interest in the joint ventures, the Company is
responsible for the day-to-day operations of the hotels owned by the joint
ventures and receives management fees for operating the hotels. Under each joint
venture agreement or separate management contract with respect to a hotel, the
Company's compensation is comprised of either an annual base management fee, an
annual incentive management fee (based on a percentage of cash flow or operating
profit) or both. The Company has made significant advances to certain of the
joint ventures. Repayment of these advances receives priority distribution from
the cash flow distributable to the joint venture's partners.
HOTEL AND VACATION RESORT BRANDS
Club Hotel by Doubletree Hotels
Club Hotels are moderately-priced hotels primarily targeted at individual
business travelers. Club Hotels have an average of 203 rooms and are located in
13 states. Club Hotels typically include a conference area, a library or reading
area, desk with telephone, a business center and food service facilities.
The Company plans to grow the Club Hotel by Doubletree brand through the
acquisition of management contracts of unaffiliated underperforming hotels, a
focused franchising program and ground-up construction. As of December 31, 1997,
22 Club Hotels were in operation and eight were under construction or
conversion.
See "Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, average daily rate per occupied room
(ADR) and revenue per available room (RevPAR) for Doubletree hotels, which
includes Club Hotels by Doubletree.
Doubletree Hotels
Doubletree hotels are full-service hotels targeted at business travelers,
group meetings and leisure travelers. Doubletree hotels are located in 31
states, the District of Columbia, U.S. Virgin Islands and Mexico and have an
average of 294 rooms. As of December 31, 1997, eight Doubletree hotels were
under construction or conversion. These hotels typically include a swimming
pool, gift shop, meeting and banquet facilities, at least one restaurant and
cocktail lounge, room service, parking facilities and other services.
See "Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for Doubletree hotels.
Doubletree Guest Suites Hotels
Doubletree Guest Suites all-suite hotels are targeted at business travelers
and families who have a need or desire for greater space than typically is
provided at most traditional upscale hotels. Each guest suite has a separate
living room and dining/work area, with a color television, refrigerator and wet
bar. Guest Suites hotels have an average of 214 rooms and are located in 21
states and the District of Columbia. As of December 31, 1997, there was one
Doubletree Guest Suites hotel under conversion.
See "Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for Doubletree hotels,
which includes Doubletree Guest Suite Hotels.
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Embassy Suites Hotels
Embassy Suites hotels are located in 35 states, the District of Columbia,
Thailand, Canada and Latin America and have an average of 242 suites per hotel.
As of December 31, 1997, nine Embassy Suites hotels were under construction,
eight of which will be licensee operated. Each guest suite has a separate living
room and dining/work area, with a console television, sofa-sleeper, refrigerator
and wet bar, as well as a traditional bedroom (with a king size bed or two
double beds). Most Embassy Suites hotels are built around a landscaped atrium.
All hotels offer a free, cooked-to-order breakfast and, where local law allows,
complimentary evening cocktails.
See "Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for Embassy Suite hotels.
Hampton Inn Hotels
Hampton Inn hotels are currently located in 48 states, as well as Canada,
Thailand, Puerto Rico and Latin America. An average Hampton Inn hotel has 107
rooms. On December 31, 1997, 100 Hampton Inn hotels were under construction, all
of which will be licensee operated. The Hampton Inn hotel's standardized concept
provides for a guest room featuring a color television, free in-room movies,
free local telephone calls and complimentary continental breakfast. Unlike
full-service hotels, Hampton Inn hotels do not feature restaurants, lounges or
large public spaces.
See "Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for Hampton Inn hotels.
Hampton Inn & Suites
Hampton Inn & Suites have an average of 111 rooms and suites and are
currently located in 16 states and Canada. As of December 31, 1997, 20 Hampton
Inn & Suites hotels were under construction, all of which will be licensee
operated. These hotels combine standard guest rooms with a significant block of
two-room suites in a single property. Development of this product is targeted
for commercial and suburban markets, as well as destination and resort markets.
Each property contains a centrally located, expanded lobby and complimentary
services area and includes an exercise room, convenience shop,
meeting/hospitality room and guest laundry. An expanded complimentary
continental breakfast buffet is offered.
See "Performance Statistics" for information regarding number of rooms and
number of hotels for Hampton Inn & Suite hotels. The first Hampton Inn & Suites
hotel opened in June, 1995. Accordingly, revenue statistics for Hampton Inn &
Suite hotels have not been provided, as there were no Hampton Inn & Suite hotels
open for the entire three year reporting period.
Homewood Suites Hotels
Homewood Suites hotels, which have an average of 103 suites, are currently
located in 25 states. On December 31, 1997, 28 Homewood Suites hotels were under
construction, 21 of which will be licensee operated. Homewood Suites hotels
feature residential-style accommodations, which include a living room area (some
with fireplaces), separate bedroom (with a king size bed or two double beds) and
a separate bathroom, and a fully-equipped kitchen. The hotel is centered around
a central community building called the Lodge which affords guests a high level
of social interaction. Amenities include a complimentary breakfast and an
evening social hour, a convenience store, grocery shopping, business center,
outdoor pool, exercise center and limited meeting facilities.
See "Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for Homewood Suite
hotels.
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Non-Promus Brand Hotels
In addition to the Promus brand hotels, the Company operates 81 hotels (49
of which are leased) which are not Promus branded. These hotels have an average
of 168 rooms. See "Performance Statistics" for information regarding number of
rooms, number of hotels, occupancy percentage, ADR and RevPAR for non-branded
Promus hotels.
Promus Vacation Resort Properties
The Promus Vacation Resort is a premium interval ownership concept that
provides consumers the opportunity to purchase use of a one, two or three
bedroom condominium-style unit for one or more weeks annually in a prime leisure
location, for an initial investment plus a reasonable annual maintenance fee.
Each Promus Vacation Resort property offers a quality, fully furnished product
(consisting of an inside living area, full kitchen, bathroom(s), bedroom(s), and
outside patio/entertainment area) coupled with added value facilities like
swimming pool, exercise room, hot tub, tennis courts, volleyball, and kids club.
Beach, boating, snow/water skiing facilities may be available depending on
location. For a separate annual fee (the initial year fee is paid as part of the
purchase price), plus a per exchange service fee, each owner has the opportunity
to exchange his interest for the use of similar facilities at another Embassy
Vacation Resort property or a third party participating resort property.
Promus has entered into license agreements with Signature Resorts, Inc. for
Embassy Vacation Resorts at Orlando, Florida; Lake Tahoe, California; Porpu
Point, Hawaii; and Maui, Hawaii. Additionally, the Company entered into a joint
venture with Vistana Development, Inc. for the purpose of developing multiple,
future interval resorts. As part of this agreement, the Company agreed to
franchise two resort projects under the Company's brands, one of which will also
be managed by the Company.
See "Performance Statistics" for information regarding number of units,
number of resorts, number of available timeshare intervals, and number of
intervals sold for Promus Vacation Resorts.
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PERFORMANCE STATISTICS
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COMPOUND COMPOUND
NUMBER OF HOTELS ANNUAL NUMBER OF ROOMS ANNUAL
-------------------- GROWTH --------------------------- GROWTH
1995 1996 1997 RATE 1995 1996 1997 RATE
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Doubletree Hotels
Company owned............................. 1 1 16 300% 238 239 4,749 347%
Leased(a)................................. 2 7 18 200% 594 1,748 4,805 184%
Joint venture(b).......................... -- -- 3 n/a -- -- 812 n/a
Management contract....................... 72 65 83 7% 21,028 18,240 23,466 6%
Franchised................................ 30 37 49 28% 6,641 8,469 10,980 29%
--- ----- ----- ------- ------- -------
105 110 169 27% 28,501 28,696 44,812 25%
=== ===== ===== ======= ======= =======
Embassy Suites
Company owned............................. 9 9 6 (18)% 2,025 2,025 1,299 (20)%
Joint venture(b).......................... 23 22 19 (9)% 5,901 5,578 4,946 (8)%
Management contract....................... 27 47 53 40% 6,280 11,461 13,020 44%
Franchised................................ 55 58 63 7% 12,529 13,583 14,826 9%
--- ----- ----- ------- ------- -------
114 136 141 11% 26,735 32,647 34,091 13%
=== ===== ===== ======= ======= =======
Hampton Inn
Company owned............................. 14 12 11 (11)% 1,916 1,654 1,506 (11)%
Leased(a)................................. -- 17 19 n/a -- 2,202 2,359 n/a
Joint venture(b).......................... 19 19 -- (100)% 2,376 2,376 -- (100)%
Management contract....................... 4 5 7 32% 464 678 929 41%
Franchised................................ 483 567 689 19% 52,958 60,628 72,793 17%
--- ----- ----- ------- ------- -------
520 620 726 18% 57,714 67,538 77,587 16%
=== ===== ===== ======= ======= =======
Hampton Inn & Suites
Management contract....................... -- 1 2 n/a -- 127 287 n/a
Franchised................................ 5 15 29 141% 573 1,719 3,167 135%
--- ----- ----- ------- ------- -------
5 16 31 149% 573 1,846 3,454 146%
=== ===== ===== ======= ======= =======
Homewood Suites
Company owned............................. 9 7 11 11% 1,024 800 1,202 8%
Leased(a)................................. -- 1 -- n/a -- 98 -- n/a
Management contract....................... -- 4 4 n/a -- 471 471 n/a
Franchised................................ 21 25 36 31% 2,071 2,530 3,590 32%
--- ----- ----- ------- ------- -------
30 37 51 30% 3,095 3,899 5,263 30%
=== ===== ===== ======= ======= =======
Other Hotels
Company owned............................. -- 22 9 n/a -- 5,548 1,320 n/a
Leased(a)................................. 2 57 49 395% 185 9,855 7,244 526%
Joint venture(b).......................... 3 3 -- (100)% 812 812 -- (100)%
Management contract....................... 6 31 23 96% 1,117 8,824 5,031 112%
--- ----- ----- ------- ------- -------
11 113 81 171% 2,114 25,039 13,595 154%
=== ===== ===== ======= ======= =======
Total System
Company owned............................. 33 51 53 27% 5,203 10,266 10,076 39%
Leased(a)................................. 4 82 86 364% 779 13,903 14,408 330%
Joint venture(b).......................... 45 44 22 (30)% 9,089 8,766 5,758 (20)%
Management contract....................... 109 153 172 26% 28,889 39,801 43,204 22%
Franchised................................ 594 702 866 21% 74,772 86,929 105,356 19%
--- ----- ----- ------- ------- -------
785 1,032 1,199 24% 118,732 159,665 178,802 23%
=== ===== ===== ======= ======= =======
</TABLE>
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(a) In February 1996, the Company acquired RFS, Inc., with 49 leased hotels, in
a transaction accounted for as a pooling-of-interests. 1995 statistical
results, as presented above, do not reflect this acquisition.
(b) For statistical purposes only, the Company classifies unconsolidated joint
ventures in which it holds less than a 20% interest as management contracts
and consolidated joint ventures as Company owned.
8
<PAGE> 10
<TABLE>
<CAPTION>
MANAGED FRANCHISED TOTAL
-------------- --------------- ---------------
1996 1997 1996 1997 1996 1997 INCREASE
----- ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Promus Vacation Resorts(a)
Resort properties..................... 2 3 1 3 3 6 100%
Timeshare units....................... 164 228 207 818 371 1,046 182%
Timeshare intervals available......... 8,364 11,628 10,557 41,718 18,921 53,346 182%
Timeshare intervals sold(b)........... 3,098 6,227 1,426 4,077 4,524 10,304 128%
</TABLE>
- - ---------------
(a) 1997 statistics do not include 40 non-branded resort units managed by
Promus.
(b) Includes pre-sales for resorts under construction but not yet open.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,(A)
---------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Doubletree Hotels(b)
Occupancy................................................. 71.6% 73.7% 74.0%
ADR....................................................... $ 90.67 $ 97.96 $108.27
RevPAR.................................................... $ 64.97 $ 72.22 $ 80.09
Red Lion Hotels converted to Doubletree Hotels(c)
Occupancy................................................. N/A N/A 70.4%
ADR....................................................... N/A N/A $ 89.07
RevPAR.................................................... N/A N/A $ 62.73
Embassy Suites
Occupancy................................................. 74.5% 75.1% 75.2%
ADR....................................................... $102.00 $107.97 $113.84
RevPAR.................................................... $ 75.95 $ 81.08 $ 85.58
Hampton Inn
Occupancy................................................. 74.7% 73.6% 72.1%
ADR....................................................... $ 57.04 $ 60.94 $ 64.39
RevPAR.................................................... $ 42.62 $ 44.88 $ 46.45
Homewood Suites
Occupancy................................................. 78.2% 76.9% 78.8%
ADR....................................................... $ 83.17 $ 89.31 $ 92.27
RevPAR.................................................... $ 65.00 $ 68.70 $ 72.71
Other Hotels(d)
Occupancy................................................. 74.2% 74.5% 72.0%
ADR....................................................... $ 70.83 $ 75.22 $ 80.10
RevPAR.................................................... $ 52.57 $ 56.02 $ 57.69
</TABLE>
- - ---------------
(a) Revenue statistics are for comparable hotels, and include information only
for those hotels in the system as of December 31, 1997 and managed or
franchised by PHC or managed by Doubletree since January 1, 1995. Doubletree
franchised hotels are not included in the statistical information.
(b) Includes Club Hotels by Doubletree and Doubletree Guest Suites hotels.
(c) Revenue statistics for the Red Lion hotels converted to the Doubletree brand
are included only for the period from the initial date of conversion (Phase
I -- 4 hotels on April 1, 1997; Phase II -- 36 hotels on July 1, 1997)
through December 31, 1997.
(d) Includes results for the 16 Red Lion hotels that have not been converted to
the Doubletree brand as well as the results for comparable hotels managed
under other franchisors' brands or as independent hotels.
9
<PAGE> 11
HOTELS BY GEOGRAPHIC REGION
The following tables present certain hotel information with respect to the
Company's hotels in all of North America and in each of eight geographic
regions: New England (Maine, New Hampshire, Vermont, Massachusetts, Rhode Island
and Connecticut). Middle Atlantic (New York, New Jersey, Pennsylvania, Delaware,
Maryland, District of Columbia, Virginia and West Virginia), Mountain (Montana,
Idaho, Wyoming, Colorado, Utah and Nevada), Pacific (Washington, Oregon,
California, Alaska and Hawaii), Midwest (Ohio, Indiana, Illinois, Michigan and
Wisconsin), Plains (Minnesota, Iowa, Missouri, North Dakota, South Dakota,
Nebraska and Kansas), Southeast (North Carolina, South Carolina, Georgia,
Florida, Kentucky, Tennessee, Alabama, Mississippi, Arkansas and Louisiana) and
Southwest (Oklahoma, Texas, New Mexico and Arizona).
Total Hotel Portfolio
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1997(A)
--------------------- ------------------------------------------
NUMBER OF NUMBER OF OCCUPANCY AVERAGE DAILY
HOTELS ROOMS PERCENTAGE RATE REVPAR(C)
--------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Club Hotel by Doubletree........... 22 4,470 67.7%(d) $ 70.73(d) $47.85(d)
Doubletree(b)...................... 105 31,362 70.9 93.84 66.56
Doubletree Guest Suites............ 42 8,980 76.6 124.73 95.60
Embassy Suites..................... 141 34,091 75.1 113.29 85.04
Hampton Inn........................ 726 77,587 72.4 64.09 46.42
Hampton Inn & Suites............... 31 3,454 72.4 71.73 51.92
Homewood Suites.................... 51 5,263 78.9 92.13 72.71
Non-Promus Brand Hotels............ 81 13,595 71.8 81.24 58.35
----- -------
Total Hotel
Portfolio(e)........... 1,199 178,802
===== =======
</TABLE>
New England(f)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1997(A)
--------------------- --------------------------------------
NUMBER OF NUMBER OF OCCUPANCY AVERAGE DAILY
HOTELS ROOMS PERCENTAGE RATE REVPAR(C)
--------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Club Hotel by Doubletree............... 1 239 --(a) --(a) --(a)
Doubletree............................. 3 602 62.5% $146.49 $91.62
Doubletree Guest Suites................ 2 585 77.5 143.95 111.54
Embassy Suites......................... 2 348 79.8 107.93 86.15
Hampton Inn............................ 15 1,912 70.8 68.56 48.56
Hampton Inn & Suites................... -- -- -- -- --
Homewood Suites........................ 1 132 79.4 90.18 71.60
Non-Promus Brand Hotels................ 8 922 80.1 200.32 160.47
----- -------
Total Hotel Portfolio(e)..... 32 4,740
===== =======
</TABLE>
10
<PAGE> 12
Middle Atlantic (f)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1997(A)
--------------------- --------------------------------------
NUMBER OF NUMBER OF OCCUPANCY AVERAGE DAILY
HOTELS ROOMS PERCENTAGE RATE REVPAR(C)
--------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Club Hotel by Doubletree............... 4 755 --(a) --(a) --(a)
Doubletree............................. 10 3,661 69.8% $ 98.67 $68.91
Doubletree Guest Suites................ 7 1,541 82.6 156.09 128.89
Embassy Suites......................... 15 3,686 76.6 123.76 94.81
Hampton Inn............................ 110 12,622 73.7 68.35 50.39
Hampton Inn & Suites................... 5 547 87.1 66.76 58.18
Homewood Suites........................ 5 451 75.3 88.12 66.34
Non-Promus Brand Hotels................ 6 1,173 72.9 78.60 57.29
----- -------
Total Hotel Portfolio(e)..... 162 24,436
===== =======
</TABLE>
Mountain (f)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1997(A)
--------------------- --------------------------------------
NUMBER OF NUMBER OF OCCUPANCY AVERAGE DAILY
HOTELS ROOMS PERCENTAGE RATE REVPAR(C)
--------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Club Hotel by Doubletree............... 1 158 67.9%(d) $ 70.16(d) $47.61(d)
Doubletree(b).......................... 10 2,869 76.4 85.35 65.22
Doubletree Guest Suites................ -- -- -- -- --
Embassy Suites......................... 7 1,510 74.2 109.31 81.10
Hampton Inn............................ 27 3,213 74.5 59.99 44.72
Hampton Inn & Suites................... 1 81 --(a) --(a) --(a)
Homewood Suites........................ 2 210 80.4 113.89 91.53
Non-Promus Brand Hotels................ 3 274 57.5 54.09 31.10
----- -------
Total Hotel Portfolio(e)..... 51 8,315
===== =======
</TABLE>
Pacific(f)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1997(A)
--------------------- --------------------------------------
NUMBER OF NUMBER OF OCCUPANCY AVERAGE DAILY
HOTELS ROOMS PERCENTAGE RATE REVPAR(C)
--------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Club Hotel by Doubletree............... 4 765 --(a) --(a) --(a)
Doubletree (b)......................... 42 12,303 70.6% $ 92.03 $65.00
Doubletree Guest Suites................ 3 674 78.0 119.24 92.97
Embassy Suites......................... 33 8,340 73.5 120.42 88.53
Hampton Inn............................ 23 2,679 72.7 63.99 46.49
Hampton Inn & Suites................... -- -- -- -- --
Homewood Suites........................ 3 350 83.6 109.16 91.27
Non-Promus Brand Hotels................ 19 3,527 68.3 74.78 51.07
----- -------
Total Hotel Portfolio(e)..... 127 28,638
===== =======
</TABLE>
11
<PAGE> 13
Midwest(f)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1997(A)
--------------------- --------------------------------------
NUMBER OF NUMBER OF OCCUPANCY AVERAGE DAILY
HOTELS ROOMS PERCENTAGE RATE REVPAR(C)
--------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Club Hotel by Doubletree............... 1 242 --(a) --(a) --(a)
Doubletree............................. 4 1,111 --(a) --(a) --(a)
Doubletree Guest Suites................ 9 1,939 73.6% $113.78 $83.71
Embassy Suites......................... 13 3,240 74.6 120.78 90.10
Hampton Inn............................ 111 11,381 71.3 64.29 45.85
Hampton Inn & Suites................... 6 619 --(a) --(a) --(a)
Homewood Suites........................ 9 831 79.2 82.05 64.97
Non-Promus Brand Hotels................ 9 1,146 75.1 75.49 56.68
----- -------
Total Hotel Portfolio(e)..... 162 20,509
===== =======
</TABLE>
Plains (f)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1997(A)
--------------------- --------------------------------------
NUMBER OF NUMBER OF OCCUPANCY AVERAGE DAILY
HOTELS ROOMS PERCENTAGE RATE REVPAR(C)
--------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Club Hotel by Doubletree............... 1 181 --(a) --(a) --(a)
Doubletree(b).......................... 6 2,000 73.8% $ 90.18 $66.60
Doubletree Guest Suites................ 3 638 --(a) --(a) --(a)
Embassy Suites......................... 10 2,377 72.9 103.34 75.38
Hampton Inn............................ 46 5,353 67.4 63.45 42.77
Hampton Inn & Suites................... -- -- -- -- --
Homewood Suites........................ 3 319 67.4 73.66 49.65
Non-Promus Brand Hotels................ 3 493 74.3 77.87 57.84
----- -------
Total Hotel Portfolio(e)..... 72 11,361
===== =======
</TABLE>
Southeast(f)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1997(A)
--------------------- --------------------------------------
NUMBER OF NUMBER OF OCCUPANCY AVERAGE DAILY
HOTELS ROOMS PERCENTAGE RATE REVPAR(C)
--------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Club Hotel by Doubletree............... 7 1,576 67.5%(d) $ 71.28(d) $48.08(d)
Doubletree............................. 13 3,552 70.5 90.88 64.12
Doubletree Guest Suites................ 14 2,467 72.2 106.54 76.93
Embassy Suites......................... 31 7,800 76.5 113.15 86.51
Hampton Inn............................ 310 31,248 73.5 62.84 46.21
Hampton Inn & Suites................... 15 1,704 64.3 78.91 50.77
Homewood Suites........................ 16 1,651 80.2 91.94 73.76
Non-Promus Brand Hotels................ 23 4,121 72.2 70.21 50.72
----- -------
Total Hotel Portfolio(e)..... 429 54,119
===== =======
</TABLE>
12
<PAGE> 14
Southwest(f)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1997(A)
--------------------- --------------------------------------
NUMBER OF NUMBER OF OCCUPANCY AVERAGE DAILY
HOTELS ROOMS PERCENTAGE RATE REVPAR(C)
--------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Club Hotel by Doubletree............... 3 554 --(a) --(a) --(a)
Doubletree(b).......................... 14 4,709 70.4% $ 95.59 $67.28
Doubletree Guest Suites................ 4 1,136 82.4 114.20 94.10
Embassy Suites......................... 24 5,350 74.8 100.94 75.48
Hampton Inn............................ 74 7,896 68.7 62.28 42.81
Hampton Inn & Suites................... 3 399 73.0 67.21 49.09
Homewood Suites........................ 12 1,319 77.1 99.48 76.75
Non-Promus Brand Hotels................ 10 1,939 72.3 75.59 54.68
----- -------
Total Hotel Portfolio(e)..... 144 23,302
===== =======
</TABLE>
- - ---------------
(a) Revenue statistics are for comparable hotels, which include only those
hotels in the system for the entire period from January 1, 1996 through
December 31, 1997. Club Hotel by Doubletree, Doubletree and Doubletree Guest
Suites' revenues statistics exclude franchised hotels. Embassy Suites,
Hampton Inn, Hampton Inn & Suites and Homewood Suites' revenue statistics
exclude hotels that had room additions.
(b) During 1997, 40 Red Lion hotels were converted to Doubletree hotels. The
converted hotels are included in the number of Doubletree hotels and rooms
as of December 31, 1997. Revenue statistics for the converted hotels are
included in the Doubletree hotel statistics for the period from the
conversion date through December 31, 1997.
(c) Revenue per available room is the product of the occupancy percentage times
the average daily rate.
(d) Includes one property in the Mountain Region and one property in the
Southeast Region.
(e) Excludes three vacation interval resorts operated by the Company.
(f) The geographical regional data presented above excludes 20 hotels, with an
aggregate of 3,382 rooms located outside the United States.
AUDUBON WOODS BUSINESS CAMPUS
The Company's corporate headquarters, located in Memphis, Tennessee,
consists of four office buildings acquired in 1995 containing approximately
360,000 square feet of office space on 31 acres of land. The Company currently
occupies 50% of the office space and as a result of the merger, is expanding
into an additional 25%. The remaining space is leased.
TRADEMARKS
The following trademarks used herein are owned by the Company: Club Hotel
by Doubletree(R); Doubletree(R); Doubletree Guest Suites(R); Embassy Suites(R);
Embassy Vacation Resort(R); Hampton Inn(R); Hampton Inn & Suites(R), Hampton
Vacation Resort(SM); Homewood Suites(R); Promus(R); Red Lion Hotels and Inns(R)
and System 21(TM). The names "Club Hotels by Doubletree," "Doubletree,"
"Doubletree Guest Suites," "Embassy Suites," "Embassy Vacation Resort," "Hampton
Inn," "Hampton Inn & Suites," and "Homewood Suites" are registered as service
marks in the United States and in certain foreign countries. The Company
considers all of these marks, and the associated name recognition, to be
valuable to its business.
COMPETITION
The Company encounters strong competition as a manager, franchisor, and
hotel owner with other related companies in the lodging industry. As of December
31, 1997, there were more than 174 hotel brands (chains with more than one
hotel). Although most of these companies are privately owned firms, several
large national chains own and operate their own hotels and also franchise their
brands. There is no single competitor which is dominant in the industry.
Affiliation with a national or regional brand is a major trend in the U.S.
lodging industry. In 1997 68% of U.S. hotel rooms were brand-affiliated,
compared to 62% in 1989. Most of the branded properties are
13
<PAGE> 15
franchises, under which the operator pays the franchisor a fee for use of its
systems, brand identification and reservation system.
The Company believes that its brands are attractive to hotel owners seeking
franchise affiliation or a management company because its hotels typically
generate higher occupancies and revenue per available room (RevPAR) than direct
competitors in most market areas. The Company attributes this performance
premium to its success in achieving and maintaining strong customer preference.
The Company's brands are also designed to be attractive to leisure guests and
generate weekend demand. Repeat guest business is enhanced by the Company's
unconditional guest satisfaction guarantee, which is a significant component of
the Company's operating strategy. Customer preference for the Company's brands
means the Company neither needs nor desires to incur the significant cost of
frequent stay programs.
The lodging industry in general, including the Company's brands, may be
adversely affected by national and regional economic conditions and government
regulations. The demand for accommodations at a particular hotel may be
adversely affected by many factors including changes in travel patterns, local
and regional economic conditions and the degree of competition with other hotels
in the area.
GOVERNMENTAL REGULATION
A number of states regulate the licensing of hotels and restaurants and the
granting of liquor licenses by requiring registration, disclosure statements and
compliance with specific standards of conduct. Various federal and state
regulations mandate certain disclosures and other practices with respect to the
sales of license agreements and the licensor/licensee relationship. In addition,
there is considerable state regulation of the vacation interval industry. The
Company's operations have not been materially affected by such legislation and
regulations, but the Company cannot predict the effect of future legislation.
EMPLOYEE RELATIONS
Promus, through its subsidiaries, has approximately 41,000 employees.
Promus' subsidiaries have collective bargaining agreements at six of the
Company's managed locations. The Company considers its relations with employees
to be very good.
ITEM 3. LEGAL PROCEEDINGS.
Actions for negligence or other tort claims occur routinely in the ordinary
course of the Company's business, but none of these proceedings involves a claim
for damages (in excess of applicable excess umbrella insurance coverages)
involving more than 10% of current assets of the Company. The Company does not
anticipate any amounts which it may be required to pay as a result of an adverse
determination of such legal proceedings, individually or in the aggregate, or
any other relief granted by reason thereof, will have a material adverse effect
on the Company's financial position or results of operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A Special Meeting of the Stockholders of PHC was held on December 18, 1997.
Matters voted upon at the meeting were (a) to consider and vote upon a proposal
to approve and adopt the Merger Agreement pursuant to which, among other things,
(i) PHC and Doubletree would become wholly-owned subsidiaries of the Company;
(ii) each outstanding share of common stock of PHC would be converted into the
right to receive .925 of a share of common stock of the Company; and (iii) each
outstanding share of common stock of Doubletree would be converted into the
right to receive one share of common stock of the Company; and (b) to consider
and vote on a proposal to approve and adopt the 1997 Equity Participation Plan
of the Company (1997 Plan).
14
<PAGE> 16
The results of the voting were as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- --------- -------
<S> <C> <C> <C>
Approval of Merger Agreement.......................... 41,330,357 139,697 57,263
Approval of the 1997 Plan............................. 34,303,359 7,116,581 107,317
</TABLE>
A Special Meeting of the Stockholders of Doubletree was held on December
18, 1997. Matters voted upon at the meeting were (a) to consider and vote upon a
proposal to approve and adopt the Merger pursuant to which, among other things,
(i) PHC and Doubletree would become wholly-owned subsidiaries of the Company;
(ii) each outstanding share of common stock of PHC would be converted into the
right to receive .925 of a share of common stock of the Company; and (iii) each
outstanding share of common stock of Doubletree would be converted into the
right to receive one share of common stock of the Company; and (b) to consider
and vote on a proposal to approve and adopt the 1997 Plan.
The results of the voting were as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- --------- -------
<S> <C> <C> <C>
Approval of Merger Agreement........................... 34,988,277 4,081 7,155
Approval of the 1997 Plan.............................. 33,905,504 1,084,442 9,567
</TABLE>
15
<PAGE> 17
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD AND PRINCIPAL
NAME AND AGE OCCUPATIONS OR EMPLOYMENT DURING PAST 5 YEARS
- - ------------ ---------------------------------------------
<S> <C>
Raymond E. Schultz(64)................. Chairman of the Board and Chief Executive Officer of
Parent Holding Corp., predecessor of the Company, since
August 1997 and of Promus since December 1997. Director,
President and Chief Executive Officer of PHC
(1995-1997). President and Chief Executive Officer of
the Hotel Division of The Promus Companies Incorporated
("PCI") (1993-1995). President and Chief Executive
Officer of Hampton Inn/Homewood Suites Hotel Division of
PCI (1991-1993). President and Chief Executive Officer
of Hampton Inn Hotel Division of PCI (1983-1991).
Richard M. Kelleher(48)................ Director, President and Chief Operating Officer of Parent
Holding Corp., predecessor of the Company, since August
1997 and of Promus since December 1997. Director,
President and Chief Executive Officer of Doubletree
Corporation (1996-1997). President of Doubletree Hotels
Corporation (1993-1996). Chief Executive Officer and
President of Guest Quarters Hotel Partnership (April
1993-December 1993). President of Guest Quarters Suite
Hotels (1989-1993).
Thomas L. Keltner(51).................. Executive Vice President and Chief Development Officer of
Promus since December, 1997. Senior Vice President,
Development of PHC (1995-1997). Senior Vice President,
Development of the Hotel Division of PCI (1993-1995).
President, Golf Training Systems, Inc., (1991-1993).
Senior Vice President and Chief Operating Officer,
Franchise Division of Holiday Inn Worldwide (1990).
President and Managing Director, Holiday Inns
International (1988-1990).
Ralph B. Lake(53)...................... Executive Vice President, General Counsel and Secretary of
Promus since December, 1997. Senior Vice President,
General Counsel and Secretary of PHC (1995-1997). Vice
President and General Counsel of Gaming Development of
PCI (1992-1995). Associate General Counsel-International
of PCI (1991-1992). Vice President and General Counsel
of Homewood Suites Hotel Division of PCI (1988-1991).
William L. Perocchi(40)................ Executive Vice President and Chief Financial Officer of
Promus since December, 1997. Executive Vice President and
Chief Financial Officer of Doubletree Corporation
(1993-1997). Executive Vice President and Chief
Financial Officer of Guest Quarters Hotel Partnership
(1992-1993).
M. Ann Rhoades(53)..................... Executive Vice President, Human Resources & Corporation
Communications of Promus since December 1997. Executive
Vice President, Human Resources of Doubletree Hotels
Corporation (1996-1997). Senior Vice President, Human
Resources of Doubletree Hotels Corporation (1995-1996).
Vice President, People Department of Southwest Airlines
(1989-1995).
Thomas W. Storey(41)................... Executive Vice President, Marketing of Promus since
December, 1997. Executive Vice President, Sales and
Marketing of Doubletree Hotels Corporation (1994-1997).
Executive Vice President, Sales and Marketing of
Radisson Hotels International (1989-1994).
James T. Harvey(39).................... Senior Vice President and Chief Information Officer of
Promus since December, 1997. Vice President, Information
Technology of PHC (1995-1997). Corporate Director, Hotel
and Corporate Information Systems of PCI (1994-1995).
Director, Information Systems of PCI (1993-1994).
</TABLE>
16
<PAGE> 18
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange and
traded under the ticker symbol "PRH". The stock is also listed on the Chicago
Stock Exchange, the Pacific Stock Exchange and the Philadelphia Stock Exchange.
The following table sets forth the high and low price per share of the
Company's Common Stock for 1997:
<TABLE>
<CAPTION>
DOUBLETREE PHC PROMUS
--------------- --------------- ---------------
1997 HIGH LOW HIGH LOW HIGH LOW
---- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Fourth Quarter (December 19-31, 1997)............ N/A N/A N/A N/A $43.13 $36.50
Fourth Quarter (through December 18, 1997)....... $49.38 $37.75 $45.38 $35.75 N/A N/A
Third Quarter.................................... 50.75 41.38 46.88 38.00 N/A N/A
Second Quarter................................... 49.00 30.25 39.25 30.50 N/A N/A
First Quarter.................................... 45.25 35.00 36.38 28.25 N/A N/A
</TABLE>
The approximate number of holders of record of the Company's Common Stock
as of March 16, 1998 is as follows:
<TABLE>
<CAPTION>
APPROXIMATE NUMBER
TITLE OF CLASS OF HOLDERS OF RECORD
- - -------------- --------------------
<S> <C>
Common Stock, Par Value $0.01 per share..................... 11,500
</TABLE>
The Company has not paid and does not presently intend to declare cash
dividends. See "Management's Discussion and Analysis -- Liquidity and Capital
Resources". The payment of dividends in the future will be at the discretion of
the Board of Directors of the Company and will be dependent on the Company's
results of operations, financial condition, cash requirements, future prospects
and other factors deemed relevant by the Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
COMPOUND
PRO FORMA ANNUAL
1993 1994 1995 1996(B) 1996(A) 1997(B) GROWTH RATE
-------- -------- -------- ---------- --------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Results
Revenues........... $252,571 $326,655 $421,829 $ 560,213 $890,552 $1,038,011 42.4%
Operating income... 70,377 109,698 123,854 165,356 230,445 183,902 27.1%
Net income......... 21,859 49,554 64,370 90,658 105,984 95,436 44.6%
Diluted earning per
share........... N/A 0.73 0.92 1.23 1.21 1.09 --(c)
EBITDA(d).......... 92,293 129,330 148,690 213,933 310,788 312,279 35.6%
Financial Position
Total assets....... 527,088 548,009 682,916 2,362,914 N/A 2,379,046 45.8%
Notes payable
(long-term)..... 197,326 188,725 229,479 789,174 N/A 671,978 35.8%
Total equity....... 193,083 234,595 281,753 1,049,619 N/A 1,095,735 54.3%
</TABLE>
- - ---------------
(a) 1996 pro forma results of operations reflect the acquisition of Red Lion as
if it had occurred on January 1, 1996.
(b) 1997 includes certain unusual items, including $115.0 million of business
combination expenses, a $10.9 million breakup fee received in connection
with the terminated Renaissance Hotel Group transaction, $43.3 million of
gains on the sale of real estate and securities, and other net gains of $0.9
million. In 1996, unusual items included gains of $4.4 million on the sale
of real estate and securities. Excluding the effect of these transactions,
1997 and 1996 net income would have been $143.8 million and $103.4 million,
respectively. Diluted earnings per share for 1997 and 1996, excluding the
effect of these transactions, would have been $1.64 and $1.18 per share,
respectively.
17
<PAGE> 19
(c) For periods prior to PHC's June 30, 1995 spin-off by its former parent,
weighted average shares outstanding are assumed to be equal to the actual
shares outstanding at the spin-off. For the period January 1, 1994 through
June 30, 1994 (Doubletree's initial public offering), shares outstanding
were assumed to be equal to the shares issued on June 30, 1994. For periods
prior to January 1, 1994, there were no shares assumed outstanding for
Doubletree. Excluding unusual items in 1997 and 1996, diluted earnings per
share would have been $1.64 and $1.18, respectively, resulting in a 40.0%
three year compound growth rate.
(d) EBITDA, consisting of income before extraordinary items plus interest
expense, income tax expense, depreciation and amortization and cash
distributions from nonconsolidated affiliates less earnings from
nonconsolidated affiliates, is a supplemental financial measurement used by
management, as well as by industry analysts, to evaluate Promus' operations.
However, EBITDA should not be construed as an alternative to operating
income (as an indicator of operating performance) or to cash flows from
operating activities (as a measure of liquidity) as determined in accordance
with generally accepted accounting principles.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
On December 19, 1997, Doubletree Corporation (Doubletree) and Promus Hotel
Corporation (PHC) merged in accordance with the Agreement and Plan of Merger
(the Merger Agreement or the Merger) by and among Doubletree, PHC and Parent
Holding Corp., a newly-formed corporation jointly owned by Doubletree and PHC.
Concurrent with the merger, PHC was renamed Promus Operating Company, Inc., and
Parent Holding Corp. was renamed Promus Hotel Corporation. Promus Hotel
Corporation and subsidiaries are collectively referred to herein as Promus or
the Company.
As a result of the Merger Agreement, (i)Doubletree and PHC became
wholly-owned subsidiaries of Promus; (ii) each outstanding share of common stock
of Doubletree was converted into one share of common stock of Promus; and (iii)
each outstanding share of PHC common stock was converted into 0.925 of a share
of common stock of Promus. The Merger qualified as a tax free exchange and was
accounted for as a pooling-of-interests; accordingly, the accompanying
consolidated financial statements and financial information contained herein
have been restated to combine the historical results of both Doubletree and PHC
for all periods presented.
As of December 31, 1997, the Promus hotel system contained 1,199 hotels,
representing almost 179,000 hotel rooms, in all 50 states, the District of
Columbia, Puerto Rico, the U.S. Virgin Islands and six foreign countries. Promus
brands include some of America's premier hotel products, including Club Hotels
by Doubletree, Doubletree Hotels, Doubletree Guest Suites, Embassy Suites,
Hampton Inn, Hampton Inn & Suites, and Homewood Suites. The Promus system also
includes certain properties that are not Promus-branded.
Of these 1,199 hotels, 866 are owned and operated by franchisees, and 333
are operated by the Company. Depending on the hotel brand, Promus charges each
franchisee royalty fees of up to four percent of suite or room revenues in
exchange for the use of one of its brand names and franchise-related services.
Company operated properties include 53 wholly-owned hotels, 86 leased hotels, 22
hotels partially-owned through joint ventures and 172 hotels managed for third
parties. As a manager of hotels, Promus is typically responsible for supervising
or operating the hotel in exchange for fees based on a percentage of the hotel's
gross revenues, operating profits, cash flow, or a combination thereof. The
Company's results of operations for owned and leased hotels reflect the revenues
and expenses of these hotel operations.
Promus also licenses six vacation interval ownership properties under the
Embassy Vacation Resort and Hampton Vacation Resort brand names, for which the
Company earns franchise fees on net interval sales and on revenues related to
the rental of interval units.
Promus' primary focus is to grow its franchise and management businesses,
while limiting its ownership of real estate. The Company owns a mix of
Promus-brand hotels that can enhance its role as manager and franchisor for its
brands, but periodically sells hotels as opportunities arise to realize a
hotel's appreciated value.
18
<PAGE> 20
RESULTS OF OPERATIONS
The principal factors which affect Promus' results are: continued growth in
the number of system hotels; occupancy and room rates achieved by hotels; the
relative mix of owned, leased, managed and franchised hotels; and Promus'
ability to manage costs. The number of rooms at franchised and managed
properties and revenue per available room (RevPAR) significantly affect Promus'
results because franchise royalty and management fees are generally based upon a
percentage of room revenues. Increases in franchise royalty and management fee
revenues have a favorable impact on Promus' operating margin due to minimal
incremental costs associated with this type of revenue.
Summarized operating results for the three years ended December 31, 1997
are as follows:
<TABLE>
<CAPTION>
PERCENTAGE
YEARS ENDED DECEMBER 31, INCREASE (DECREASE)
-------------------------- -----------------------
1995 1996 1997 '96 VS '95 '97 VS '96
------ ------ -------- ---------- ----------
(IN MILLIONS, EXCEPT PERCENTAGES AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................................ $421.8 $560.2 $1,038.0 32.8% 85.3%
Operating income........................ 123.9 165.4 183.9 33.5% 11.2%
Net income.............................. 64.4 90.7 95.4 40.8% 5.2%
Basic earnings per share................ 0.93 1.25 1.10 34.4% (12.0)%
Diluted earnings per share.............. 0.92 1.23 1.09 33.7% (11.4)%
</TABLE>
Comparisons of the actual financial results presented above are difficult
as a result of recent acquisition activity and unusual items, including business
combination expenses, experienced in 1997 and 1996. The Company's November 8,
1996 acquisition of Red Lion Hotels, Inc. (Red Lion) was accounted for under the
purchase method of accounting and, accordingly, Red Lion's operating results
prior to the acquisition are not included in the Company's reported results. The
following table sets forth the actual results of operations for the year ended
December 31, 1997, as compared to the pro forma results of operations for the
years ended December 31, 1996 and 1995, assuming that the November 8, 1996
acquisition of Red Lion and related transactions had occurred as of January 1,
1995. The Company believes that this information provides a more meaningful
basis for comparison than the historical results of the Company and includes all
necessary adjustments for a fair presentation of such pro forma information. The
pro forma results of operations are not necessarily indicative of the results of
operations as they might have been had the Red Lion transaction been consummated
at the beginning of 1995.
19
<PAGE> 21
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
PRO FORMA PRO FORMA
1995(A)(B) 1996(A)(B) 1997(B)
---------- ---------- ----------
(IN THOUSANDS, UNAUDITED)
<S> <C> <C> <C>
Revenues:
Franchise and management fees............................. $121,439 $151,488 $ 185,546
Owned hotel revenues...................................... 349,648 362,905 368,012
Leased hotel revenues..................................... 274,154 326,594 410,526
Purchasing and service fees............................... 11,715 14,947 19,304
Other fees and income..................................... 29,974 34,618 54,623
-------- -------- ----------
Total revenues.................................... 786,930 890,552 1,038,011
Operating Costs and Expenses:
General and administrative expenses....................... 66,985 72,274 79,249
Owned hotel expenses...................................... 224,506 227,633 224,052
Leased hotel expenses..................................... 242,394 287,584 362,681
Depreciation and amortization............................. 70,228 72,616 73,127
Business combination expenses............................. -- -- 115,000
-------- -------- ----------
Total operating costs and expenses................ 604,113 660,107 854,109
-------- -------- ----------
Operating income............................................ 182,817 230,445 183,902
Interest and dividend income.............................. 12,621 22,727 22,982
Interest expense.......................................... (77,600) (75,178) (72,027)
Gain on sale of real estate and securities................ 2,334 4,439 43,330
-------- -------- ----------
Income before income taxes and minority interest............ 120,172 182,433 178,187
Minority interest share of net income..................... (842) (1,892) (3,087)
-------- -------- ----------
Income before income taxes and extraordinary items.......... 119,330 180,541 175,100
Income tax expense........................................ (51,245) (74,557) (79,664)
-------- -------- ----------
Income before extraordinary items........................... 68,085 105,984 95,436
Extraordinary items, net of income tax.................... 2,819 -- --
-------- -------- ----------
Net income.................................................. $ 70,904 $105,984 $ 95,436
-------- -------- ----------
Basic earnings per share.................................... $ 0.83 $ 1.22 $ 1.10
======== ======== ==========
Diluted earnings per share.................................. $ 0.82 $ 1.21 $ 1.09
======== ======== ==========
Basic weighted average shares outstanding................... 85,801 86,649 86,573
======== ======== ==========
Diluted weighted average shares outstanding................. 86,370 87,647 87,904
======== ======== ==========
</TABLE>
- - ---------------
(a) 1996 and 1995 results are presented on a pro forma basis to give effect to
the November 8, 1996 acquisition of Red Lion and related transactions, as if
they had occurred on January 1, 1995.
(b) 1997 results of operations include certain unusual items, including a
provision for business combination expenses of $115.0 million, a $10.9
million break-up fee received in connection with the terminated Renaissance
Hotel Group transaction, $43.3 million of gains on the sale of real estate
and securities, and other net gains of $0.9 million. In 1996 and 1995,
unusual items include gains of $4.4 million and $2.3 million, respectively,
on the sale of real estate and securities. Excluding the effects of these
transactions, net income would have been $69.6 million, $103.4 million and
$143.8 million and diluted earnings per share would have been $0.81, $1.18
and $1.64, for 1995, 1996 and 1997, respectively.
20
<PAGE> 22
Though its revenues come from various sources, nearly all components of
Promus' revenues are favorably impacted by system-wide increases in RevPAR. On a
comparable hotel basis, RevPAR increases were as follows:
REVENUE PER AVAILABLE ROOM
Comparable Hotels(a)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, INCREASE
------------------------ -------------------
1995 1996 1997 95 VS 96 96 VS 97
------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C>
Doubletree Hotels.................................... $64.97 $72.22 $80.09 11.2% 10.9%
Red Lion hotels converted to Doubletree Hotels(b).... N/A N/A 62.73 N/A N/A
Embassy Suites....................................... 75.95 81.08 85.58 6.8% 5.6%
Hampton Inn.......................................... 42.62 44.88 46.45 5.3% 3.5%
Homewood Suites...................................... 65.00 68.70 72.71 5.7% 5.8%
Other hotels(c)...................................... 52.57 56.02 57.69 6.6% 3.0%
</TABLE>
- - ---------------
(a) Revenue statistics are for comparable hotels, and include information only
for those hotels in the system as of December 31, 1997 and managed or
franchised by PHC or managed by Doubletree since January 1, 1995. Doubletree
franchised hotels are not included in the statistical information.
(b) Revenue statistics for the Red Lion hotels converted to the Doubletree brand
are included only for the period from the initial date of conversion (Phase
I -- 4 hotels on April 1, 1997; Phase II -- 36 hotels on July 1, 1997)
through December 31, 1997.
(c) Includes results for the 16 Red Lion hotels that have not been converted to
the Doubletree brand as well as the results for comparable hotels managed
under other franchisors' brands or as independent hotels.
Year Ended December 31, 1997 (Actual) Compared with Year Ended December 31,
1996 (Pro Forma)
1997 revenues increased 16.6%, or $147.5 million, over 1996 pro forma
revenues, to $1,038.0 million.
Revenues from franchise and management fees increased $34.1 million, or
22.5%, due to growth in the number of franchised and managed properties as well
as improved performance at existing franchised and managed properties. The
number of franchised properties increased by 164 properties, or 23.4%, to 866
hotels at December 31, 1997. The Company added 19 new management contracts, net
of terminations, during 1997. New contracts represented 59.0% of the increase in
franchise and management fees for the year. Incentive management fees increased
32.0% in 1997 to approximately $23.0 million.
Owned hotel revenues for the year increased 1.4% from the prior year.
Revenues from newly opened or acquired hotels, and higher revenues from
comparable hotels, were offset by the effects of hotel sales during the year.
Despite the inclusion of $2.0 million in preopening expenses for new hotels,
owned hotel expenses actually decreased by 1.6% in 1997 as compared to 1996, as
a result of both hotel sales during the year and cost containment measures at
same store hotels. These measures helped to increase operating margins from
37.3% in 1996 to 39.1% in 1997.
Leased hotel revenues for 1997 increased $83.9 million, or 25.7% from the
prior year, due to the net addition of four leased properties during 1997,
property performance improvements, and the impact of a full year of operations
for 1996 additions. Leased hotel expenses increased 26.1% from the prior year,
also primarily due to the increase in the number of leased properties. The
operating margin on leased hotels decreased slightly from 11.9% in 1996 to 11.7%
in 1997.
Purchasing and service fees increased 29.1%, or $4.4 million, over 1996
levels, due to an increase in the number of preferred vendor programs, whereby
the Company earns an administrative fee as opposed to purchasing and reselling
goods, combined with improvements related to the integration of the Doubletree
and Red Lion purchasing programs.
Other fees and income increased $20.0 million, or 57.8%. During 1997, the
Company realized unusual items totaling $17.3 million compared to $1.5 million
in 1996. 1997 unusual items include a break-up fee of
21
<PAGE> 23
$10.9 million (net of expenses) resulting from the terminated Renaissance
transaction, a gain of $3.0 million from the sale of the Company's management
rights for a planned hotel in Atlantic City and $3.4 million in gains from the
sale of joint venture hotels. 1996 included $1.5 million in gains from joint
venture asset sales. The remainder of the increase is primarily due to increases
in earnings from unconsolidated joint ventures.
General and administrative expenses increased 9.7%, or $7.0 million, in
1997. This increase is the result of overall corporate growth to support the
Company's expanding hotel system, combined with the inclusion in first quarter
1997 of a $5.5 million charge related to the establishment of certain long-term
executive compensation programs. Depreciation and amortization was virtually
flat in 1997 as compared to 1996, as depreciation expense on new hotels was
offset by the impact of hotel sales.
The Company recorded a $115.0 million provision for Merger-related business
combination expenses in the fourth quarter of 1997. These expenses include $40.3
million of transaction costs and $74.7 million of severance and exit costs
related to the consolidation of administrative functions and asset write-offs.
After the integration of Doubletree and PHC is complete, the Company expects to
realize annual savings of $15.0-$20.0 million in general and administrative
costs. Additionally, the Company anticipates as much as $5.0 million in 1998
interest savings.
Interest and dividend income increased slightly in 1997, with higher
interest income earned on loans to hotel owners partially offset by lower
dividend income due to sales during the year of portions of the Company's common
stock investments. Interest expense decreased 4.2% in 1997 as compared to 1996,
as the Company maintained a lower average outstanding debt balance during 1997
due to increased operating cash flow.
1997 operating results include $43.3 million in pre-tax gains on the sale
of real estate and common stock investments. During 1997, Promus sold five
hotels and recognized a net $30.3 million gain. Promus continues to manage four
of the five hotels under long-term management contracts. In 1996 in connection
with strategic alliances with three publicly traded real estate investment
trusts (REITs), Promus purchased common stock and limited partnership interests
in these REITs. During 1997, Promus sold portions of its common stock holdings
in two of these REITs for $57.4 million, recognizing a gain of $13.0 million.
1997 operating results reflect an overall tax rate of 45.5%, compared with
an overall rate of 41.3% for the 1996 period. The increase in the overall rate
is primarily due to the nondeductibility of certain business combination costs,
which increased the effective tax rate by 6.6%.
The increase of $1.2 million in the minority interest share of net income
reflects the profits allocable to third party owners of consolidated joint
venture hotels.
Net income and earnings per diluted share for the year ended December 31,
1997 were $95.4 million and $1.09, respectively, compared to $106.0 million and
$1.21 for 1996. Excluding the effect of the unusual items described above, net
income and earnings per diluted share for 1997 would have been $143.8 million
and $1.64, respectively, compared to $103.4 million and $1.18, respectively, in
1996.
Year Ended December 31, 1996 (Pro Forma) Compared with Year Ended December 31,
1995 (Pro Forma)
1996 pro forma revenues increased $103.6 million, or 13.2%, to $890.6
million, compared to $786.9 million for the 1995 pro forma period.
Revenues from franchise and management fees increased $30.0 million, or
24.7%, due to growth in the number of franchised properties, an increase in the
number of managed hotels and improved performance at existing properties. The
number of franchised properties increased 18.2%, from 594 at December 31, 1995
to 702 at December 31, 1996. In addition, the Company added 44 new management
contracts, net of terminations, between December 31, 1995 and December 31, 1996,
a 40.4% increase. Incentive management fees also increased as a result of
improved performance at managed hotels.
Owned hotel revenues increased $13.3 million, or 3.8%, for the year, while
owned hotel expenses increased only 1.4% for the period, resulting in a $10.1
million increase in owned hotel margin to 37.3%. This
22
<PAGE> 24
is due primarily to increases in RevPAR, coupled with continued cost
containment. The 1996 sale of three owned hotels partially offset the
year-over-year performance increase.
Leased hotel revenues increased $52.4 million, or 19.1%, principally due to
an increase in the size of the Company's leased hotel portfolio in 1996 as
compared to 1995, coupled with improved RevPAR. The increased number of leased
hotels is also reflected in the 18.6% increase in leased hotel expenses.
Purchasing and service fees increased $3.2 million, or 27.6%, primarily due
to the growth in the number and size of preferred vendor programs, from which
the Company earns administrative fees. Other fees and income increased $4.6
million, or 15.5%, due primarily to higher income from nonconsolidated joint
venture partnerships.
General and administrative expenses increased $5.3 million, or 7.9%, due
primarily to higher corporate costs incurred to support the growing franchise
and management systems.
Interest and dividend income increased $10.1 million, or 80.1%, due to
higher dividend income from Promus' investments in the stocks of four REITs and
higher interest income on loans to hotel owners and Promus' investment in its
franchise system.
Interest expense decreased slightly in 1996 from the 1995 period, due to
the combined effects of lower interest expense from joint ventures and a lower
corporate borrowing rate.
The increase in gains on the sale of real estate and stock investments
during 1996 is due to the sale of three hotels during 1996 as opposed to a
single hotel in 1995.
The increase of $1.1 million in the minority interest share of net income
reflects the profits allocable to third party owners of certain consolidated
joint ventures.
The 1996 effective tax rate of 41.3% improved over the 1995 effective rate
of 42.9% due to effective management of the Company's tax liabilities, but
remained higher than the federal statutory rate due primarily to state income
taxes.
Net income and earnings per diluted share were $90.7 million and $1.23,
respectively for 1996, and $64.4 million and $0.92, respectively, for 1995. Pro
forma net income and diluted earnings per share for 1996 were $106.0 million and
$1.21, respectively, compared to $70.9 million and $0.82, respectively, in 1995.
Excluding the effect of 1995 and 1996 unusual items, net income and diluted
earnings per share would have been $69.6 million or $0.81 per share,
respectively, in 1995, and $103.4 million, or $1.18 per share, in 1996.
Year Ended December 31, 1997 (Actual) Compared with Year Ended December 31,
1996 (Actual)
1997 revenues increased $477.8 million, or 85.3%, due in large measure to
the full year effect of the November 8, 1996 acquisition of Red Lion. Red Lion's
1996 results were only included for the period subsequent to the acquisition.
Also contributing to the revenue growth were increases in the number of hotels
in the system, improved hotel performance and growth in the Company's preferred
vendor programs. Other fees and income increased $23.1 million primarily due to
the $10.9 million (net of expenses) Renaissance break-up fee, the $3.0 million
gain on the sale of the Company's management rights for a hotel under
development and $3.4 million in gains from the sale of joint venture
investments.
Operating costs increased $459.3 million, or 116.3%, primarily due to the
full year impact of the Red Lion acquisition, expenses related to the merger of
Doubletree and PHC, and costs resulting from growth in the Company's hotel
system.
Interest and dividend income increased $5.8 million, or 33.8%, due to
increases in interest earned on loans to hotel owners and dividends on REIT
stock.
Interest expense increased $35.4 million, or 96.5%, percent primarily due
to higher borrowings resulting from the Red Lion acquisition.
23
<PAGE> 25
Gains on the sale of real estate and securities increased $38.9 million.
The Company realized $30.3 million of gains from the sale of five hotels and
$13.0 million from the sale of a portion of its investments in the common stock
of two REITs.
The increase in minority interest share of net income reflects the increase
in the number of consolidated joint ventures resulting from the Red Lion
acquisition.
Net income and diluted earnings per share, excluding the effect of unusual
items, were $143.8 million and $1.64, respectively. Net income for 1997 was
$95.4 million, or $1.09, per diluted share. Net income for 1996 was $90.7
million, or $1.23, per diluted share.
OVERALL
Excluding unusual items, Promus' operating income has increased each year
over prior year levels. Though these increases are in part due to the revenue
growth discussed above, growth has also come from the changing mix of Promus'
business. Due to the size and strength of Promus' infrastructure and systems,
openings of additional franchised or managed properties require fewer
incremental costs, and the growth which has occurred in the Promus system over
the past several years has served to improve overall operating margins. Promus'
pro forma overall operating margin increased from 23.2% in 1995 to 25.9% in
1996; the 1997 operating margin (excluding unusual items) increased to 28.1%.
Due to the continuing growth of Promus' franchise and management businesses and
the sale of five owned hotels in 1997, growth in fee revenues has outpaced
growth in operating expenses, resulting in higher operating margins. This trend
of margin improvement has continued over the past several years, as Promus'
franchising and management businesses have grown.
HOTEL DEVELOPMENT
Overview
Promus continues to be an industry leader in hotel development. During
1997, the Company added 19,137 net rooms to its hotel system, increasing its
system size by 12% during the year. This compares to the addition of 40,933 net
rooms during 1996. Net room additions, by brand, are as follows:
<TABLE>
<CAPTION>
NET ROOMS ADDED
----------------
1996 1997
------ -------
<S> <C> <C>
Doubletree Hotels........................................... 195 16,116
Hampton Inn................................................. 9,824 10,049
Hampton Inn & Suites........................................ 1,273 1,608
Embassy Suites.............................................. 5,912 1,444
Homewood Suites............................................. 804 1,364
Other....................................................... 22,925 (11,444)
------ -------
40,933 19,137
====== =======
</TABLE>
1997's dramatic increase in Doubletree rooms and corresponding decrease in
Other hotel rooms, is due to the conversion during 1997 of 40 Red Lion hotels,
containing almost 12,000 rooms, to the Doubletree brand. 1996 room increases
reflect the impact of the RFS (7,000 rooms) and Red Lion (13,000 rooms)
acquisitions, the conversion of 16 Crown Sterling hotels (4,000 rooms) to the
Embassy Suites brand, as well as strong Hampton Inn unit growth. Promus will
continue growing the Hampton Inn brand as demand from franchisees and guests
remains strong. However, the Company has seen a slight decline in Hampton Inn
approvals, in part because of the supply growth over the past several years in
Hampton Inn's mid-price market segment.
24
<PAGE> 26
Promus' current development pipeline contains an increasing number of
projects within its hotel brands. Promus' hotel development pipeline as of
December 31, 1997 contained 412 properties that were either in the design or
construction phase, as follows:
<TABLE>
<CAPTION>
UNDER
CONSTRUCTION/ IN
CONVERSION DESIGN TOTAL
------------- ------ -----
<S> <C> <C> <C>
Hampton Inn................................................. 100 128 228
Hampton Inn & Suites........................................ 20 35 55
Homewood Suites............................................. 28 20 48
Embassy Suites.............................................. 9 22 31
Club Hotels by Doubletree................................... 8 15 23
Doubletree Hotels........................................... 8 11 19
Doubletree Guest Suites..................................... 1 4 5
Other....................................................... 3 -- 3
--- --- ---
177 235 412
=== === ===
</TABLE>
When completed, the 177 properties under construction or conversion will
add over 20,000 rooms to the Promus hotel system. The remaining 235 hotels in
the design phase, if completed, will add almost 30,000 additional rooms.
Twenty-four of the properties within the pipeline are being developed by the
Company to be sold to strategic alliance partners or for operation as Company
owned hotels; the remainder are being developed by franchisees.
Promus plans to actively pursue development opportunities for all its
brands. Though this development will most likely come through franchising these
brands, growth plans could include ground-up construction of new hotels, either
for sale to strategic partners or for operation as company owned properties. In
addition, Promus is assessing the market position of individual
properties/markets, and could reposition itself by rebranding existing
properties or acquiring or selling selected properties.
STRATEGIC ALLIANCES AND JOINT VENTURES
Over the past several years, Promus has entered into several strategic
alliances designed to grow its hotel brands. In September 1997, Promus and
Strategic Hotel Capital, Inc. (SHC) entered into a development agreement, under
which SHC committed to invest up to $200.0 million in the development of at
least ten Embassy Suites hotel properties. Under the agreement, Promus will fund
the construction of the hotels and, upon completion, SHC will purchase the hotel
properties at Promus' cost. Promus will retain management and franchise
agreements with twenty year terms. Promus expects to begin funding these
projects in 1998, and the first property is expected to open in 1999.
Promus has entered into a strategic alliance with FelCor Suite Hotels, Inc.
and FelCor Suites Limited Partnership (collectively, FelCor), under which FelCor
has committed to invest up to $100.0 million in Embassy Suites developments.
Promus will construct at least five Embassy properties and, upon completion,
will sell a 90% interest in each property to FelCor at Promus' cost. These
hotels will operate under Promus management contracts and franchise agreements
with fifteen and twenty year terms, respectively. As with the SHC developments,
Promus will begin funding the projects in 1998, and the first hotel under this
alliance is expected to open in 1999.
During 1995, Promus entered into development agreements with FelCor in
which Promus invested $75.0 million in FelCor limited partnership interests and
common stock and guaranteed repayment of up to $25.0 million of a third party
loan advanced to FelCor. Subject to some restrictions, the limited partnership
interests are convertible to common stock, which may be sold on the open market.
During 1997, Promus sold approximately 51% of its FelCor investment for $50.1
million, resulting in pre-tax gains of $11.2 million. The proceeds from these
sales will be used to promote further growth of the Embassy Suites brand,
including the development of new Embassy Suites properties pursuant to the
FelCor alliance discussed above. Based on the market value of its remaining
FelCor common stock as of December 31, 1997, Promus has recorded an
25
<PAGE> 27
unrealized gain on marketable equity securities of $14.2 million (pre-tax). This
amount will fluctuate based on the market value of FelCor stock, but no earnings
impact will be realized until the stock is actually sold.
As of December 31, 1997, FelCor owned or had an interest in 64 Promus brand
hotels, which represents 5% and 8% of all Promus hotels and hotel rooms,
respectively. Promus owns a 50% interest in 12 of the 64 hotels. These 64 hotels
contributed approximately 13% of the Company's franchise and management fee
revenue in 1997.
In 1996, Promus entered into an agreement with Remington Hotel Corporation
(Remington) and Nomura Asset Capital Corporation in which Remington will develop
ten Embassy Suites hotels that will incorporate a new, smaller 150-suite
prototype design. This will allow Embassy Suites properties to be built in
somewhat smaller or suburban markets. Promus will provide a portion of each
project's capital through mezzanine financing. Through December 31, 1997, Promus
had invested $2.0 million in one project, four properties were under
construction and another six were in the development pipeline. The first
150-suite Embassy Suites hotel opened in January 1998.
At December 31, 1997, the Company owned approximately 27% of the
outstanding common stock (16% assuming conversion of outstanding preferred
stock) of Candlewood Hotel Company, L.L.C. (Candlewood). In connection with the
November 1996 initial public offering of Candlewood, the Company's contribution
in excess of $0.2 million and its preferred return were converted to an interest
bearing note receivable in the amount of $12.1 million. As a result of
subsequent borrowings, the note receivable balance at December 31, 1997 is $14.6
million. The Company's remaining investment consists of 2,587,500 shares of
Candlewood's common stock, the fair value of which was $22.6 million at December
31, 1997.
During 1996, Promus entered into strategic development alliances with
Equity Inns, Inc. (Equity) and Winston Hotels, Inc. (Winston), two REITs,
whereby Promus agreed to invest up to $15.0 million in the common stock of both
REITs in connection with their purchase of hotels from the Company. Through
December 31, 1997, Promus has invested $7.1 million and $1.5 million in Equity
and Winston, respectively, and Equity and Winston have purchased four hotels and
one hotel, respectively. During the fourth quarter of 1997, Promus sold
approximately 78% of its Equity stock for $7.3 million, recognizing a pre-tax
gain of $1.8 million. Under the terms of these alliances, Promus may offer
additional properties for sale to Equity and Winston at Promus' cost of
development. Promus will receive 20-year franchise agreements and 10-year
management contracts for all hotels developed and purchased by the REITs
pursuant to these alliances.
In February 1996, the Company purchased RFS, Inc. (RFS Management), a
privately-held hotel operator, for approximately $72.0 million. RFS Management
leased and/or managed 49 hotels owned by RFS Hotel Investors, Inc. (RHI), a
publicly-traded REIT. In a separate transaction, the Company purchased $18.5
million of convertible preferred stock in RHI and obtained a 10-year right of
first refusal to manage or lease future hotels acquired or developed by RHI. At
December 31, 1997, RFS Management leased and/or managed 61 hotels from RHI.
ACQUISITIONS AND INVESTMENTS
In early January 1998, Promus announced its acquisition of Harrison
Conference Associates, Inc. (Harrison) for $60.2 million in cash. Harrison is a
leading conference center operator with over 1,200 rooms under management,
including two owned and seven managed properties.
During 1997, Promus purchased two Homewood Suites hotels, in Salt Lake
City, Utah and Plano, Texas, for $15.4 million, and an Embassy Suites hotel in
Portland, Oregon, for $45.3 million. All three properties are being operated as
company owned hotels.
DEVELOPMENT FINANCING
The Company recognizes the challenges faced by some prospective owners in
obtaining conventional financing for projects. As a result, Promus has initiated
programs designed to grow the Promus hotel system by providing alternative
capital sources to owners.
26
<PAGE> 28
In 1997 the Company announced the formation of Promus Acceptance Corp.
(ProMAC). ProMAC provides conservatively underwritten first mortgage
construction financing to Promus franchisees for select Homewood Suites, Hampton
Inn & Suites and Hampton Inn hotels by issuing up to $120.0 million in
commercial paper that is backed by a liquidity facility from participating
financial institutions. The terms generally provide for favorably priced
floating and fixed rate loans ranging from $3.5 million to $8.0 million with
six-year terms and 20-year amortization schedules. Promus has provided a
guarantee up to $36.0 million on loans outstanding under the program and has
also provided a $1.0 million working capital guarantee to ProMAC. In June 1997,
Promus loaned $2.0 million to ProMAC in the form of a start-up loan. This loan,
which bears interest at Prime, matures in April 2005. As of December 31, 1997,
ProMAC had committed and funded $50.4 million and $6.5 million, respectively, in
hotel financing.
Under its mezzanine financing program, Promus provides conservatively
underwritten secondary financing to franchisees. A minimum of 20% equity is
required by the borrower, and the investment must meet certain defined
underwriting criteria. The terms of the first mortgage and the mezzanine
financing must be acceptable to Promus and the first mortgage lender, with whom
Promus will enter into an inter-creditor agreement. During 1997, Promus provided
$8.2 million in mezzanine loans, and $6.8 million in such loans were repaid
during the year. Outstanding loans bear interest at rates ranging from 10.0% to
10.5%.
The Company provides credit support for a loan facility utilized by
Candlewood to provide construction and permanent financing to Candlewood and its
franchisees on terms that, in most cases, are more attractive than those which
could otherwise be obtained. The Company's maximum exposure on any individual
loan will range from $0.9 million to $1.9 million per hotel, with the aggregate
amount of exposure for all such credit support capped at $30.0 million. As of
December 31, 1997, the Company has guaranteed $22.8 million in such financing.
VACATION RESORT DEVELOPMENT
Promus Vacation Resorts (PVR) allows the Company to expand upon its
reputation and expertise in the lodging industry, by extending that knowledge to
the vacation interval ownership business. Development of PVR properties consists
of the construction or acquisition of resort-quality accommodations in
destination locations throughout the United States. These accommodations consist
of full-featured one, two and three bedroom units, which are sold in one week
intervals as an alternative to renting. Each unit contains 51 sellable weekly
intervals, with one week reserved for annual maintenance. By purchasing an
interval, owners are entitled to a one week stay during each year. Owners have
several options with an interval purchase, including splitting their week,
spending their week at other timeshare resorts (by trading with other interval
owners), or renting the unit to others during their interval in any year. Units
containing unsold intervals are also rented on a daily basis.
The Company has two licensed PVR products: Embassy Vacation Resorts and
Hampton Vacation Resorts. Promus receives a one-time franchise licensing fee
upon the sale of an interval; the Company then receives ongoing franchise
royalty fees from interval owners, as well as royalty fees for hotel revenues
earned from any interval rentals. For properties which Promus manages, the
Company will also earn a management fee from the operation of the facility. To
facilitate growth and development of PVR properties, Promus has entered into
alliances with Signature Resorts (Signature) and Vistana Development Ltd.
(Vistana).
Promus has licensed four Embassy Vacation Resorts to Signature. The latest
Signature agreement, announced in October 1997, calls for the conversion, by
Signature, of the Embassy Suites hotel in Maui, Hawaii, to an Embassy Vacation
Resort. The resort will feature over 400 units, 157 of which will be initially
converted to interval ownership units. Plans for additional Embassy Vacation
Resort properties to be developed or acquired by Signature and licensed by the
Company are being discussed.
In 1996, Promus entered into a five-year joint venture development
agreement with Vistana to acquire, develop, manage and market vacation ownership
resorts in North America under Promus brand names. Vistana will serve as
managing partner and project developer and will market the timeshare units.
Promus will serve as franchisor and manager of these joint venture properties
and will own a 50% interest in certain projects developed pursuant to this
agreement. In addition to the proposed joint venture developments,
27
<PAGE> 29
Vistana has licensed three other PVR properties. The latest of these, announced
in October 1997, calls for the development by Vistana of a 150-unit Embassy
Vacation Resort in Scottsdale, Arizona which will be managed by Promus. In May
1997, Vistana opened the first Hampton Vacation Resort in Kissimmee, Florida.
This resort is managed by Vistana. An Embassy Vacation Resort in Myrtle Beach,
South Carolina, which will be managed by Promus, is currently under
construction.
As of December 31, Promus Vacation Resort statistics were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1997
------ ------
<S> <C> <C>
Total vacation resorts open................................. 3 6
Total available timeshare units............................. 371 1,046
Total available timeshare intervals......................... 18,921 53,346
Total timeshare intervals sold*............................. 4,524 10,304
</TABLE>
- - ---------------
* Includes presold intervals for resorts under construction.
Promus Vacation Resorts also manages a non-branded resort property in
Miami, Florida.
OTHER
In addition to ground-up development of hotels, strategic alliances with
others, and incentives provided to hotel owners as a means of obtaining
franchise and management contracts, the Company pursues other means of system
growth, including strategic hotel acquisitions. The hotel industry is in an
intense period of consolidation, which is expected to continue for several more
years. Promus is well positioned to take advantage of these unique market
conditions and may, from time to time, pursue such opportunities as they become
available.
CAPITAL SPENDING
Investment in Franchise System
Promus' net investment in its franchise system infrastructure at December
31, 1997 increased slightly from December 31, 1996. The Company expects its
investment in the franchise system to decrease slightly in 1998, as
reimbursements from hotel assessments outpace additional spending on system
enhancements.
Other
In order to maintain Promus' quality standards, ongoing refurbishment of
existing company owned and leased hotel properties will continue in 1998 at an
estimated annual cost of approximately $39.0 million. During 1997, the Company
spent a similar amount on hotel refurbishment and conversions. 1997 spending
increased significantly over prior year levels due to the November 1996
acquisition of Red Lion, in which the Company obtained 34 owned and leased
hotels.
In April 1997, PHC's Board of Directors authorized the Company to
repurchase up to $150.0 million of its common stock for general corporate
purposes and future strategic investments. PHC repurchased 1,573,800 shares of
its common stock at a cost of $60.0 million. Repurchases of these shares were
funded primarily through operating cash flows. As a result of the Merger of PHC
into Promus, the Company terminated this share repurchase program.
Promus' capital expenditures totaled $240.6 million for the twelve months
ended December 31, 1997. The Company currently expects to spend between $250.0
million and $300.0 million during 1998 to fund hotel and resort development,
refurbish existing facilities, support its hotel management and business
systems, loan funds to hotel owners, invest in joint ventures and pursue other
corporate related projects. If the Company identifies other significant
acquisition and/or investment opportunities, 1998 capital spending could
increase from these planned levels.
28
<PAGE> 30
Cash necessary to finance projects currently identified, as well as
additional projects to be pursued by Promus, will be made available from
operating cash flows, the revolving credit facility, joint venture partners,
specific project financing, sales of existing hotel assets and/or investments
and, if necessary, Promus debt and/or equity offerings.
LIQUIDITY AND CAPITAL RESOURCES
1997 operating cash flow increased $62.6 million from 1996 levels. This
increase is due in part to higher income levels and the full year effect of the
Red Lion acquisition, combined with the noncash impact of unusual items
including business combination expenses. The increase in 1996 operating cash
flow over 1995 is also due primarily to net income growth, which increased $26.3
million to $90.7 million in 1996.
Cash flows used in investing activities decreased substantially in 1997
from 1996 levels, due to the 1996 purchase of Red Lion. 1997 capital spending
was also partially offset by proceeds from the sales of real estate, securities
and investments. The increase in cash used for investing activities during 1996
as compared to 1995 was attributable to the Red Lion purchase noted above.
Cash flows used in financing activities during 1997 include approximately
$60.0 million used by PHC to repurchase common stock and approximately $77.4
million used by the Company to retire debt. 1996 included $866.3 million in cash
received from debt and equity offerings that was used to purchase Red Lion.
On December 31, 1997, the Company had a working capital deficit of $120.7
million, compared to a $49.0 million deficit that existed at December 31, 1996.
This increase is primarily the result of accrued business combination expenses
and an increase in the current portion of notes payable related to a
consolidated joint venture hotel mortgage. Cash needed to fund business
combination expenses will be made available from operations or borrowings under
the Promus Facility. The hotel mortgage which matures during 1998 is currently
being refinanced.
The Company's cash management program uses all excess cash to pay down
amounts outstanding under the Promus Facility. Promus does not believe that the
current ratio is an appropriate measure of its short-term liquidity without
considering the aggregate availability of its capital resources. Promus believes
that these resources, consisting of strong operating cash flow, available
borrowings under the Promus Facility, and Promus' ability to obtain additional
financing through various financial markets, are sufficient to meet its
liquidity needs.
Promus Facility and Other Indebtedness
Concurrent with the Merger, Promus entered into a new unsecured revolving
credit arrangement (the Promus Facility), which consists of two separate
agreements, the significant terms of which are as follows:
<TABLE>
<CAPTION>
TOTAL MATURITY INTEREST FACILITY
FACILITY DATE RATE FEES
------------ ----------------- ------------- ------------------
<S> <C> <C> <C> <C>
Five-Year Revolver... $750,000,000 December 19, 2002 Base Rate, as 0.125% of the
defined or total facility
LIBOR +25.0
basis
points
Extendible Base Rate, as 0.105% of the
Revolver........... $250,000,000 December 18, 1998 defined, or total facility
LIBOR +27.0
basis
points
</TABLE>
Promus borrowed $592.0 million under the Promus Facility on December 19,
1997, which was used to repay the existing indebtedness of Doubletree and PHC.
Previously capitalized financing costs were written off
29
<PAGE> 31
and costs incurred to obtain the Promus Facility were capitalized and are being
amortized over the term of the Promus Facility.
The Extendible Revolver is a 364-day facility with annual renewals and may
be converted into a four-year term loan with equal quarterly amortizing
payments. The Five-Year Revolver includes a sublimit for letters of credit of
$100.0 million. At December 31, 1997, approximately $16.0 million in letters of
credit were outstanding under this agreement (related primarily to the Company's
self-insurance reserves). Promus Facility availability at December 31, 1997, was
$376.9 million. The remaining borrowing capacity is available for working
capital, hotel development and other general corporate purposes.
Facility fees and interest on Base Rate loans are paid quarterly. The
agreements contain a tiered scale for facility fees and the applicable LIBOR
spread that, subsequent to June 1998, is based on the more favorable of Promus'
current credit rating or the leverage ratio, as defined. Based on the terms of
the Promus Facility, Promus' current fee structure (reflected in the previous
page's table) is fixed for the first six months, but will begin to follow the
tiered scale thereafter. Had the tiered scale been in effect at December 31,
1997, Promus' borrowing rate, based on its current credit rating (BBB+ per
Standard & Poor's) would have been five basis points lower, for a combined fee
of LIBOR plus 32.5 basis points.
Both the Extendible Revolver and the Five-Year Revolver contain provisions
that allow Promus to request increases in total capacity of $50.0 million and
$200.0 million, respectively. Though all the banks which currently participate
in the Promus Facility are not obligated to provide this additional capacity,
Promus can approach banks outside the current facility. The Promus Facility also
contains provisions that restrict certain investments, limit the Company's
ability to dispose of property, and require that certain performance ratios be
maintained. As of December 31, 1997, Promus was in compliance with all such
covenants.
In addition to the Promus Facility, the Company has other notes payable,
which are primarily mortgage financing on consolidated joint venture hotel
properties. One such note matures in June 1998, and Promus, in conjunction with
its partner, is currently in negotiations to refinance this debt.
During the fourth quarter of 1997, Promus obtained a $20.0 million
five-year convertible rate unsecured term loan, the proceeds from which were
used to retire a portion of PHC's previous credit facility. This loan bears
interest for two years at the three-month LIBOR rate minus 15 basis points (5.7%
at December 31, 1997). At the beginning of the third year, the rate changes to a
fixed rate of 6.7%. The bank may elect to convert this fixed rate to the
three-month LIBOR rate plus 32.5 basis points, under a conversion option that is
exercisable annually beginning on October 28, 1999.
As of December 31, 1997, Promus was a party to several interest rate swap
agreements, bearing a total notional amount of $389.8 million, which serve to
convert a portion of the Company's variable rate debt to a fixed rate of
interest. The weighted average fixed rate pursuant to the agreements, which
expire between December 1998 and January 2002, was approximately 6.1% at
December 31, 1997, resulting in a weighted average effective rate (including the
applicable spreads) of approximately 6.7%.
YEAR 2000
With the approach of the year 2000, there has been concern over the impact
of this event on computer systems worldwide. Promus has assessed the impact of
the year 2000 on its business, and does not believe this event will materially
or adversely affect its future operations, financial results or financial
position.
SEASONALITY
The operating results of hotels are affected by seasonality. Though the
Company's hotels are geographically dispersed, revenues and profits are
typically higher in summer periods than winter periods.
INFLATION
Although operations of the Company can be impacted by inflation, Promus has
not typically experienced a significant negative effect on its hotels and food
and beverage operations as a result of inflation. To date, the
30
<PAGE> 32
Company has been able to increase rates and prices and thereby pass on the
effects of inflationary cost increases. Although competitive conditions may
limit the industry's future ability to raise room rates at the rate of inflation
and although inflation can also impact the travel patterns of guests, management
believes that each of its hotel brands has rate growth potential in excess of
the inflation rate. Promus will continue to emphasize cost containment and
productivity improvement programs. Inflation tends to increase the underlying
value of Promus' real estate and management and franchise contracts.
NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued several Statements of
Financial Accounting Standards (SFAS) in recent months. SFAS No. 130, "Reporting
Comprehensive Income," establishes standards for the reporting and display of
comprehensive income and its components within the financial statements. SFAS
No. 130 is effective for annual periods beginning after December 15, 1997, but
summary disclosure will be required in Promus' first quarter 1998 Form 10-Q.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," may require additional financial and descriptive disclosure
regarding Promus' operating segments, and is effective for the year ended
December 31, 1998.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. Certain information included in this
document and other materials filed or to be filed by the Company with the
Securities and Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the Company)
contains statements based on management's beliefs and assumptions, which are
based on information currently available to management. Forward looking
statements include information relating to, and may be impacted by changes in,
the following activities, among others: (A) operations of existing hotel
properties, including the effects of competition and customer demand, which can
impact future performance; (B) changes in the size of Promus' hotel system,
including anticipated scope and opening dates of new developments and planned
future capital spending; (C) relationships with third parties, including
franchisees, lessors, hotel owners, lenders and others; (D) litigation or other
judicial actions; (E) changes in the economy; and (F) adverse changes in
interest rates for both Promus and its franchisees and business partners. These
activities involve important factors, some of which are beyond Promus' ability
to control and predict, that could cause actual results to differ materially
from those expressed in any forward looking statements made by or on behalf of
the Company. Any forward looking statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only as of the date
made.
31
<PAGE> 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PROMUS HOTEL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Report on Financial Statements................. 32
Independent Auditors' Report................................ 33
Consolidated Financial Statements:
Balance Sheets as of December 31, 1996 and 1997........... 34
Statements of Operations for the years ended December 31,
1995, 1996 and 1997.................................... 35
Statements of Stockholders' Equity for the years ended
December 31, 1995, 1996 and 1997....................... 36
Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997.................................... 37
Notes to Consolidated Financial Statements.................. 38
</TABLE>
Financial Statement Schedules
All financial statement schedules have been omitted as the information is
either included in the consolidated financial statements and notes thereto, is
not applicable or is not required.
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
Promus is responsible for preparing the financial statements and related
information appearing in this report. Management believes that the financial
statements present fairly its financial position, results of operations and cash
flows in conformity with generally accepted accounting principles. In preparing
its financial statements, Promus is required to include amounts based on
estimates and judgments which it believes are reasonable under the
circumstances.
Promus maintains accounting and other control systems designed to provide
reasonable assurance that financial records are reliable for purposes of
preparing financial statements and that assets are properly accounted for and
safeguarded. Compliance with these systems and controls is reviewed through a
program of audits by an internal auditing staff. Limitations exist in any
internal control system, recognizing that the system's cost should not exceed
the benefits derived.
The Board of Directors pursues its responsibility for Promus' financial
statements through its Audit Committee, which is composed solely of directors
who are not officers or employees of Promus. The Audit Committee meets from time
to time with the independent public accountants, management and the internal
auditors. Promus' internal auditors report directly to, and the independent
public accountants have access to, the Audit Committee, with and without the
presence of management representatives.
<TABLE>
<S> <C>
Raymond E. Schultz William L. Perocchi
Chairman of the Board & Executive Vice President &
Chief Executive Officer Chief Financial Officer
</TABLE>
32
<PAGE> 34
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Promus Hotel Corporation:
We have audited the accompanying consolidated balance sheets of Promus
Hotel Corporation (a Delaware corporation) and subsidiaries (Promus) as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years
ended December 31, 1997. These financial statements are the responsibility of
Promus' management. Our responsibility is to express an opinion on these
financial statements based on our audits. These financial statements include the
financial position and results of operations of Doubletree Corporation
(Doubletree), pursuant to a merger of Doubletree and Promus effective December
19, 1997. As discussed in Note 1, this merger was accounted for as a
pooling-of-interests, and the financial position and results of operations for
Promus and Doubletree have been combined for all periods presented. We have not
audited the financial statements of Doubletree for the two years ended December
31, 1996. Those statements were audited by other auditors whose report, dated
March 17, 1997, was furnished to us and our opinion, insofar as it relates to
amounts included for Doubletree, is based solely upon the report of the other
auditors. The financial statements of Doubletree for the two years ended
December 31, 1996, audited by other auditors, represent 73 percent of total
consolidated assets as of December 31, 1996, and 52 percent and 44 percent of
total consolidated revenues for the years ended December 31, 1996 and 1995,
respectively.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of Promus Hotel Corporation and subsidiaries as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years ended December 31, 1997, in conformity with
generally accepted accounting principles.
Memphis, Tennessee,
February 4, 1998.
33
<PAGE> 35
PROMUS HOTEL CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31,
<TABLE>
<CAPTION>
1996 1997
---------- ----------
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 29,288 $ 24,066
Accounts receivable, net.................................... 69,246 78,941
Other....................................................... 19,693 43,222
---------- ----------
Total current assets.............................. 118,227 146,229
---------- ----------
Property and equipment, net................................. 955,886 960,231
Investments................................................. 264,442 250,688
Management and franchise contracts, net..................... 468,301 440,568
Goodwill, net............................................... 378,326 374,500
Notes receivable............................................ 85,629 89,452
Investment in franchise system.............................. 48,750 50,421
Deferred costs and other assets............................. 43,353 66,957
---------- ----------
$2,362,914 $2,379,046
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses....................... $ 161,435 $ 220,924
Current portion of notes payable............................ 5,778 46,020
---------- ----------
Total current liabilities......................... 167,213 266,944
---------- ----------
Deferred income taxes....................................... 279,805 264,859
Notes payable............................................... 789,174 671,978
Other long-term obligations................................. 77,103 79,530
---------- ----------
1,313,295 1,283,311
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value. Authorized 500,000,000
shares; 87,114,511 and 86,118,141 shares issued and
outstanding............................................ 871 861
Additional paid-in capital................................ 902,451 856,008
Unrealized gain on marketable equity securities........... 17,137 13,601
Unearned employee compensation............................ (739) (70)
Retained earnings......................................... 129,899 225,335
---------- ----------
1,049,619 1,095,735
---------- ----------
$2,362,914 $2,379,046
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
34
<PAGE> 36
PROMUS HOTEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- ----------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Franchise and management fees............................. $110,350 $140,768 $ 185,546
Owned hotel revenues...................................... 137,160 172,893 368,012
Leased hotel revenues..................................... 141,942 205,163 410,526
Purchasing and service fees............................... 6,112 9,867 19,304
Other fees and income..................................... 26,265 31,522 54,623
-------- -------- ----------
Total revenues.................................... 421,829 560,213 1,038,011
-------- -------- ----------
Operating costs and expenses:
General and administrative expenses....................... 52,952 62,638 79,249
Owned hotel expenses...................................... 82,055 105,146 224,052
Leased hotel expenses..................................... 132,644 190,797 362,681
Depreciation and amortization............................. 27,759 36,276 73,127
Business combination expenses............................. 2,565 -- 115,000
-------- -------- ----------
Total operating costs and expenses................ 297,975 394,857 854,109
-------- -------- ----------
Operating income.................................. 123,854 165,356 183,902
Interest and dividend income.............................. 7,551 17,175 22,982
Interest expense, net..................................... (31,818) (36,647) (72,027)
Gain on sale of real estate and securities................ 2,334 4,439 43,330
-------- -------- ----------
Income before income taxes, minority interest and
extraordinary items............................. 101,921 150,323 178,187
Minority interest share of net income....................... (83) (539) (3,087)
-------- -------- ----------
Income before income taxes and extraordinary
items........................................... 101,838 149,784 175,100
Income tax expense.......................................... (40,287) (59,126) (79,664)
-------- -------- ----------
Income before extraordinary items................. 61,551 90,658 95,436
Extraordinary items, net of tax of $1,635................... 2,819 -- --
-------- -------- ----------
Net income........................................ $ 64,370 $ 90,658 $ 95,436
======== ======== ==========
Basic earnings per share
Income before extraordinary items................. $ 0.89 $ 1.25 $ 1.10
======== ======== ==========
Net income........................................ $ 0.93 $ 1.25 $ 1.10
======== ======== ==========
Diluted earnings per share
Income before extraordinary items................. $ 0.88 $ 1.23 $ 1.09
======== ======== ==========
Net income........................................ $ 0.92 $ 1.23 $ 1.09
======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
35
<PAGE> 37
PROMUS HOTEL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
ADDITIONAL MARKETABLE UNEARNED PARENT
COMMON PAID-IN EQUITY EMPLOYEE RETAINED COMPANY
STOCK CAPITAL SECURITIES COMPENSATION EARNINGS INVESTMENT TOTAL
------ ---------- ---------- ------------ -------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- December 31,
1994........................ $216 $ 93,215 $ -- $ -- $ (1,844) $143,008 $ 234,595
Proceeds from sale of 400,000
shares of common stock to
the public, net of offering
costs of $980............... 4 6,616 -- -- -- -- 6,620
PHC intercompany activity with
Parent -- January 1, 1995
through June 30, 1995....... -- -- -- -- -- (24,656) (24,656)
Spin-off of PHC............... 475 140,461 -- (1,354) -- (139,582) --
Net shares issued under
incentive compensation plan,
including income tax benefit
of $159..................... 1 889 -- 145 -- -- 1,035
Unrealized gain on equity
securities, net of deferred
income taxes................ -- -- 1,844 -- -- -- 1,844
Distributions to
stockholders................ -- -- -- -- (2,055) -- (2,055)
Net income.................... -- -- -- -- 43,140 21,230 64,370
---- -------- ------- ------- -------- -------- ----------
Balance -- December 31,
1995........................ 696 241,181 1,844 (1,209) 39,241 -- 281,753
Proceeds from sale of 952,300
shares of common stock to
the public, net of offering
costs of $1,045............. 10 27,362 -- -- -- -- 27,372
Proceeds from sale of
9,067,534 shares of common
stock, net of offering costs
of $1,500................... 91 340,681 -- -- -- -- 340,772
Issuance of 7,381,588 shares
to the shareholders of Red
Lion........................ 74 291,499 -- -- -- -- 291,573
Net shares issued under
incentive compensation
plans, including income tax
benefit of $584............. -- 1,728 -- 470 -- -- 2,198
Change in unrealized gain on
equity securities, net of
deferred income taxes....... -- -- 15,293 -- -- -- 15,293
Net income.................... -- -- -- -- 90,658 -- 90,658
---- -------- ------- ------- -------- -------- ----------
Balance -- December 31,
1996........................ 871 902,451 17,137 (739) 129,899 -- 1,049,619
Net shares issued under
incentive compensation
plans, including income tax
benefit of $4,136........... 5 13,534 -- 669 -- -- 14,208
Purchases of treasury
shares...................... (15) (59,977) -- -- -- -- (59,992)
Change in unrealized gain on
equity securities, net of
realized gains and deferred
income taxes................ -- -- (3,536) -- -- -- (3,536)
Net income.................... -- -- -- -- 95,436 -- 95,436
---- -------- ------- ------- -------- -------- ----------
Balance -- December 31,
1997........................ $861 $856,008 $13,601 $ (70) $225,335 $ -- $1,095,735
==== ======== ======= ======= ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
36
<PAGE> 38
PROMUS HOTEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................. $ 64,370 $ 90,658 $ 95,436
Adjustments to reconcile net income to net cash provided
by operations:
Extraordinary items.................................... (4,454) -- --
Provision for business combination expenses, net of
payments............................................. -- -- 93,591
Depreciation and amortization.......................... 27,759 36,276 73,127
Other noncash expenses................................. (1,064) (3,578) 11,742
Equity in earnings of nonconsolidated affiliates....... (2,784) (7,677) (10,722)
Loss (gain) on sale of investments in partnerships and
affiliates........................................... 175 1,160 (3,445)
Gain on sale of real estate and securities............. (2,334) (4,439) (43,330)
Changes in assets and liabilities:
Increase in accounts receivable, net................... (9,393) (9,363) (9,882)
Increase in other current assets....................... (1,047) (5,766) (3,243)
Increase in accounts payable and accrued expenses...... 22,774 10,506 1,452
Increase in deferred costs and other assets............ (2,551) (3,275) (16,313)
Increase (decrease) in other long-term obligations and
deferred income taxes................................ 7,972 11,812 (14,520)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 99,423 116,314 173,893
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Red Lion and related costs................. -- (819,025) (20,607)
Purchases of property and equipment.................... (58,580) (60,277) (155,988)
Proceeds from sale of property and equipment........... 7,843 43,709 128,156
Investments in and advances to partnerships and
affiliates........................................... (50,363) (112,203) (47,285)
Distributions from partnerships and affiliates......... 3,411 11,104 16,004
Net investment in management and franchise contracts... (6,369) (1,284) (372)
Escrow deposits held for future development............ -- -- (22,053)
Proceeds from sale of investments...................... -- 2,224 62,530
Loans to owners of managed and franchised hotels....... (15,266) (26,941) (18,818)
Collections of loans to owners of managed and
franchised hotels.................................... 1,500 2,750 15,553
Net investment in franchise system..................... 138 (10,817) (3,257)
Other.................................................. (1,231) 4,210 (943)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES............. (118,917) (966,550) (47,080)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock............. 6,620 368,144 --
Proceeds from exercise of common stock options......... 305 1,219 6,817
Purchases of treasury stock............................ -- -- (59,992)
Net activity under revolving credit facilities......... 10,600 14,500 383,950
Proceeds from notes payable............................ -- 498,200 40,000
Principal payments on notes payable.................... (1,123) (37,596) (501,351)
Advances from Parent................................... 14,840 -- --
Other.................................................. (1,818) (263) (1,459)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES...................................... 29,424 844,204 (132,035)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ 9,930 (6,032) (5,222)
Cash and cash equivalents, beginning of period.............. 25,390 35,320 29,288
--------- --------- ---------
Cash and cash equivalents, end of period.................... $ 35,320 $ 29,288 $ 24,066
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
37
<PAGE> 39
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1. SUMMARY OF ORGANIZATION AND BUSINESS OPERATIONS
COMPANY HISTORY
On December 19, 1997, Doubletree Corporation (Doubletree) and Promus Hotel
Corporation (PHC) merged in accordance with the Agreement and Plan of Merger
(the Merger Agreement or the Merger) by and among Doubletree, PHC and Parent
Holding Corp., a newly-formed corporation jointly owned by Doubletree and PHC.
This transaction has been accounted for as a pooling-of-interests. Accordingly,
the accompanying consolidated financial statements have been restated to combine
the historical results of both Doubletree and PHC for all periods presented.
Concurrent with consummation of the Merger, PHC was renamed Promus Operating
Company, Inc. and Parent Holding Corp. was renamed Promus Hotel Corporation.
Promus Hotel Corporation and subsidiaries are collectively referred to herein as
Promus or the Company.
On November 8, 1996, the Company acquired Red Lion Hotels, Inc. (Red Lion)
in a business combination accounted for as a purchase. Accordingly, the
financial results of Red Lion and its subsidiaries are included since November
8, 1996.
On February 27, 1996, the Company acquired RFS, Inc. (RFS Management) in a
transaction accounted for as a pooling-of-interests. Accordingly, the
accompanying consolidated financial statements have been restated to include the
historical results of RFS Management for all periods presented.
On June 30, 1995, PHC was created when The Promus Companies Incorporated
(Parent) completed the transfer of the operations, assets and liabilities of its
hotel business to PHC, a new publicly-traded entity. Parent spun-off PHC and
distributed its stock to Parent's stockholders on a one-for-two basis effective
June 30, 1995 (the Spin-off). The 1995 financial statements include a portion of
Parent's historical revenues and expenses for periods before the Spin-off.
DESCRIPTION OF BUSINESS
Through its wholly-owned subsidiaries, Promus franchises and manages hotels
with the following brands: Club Hotel by Doubletree, Doubletree Hotels,
Doubletree Guest Suites, Embassy Suites, Hampton Inn, Hampton Inn & Suites and
Homewood Suites. Promus may also own all or a portion of these hotels or lease
these hotels from others. In addition, Promus leases and manages hotels that are
not Promus-branded. At December 31, 1997, Promus franchises 866 hotels and
operates 333 hotels, of which 53 hotels are wholly-owned, 22 are partially-owned
through joint ventures, 86 are leased from third parties and 172 are managed for
third parties. These hotels are located in all 50 states, the District of
Columbia, Puerto Rico, the U.S. Virgin Islands and six foreign countries. The
Company also operates and licenses vacation interval ownership systems under the
Embassy Vacation Resort and Hampton Vacation Resort names.
Promus' primary focus is to develop, grow and support its franchise and
management business. Promus' primary sources of revenues are from the operations
of owned and leased hotels, franchise royalty fees and management fees. Promus
charges franchisees a royalty fee of up to four percent of room revenues.
Management fees are based on a percentage of the managed hotels' gross revenues,
operating profits, cash flow, or a combination thereof. Generally, the Company
is also reimbursed for certain costs associated with providing central
reservations, sales, marketing, accounting, data processing, internal audit and
employee training services to hotels.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. The preparation of financial
statements in accordance with generally accepted accounting principles requires
38
<PAGE> 40
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues, and expenses and the disclosure of contingent
assets and liabilities. While management endeavors to make accurate estimates,
actual results could differ from these estimates. Certain financial statement
items from prior years have been reclassified to achieve consistency in
presentation between Doubletree and PHC.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, cash equivalents are highly
liquid investments with an original maturity of three months or less.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Improvements that extend the
life of the asset are capitalized. Maintenance and repairs are expensed as
incurred. Interest expense is capitalized on constructed assets at Promus'
overall weighted average borrowing rate. The Company capitalized interest of
$1.4 million, $1.6 million and $2.3 million in 1995, 1996 and 1997,
respectively. Depreciation expense is calculated using the straight-line method
over the shorter of the estimated useful life of the assets or over the related
lease term, as follows:
<TABLE>
<S> <C>
Land improvements.......................................... 12 to 15 years
Buildings and improvements................................. 10 to 40 years
Furniture, fixtures and equipment.......................... 2 to 15 years
</TABLE>
INVESTMENTS
Investments in partnerships and ventures are accounted for using the equity
method of accounting when the Company has a general partnership interest or its
limited partnership interest exceeds 5% and the Company does not exercise
control over the venture. Profits and losses are allocated in accordance with
the partnership or joint venture agreements. The Company's share of the income
or losses before interest expense and extraordinary items is included in other
fees and income in the accompanying consolidated statements of operations.
Promus' proportionate share of interest expense and extraordinary items of such
joint ventures is included in interest expense and extraordinary items,
respectively, in the accompanying consolidated statements of operations. The
Company's proportionate share of interest expense totaled $13.4 million, $12.2
million and $13.3 million for the years ended December 31, 1995, 1996 and 1997,
respectively. During 1995, the Company realized its proportionate share of
extraordinary gains of $2.8 million (net of tax) related to the early payoff and
forgiveness of a portion of debt on two joint venture hotels. All other
investments are accounted for using the cost method.
MANAGEMENT AND FRANCHISE CONTRACTS
Management and franchise contracts acquired in acquisitions that were
accounted for as purchases are recorded at the estimated present value of net
cash flows expected to be received over the lives of the contracts. This value
is amortized using the straight-line method over the estimated weighted average
contract life, which ranges from 25 years to 41 years. Costs incurred to acquire
individual management and franchise contracts are amortized using the
straight-line method over the life of the respective contract. Management and
franchise contracts are carried net of accumulated amortization of $17.5 million
and $31.9 million at December 31, 1996 and 1997, respectively.
39
<PAGE> 41
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GOODWILL
Goodwill arose in connection with purchase acquisitions and is amortized
using the straight-line method over 40 years. Goodwill is carried net of
accumulated amortization of $2.6 million and $12.1 million at December 31, 1996
and 1997, respectively.
NOTES RECEIVABLE
Notes receivable consist primarily of loans to owners of managed and
franchised hotels. Management considers a note to be impaired when it is
probable that the Company will be unable to collect all amounts due according to
the contractual terms of the note. When a loan is considered to be impaired, the
amount of the impairment is measured based on the present value of expected
future cash flows discounted at the note's effective interest rate. Impairment
losses are charged to expense. Generally, cash receipts will first be applied to
reduce accrued interest and then to reduce principal.
INVESTMENT IN FRANCHISE SYSTEM
Promus' investment in its franchise system includes the costs for computer
systems to operate the centralized marketing and reservation centers and a
property management system that interacts with several operational software
packages which are available to each Promus franchised hotel. Promus is
reimbursed for these costs by its system funds over their estimated useful
lives. In addition to computer system costs, these funds reimburse Promus for
related personnel and fringe benefit, advertising, promotional fees and other
reservation costs. The owner of each hotel, including Promus' company owned
hotels, contributes a percentage of room revenues to its brand's fund.
DEFERRED COSTS AND OTHER ASSETS
Deferred costs and other assets include escrow deposits, debt issuance
costs, franchise application fees paid and cash surrender value of insurance
policies. Escrow deposits represent proceeds received from 1997 hotel sales
which are expected to be used in 1998 to purchase replacement property, in order
for the sales to qualify as like-kind exchanges for income tax purposes. Costs
related to the issuance of debt are capitalized and amortized to interest
expense over the lives of the related debt.
REVENUE RECOGNITION
Franchise and management fees, hotel revenues and purchasing and service
fees are recognized when earned. Owned hotel revenues and leased hotel revenues
represent revenue derived primarily from the rental of rooms and suites and food
and beverage sales for hotels owned or leased by the Company.
EARNINGS PER SHARE
As of December 31, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standard (SFAS) No. 128, "Earnings per Share." In adopting
this pronouncement, the Company restated prior period earnings per share data
for all periods presented in the accompanying consolidated financial statements.
For Promus, basic earnings per share is determined by dividing net income by the
weighted average number of common shares outstanding during the year. Diluted
earnings per share is computed by dividing net income by the weighted average
number of common and common equivalent shares outstanding during the year.
Common equivalent shares include employee stock options, restricted stock and
warrants deemed exercisable for the purpose of computing diluted earnings per
share. The Company has no other potentially dilutive securities.
40
<PAGE> 42
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Under the asset and liability method of accounting for income taxes,
deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets, including net operating loss carryforwards,
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period when the new rate is enacted.
LONG-LIVED ASSETS
The recoverability of hotel real estate, investments, management contracts
and goodwill are periodically evaluated to determine whether such costs will be
recovered from future operations. Evaluations are based on projected cash flows
on an undiscounted basis. If the undiscounted cash flows are insufficient to
recover the recorded assets, then the projected cash flows are discounted and an
impairment loss is recognized for the difference.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of notes receivable,
marketable equity securities, notes payable and interest rate swap agreements.
The carrying amounts of financial instruments other than notes receivable and
interest rate swap agreements approximate fair value due to the short maturity
of those instruments, interest terms or, in the case of marketable equity
securities, they are carried at their estimated fair value. The Company has
determined that the fair value of its notes receivable approximates carrying
value based on interest rate and payment terms the Company would currently offer
on notes with similar security to borrowers of similar creditworthiness.
RECENT PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which are effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components within the
financial statements. SFAS No. 131 established standards requiring public
companies to report information about operating segments within the financial
statements. Promus will adopt both SFAS No. 130 and SFAS No. 131 in 1998, and
these adoptions are not expected to materially impact the Company's financial
statements.
NOTE 3. BUSINESS COMBINATIONS
DOUBLETREE/PROMUS MERGER
The Company was formed on December 19, 1997, as a result of the Merger of
Doubletree and PHC. As a result of the Merger Agreement, (i) Doubletree and PHC
became wholly-owned subsidiaries of Promus; (ii) each outstanding share of
common stock of Doubletree was converted into one share of common stock of
Promus; and (iii) each outstanding share of PHC common stock was converted into
0.925 of a share of common stock of Promus. The Merger qualified as a tax free
exchange and was accounted for as a pooling-of-interests. Historical financial
results of Doubletree and PHC have been combined for all periods presented.
41
<PAGE> 43
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The results of operations for the separate companies and the pro forma
combined results presented in the accompanying consolidated financial statements
are as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------- -----------------
1995 1996 1997
-------- -------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Doubletree..................................... $185,278 $292,710 $570,446
PHC............................................ 236,551 267,503 223,820
-------- -------- --------
Combined....................................... 421,829 560,213 794,266
======== ======== ========
Net Income:
Doubletree..................................... $ 17,791 $ 25,934 $ 55,518
PHC............................................ 46,579 64,724 87,017
-------- -------- --------
Combined....................................... 64,370 90,658 142,535
======== ======== ========
</TABLE>
In connection with the Merger, the Company recorded a $115.0 million
provision for business combination expenses, including both transaction costs
and restructuring costs. Transaction costs of approximately $40.3 million
consist primarily of fees for investment bankers, attorneys, accountants,
financial printing and other related charges. Restructuring costs of
approximately $74.7 million include severance costs, exit costs related to the
consolidation of administrative functions, and the write off of certain assets
whose benefits will not be realized after the Merger. At December 31, 1997,
$70.9 million relating to these obligations was classified within current
liabilities.
ACQUISITION OF RED LION HOTELS, INC.
On November 8, 1996, the Company acquired all of the outstanding common
stock of Red Lion in a transaction valued at approximately $1.2 billion. The
Company paid $695.0 million in cash, repaid $124.0 million of existing Red Lion
indebtedness, issued 7.4 million shares of common stock to the shareholders of
Red Lion with a fair value at the date of closing of $291.5 million and assumed
net liabilities of $90.0 million. The acquisition has been accounted for as a
purchase and the results of operations of Red Lion have been included in the
consolidated financial statements since November 8, 1996. The purchase price was
allocated to the net assets acquired based upon their estimated fair market
values. The excess of the purchase price over the estimated fair value of the
net assets acquired of $365.0 million was recorded as goodwill and is being
amortized over a 40 year life. During 1997, the Company finalized the purchase
price allocation which resulted in an increase in goodwill of $7.3 million. This
increase primarily related to the write-down of certain management contracts
terminated since the acquisition date and acquisition-related costs in excess of
the original estimates, net of the write-up of a partnership investment to its
fair value at acquisition.
42
<PAGE> 44
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma summary financial data presents the
consolidated results of operations of the Company as if Red Lion had been
acquired at the beginning of 1995 with pro forma adjustments to give effect to
(a) amortization of goodwill, (b) additional depreciation expense as a result of
a step-up in the basis of properties and equipment and investments in
unconsolidated joint ventures, (c) increased interest expense on acquisition
debt (d) the operating results of three hotels acquired in 1996 and (e) related
income tax effects. The pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
that would actually have resulted had the combination been in effect on the date
indicated:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1995 1996
-------- --------
(UNAUDITED)(IN
THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues.................................................... $786,930 $890,552
Operating income............................................ 182,817 230,445
Income before taxes and extraordinary items................. 119,330 180,541
Net income.................................................. 70,904 105,984
Basic earnings per share.................................... $ 0.83 $ 1.22
Diluted earnings per share.................................. $ 0.82 $ 1.21
</TABLE>
ACQUISITION OF RFS, INC.
In February 1996, the Company issued 2.7 million shares of common stock in
exchange for all of the outstanding stock of RFS Management in a transaction
accounted for as a pooling-of-interests. Accordingly, the accompanying
consolidated financial statements were restated to include the results of RFS
Management for all periods presented.
ACQUISITION OF HARRISON CONFERENCE ASSOCIATES, INC.
In January 1998, the Company acquired Harrison Conference Associates, Inc.
(Harrison) for approximately $60.2 million cash in a transaction accounted for
as a purchase. Harrison is a leading conference center operator with over 1,200
rooms under management, including two owned and seven managed properties.
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Land and improvements....................................... $ 147,394 $ 140,826
Buildings and improvements.................................. 683,698 682,113
Furniture, fixtures and equipment........................... 215,253 207,422
Construction in progress.................................... 36,120 55,878
---------- ----------
1,082,465 1,086,239
Accumulated depreciation.................................... (126,579) (126,008)
---------- ----------
$ 955,886 $ 960,231
========== ==========
</TABLE>
43
<PAGE> 45
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. NOTES RECEIVABLE
Notes receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Secured:
Due from Red Lion MLP....................................... $24,405 $23,133
Secured notes, with interest at rates varying from
8.0%-11.5%, maturing through 2016......................... 34,161 38,241
------- -------
58,566 61,374
Unsecured:
Candlewood $15.0 million credit facility, with interest at
rates varying from 7.0%-10.0%, maturing in 2001........... 12,065 14,608
Unsecured notes, with interest at rates varying from
5.8%-15.0%, maturing through 2007......................... 15,590 14,541
------- -------
86,221 90,523
Less current portion...................................... (592) (1,071)
------- -------
$85,629 $89,452
======= =======
</TABLE>
Interest is generally received monthly with principal due upon the earlier
of termination of the management contract or sale of the hotel. Certain of the
notes receivable bear a variable interest rate based on Prime or LIBOR. At
December 31, 1997, the variable interest rates ranged from Prime minus 1.5%
(7.0% at December 31, 1997) to Prime plus 2% (10.5% at December 31, 1997). At
December 31, 1997, management does not consider any of its notes receivable to
be impaired. The Company is the 1.99% general partner of Red Lion Inns Limited
Partnership, a publicly-traded master limited partnership (Red Lion MLP). Red
Lion MLP owns 10 hotels which are also managed by the Company under a long-term
management agreement. In connection with its responsibilities as general
partner, the Company advanced funds for capital improvements and other operating
needs. These advances generally bear interest at Prime plus 0.5% (9.0% at
December 31, 1997). Advances include approximately $5.3 million at December 31,
1997 which are noninterest bearing and represent the funding of partnership
distributions and the deferral of incentive management fees due to insufficient
Cash Flow, as defined. On December 30, 1997, Red Lion MLP agreed to a proposed
merger transaction with a third party which, subject to approval by the
unitholders, is expected to close in the second quarter of 1998. This proposed
merger will result in the Company being paid in full for these advances upon
closing.
NOTE 6. INVESTMENTS
Investments consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Hotel partnerships.......................................... $132,550 $168,884
Investments in common stock (at market)..................... 113,392 63,304
Convertible preferred stock................................. 18,500 18,500
-------- --------
$264,442 $250,688
======== ========
</TABLE>
The Company's noncontrolling general and/or limited partnership interests
in hotel partnerships range from less than 1.0% to 50.0%. Investments in common
stock are carried at market value and include investments in FelCor Suite
Hotels, Inc. and FelCor Limited Partnership (collectively, FelCor), Equity Inns,
44
<PAGE> 46
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inc. (Equity), Winston Hotels, Inc. (Winston) and RFS Hotel Investors, Inc.
(RHI). Promus' cost of these investments at December 31, 1996 and 1997 was
approximately $84.3 million and $40.1 million, respectively.
In 1995, Promus entered into two agreements with FelCor. Under these
agreements, the Company purchased $25.0 million of FelCor limited partnership
interests and $50.0 million of FelCor common stock. FelCor used the proceeds to
help acquire all-suites upscale hotels that it converted to the Embassy Suites
brand, including the acquisition of Crown Sterling Suite Hotels. The limited
partnership interests may be converted to shares of FelCor common stock on a
one-for-one basis and the common stock may be sold on the open market. During
1997, Promus sold approximately $38.9 million of its original investment in
FelCor stock, resulting in a pre-tax gain of approximately $11.2 million.
During 1996, Promus entered into agreements with Equity and Winston whereby
Promus would invest up to $15.0 million in the common stock of both Equity and
Winston in conjunction with their purchase of hotels from the Company. During
1996, Promus invested $7.1 million and $1.5 million in the common stock of
Equity and Winston, respectively, in exchange for their purchase of four hotels
and one hotel, respectively. During 1997, Promus sold approximately $5.5 million
of its original Equity stock, resulting in a pre-tax gain of $1.8 million.
In 1996, the Company, through RFS Management, purchased 973,684 shares of
convertible preferred stock of RHI for $19 per share, or approximately $18.5
million. This investment is recorded at cost as there is no ready market for
these securities. The convertible preferred stock pays a fixed annual dividend
of $1.45 per share and is convertible on a one-for-one basis at the end of seven
years. RHI also owns a partnership in which the Company has an investment. This
partnership investment is convertible into common stock of RHI. RHI granted the
Company a 10- year first right of refusal to manage and lease future hotels
acquired or developed by RHI. The Company has committed to RHI to maintain $15.0
million of net worth in RFS Management.
NOTE 7. LEASES
The Company leases hotel properties, land and administrative office space.
All such leases are operating leases. As of December 31, 1995, 1996 and 1997,
the Company leased 53, 82 and 86 hotels, respectively. As of December 31, 1997,
61 of these hotels are leased from RHI. All of the Company's hotel leases
require the payment of rent equal to the greater of fixed base rent or
percentage rent based on a percentage of gross room revenue, beverage revenue
and food revenue (if the hotel offers food and beverage service) and expire
beginning December 1999 through July 2015, with varying renewal options.
Substantially all of the hotels leased from RHI are cross-defaulted with one
another. Promus' land leases represent ground leases for certain owned hotels
and, in addition to minimum base rental payments, may require the payment of
percentage rents based on hotel revenues, a share of maintenance expenses and/or
real estate taxes.
Total rent expense incurred under the Company's leases was as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Hotel and ground leases:
Base rent.............................................. $31,331 $35,776 $ 63,994
Percentage rent........................................ 26,106 40,121 57,786
Other Leases............................................. 2,460 2,814 3,412
------- ------- --------
Total.......................................... $59,897 $78,711 $125,192
======= ======= ========
</TABLE>
45
<PAGE> 47
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a schedule of future minimum rental payments required
under Promus' noncancelable operating leases for years ending December 31, as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998........................................................ $ 64,430
1999........................................................ 63,930
2000........................................................ 58,721
2001........................................................ 57,673
2002........................................................ 57,443
Thereafter.................................................. 271,769
--------
Total future minimum lease payments $573,966
========
</TABLE>
NOTE 8. NOTES PAYABLE
Promus' indebtedness consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Promus Facility............................................. $243,100 $607,050
Term loans repaid in December 1997.......................... 461,600 --
Mortgages, LIBOR plus 1.5% -- 8.6%, maturities through
2005...................................................... 84,500 85,037
Convertible rate term loan.................................. -- 20,000
Notes payable and other unsecured debt, 8.7%-13.0%,
maturities through 2022................................... 5,752 5,911
-------- --------
794,952 717,998
Current portion of notes payable............................ (5,778) (46,020)
-------- --------
$789,174 $671,978
======== ========
</TABLE>
Annual maturities of long-term debt are: 1998, $46.0 million; 1999, $0.8
million; 2000, $0.9 million; 2001, $0.9 million; 2002, $663.7 million and $5.6
million, thereafter.
PROMUS FACILITY
Concurrent with the Merger, Promus entered into a $1.0 billion revolving
credit facility (the Promus Facility), under which it borrowed $592.0 million on
December 19, 1997. These funds were used to repay the existing bank facilities
of both Doubletree and PHC. The Promus Facility consists of a $750.0 million
revolving credit facility which matures on December 19, 2002 (the Five-Year
Revolver) and a $250.0 million annually extendible revolving credit facility
(the Extendible Revolver) which matures on December 18, 1998. The Extendible
Revolver is convertible into a four-year term loan with equal amortizing
payments over the four-year period. Interest on the drawn portion of the Promus
Facility is, at the Company's option, equal to either (i) the base rate, as
defined, or (ii) LIBOR plus the applicable spread. Both agreements incorporate a
tiered scale that defines the applicable LIBOR spread and a facility fee based
upon the more favorable of the Company's current debt rating or leverage ratio,
as defined. At December 31, 1997, the LIBOR spread on the Five-Year Revolver and
the Extendible Revolver was 0.25% and 0.27%, respectively, and the facility fee
required on the total amount of the Five-Year Revolver and the Extendible
Revolver was 0.125% and 0.105%, respectively. At December 31, 1997, the weighted
average interest rate on outstanding Promus Facility borrowings, including the
applicable LIBOR spread, was 6.6%. Both the Five-Year Revolver and the
Extendible Revolver are unsecured. The Promus Facility contains provisions that
restrict certain investments, limit the Company's ability to dispose of property
and require that certain performance ratios be maintained. As of December 31,
1997, Promus was in compliance with all such covenants.
46
<PAGE> 48
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Five-Year Revolver also provides a sublimit for letters of credit of
$100.0 million. At December 31, 1997, approximately $16.0 million in letters of
credit were outstanding under this agreement.
CONVERTIBLE RATE TERM LOAN
In the fourth quarter of 1997, the Company obtained a $20.0 million
five-year convertible rate unsecured term loan, the proceeds of which were used
to retire a portion of PHC's previous credit facility. This loan bears interest
for two years at the three-month LIBOR rate minus 15 basis points (5.7% at
December 31, 1997). At the beginning of the third year, the rate changes to a
fixed rate of 6.7%. The bank may elect to convert this fixed rate to the
three-month LIBOR rate plus 32.5 basis points, under a conversion option that is
exercisable annually beginning on October 28, 1999.
DERIVATIVE FINANCIAL INSTRUMENTS
Promus' use of derivative financial instruments is limited to the
management of its interest rate exposure. The Company maintains interest rate
swap agreements which exchange floating interest payments for fixed interest
payments over the life of the agreements. Existing swap agreements, with an
aggregate notional amount of $389.8 million, expire between December 1998 and
January 2002, and as of December 31, 1997 carried a weighted average fixed rate
of approximately 6.1% and a weighted average effective rate of 6.7% (including
the applicable spreads). The differential to be paid or received is accrued as
interest rates change and is recognized as an adjustment to interest expense. At
December 31, 1997, the fair value of the swap agreements, which Promus would
have been required to pay to terminate them, was approximately $2.1 million.
These agreements contain a credit risk that the counterparties may be
unable to meet the terms of the agreements. Promus minimizes that risk by
evaluating the creditworthiness of its counterparties, which are limited to
major banks and financial institutions, and does not anticipate nonperformance
by the counterparties.
NOTE 9. STOCKHOLDERS' EQUITY
One special right (Right) is attached to each outstanding share of common
stock. These Rights entitle the holders to purchase, under certain conditions,
units consisting of fractional shares of preferred stock at an exercise price to
be determined by Promus' Board of Directors. Under certain conditions, the
rights also entitle the holders to purchase, at the Rights' then exercise price,
new shares of common stock having a market value of twice the Rights' exercise
price. These Rights expire on December 17, 2007, unless Promus decides to redeem
them earlier at $0.01 per Right or upon the occurrence of certain other events.
In April 1997, PHC's Board of Directors authorized PHC to repurchase, in
open market, negotiated or block transactions, up to $150.0 million of its
common stock for general corporate purposes and future strategic investments.
PHC repurchased 1,573,800 shares of its common stock at a cost of $60.0 million.
Repurchases of these shares were funded primarily through operating cash flows.
All shares repurchased have been retired and are not available for reissuance.
As a result of the Merger of PHC into Promus, the Company terminated this share
repurchase program.
In addition to its common stock, the Company has 10,000,000 shares of
authorized but unissued preferred stock, with a $0.01 par value.
47
<PAGE> 49
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. EARNINGS PER SHARE
The following table reflects Promus' weighted average common shares
outstanding and the impact of its dilutive common share equivalents:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Basic weighted average shares outstanding................. 69,351 72,581 86,573
Effect of dilutive securities:
Restricted stock..................................... 38 14 15
Stock options and warrants........................... 531 984 1,316
------- ------- -------
Diluted weighted average shares outstanding............... 69,920 73,579 87,904
======= ======= =======
</TABLE>
Options to purchase approximately 1,078,000, 792,000 and 54,000 shares of
common stock were outstanding at December 31, 1995, 1996 and 1997, respectively,
but were not included in the above computations of diluted weighted average
outstanding shares because the options' exercise prices were greater than the
average market price of the common shares.
NOTE 11. TRANSACTIONS WITH RELATED PARTIES
Revenues and expenses include amounts derived from or paid to entities in
which affiliates of the Company own interests and, in general, exercise
operational control. A summary of these transactions is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Franchise and management fees........................... $11,962 $11,198 $12,925
Interest income......................................... 898 881 1,192
Purchasing and service fees............................. 71 279 383
Expenses
Hotel rent.............................................. 2,031 4,123 5,407
</TABLE>
Amounts due from affiliates included in accounts receivable at December 31,
1996 and 1997 are $5.3 million and $4.1 million, respectively. Notes receivable
include amounts due from affiliates at December 31, 1996 and 1997 of $5.9
million and $6.0 million, respectively.
NOTE 12. COMMITMENTS AND CONTINGENCIES
Promus is liable under certain lease agreements pursuant to which it has
assigned the direct obligation to third party interests. Additionally, Promus
manages certain hotels for others under agreements that provide for payments or
loans to the hotel owners if stipulated levels of financial performance are not
maintained. The Company has also provided guarantees for certain loans and
leases related to joint venture investments. Management believes the likelihood
is remote that material payments will be required under these agreements.
Promus' estimated maximum exposure under such agreements is approximately $38.0
million over the next 30 years. Promus also has construction commitments
pursuant to development agreements, other than those specifically discussed
below, of approximately $18.0 million.
FELCOR AGREEMENTS
In connection with its FelCor agreements, Promus has guaranteed repayment
of a third party loan to FelCor of up to $25.0 million. During 1997, Promus
announced the formation of a new strategic alliance with FelCor, under which
Promus committed to construct at least five Embassy Suites hotel properties.
Upon
48
<PAGE> 50
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
completion of these developments, FelCor will purchase a 90% interest in the
properties. As part of this new alliance, Promus sold two company owned Embassy
Suites hotels to FelCor for approximately $46.7 million. Promus will receive
20-year license agreements and 15-year management contracts for all hotels
developed pursuant to this agreement. In 1997, FelCor also purchased two Embassy
Suites hotels from a joint venture in which Promus owned a 50% interest.
FelCor owns or has an interest in 64 Promus hotels as of December 31, 1997,
which represents 5% and 8% of all Promus brand hotels and hotel rooms,
respectively. These hotels contributed approximately 13% of the Company's
franchise and management fee revenue for 1997. Of these 64 hotels, the Company
owns a 50% interest in 12 hotels.
SHC AGREEMENTS
During 1997, Promus announced the formation of a strategic alliance with
Strategic Hotel Capital, Inc. (SHC), under which Promus committed to construct
at least ten Embassy Suites hotel properties. Upon completion of these
developments. SHC will purchase these hotel properties at Promus' cost. As part
of this new alliance, Promus sold two of its owned Embassy Suites hotels to SHC
for approximately $65.0 million. Promus will receive 20-year license agreements
and management contracts for all hotels developed pursuant to this agreement. In
1997, SHC also purchased two Embassy Suites hotels from a joint venture in which
Promus owned a minority interest.
PROMUS ACCEPTANCE CORP.
In 1997 the Company announced the formation of Promus Acceptance Corp.
(ProMAC). ProMAC provides first mortgage financing to Promus franchisees for
newly constructed Hampton Inn, Hampton Inn & Suites and Homewood Suites hotels.
ProMAC will issue up to $120.0 million in commercial paper backed by a liquidity
facility from participating financial institutions. The terms generally provide
for favorably priced floating and fixed rate loans ranging from $3.5 million to
$8.0 million with six-year terms and 20-year amortization schedules. Promus has
provided a guarantee up to $36.0 million on loans outstanding under the program,
and has also provided a $1.0 million working capital guarantee to ProMAC.
Additionally, Promus has provided a $2.0 million start-up loan to ProMAC, which
earns interest at Prime and matures in April 2005.
CANDLEWOOD
A subsidiary of the Company has committed to provide credit support for a
loan facility utilized by Candlewood to provide construction and permanent
financing to Candlewood and its franchisees on terms that, in most cases, are
more attractive than those which could otherwise be obtained. The Company's
maximum exposure on any individual loan will range from $0.9 million to $1.9
million per hotel, with the aggregate amount of exposure for all such credit
support capped at $30.0 million. As of December 31, 1997, the Company has
guaranteed $22.8 million in such financing.
LITIGATION
The Company is party to various inquiries, administrative proceedings and
litigation relating to contracts, sales of property and other matters arising in
the normal course of business. While any proceeding or litigation has an element
of uncertainty, management believes that the final outcome of these matters will
not have a material impact on Promus' consolidated financial position or its
results of operations.
49
<PAGE> 51
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SELF-INSURANCE RESERVES
Promus self-insures various levels of general liability, workers'
compensation and employee medical coverage. All self-insurance reserves include
accruals of estimated settlements for known claims, as well as accruals of
actuarial estimates of incurred but not reported claims. These estimates are
based on historical information along with certain assumptions about future
events. Though changes in assumptions for such things as medical costs and legal
expenses, as well as changes in actual experience, could cause these estimates
to change significantly in the near term, the Company maintains stop-loss
insurance to minimize the effect of large claims on its financial results.
NOTE 13. EMPLOYEE BENEFIT PLANS
RETIREMENT SAVINGS PLANS
Promus and its subsidiaries maintain three defined contribution savings and
retirement plans. Employees who are over 21 years of age and have completed one
year of service are eligible to participate in the plans. Depending on the plan,
participating employees may elect to make pre-tax and after-tax contributions of
up to 16 percent of their eligible earnings and the Company matches employee
contributions up to 6% of an employee's eligible compensation. Amounts
contributed to the plans are invested in one or more investment funds, at the
participant's option.
The Company also has two nonqualified supplemental employee retirement
plans (SERP). One SERP was designed to supplement key employees whose benefits
would otherwise be reduced or lost due to the statutory limits of 401(k) plans.
This plan is fully funded. The second plan was designed to supplement retirement
income for certain executive officers of the Company. The liability under this
plan at December 31, 1997 was $3.8 million.
The aggregate expense to the Company under all retirement savings plans
amounted to $1.0 million, $2.0 million and $4.5 million for the years ended
December 31, 1995, 1996 and 1997, respectively.
DEFERRED COMPENSATION PLANS
Promus has deferred compensation plans under which certain employees may
defer a portion of their compensation. Amounts deposited into these plans are
unsecured and earn interest at rates approved by the Human Resources Committee
of the Board of Directors. In connection with the administration of the deferred
compensation plans, company-owned life insurance policies have been purchased.
As of December 31, 1996 and 1997, the total liability under these plans was
$11.2 million and $14.5 million, respectively, and the related value of life
insurance policies and other investments was $12.1 million and $18.0 million,
respectively.
NOTE 14. STOCK OPTIONS
The 1997 Equity Participation Plan (the Plan) is a new stock option plan,
approved in conjunction with the Merger, in which options may be granted to key
personnel to purchase shares of the Company's stock at a price not less than the
current market price at the date of grant. The options vest annually and ratably
over a four year period from the date of grant and expire ten years after the
grant date. An aggregate of 10,000,000 shares have been authorized for issuance.
The Plan also provides for the issuance of stock appreciation rights, restricted
stock or other awards.
Additionally, both PHC and Doubletree had stock option plans prior to the
Merger date. Concurrent with the Merger, options were issued by Promus to
replace PHC options and Doubletree options which were outstanding under the
prior plans. The replacement options were issued with identical remaining terms
and conditions, except such options were immediately vested, in accordance with
the terms of the prior plans.
50
<PAGE> 52
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Promus applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
stock option plans. Accordingly, no compensation cost has been recognized in the
consolidated statements of operations for these plans. In accordance with SFAS
No. 123, "Accounting for Stock-Based Compensation," the Company has estimated
the fair value of each option grant using the Black-Scholes option-pricing
model. Had compensation cost for awards under the Plan and each predecessor plan
been determined based on the fair value at the grant dates, Promus' net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
(IN THOUSANDS,
EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C>
Net income
As reported............................................. $64,370 $90,658 $95,436
Pro forma............................................... 60,144 85,184 86,544
Basic earnings per share
As reported............................................. $ 0.93 $ 1.25 $ 1.10
Pro forma............................................... 0.87 1.17 1.00
Diluted earnings per share
As reported............................................. $ 0.92 $ 1.23 $ 1.09
Pro forma............................................... 0.86 1.16 0.98
</TABLE>
A summary of Promus stock option transactions, from January 1, 1995 through
December 31, 1997, are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------
WEIGHTED COMMON
AVERAGE STOCK
EXERCISE AVAILABLE
PRICE NUMBER FOR GRANT
-------- --------- ----------
<S> <C> <C> <C>
Balance -- January 1, 1995.......................... $13.69 967,500 2,332,500
Granted............................................. 24.97 850,814 (850,814)
Approval of new options............................. -- -- 3,330,000
Replacement options granted at Spin-Off............. 18.18 1,145,926 (1,145,926)
Exercised........................................... 9.61 (32,106) --
Canceled............................................ 17.88 (59,983) 59,983
--------- ----------
Balance -- December 31, 1995........................ 18.78 2,872,151 3,725,743
Granted............................................. 34.27 2,333,230 (2,333,230)
Exercised........................................... 13.83 (89,206) --
Canceled............................................ 22.91 (167,386) 167,386
--------- ----------
Balance -- December 31, 1996........................ 26.03 4,948,789 1,559,899
Approval of new options............................. -- -- 11,200,000
Granted............................................. 39.91 4,503,369 (4,503,369)
Exercised........................................... 16.52 (410,851) --
Canceled............................................ 27.02 (160,334) (1,769,530)
--------- ----------
Balance -- December 31, 1997........................ $33.49 8,880,973 6,487,000
========= ==========
Options exercisable at December 31,
1996.............................................. $13.09 985,921
1997.............................................. 29.44 5,367,973
</TABLE>
The weighted average fair value of options granted by Promus based on the
Black-Scholes option-pricing model for the options granted during 1995, 1996 and
1997 are $10.75, $10.71 and $19.47, respectively.
51
<PAGE> 53
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Assumptions included risk-free interest rates ranging from 5.9% to 6.2%,
expected lives of 4.0 years to 6.0 years, volatility factors of 30% to 40%, and
no dividends.
The following table summarizes information about options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -------------------------
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICES 1997 LIFE PRICE 1997 PRICE
- - ------------------------ -------------- ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$2.61 to $25.50....................... 1,415,124 6.08 $14.35 1,415,124 $14.35
$26.55 to $34.73...................... 2,158,335 8.04 29.76 2,158,335 29.76
$34.75 to $39.69...................... 3,541,825 9.96 39.67 28,825 37.38
$40.13 to $46.50...................... 1,765,689 9.10 41.01 1,765,689 41.01
--------- ---- ------ --------- ------
8,880,973 8.86 $33.49 5,367,973 $29.44
========= ==== ====== ========= ======
</TABLE>
NOTE 15. INCOME TAXES
Income tax expense attributable to income before extraordinary items
consisted of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal................................................ $25,813 $40,535 $ 79,559
State.................................................. 4,421 9,085 16,843
Deferred
Federal................................................ 5,836 8,612 (13,410)
State.................................................. 4,217 894 (3,328)
------- ------- --------
$40,287 $59,126 $ 79,664
======= ======= ========
</TABLE>
The differences between the statutory federal income tax rate and the
effective tax rate expressed as a percentage of income before income taxes and
extraordinary items were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Income tax expense at federal statutory rate................ 35.0% 35.0% 35.0%
Business combination expenses............................... -- -- 6.6
State taxes, net of federal tax benefit..................... 5.6 4.0 4.3
Goodwill and other permanent differences.................... 0.2 0.6 2.2
Tax reserve reduction....................................... (1.3) (1.7) (2.8)
Other....................................................... 0.1 1.6 0.2
---- ---- ----
39.6% 39.5% 45.5%
==== ==== ====
</TABLE>
As a result of the acquisition of the common stock of Red Lion, the
allocation of the purchase price to the assets and liabilities for financial
reporting purposes significantly exceeds the tax basis carried over from Red
Lion. Accordingly, the acquisition created nondeductible goodwill and
substantial temporary differences. The
52
<PAGE> 54
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
tax effects of temporary differences that give rise to significant portions of
the deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 7,351 $ 4,181
Compensation.............................................. 5,777 22,280
Deferred income........................................... 4,300 3,102
Business combination expenses............................. 973 11,287
Reserves.................................................. 13,194 7,137
Other..................................................... 601 1,210
Valuation allowance....................................... (5,434) (3,781)
--------- ---------
Total deferred tax assets......................... 26,762 45,416
--------- ---------
Deferred tax liabilities:
Basis difference in other assets.......................... (178,370) (167,637)
Property and equipment.................................... (90,706) (101,736)
Investments............................................... (34,638) (29,313)
Franchise system fund prepayments......................... (1,921) (3,338)
--------- ---------
Total deferred tax liabilities.................... (305,635) (302,024)
--------- ---------
Net deferred tax liability.................................. $(278,873) $(256,608)
========= =========
</TABLE>
The Company estimates that, more likely than not, it will not realize a
portion of the benefits of its deferred tax assets. Accordingly, it has
established a valuation allowance to reflect this uncertainty. The valuation
allowance was established as a result of deferred tax assets created by previous
business combinations in accordance with purchase accounting methodology and, to
the extent the tax benefits to which this allowance relates are recognized, the
reduction in the valuation allowance will be applied to reduce goodwill. During
1995, 1996 and 1997, $1.5 million, $0.5 million and $1.6 million was used and
credited to goodwill, respectively.
The Company's federal net operating loss carryforwards (NOLs) of $10.8
million expire as follows:
<TABLE>
<CAPTION>
YEAR OF EXPIRATION AMOUNT OF FEDERAL NOLS
- - ------------------ ----------------------
(IN THOUSANDS)
<S> <C>
2005................................................ $9,827
2008................................................ 968
</TABLE>
Total NOLs for state income tax purposes are less than the amounts stated
above due primarily to shorter carryforward periods.
TAX SHARING AGREEMENT
In connection with the Spin-Off, PHC and Parent entered into a tax sharing
agreement that defines each company's rights and obligations with respect to
deficiencies and refunds of federal, state and other income or franchise taxes
relating to Promus' business for tax years prior to the Spin-off and with
respect to certain tax attributes of Promus after the Spin-off. Promus will
reimburse Parent for the portion of subsequent tax liability redeterminations
relating to the Parent's hotel operations.
53
<PAGE> 55
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
Other current assets consist of the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Federal and state income tax receivables.................... $ 5,120 $17,361
Prepayments................................................. 7,019 9,507
Deferred tax assets......................................... 932 8,251
Other....................................................... 6,622 8,103
------- -------
$19,693 $43,222
======= =======
</TABLE>
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Business combination accruals............................... $ 21,791 $ 70,879
Self-insurance reserves..................................... 23,845 31,654
Accounts payable............................................ 31,966 31,404
Accrued payroll and other compensation...................... 39,163 31,275
Operating leases payable.................................... 8,305 12,146
Refundable deposits and customer funds...................... 6,288 10,845
Taxes payable, other than income taxes...................... 10,547 10,495
Other....................................................... 19,530 22,226
-------- --------
$161,435 $220,924
======== ========
</TABLE>
NOTE 17. SUPPLEMENTAL CASH FLOW INFORMATION
The historical assets and liabilities of the hotel business, transferred to
PHC by its Parent, and the issuance of PHC common stock were completed in
connection with the Spin-off in 1995. These noncash transactions have been
excluded from the consolidated statements of cash flows.
Cash paid for interest, net of interest capitalized, amounted to $17.7
million, $22.9 million, and $56.2 million for the years ended December 31, 1995,
1996 and 1997, respectively. Cash paid for income taxes amounted to $19.7
million, $62.0 million and $100.5 million for the years ended December 31, 1995,
1996 and 1997, respectively.
54
<PAGE> 56
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18. SUMMARIZED FINANCIAL INFORMATION
Promus Hotels, Inc. (PHI) is a wholly-owned subsidiary of PHC and an entity
through which a significant portion of the operations of Promus are conducted.
Among other things, PHI holds the franchise license for many of the Company's
franchised hotels. Summarized financial information for PHI, prepared on the
same basis as Promus, as of and for the years ended December 31, is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets......................................... $ 29,397 $ 38,491
Property and equipment, net............................ 320,413 336,553
Other assets........................................... 276,876 271,516
-------- --------
$626,686 $646,560
-------- --------
LIABILITIES
Current liabilities.................................... $ 50,561 $ 70,843
Notes payable.......................................... 243,682 212,233
Other long-term obligations............................ 81,621 91,476
-------- --------
375,864 374,552
-------- --------
Net assets................................... $250,822 $272,008
======== ========
Revenues............................................... $236,513 $266,625 $289,905
======== ======== ========
Operating income....................................... $104,137 $129,496 $104,079
======== ======== ========
Net income............................................. $ 46,895 $ 65,124 $ 73,698
======== ======== ========
</TABLE>
55
<PAGE> 57
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1997 ACTUAL
Revenues.............................................. $259,486 $260,065 $274,715 $243,745
Operating income (loss)............................... 74,821 70,121 89,358 (50,398)
Net income (loss)..................................... 38,902 47,376 56,257 (47,099)
Basic earnings (loss) per share(a).................... $ 0.45 $ 0.55 $ 0.65 $ (0.55)
Basic weighted average shares outstanding............. 87,097 86,916 86,206 86,050
Diluted earnings (loss) per share (a)................. $ 0.44 $ 0.54 $ 0.64 $ (0.54)
Diluted weighted average shares outstanding........... 88,420 88,225 87,939 87,620
1996 ACTUAL
Revenues.............................................. $113,787 $129,994 $138,921 $177,511
Operating income...................................... 33,768 42,388 48,201 40,999
Net income............................................ 17,627 25,685 27,712 19,634
Basic earnings per share(a)........................... $ 0.25 $ 0.37 $ 0.39 $ 0.25
Basic weighted average shares outstanding ............ 69,581 70,087 70,588 80,086
Diluted earnings per share(a)......................... $ 0.25 $ 0.36 $ 0.39 $ 0.24
Diluted weighted average shares outstanding........... 70,293 70,982 71,713 81,412
1996 PRO FORMA(B)
Revenues.............................................. $200,941 $228,558 $239,438 $221,615
Operating income...................................... 44,570 62,203 72,040 51,632
Net income............................................ 17,475 30,659 34,927 22,923
Basic earnings per share(a)........................... $ 0.20 $ 0.35 $ 0.40 $ 0.26
Basic weighted average shares outstanding ............ 86,031 86,537 87,038 87,059
Diluted earnings per share(a)......................... $ 0.20 $ 0.35 $ 0.40 $ 0.26
Diluted weighted average shares outstanding........... 86,743 87,432 88,163 88,385
</TABLE>
- - ---------------
(a) The sum of the quarterly per share amounts may not equal the annual amount
reported, as per share amounts are computed independently for each quarter
while the full year is based on the annual weighted average shares
outstanding.
(b) Pro forma information is presented to give effect to the acquisition of Red
Lion and related transactions as if they had occurred on January 1, 1996.
56
<PAGE> 58
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
DIRECTORS
See the information regarding the names, ages, positions and prior business
experience of the directors of the Company set forth on pages 6 through 8 of the
Proxy Statement, which pages are incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
See "Executive Officers of the Registrant" on page 16 in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
See the information set forth in the Proxy Statement on pages 8 and 9
thereof entitled "Compensation of Directors" and the information on pages 17
through 22 thereof. The information on pages 8 and 9 of the Proxy Statement
entitled "Compensation of Directors" and the information on pages 17 through 22
of the Proxy Statement entitled "Summary Compensation Table," "Options Granted
in 1997," "Aggregated Option Exercises in 1997 and December 31, 1997, Option
Values," and "Certain Employment Arrangements" is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See the information set forth in the Proxy Statement on pages 4 through 6
thereof entitled "Ownership of the Capital Stock of the Company" which
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See the information set forth in the Proxy Statement entitled "Certain
Transactions" on pages 24 through 26 thereof, which information is incorporated
herein by reference.
57
<PAGE> 59
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements
1. The financial statements contained in the accompanying Index to
Consolidated Financial Statements covered by the Independent Auditors' Report
are filed as part of this Report (see page 32).
2. Financial Statement Schedules
None
3. Exhibits
The list of exhibits contained in the Index to Exhibits are filed as part
of this Report (see page 61).
(b) Reports on Form 8-K
One report on Form 8-K was filed by the Company during the fourth quarter
of 1997. This report was filed on December 22, 1997 and reported the Merger
under Item 2, the adoption of a stockholder rights agreement under Item 5, and
financial information under Item 7. No financial statements were included in
this Form 8-K; however, financial statements of PHC and Doubletree, together
with proforma financial information, were incorporated by reference in this Form
8-K.
58
<PAGE> 60
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
PROMUS HOTEL CORPORATION
By: /s/ RAYMOND E. SCHULTZ
------------------------------------
Raymond E. Schultz,
Chairman
Dated: March 24, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ RICHARD J. FERRIS Director March 24, 1998
- - -----------------------------------------------------
Richard J. Ferris
/s/ PRISCILLA FLORENCE Director March 24, 1998
- - -----------------------------------------------------
Priscilla Florence
/s/ DALE F. FREY Director March 24, 1998
- - -----------------------------------------------------
Dale F. Frey
/s/ CHRISTOPHER W. HART Director March 24, 1998
- - -----------------------------------------------------
Christopher W. Hart
/s/ RICHARD M. KELLEHER Director March 24, 1998
- - -----------------------------------------------------
Richard M. Kelleher
/s/ MICHAEL W. MICHELSON Director March 24, 1998
- - -----------------------------------------------------
Michael W. Michelson
/s/ JOHN H. MYERS Director March 24, 1998
- - -----------------------------------------------------
John H. Myers
/s/ C. WARREN NEEL Director March 24, 1998
- - -----------------------------------------------------
C. Warren Neel
/s/ MICHAEL D. ROSE Director March 24, 1998
- - -----------------------------------------------------
Michael D. Rose
/s/ MICHAEL I. ROTH Director March 24, 1998
- - -----------------------------------------------------
Michael I. Roth
/s/ RAYMOND E. SCHULTZ Chairman of the Board March 24, 1998
- - ----------------------------------------------------- and Chief Executive Officer
Raymond E. Schultz (Principal Executive Officer)
</TABLE>
59
<PAGE> 61
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAY STEIN Director March 24, 1998
- - -----------------------------------------------------
Jay Stein
/s/ RONALD TERRY Director March 24, 1998
- - -----------------------------------------------------
Ronald Terry
/s/ PETER V. UEBERROTH Director March 24, 1998
- - -----------------------------------------------------
Peter V. Ueberroth
/s/ WILLIAM L. PEROCCHI Executive Vice President and March 24, 1998
- - ----------------------------------------------------- Chief Financial Officer
William L. Perocchi (Principal Financial Officer)
/s/ RICHARD L. TRUEBLOOD Senior Vice President, March 24, 1998
- - ----------------------------------------------------- Controller
Richard L. Trueblood and Chief Accounting Officer
(Principal Accounting Officer)
</TABLE>
60
<PAGE> 62
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<C> <C> <S>
2.1 -- Agreement and Plan of Merger, dated September 1, 1997, by
and among Doubletree Corporation ("Doubletree"), Promus
Hotel Corporation ("Promus") and the Registrant(1)
2.2 -- Amendment Agreement, dated October 1, 1997, by and among
Doubletree Acquisition Corp. and Promus Acquisition
Corp.(2)
3.1 -- Form of Restated Certificate of Incorporation of the
Registrant(2)
3.2 -- Form of Amended and Restated Bylaws of the Registrant(2)
4.1 -- Rights Agreement between the Registrant and First Union
National Bank(21)
4.2 -- Form of Registration Rights Agreement to be entered by the
Registrant and certain Stockholders of the Registrant(2)
+10.1 -- Form of Employment Agreement of Raymond E. Schultz(2)
+10.2 -- Form of Employment Agreement of Richard M. Kelleher(2)
+10.3 -- Form of Employment Agreement of Thomas L. Keltner(2)
+10.4 -- Form of Employment Agreement of William L. Perocchi(2)
+10.5 -- Form of Severance Agreement of Raymond E. Schultz(2)
+10.6 -- Form of Severance Agreement of Richard M. Kelleher(2)
+10.7 -- Form of Severance Agreement of Thomas L. Keltner(2)
+10.8 -- Form of Severance Agreement of William L. Perocchi(2)
+10.9 -- Form of Severance Agreement for Tier I employees of
Doubletree(2)
+10.10 -- Form of Severance Agreement for Tier I employees of
Promus(2)
+10.11 -- Form of Severance Agreement for Tier II employees of
Doubletree and Promus
+10.12 -- Form of Severance Agreement for Tier III employees of
Doubletree(2)
+10.13 -- Form of Severance Plan for Regional Offices Directors and
Managers of Promus(2)
+10.14 -- Form of Severance Plan for Corporate Headquarters and
Regional Offices Administrative
Staff of Doubletree and Promus(2)
+10.15 -- Form of Indemnification Agreement for directors and
executive officers of the Registrant(2)
+10.16 -- New Promus 1997 Equity Participation Plan(2)
+10.17 -- Promus Hotel Corporation 1995 Stock Option Plan(3)
+10.18 -- Form of Amendment to the 1995 Promus Hotel Corporation Stock
Option Plan, dated as of November 13, 1996(4)
+10.19 -- Promus Hotel Corporation 1995 Restricted Stock Plan(5)
+10.20 -- Form of Amendment to the 1995 Restricted Stock Plan dated as
of November 13, 1996(4)
+10.21 -- Promus Hotel Corporation Non-Management Directors Stock
Incentive Plan(6)
+10.22 -- Form of Amendment to the Promus Hotel Corporation 1996
Non-Management Directors Stock Incentive Plan dated as of
December 23, 1996(4)
+10.23 -- 1997 Amended and Restated Equity Participation Plan, adopted
by Doubletree Corporation on May 2, 1997(7)
+10.24 -- Promus Hotel Corporation Key Executive Officer Annual
Incentive Plan(8)
+10.25 -- Promus Hotel Corporation Executive Deferred Compensation
Plan(9)
+10.26 -- Promus Hotel Corporation Deferred Compensation Plan(9)
+10.27 -- Promus Hotel Corporation Bonus Replacement Options Plan(10)
</TABLE>
61
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<C> <C> <S>
+10.28 -- Administrative Regulations, Long Term Compensation Plan
(Restricted Stock Plan and Stock Option Plan), dated as of
January 1, 1992, adopted by Promus Hotel Corporation on
April 5, 1995(11)
+10.29 -- The Restatement of the Promus Hotel Corporation Savings and
Retirement Plan A, dated as of June 30, 1995(12)
+10.30 -- Amendment to the Promus Hotel Corporation Savings and
Retirement Plan A, dated as of June 30, 1995(12)
+10.31 -- The Restatement of the Promus Hotel Corporation Savings and
Retirement Plan B, dated as of June 30, 1995(12)
+10.32 -- Amendment to the Promus Hotel Corporation Savings and
Retirement Plan B, dated as of June 30, 1995(12)
+10.33 -- Promus Hotel Corporation Savings and Retirement Plan Trust
Agreement, dated as of May 26, 1995, among Promus Hotel
Corporation and Robert S. Davis, Donald H. Dempsey,
Patricia R. Ferguson, Jeffery M. Jarvis, Kelly R. Jenkins,
Frederick G. Schultz and Mark C. Wells, as trustees(9)
+10.34 -- Financial Counseling Plan of The Promus Companies
Incorporated as amended February 25, 1993, as adopted by
Promus Hotel Corporation on April 5, 1995(13)
+10.35 -- Summary Plan Description of Executive Term Life Insurance
Plan adopted by Promus Hotel Corporation on April 5,
1995(14)
+10.36 -- Red Lion Supplemental Employee Retirement Plan(15)
+10.37 -- Plan of Reorganization and Distribution Agreement, dated as
of June 30, 1995, between The Promus Companies
Incorporated and Promus Hotel Corporation(16)
+10.38 -- Employee Benefits and Other Employment Matters Allocation
Agreement, dated as of June 30, 1995, between The Promus
Companies Incorporated and Promus(16)
10.39 -- Risk Management Allocation Agreement, dated as of June 30,
1995, between The Promus Companies Incorporated and
Promus(16)
10.40 -- Tax Sharing Agreement, dated as of June 30, 1995, between
The Promus Companies Incorporated and Promus(16)
10.41 -- Form of Guarantee Agreement, dated February 5, 1996, among
Promus, Promus Hotels, Inc., Canadian Imperial Bank of
Commerce, as agent for the Lenders, FelCor Suites Limited
Partnership, FelCor/CSS Holdings, L.P., and FelCor Suite
Hotels, Inc.(18)
10.42 -- Form of Stock Purchase Agreement between Promus Hotels, Inc.
and Winston Hotels, Inc. dated as of April 24, 1996(4)
10.43 -- Form of Amendment No. 1 to Stock Purchase Agreement between
Promus Hotels, Inc. and Winston Hotels, Inc. dated as of
August 7, 1996(4)
10.44 -- Form of Stock Purchase Agreement between Promus Hotels, Inc.
and Equity Inns, Inc. and Equity Inns Partnership, L.P.
dated as of May 31, 1996(4)
10.45 -- Stockholders Agreement dated as of September 30, 1996
between Doubletree, Jack DeBoer, the Alexander John DeBoer
Trust dated March 14, 1995, the Christopher Scott DeBoer
Trust dated March 14, 1995 and the Warren D. Fix Family
Partnership, L.P.(15)
10.46 -- Securities Purchase Agreement dated as of October 31, 1996
by and between Doubletree and the Trustees of General
Electric Pension Trust(19)
10.47 -- Partnership Services Agreement dated as of November 8, 1996
by and among Doubletree, Red Lion Hotels, Inc., Red Lion,
a California Limited Partnership and the affiliates
thereof identified therein(19)
</TABLE>
62
<PAGE> 64
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<C> <C> <S>
10.48 -- Master Agreement, dated as of February 1, 1996, by and among
RFS Partnership, L.P., Doubletree, RFS Hotel Investors,
Inc., Seedling Merger Subsidiary, Inc. and RFS, Inc.(20)
10.49 -- First Amendment to Master Agreement by and among RFS
Partnership, L.P., Doubletree, RFS Hotel Investors, Inc.,
Seedling Merger Subsidiary, Inc. and RFS, Inc. dated
November 21, 1996(15)
10.50 -- Master Lease dated August 1, 1995 between RLH Partnership,
L.P. and Red Lion Hotels, Inc.(19)
10.51 -- Assignment and Assumption Agreement dated August 1, 1995
between Red Lion, a California Limited Partnership and Red
Lion Hotels, Inc.(19)
10.52 -- Consolidated Lease Amendment, dated as of February 27, 1996,
by and between RFS, Inc. and RFS Partnership, L.P.(20)
10.53 -- Guaranty of Lease Obligations dated as of November 8, 1996
by and among Doubletree, Red Lion Hotels, Inc. and RLH
Partnership, L.P.(19)
10.54 -- Guaranty Agreement, dated December 31, 1996, by Doubletree
in favor of GMAC Commercial Mortgage Corporation(15)
10.55 -- Form of Aircraft Agreement, dated August 4, 1995, between
Promus Hotels, Inc., and Harrah's Operating Company,
Inc.(17)
+10.56 -- Employment Agreement of Richard M. Kelleher, dated as of
January 13, 1995(15)
*10.57 -- Form of Tranche A Credit Agreement among Doubletree
Corporation, Promus Hotels, Inc., Promus Hotel Corporation
(f/k/a Parent Holding Corp.), Promus Operating Company,
Inc. (f/k/a Promus Acquisition Corp. f/k/a Promus Hotel
Corporation), Bankers Trust Company, The Bank of Nova
Scotia, Canadian Imperial Bank of Commerce and
NationsBank, N.A.
*10.58 -- Form of Tranche B Credit Agreement among Doubletree
Corporation, Promus Hotels, Inc., Promus Hotel Corporation
(f/k/a Parent Holding Corp.), Promus Operating Company,
Inc. (f/k/a Promus Acquisition Corp. f/k/a Promus Hotel
Corporation), Bankers Trust Company, The Bank of Nova
Scotia, Canadian Imperial Bank of Commerce and
NationsBank, N.A.
*11.1 -- Computation of per share earnings.
*21.1 -- Subsidiaries of the Registrant.
*23.1 -- Consent of Arthur Andersen LLP.
*27.1 -- Financial Data Schedule -- Year ended December 31, 1997.
*27.2 -- Financial Data Schedule -- Year ended December 31, 1996.
*27.3 -- Financial Data Schedule -- Three months ended March 31,
1997.
*27.4 -- Financial Data Schedule -- Six months ended June 30, 1997.
*27.5 -- Financial Data Schedule -- Nine months ended September 30,
1997.
*27.6 -- Financial Data Schedule -- Three months ended March 31,
1996.
*27.7 -- Financial Data Schedule -- Six months ended June 30, 1996.
*27.8 -- Financial Data Schedule -- Nine months ended September 30,
1996.
</TABLE>
- - ---------------
* Included herewith.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
(1) Incorporated by reference from POC's Current Report on Form 8K, filed
September 5, 1997, File No. 1-11463.
63
<PAGE> 65
(2) Incorporated by reference from the Company's registration statement on Form
S-4, filed November 11, 1997, File No. 333-40253.
(3) Incorporated by reference from the Proxy Statement of The Promus Companies
Incorporated ("PCI"), Annex III-A, dated April 25, 1995, File No. 1-10410.
(4) Incorporated by reference from POC's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, filed March 18, 1997, File No.
1-11463.
(5) Incorporated by reference from PCI's Proxy Statement, Annex III-B, dated
April 25, 1995, File No. 1-10410.
(6) Incorporated by reference from PCI's Proxy Statement, Annex VIII, dated
April 25, 1995, File No. 1-10410.
(7) Incorporated by reference from Doubletree's Proxy Statement, Appendix A,
dated March 28, 1997, File No. 0-24392.
(8) Incorporated by reference from PCI's Proxy Statement, Annex VII, dated
April 25, 1995, File No. 1-10410.
(9) Incorporated by reference from POC's Current Report on Form 8-K, filed June
14, 1995, File No. 1-11463.
(10) Incorporated by reference from POC's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997, filed May 15, 1997, File No. 1-10410.
(11) Incorporated by reference from PCI's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1992, filed May 13, 1992, File No. 1-10410.
(12) Incorporated by reference from POC's Registration Statement on Form S-3,
filed October 11, 1996, File No. 1-11463.
(13) Incorporated by reference from PCI's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993, filed May 13, 1993, File No. 1-10410.
(14) Incorporated by reference from PCI's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, filed March 17, 1993, File No.
1-10410.
(15) Incorporated by reference from Doubletree's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, filed March 28, 1997, File No.
0-24392.
(16) Incorporated by reference from POC's Quarterly Report on Form 10-Q, for the
quarter ended June 30, 1995, filed August 11, 1995, File No. 1-11463.
(17) Incorporated by reference from POC's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, filed March 12, 1996, File No.
1-11463.
(18) Incorporated by reference from POC's Quarterly Report on Form 10-Q, for the
quarter ended March 31, 1996, filed May 7, 1996, File No. 1-11463.
(19) Incorporated by reference from Doubletree's Current Report on Form 8-K
dated November 15, 1996, filed November 21, 1996, File No. 0-24392.
(20) Incorporated by reference from Doubletree's Current Report on Form 8-K,
dated February 27, 1996.
(21) Incorporated by reference from the Company's Form 8-A, filed December 17,
1997.
64
<PAGE> 1
TRANCHE A
CREDIT AGREEMENT
Dated as of December 19, 1997
among
DOUBLETREE CORPORATION,
as a Borrower,
PROMUS HOTELS, INC.,
as a Borrower,
PROMUS HOTEL CORPORATION (f/k/a Parent Holding Corp.) AND
PROMUS OPERATING COMPANY, INC. (f/k/a Promus Acquisition Corp.
f/k/a Promus Hotel Corporation),
as Guarantors,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTY HERETO,
BANKERS TRUST COMPANY, THE BANK OF NOVA SCOTIA and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Co-Syndication Agents,
AND
NATIONSBANK, N.A.,
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
SECTION 1
DEFINITIONS....................................................................1
1.1 Definitions.......................................................1
1.2 Computation of Time Periods......................................22
1.3 Accounting Terms.................................................22
SECTION 2 CREDIT FACILITIES .................................................22
2.1 Committed Revolving Loans........................................22
2.2 Letter of Credit Subfacility.....................................26
2.3 Swingline Loan Subfacility.......................................30
2.4 Competitive Loan Subfacility.....................................33
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES.....................36
3.1 Default Rate.....................................................36
3.2 Extension and Conversion.........................................36
3.3 Reductions In Commitments and Prepayments........................37
3.4 Fees.............................................................39
3.5 Capital Adequacy.................................................40
3.6 Inability To Determine Interest Rate.............................41
3.7 Illegality.......................................................41
3.8 Requirements of Law..............................................42
3.9 Taxes............................................................43
3.10 Indemnity.......................................................45
3.11 Pro Rata Treatment..............................................46
3.12 Sharing of Payments.............................................47
3.13 Place and Manner of Payments....................................48
3.14 Indemnification; Nature of Issuing Lender's Duties..............48
3.15 Replacement of Lenders..........................................50
3.16 Change of Lending Office........................................50
SECTION 4 GUARANTY ..........................................................51
4.1 The Guarantee....................................................51
4.2 Obligations Unconditional........................................52
4.3 Reinstatement....................................................53
4.4 Certain Additional Waivers.......................................53
4.5 Remedies.........................................................53
4.6 Continuing Guarantee.............................................54
SECTION 5 CONDITIONS ........................................................54
5.1 Conditions to Initial Extensions of Credit.......................54
5.2 Each Extension of Credit.........................................56
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 6 REPRESENTATIONS AND WARRANTIES.....................................56
6.1 Financial Condition..............................................57
6.2 No Change........................................................58
6.3 Corporate and Partnership Existence; Compliance with Law.........58
6.4 Corporate Power; Authorization; Enforceable Obligations..........59
6.5 No Legal Bar.....................................................59
6.6 No Material Litigation...........................................60
6.7 No Default.......................................................60
6.8 Ownership of Property; Liens.....................................60
6.9 Intellectual Property............................................60
6.10 No Burdensome Restrictions......................................60
6.11 Taxes...........................................................61
6.12 ERISA...........................................................61
6.13 Investment Company Act; Other Regulations.......................62
6.14 Subsidiaries....................................................62
6.15 Purpose of Loans................................................62
6.16 Environmental Matters...........................................62
SECTION 7 AFFIRMATIVE COVENANTS..............................................64
7.1 Information Covenants............................................64
7.2 Preservation of Existence and Franchises.........................66
7.3 Books and Records................................................66
7.4 Compliance with Law..............................................66
7.5 Payment of Taxes and Other Claims................................67
7.6 Insurance........................................................67
7.7 Maintenance of Property..........................................67
7.8 Performance of Obligations.......................................67
7.9 Use of Proceeds..................................................67
7.10 Audits/Inspections..............................................68
7.11 Financial Covenants.............................................68
7.12 Federal Regulations.............................................68
SECTION 8 NEGATIVE COVENANTS.................................................68
8.1 Liens............................................................69
8.2 Nature of Business...............................................69
8.3 Consolidation, Merger, Sale or Purchase of Assets................69
8.4 Investments......................................................71
8.5 Transactions with Affiliates.....................................71
8.6 Fiscal Year......................................................71
8.7 No Dividend Restrictions.........................................71
SECTION 9 EVENTS OF DEFAULT..................................................71
9.1 Events of Default................................................71
9.2 Acceleration; Remedies...........................................75
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 10 AGENCY PROVISIONS....................................................................................76
10.1 Appointment........................................................................................76
10.2 Delegation of Duties...............................................................................76
10.3 Exculpatory Provisions.............................................................................76
10.4 Reliance on Communications.........................................................................77
10.5 Notice of Default..................................................................................77
10.6 Non-Reliance on Agent and Other Lenders............................................................78
10.7 Indemnification....................................................................................78
10.8 Agent in its Individual Capacity...................................................................79
10.9 Successor Agent....................................................................................79
10.10 Co Agents.........................................................................................80
SECTION 11 MISCELLANEOUS........................................................................................80
11.1 Notices............................................................................................80
11.2 Right of Set-Off...................................................................................81
11.3 Benefit of Agreement...............................................................................81
11.4 No Waiver; Remedies Cumulative.....................................................................85
11.5 Payment of Expenses, etc...........................................................................85
11.6 Amendments, Waivers and Consents...................................................................86
11.7 Counterparts.......................................................................................88
11.8 Headings...........................................................................................88
11.9 Survival of Indemnification........................................................................88
11.10 Governing Law; Submission to Jurisdiction; Venue..................................................88
11.11 Severability......................................................................................89
11.12 Entirety..........................................................................................89
11.13 Survival of Representations and Warranties........................................................89
11.14 Knowledge Standard................................................................................89
11.15 Confidentiality...................................................................................90
11.16 Agent's and Lender's Covenant.....................................................................90
11.17 Concerning Joint and Several Liability of the Borrowers...........................................90
11.18 No Bankruptcy Proceedings.........................................................................93
</TABLE>
iii
<PAGE> 5
Schedules
Schedule 2.1(a) Schedule of Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Tranche A Committed Revolving Note
Schedule 2.2(a) Existing Letters of Credit
Schedule 2.3(d) Form of Swingline Note
Schedule 2.4(b)-1 Form of Tranche A Competitive Bid Request
Schedule 2.4(b)-2 Form of Notice of Tranche A Competitive Bid Request
Schedule 2.4(c) Form of Tranche A Competitive Bid
Schedule 2.4(d) Form of Tranche A Competitive Bid Accept/Reject Letter
Schedule 2.4(h) Form of Tranche A Competitive Loan Note
Schedule 3.2 Form of Notice of Extension/Conversion
Schedule 3.9 Form of U.S. Tax Compliance Certificate
Schedule 6.4 Consents
Schedule 6.8 Excluded Assets
Schedule 6.9 Intellectual Property Claims
Schedule 6.14 Subsidiaries
Schedule 7.1(c) Form of Officer's Compliance Certificate
Schedule 11.1 Schedule of Addresses
Schedule 11.3(b) Form of Tranche A Assignment and Acceptance
Schedule 11.3(e) Form of Designation Agreement
iv
<PAGE> 6
TRANCHE A
CREDIT AGREEMENT
THIS TRANCHE A CREDIT AGREEMENT dated as of December 19, 1997 (as
amended, restated, supplemented, modified and extended from time to time, the
"Credit Agreement" and sometimes, this "Credit Agreement"), is by and among
DOUBLETREE CORPORATION, a Delaware corporation ("Doubletree"), PROMUS HOTELS,
INC., a Delaware corporation ("PHI" --hereinafter Doubletree and PHI are
sometimes individually referred to as a "Borrower" or collectively referred to
as the "Borrowers"), PROMUS HOTEL CORPORATION (f/k/a Parent Holding Corp.), a
Delaware corporation (the "Parent Company"), PROMUS OPERATING COMPANY, INC.
(f/k/a Promus Acquisition Corp. f/k/a Promus Hotel Corporation), a Delaware
corporation ("Old PHC"--hereinafter the Parent Company and Old PHC are sometimes
individually referred to as a "Guarantor" or collectively referred to as
"Guarantors"), the several lenders identified on the signature pages hereto and
such other lenders as may from time to time become a party hereto (the
"Lenders"), BANKERS TRUST COMPANY, THE BANK OF NOVA SCOTIA AND CANADIAN IMPERIAL
BANK OF COMMERCE, as co-syndication agents (each in such capacity, a "Co-Agent")
and NATIONSBANK, N.A., as agent for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H
WHEREAS, the Borrowers have requested that the Lenders provide a senior
credit facility in the amount of $750,000,000; and
WHEREAS, the Lenders have agreed to make the requested senior credit
facility available on the terms and conditions set forth herein.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINITIONS.
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural number the singular:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to
all directors and officers of such
<PAGE> 7
Person), controlled by or under direct or indirect common control with
such Person. A Person shall be deemed to control an entity if such
Person possesses, directly or indirectly, the power (i) to vote 10% or
more of the securities or other ownership interests having ordinary
voting power for the election of directors of such corporation or the
members of the managing body of such Person or (ii) to direct or cause
direction of the management and policies of such corporation or other
entity, whether through the ownership of voting securities, by contract
or otherwise.
"Agent" means NationsBank, N.A. and any successors and
permitted assigns in such capacity.
"Agent's Fee Letter" means the letter agreement dated as of
November 10, 1997 among NationsBank, N.A., NationsBanc/Montgomery
Securities, Inc. and the Borrowers, as amended, modified, supplemented
or replaced from time to time.
"Agent's Fees" has the meaning given to such term in Section
3.4(c).
"Anniversary Date" has the meaning given to such term in
Section 2.1(a).
"Applicable Percentage" means the appropriate applicable
percentages corresponding to the lowest Pricing Level available, as
determined by either the then current Leverage Ratio or the Unsecured
Senior Debt Rating in effect as of the most recent Calculation Date, as
shown below:
<TABLE>
<CAPTION>
Applicable Applicable
Percentage for Percentage for Applicable Applicable
Committed Committed Percentage Percentage
Revolving Loans Revolving Loans for for
Pricing Leverage Unsecured Senior Consisting of Consisting of Commitment Letter of
Level Ratio Debt Rating Eurodollar Loans Base Rate Loans Fee Credit Fees
----- ----- ----------- ---------------- --------------- --- -----------
<S> <C> <C> <C> <C> <C> <C>
I Less than 1.25 to Greater than A- .17% 0.0% .08% .17%
1.0 or A3
II Equal to or Greater than or .225% 0.0% .10% .225%
greater than 1.25 equal to BBB+ or
to 1.0 but less Baa1 but less
than 1.75 to 1.0 than or equal to
A- or A3
III Equal to or Greater than or .25% 0.0% .125% .25%
greater than 1.75 equal to BBB or
to 1.0 but less Baa2 but less
than 2.25 to 1.0 than BBB+ or Baa1
IV Equal to or Greater than or .30% 0.0% .15% .30%
greater than 2.25 equal to BBB- or
but less than Baa3 but less
2.75 to 1.0 than BBB or Baa2
V Equal to or Less than BBB- .425% 0.0% .20% .425%
greater than 2.75 or Baa3
to 1.0
</TABLE>
2
<PAGE> 8
The Applicable Percentage for Committed Revolving Loans, the
Letter of Credit Fees and the Commitment Fees shall, in each case, be
determined and adjusted on the date (each a "Calculation Date") not
later than five Business Days after (x) the date by which the Parent
Company is required to provide the officer's certificate in accordance
with the provisions of Section 7.1(c) or (y) the date there is a change
in the Unsecured Senior Debt Rating; provided that the Applicable
Percentage for Committed Revolving Loans, the Letter of Credit Fees and
the Commitment Fees shall be no more favorable to the Borrowers than
Pricing Level III (as shown above) until the Calculation Date occurring
immediately after the fiscal quarter of the Parent Company ending on
June 30, 1998; and provided further that if the Parent Company fails to
timely provide the officer's certificate required by Section 7.1(c),
the Applicable Percentage for Committed Revolving Loans, the Letter of
Credit Fees and the Commitment Fees shall be based on the then current
Unsecured Senior Debt Rating until such time that an appropriate
officer's certificate is provided whereupon the Pricing Level shall be
determined by the then current Leverage Ratio or Unsecured Senior Debt
Rating, as applicable. Each determination of the Applicable Percentage
shall be effective from one Calculation Date until the next Calculation
Date. Any adjustment in the Applicable Percentage shall be applicable
to all existing Committed Revolving Loans and Letters of Credit as well
as any new Committed Revolving Loans made or Letters of Credit issued.
For purposes of determining the Applicable Percentage as of any
Calculation Date, the then current Leverage Ratio shall be the Leverage
Ratio for the four (4) consecutive fiscal quarterly periods most
recently ended.
In the event the Unsecured Senior Debt Rating and the Leverage
Ratio would provide for two different Pricing Levels, the lowest
Pricing Level determined by reference to the Unsecured Senior Debt
Rating or the Leverage Ratio shall be applicable.
In the event the two Unsecured Senior Debt Ratings would
provide for two different Pricing Levels, the Pricing Level determined
by reference to the Unsecured Senior Debt Rating shall be the Pricing
Level that is one level lower (i.e. lower pricing) than the highest
(i.e. most expensive) Pricing Level indicated by either of the two
Unsecured Senior Debt Ratings.
The Parent Company (or its Subsidiaries on behalf of the
Parent Company) shall promptly deliver to the Agent information
regarding any change in such Unsecured Senior Debt Ratings, as
determined by S&P and Moody's, that would change the existing Pricing
Level pursuant to the preceding paragraph. Under the column "Unsecured
Senior Debt Rating" in the table above, the ratings of A-, BBB+, BBB,
and BBB- refer to S&P ratings and the ratings of A3, Baa1, Baa2 and
Baa3 refer to Moody's ratings.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
3
<PAGE> 9
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/1000 of 1%)
equal to the greater of (a) the Federal Funds Rate in effect on such
day plus ? of 1% or (b) the Prime Rate in effect on such day. If for
any reason the Agent shall have determined (which determination shall
be conclusive absent manifest error) that it is unable after due
inquiry to ascertain the Federal Funds Rate for any reason, including
the inability of the Agent to obtain sufficient quotations in
accordance with the terms hereof, the Base Rate shall be determined
without regard to clause (a) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist.
Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such
change in the Prime Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrowers" has the meaning given to such term in the
introductory paragraph hereof.
"Business" has the meaning given to such term in Section
6.16(a).
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina and
New York, New York are authorized or required by law to close, except
that, when used in connection with a Eurodollar Loan, such day shall
also be a day on which dealings between banks are carried on in U.S.
dollar deposits in London, England and New York, New York.
"Calculation Date" has the meaning given to such term in the
definition of "Applicable Percentage".
"Capital Lease" means any lease of property, real or personal,
the obligations with respect to which are required to be capitalized on
a balance sheet of the lessee in accordance with GAAP.
"Closing Date" means the later of the date hereof or the date
on which the Lenders make their initial Loans.
"Co-Agents" has the meaning given to such term in the
introductory paragraph hereof.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commitment" means the Revolving Commitment, the LOC
Commitment and the Swingline Commitment, individually or collectively,
as appropriate.
4
<PAGE> 10
"Commitment Fee" has the meaning given to such term in Section
3.4(a).
"Commitment Percentage" means the Revolving Commitment
Percentage or the LOC Commitment Percentage, as appropriate.
"Committed Revolving Loans" has the meaning given to such term
in Section 2.1(a).
"Committed Revolving Note" or "Committed Revolving Notes"
means the promissory notes of the Borrowers in favor of each of the
Lenders evidencing the Committed Revolving Loans provided pursuant to
Section 2.1(e), individually or collectively, as appropriate, as such
promissory notes may be amended, modified, supplemented, extended,
renewed or replaced from time to time.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with either Borrower within
the meaning of Section 4001(a)(14)(B) of ERISA or is part of a group
which includes either Borrower and which is treated as a single
employer under Section 414(b), (c) or (m) of the Code.
"Competitive Bid" means an offer by a Lender to make a
Competitive Loan pursuant to the terms of Section 2.4(c).
"Competitive Bid Rate" means, as to any Competitive Bid made
by a Lender in accordance with the provisions of Section 2.4, the fixed
rate of interest offered by the Lender making the Competitive Bid.
"Competitive Bid Request" means a request by the Borrowers for
Competitive Bids in accordance with the provisions of Section 2.4(b), a
form of which is attached at Schedule 2.4(b)-1.
"Competitive Bid Request Fee" means the administrative fee
payable to the Agent, if any, in connection with a Competitive Bid
Request as provided in the Agent's Fee Letter.
"Competitive Loan" means a loan made by a Lender pursuant to
the provisions of Section 2.4.
"Competitive Loan Lenders" means, at any time, those Lenders
which have Competitive Loans outstanding.
"Competitive Loan Maximum Amount" has the meaning given to
such term in Section 2.4(a).
5
<PAGE> 11
"Competitive Loan Note" or "Competitive Loan Notes" means the
promissory notes of the Borrowers in favor of each of the Lenders
evidencing the Competitive Loans, if any, provided pursuant to Section
2.4(h), individually or collectively, as appropriate, as such
promissory notes may be amended, modified, supplemented, extended,
renewed or replaced from time to time.
"Consolidated Adjusted EBITDA" means, for any period, the
amount equal to (i) the sum of Consolidated Net Income for such period
plus Consolidated Interest Expense for such period to the extent
deducted in the calculation of Consolidated Net Income plus the
minority interest share of net income for such period to the extent
deducted in the calculation of Consolidated Net Income minus the
minority interest share of net loss for such period to the extent
included in the calculation of Consolidated Net Income plus all
provisions for any Federal, state or other income taxes plus
depreciation and amortization, in each case for the Parent Company and
its Subsidiaries on a consolidated basis, but excluding in each case
the portion of such components attributable to Joint Ventures,
determined in accordance with GAAP plus (ii) all cash distributions
from Joint Ventures received by the Parent Company, the Borrowers or
any of their respective Subsidiaries for such period.
"Consolidated Assets" means the assets of the Parent Company
and its Subsidiaries on a consolidated basis determined in accordance
with GAAP.
"Consolidated Funded Debt" means Funded Debt of the Parent
Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP.
"Consolidated Interest Expense" means, for any period, all
interest expense, including the amortization of debt discount and
premium and the interest component under Capital Leases for the Parent
Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP.
"Consolidated Net Income" means, for any period, the net
income of the Parent Company and its Subsidiaries on a consolidated
basis determined in accordance with GAAP, but excluding for purposes
hereof extraordinary gains or losses, and any taxes on such excluded
gains and any tax deductions or credits on account of any such excluded
losses.
"Consolidated Net Worth" means total stockholders' equity for
the Parent Company and its Subsidiaries on a consolidated basis as
determined in accordance with GAAP.
6
<PAGE> 12
"Contractual Obligation" means, as to any Person, any
provision of any material security issued by such Person or of any
material agreement, instrument or other undertaking to which such
Person is a party or by which it or any of its property is bound.
"Credit Date" means (i) the date of each request for an
Extension of Credit pursuant to a Notice of Borrowing or a Notice of
Conversion, in the case of Committed Revolving Loans and Swingline
Loans, a notice of request for issuance or extension of a Letter of
Credit in accordance with the provisions of Section 2.2(a), in the case
of Letters of Credit, and a Competitive Bid Request, in the case of
Competitive Loans, and (ii) the date of any such Extension of Credit
relating thereto.
"Credit Documents" means this Credit Agreement, the Notes and
all other related agreements and documents executed by any Credit Party
and issued or delivered hereunder or thereunder or pursuant hereto or
thereto.
"Credit Party" means any of the Borrowers and the Guarantors.
"Credit Party Obligations" means, without duplication, all of
the obligations of the Credit Parties to the Lenders and the Agent,
whenever arising, under this Credit Agreement, the Notes or any of the
other Credit Documents to which either Borrower or any other Credit
Party is a party.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, at
such time (a) has failed to make a Loan, issue a Letter of Credit or
fund a Participation Interest required pursuant to the terms of this
Credit Agreement, (b) has failed to pay to the Agent or any Lender an
amount owed by such Lender pursuant to the terms of this Credit
Agreement or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or to a receiver, trustee or
similar official.
"Designated Lender" means a special purpose corporation that
is identified as such on the signature pages hereto next to the caption
"Designated Lender" as well as each special purpose corporation that
(i) shall have become a party to this Credit Agreement pursuant to
Section 11.3(e) hereof, and (ii) is not otherwise a Lender.
"Designating Lender" means each Lender that is identified as
such on the signature pages hereto next to the caption "Designating
Lender" and immediately below the signature of its Designated Lender as
well as each Lender that shall designate a Designated Lender pursuant
to Section 11.3(e) hereof.
7
<PAGE> 13
"Designation Agreement" means a designation agreement in
substantially the form of Schedule 11.3(e) attached hereto entered into
by a Lender and a Designated Lender and accepted by the Borrowers and
the Agent.
"Disapproving Lenders" has the meaning given to such term in
Section 2.1(a).
"Disqualified Stock" means any capital stock which, by its
terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event,
matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder
thereof, in whole or in part on, or prior to, or is exchangeable for
debt securities of the Parent Company or any of its Subsidiaries prior
to, the first anniversary of the Termination Date.
"Dividends" means any payment, distribution or dividend (other
than a dividend or distribution payable solely in stock of the Person
making such payment, distribution or dividend) on, or any payment on
account of the purchase, redemption or retirement of, or any other
distribution in respect of, any shares of any class of stock or other
ownership interest in a Person (including any such payment or
distribution in cash or in property or obligations).
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Eligible Assignee" means (A) (i) a commercial bank or other
financial institution organized under the laws of the United States or
any state thereof and (ii) a commercial bank or other financial
institution organized under the laws of any other country, or a
political subdivision thereof, provided that (a) such bank or other
financial institution is acting through a branch or agency located in
the United States or (b) such bank or other financial institution is
organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of such country, in each case (under clauses (i) and (ii)
above) that is reasonably acceptable to the Agent and the Borrowers and
(B) any Lender or its parent company or any affiliate of such Lender
which is at least 50% owned by such Lender or its parent company. It
shall be deemed reasonable for the Borrowers to refuse to accept as an
"Eligible Assignee" any entity the inclusion of which as a Lender
hereunder would be reasonably likely to increase amounts payable by the
Borrowers under Sections 3.5, 3.8, 3.9 or 3.10 or give rise to the
circumstances described in Section 3.6.
"Eligible Participant" means any entity satisfying the
requirements set forth in the first sentence of the definition of
"Eligible Assignee" other than the requirement for the Borrowers' or
the Agent's approval.
8
<PAGE> 14
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, codes, rules, judgments, orders, decrees, permits, licenses
or other governmental restrictions relating to the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances
or wastes into the environment including, without limitation, ambient
air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
the rulings issued thereunder.
"Eurodollar Loan" means any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = Interbank Offered Rate
---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any Interest Period,
the average daily percentage (expressed as a decimal) which is in
effect from time to time during such Interest Period under Regulation D
of the Board of Governors of the Federal Reserve System (or any
successor), as such regulation may be amended from time to time or any
successor regulation, as the maximum reserve requirement (including,
without limitation, any basic, supplemental, emergency, special, or
marginal reserves) applicable with respect to Eurocurrency liabilities
as that term is defined in Regulation D (or against any other category
of liabilities that includes deposits by reference to which the
interest rate of Eurodollar Loans is determined), whether or not any
Lender has any Eurocurrency liabilities subject to such reserve
requirement at that time. Eurodollar Loans shall be deemed to
constitute Eurocurrency liabilities and as such shall be deemed subject
to reserve requirements without benefits of credits for proration,
exceptions or offsets that may be available from time to time to a
Lender. The Eurodollar Rate shall be adjusted automatically on and as
of the effective date of any change in the Eurodollar Reserve
Percentage.
"Event of Default" has the meaning given to such term in
Section 9.1.
9
<PAGE> 15
"Excess Funding Borrower" has the meaning given to such term
in Section 11.17(h).
"Excess Payment" has the meaning given to such term in Section
11.17(h).
"Excluded Taxes" has the meaning given to such term in Section
3.9(a).
"Existing Credit Agreements" means (i) each of Tranche A and
Tranche B Credit Agreements dated as of June 7, 1995 among Embassy
Suites, Inc., Promus Hotels, Inc., certain subsidiary guarantors, the
several lenders party thereto and NationsBank, N.A., f/k/a NationsBank,
N.A. (Carolinas) as Agent and (ii) the Credit Agreement dated as of
November 8, 1996 among Doubletree Corporation, the various banks party
thereto, Morgan Stanley Senior Funding, Inc., as Syndication Agent and
as Arranger, and The Bank of Nova Scotia, as Administrative Agent.
"Existing Letters of Credit" means those letters of credit
outstanding on the Closing Date issued by a Lender and identified on
Schedule 2.2(a).
"Extension of Credit" means, as to any Lender, the making of a
Loan by such Lender or the issuance of, or participation in, a Letter
of Credit by such Lender.
"Federal Funds Rate" means, for any day, the rate of interest
per annum (rounded upwards, if necessary, to the nearest whole multiple
of 1/1000 of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (A) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day and (B) if no such
rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Agent
on such day on such transactions as determined by the Agent.
"Former Plan" means any employee benefit plan in respect of
which either Borrower or a Commonly Controlled Entity has engaged in a
transaction described in Section 4069 or Section 4212(c) of ERISA and
with respect to which transaction either Borrower or Commonly
Controlled Entity, as applicable, has as its principal purpose the
evasion of liability described in such sections.
"Funded Debt" means, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money,
(ii) all purchase money indebtedness of such Person, including, without
limitation, the principal portion of all obligations of such Person
under Capital Leases, (iii) all Guaranty Obligations of such Person
(excluding any of such obligations to maintain working capital,
solvency or other balance sheet condition
10
<PAGE> 16
of any other Person (including, without limitation, keep well
agreements, maintenance agreements, comfort letters or similar
agreements or arrangements)) and (iv) the amount of any Qualified
Stock; provided that, "Funded Debt" shall not include indebtedness
owing under or in connection with Joint Ventures to the extent such
indebtedness is Non-Recourse Indebtedness. The Funded Debt of any
Person shall include the Funded Debt of any partnership or joint
venture in which such Person is a general partner (except as set forth
in the preceding proviso).
"GAAP" means generally accepted accounting principles in the
United States.
"Government Acts" has the meaning given to such term in
Section 3.14(a).
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantors" has the meaning given to such term in the
introductory paragraph hereof.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and including, without limitation, any obligation,
whether or not contingent, (i) to purchase any such Indebtedness or any
Property constituting security therefor, (ii) to advance or provide
funds or other support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including, without limitation,
keep well agreements, maintenance agreements, comfort letters or
similar agreements or arrangements) for the benefit of any holder of
Indebtedness of such other Person, (iii) to lease or purchase Property,
securities or services primarily for the purpose of assuring the holder
of such Indebtedness, or (iv) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. The amount
of any Guaranty Obligation hereunder shall (subject to any limitations
set forth therein) be deemed to be an amount equal to the outstanding
principal amount (or maximum principal amount, if larger) of the
Indebtedness in respect of which such Guaranty Obligation is made.
"Indebtedness" of any Person means, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations
of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made,
(iii) all obligations of such Person under conditional sale or other
title retention agreements relating to Property purchased by such
Person (other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of
business), (iv) all obligations of such Person issued or assumed as the
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<PAGE> 17
deferred purchase price of Property or services purchased by such
Person (other than trade debt incurred in the ordinary course of
business) which would appear as liabilities on a balance sheet of such
Person, (v) all obligations of such Person under take-or-pay
arrangements or under commodities agreements, (vi) 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,
or payable out of the proceeds or production from, Property owned or
acquired by such Person, whether or not the obligations secured thereby
have been assumed, (vii) all Guaranty Obligations of such Person,
(viii) the principal portion of all obligations of such Person under
Capital Leases, (ix) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange
agreements, commodity purchase or option agreements or other interest
or exchange rate or commodity price hedging agreements, (x) the maximum
amount of all letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed),
and (xi) the amount of any Disqualified Stock. The Indebtedness of any
Person shall include the Indebtedness of any partnership or joint
venture in which such Person is a general partner (except to the extent
any such Indebtedness is Non-Recourse Indebtedness).
"Insolvency" means with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245(b)(i) of ERISA.
"Interbank Offered Rate" means, for any Eurodollar Loan for
any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/1000 of 1%) appearing on Telerate Page 3750
(or any successor page) as the London interbank offered rate for
deposits in Dollars at approximately 11:00 A.M. (London time) two (2)
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "Interbank Offered Rate" shall mean, for any
Eurodollar Loan for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/1000 of 1%) appearing
on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 A.M. (London time) two (2)
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates (rounded upwards, if
necessary, to the nearest 1/1000 of 1%). If for any reason neither of
such rates is available, the term "Interbank Offered Rate" shall mean,
for any Eurodollar Loan for any Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/1000 of 1%)
equal to the rate at which deposits in Dollars approximately equal in
principal amount to the Eurodollar Loan of the Agent, in its capacity
as a Lender, included in such Eurodollar Loan, and for a maturity
comparable to such Interest Period are offered to the principal London
office of the Agent in immediately available funds in the London
interbank market at approximately 11:00 A.M.. (London time) on the date
that is two (2) Business Days prior to the first day of
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<PAGE> 18
such Interest Period. If no such offers or quotes are generally
available for such amount, then the Agent shall be entitled to
determine the Eurodollar Rate by estimating in its reasonable judgment
the per annum rate (as described above) that would be applicable if
such quote or offers were generally available.
"Interest Payment Date" means (i) as to any Base Rate Loan,
the last day of each March, June, September and December, the date of
repayment of principal of such Loan and the Termination Date, (ii) as
to any Eurodollar Loan or any Competitive Loan, the last day of each
Interest Period for such Loan and the Termination Date, and in addition
where the applicable Interest Period is more than three (3) months,
then also on the date three (3) months from the beginning of the
Interest Period, and each three (3) months thereafter. If an Interest
Payment Date falls on a date which is not a Business Day, such Interest
Payment Date shall be deemed to be the next succeeding Business Day,
except that in the case of Eurodollar Loans where the next succeeding
Business Day falls in the next succeeding calendar month, then on the
next preceding Business Day.
"Interest Period" means (i) with respect to any Eurodollar
Loan, a period of one, two, three or six months' duration, as the
Borrower may elect, commencing in each case on the date of the
borrowing (including extensions and conversions) and (ii) with respect
to any Competitive Loan, a period beginning on the date of borrowing
and ending on the date specified in the respective Competitive Bid
whereby the offer to make such Competitive Loan was extended, which
shall be not less than seven (7) days nor more than ninety (90) days'
duration; provided, however, (A) if any Interest Period would end on a
day which is not a Business Day, such Interest Period shall be extended
to the next succeeding Business Day (except that in the case of
Eurodollar Loans, where the next succeeding Business Day falls in the
next succeeding calendar month, then on the next preceding Business
Day), (B) no Interest Period shall extend beyond the Termination Date,
and (C) in the case of Eurodollar Loans, where an Interest Period
begins on a day for which there is no numerically corresponding day in
the calendar month in which the Interest Period is to end, such
Interest Period shall, subject to clause (A) above, end on the last
Business Day of such calendar month.
"Investment", in any Person, means any loan or advance to such
Person, any purchase or other acquisition of any capital stock,
warrants, rights, options, obligations or other securities of such
Person, or any capital contribution to such Person or any other similar
investment in such Person.
"Issuing Lender" means NationsBank, in its capacity as issuer
of any Letter of Credit, or such other Lender as to which the Borrowers
may request and such Lender may agree.
"Joint Obligations" has the meaning given to such term in
Section 11.17(h).
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"Joint Venture" means any corporation, general or limited
partnership or limited liability company or any other entity similar to
the foregoing allowed to be formed under applicable law in which the
Parent Company or any of its Subsidiaries is a shareholder, partner,
member or owner which is not a Subsidiary of the Parent Company and is
not consolidated with the Parent Company in accordance with GAAP.
"Lenders" means each of the Persons identified as a "Lender"
on the signature pages hereto, and each Person which may become a
Lender by way of assignment in accordance with the terms hereof,
together with their successors and permitted assigns.
"Letter of Credit" means the Existing Letters of Credit and
any letter of credit issued by the Issuing Lender pursuant to the terms
hereof, as such Letter of Credit may be amended, modified, extended,
renewed or replaced from time to time.
"Letter of Credit Fee" has the meaning given to such term in
Section 3.4(b).
"Leverage Ratio" means, for any period, the ratio of
Consolidated Funded Debt as of the end of such period to Consolidated
Adjusted EBITDA for such period.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, and
any lease in the nature thereof).
"Loan" or "Loans" means a Committed Revolving Loan, a
Swingline Loan and/or a Competitive Loan, as appropriate.
"LOC Commitment" means the commitment of the Issuing Lender to
issue Letters of Credit and with respect to each Lender, the commitment
of such Lender to purchase participation interests in the Letters of
Credit up to such Lender's LOC Committed Amount as specified in
Schedule 2.1(a), as such amount may be reduced from time to time in
accordance with the provisions hereof.
"LOC Commitment Percentage" means, for each Lender a fraction
(expressed as a percentage) the numerator of which is the LOC
Commitment of such Lender at such time and the denominator of which is
the LOC Committed Amount at such time, provided that if the LOC
Commitment Percentage of any Lender is to be determined after the LOC
Committed Amount has been terminated, then the LOC Commitment
Percentage of such Lender shall be determined immediately prior (and
without giving effect) to such termination.
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"LOC Committed Amount" means, collectively, the aggregate
amount of all of the LOC Commitments of the Lenders to issue and
participate in Letters of Credit as referenced in Section 2.2 and,
individually, the amount of each Lender's LOC Commitment as specified
in Schedule 2.1(a).
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or
providing for (i) the rights and obligations of the parties concerned
or at risk or (ii) any collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (ii) the aggregate amount of all drawings
under Letters of Credit honored by the Issuing Lender but not
theretofore reimbursed.
"Mandatory Borrowing" has the meaning given to such term in
Section 2.2(e) and Section 2.3(b)(iii).
"Material Adverse Effect" means a material adverse effect on
(i) the financial condition, operations or business of the Parent
Company and its Subsidiaries taken as a whole, (ii) the ability of the
Borrowers and the Guarantors taken as a whole to perform any material
obligation under the Credit Documents or (iii) the material rights and
remedies of the Agent and the Lenders under the Credit Documents.
"Material Environmental Amount" means any amount payable by
the Parent Company or its Subsidiaries not subject to payment or
reimbursement by another Person in respect of or under any
Environmental Law for remedial costs, compliance costs, compensatory
damages, punitive damages, fines, penalties or any combination thereof,
that has a Material Adverse Effect.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Merger Agreement" means that certain Agreement and Plan of
Merger, dated as of September 1, 1997, by and among the Parent Company,
Old PHC and Doubletree.
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"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"NationsBank" means NationsBank, N.A. and its successors and
permitted assigns.
"Non-Excluded Taxes" has the meaning given to such term in
Section 3.9(a).
"Non-Recourse Indebtedness" means Indebtedness with respect to
which recourse for payment is limited to specific assets encumbered by
a Lien securing such Indebtedness; provided, however, that personal
recourse of a holder of Indebtedness against any obligor with respect
thereto for fraud, misrepresentation, misapplication of cash, waste and
other circumstances customarily excluded from non-recourse provisions
in non-recourse financing of real estate shall not, by itself, prevent
any Indebtedness from being characterized as Non-Recourse Indebtedness.
"Note" or "Notes" means the Committed Revolving Notes, the
Swingline Note and/or the Competitive Notes, collectively, separately
or individually, as appropriate.
"Notice of Borrowing" means the written notice of borrowing as
referenced and defined in Section 2.1(b)(i) or Section 2.3(b)(i), as
appropriate.
"Notice of Extension/Conversion" means the written notice of
extension or conversion as referenced and defined in Section 3.2.
"Obligations" means, collectively, the Loans and LOC
Obligations.
"Old PHC" has the meaning given to such term in the
introductory paragraph hereof.
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA, and any successor thereto.
"Parent Company" has the meaning given to such term in the
introductory paragraph hereof.
"Participation Interest" means the purchase by a Lender of a
participation interest in Letters of Credit as provided in Section
2.2(c), in Swingline Loans as provided in Section 2.3(b)(iii) or in
Committed Revolving Loans as provided in Section 3.12.
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"Permitted Liens" means:
(i) Liens (other than Liens created or
imposed by the PBGC under ERISA) for taxes, assessments or
governmental charges or levies not yet due or Liens for taxes
being contested in good faith by appropriate proceedings for
which adequate reserves determined in accordance with GAAP
have been established (and as to which the Property subject to
any such Lien is not yet subject to foreclosure, sale or loss
on account thereof);
(ii) statutory Liens of landlords and Liens
of carriers, warehousemen, mechanics, materialmen and
suppliers and other liens imposed by law or pursuant to
customary reservations or retentions of title arising in the
ordinary course of business, provided that such Liens secure
only amounts not yet due and payable or, if due and payable,
are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP
have been established (and as to which the Property subject to
any such Lien is not yet subject to foreclosure, sale or loss
on account thereof);
(iii) Liens (other than Liens created or
imposed by the PBGC under ERISA) incurred or deposits made in
the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory
obligations, bids, leases, operating, reciprocal easement or
similar agreements, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money);
(iv) Liens in connection with attachments or
judgments (including judgment or appeal bonds) in respect of
which the Parent Company or any of its Subsidiaries shall in
good faith be prosecuting an appeal or proceedings for review
in respect of which there shall have been secured a subsisting
stay of execution pending such appeal or proceeding;
(v) easements, rights-of-way, restrictions
(including zoning restrictions and operating, reciprocal
easement or similar agreements), and minor defects or
irregularities in title and other similar charges or
encumbrances not, in any material respect, impairing the use
of the encumbered Property for its intended purposes;
(vi) leases or subleases granted to others
not interfering in any material respect with the business of
the Parent Company or any of its Subsidiaries;
(vii) any interest or title of a lessor
(including Liens and underlying leases to which such lessor or
its property may be subject) under, and Liens
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arising from Uniform Commercial Code financing statements (or
equivalent filings, registrations or agreements in foreign
jurisdictions) relating to, leases permitted by this Credit
Agreement;
(viii) Liens deemed to exist in connection
with Investments in repurchase agreements;
(ix) normal and customary rights of setoff
upon deposits of cash in favor of banks or other depository
institutions;
(x) Liens on the equity interest in or
assets of any Subsidiary or Joint Venture that is not 100%
owned directly or indirectly by the Parent Company; and
(xi) Liens not otherwise permitted hereunder
securing amounts in an aggregate principal amount not to
exceed 15% of Consolidated Assets (excluding from the
calculation thereof the Consolidated Assets of any Person
other than the Parent Company and its wholly-owned
Subsidiaries) at any one time outstanding.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated) or any Governmental
Authority.
"Plan" means any employee benefit plan as defined in Section
3(3) of ERISA which is not a Multiemployer Plan and in respect of which
the Borrower or a Commonly Controlled Entity is an "employer" as
defined in Section 3(5) of ERISA.
"Plan Reorganization" means with respect to any Multiemployer
Plan, the condition that such plan is in reorganization within the
meaning of Section 4241 of ERISA.
"Prime Rate" means the per annum rate of interest established
and announced from time to time by the Agent at its principal office in
Charlotte, North Carolina as its Prime Rate. Any change in the interest
rate resulting from a change in the Prime Rate shall become effective
as of 12:01 A.M. of the Business Day on which each change in the Prime
Rate is announced by the Agent. The Prime Rate is a reference rate used
by the Agent in determining interest rates on certain loans and is not
intended to be the lowest rate of interest charged on any extension of
credit to any debtor.
"Pro Forma Basis" means, with respect to any transaction, that
such transaction shall be deemed to have occurred as of the first day
of the four fiscal-quarter period ending as of the last day of the
fiscal quarter most recently ended preceding the date of such
transaction with respect to which the Agent has received annual or
quarterly financial information, accompanied by an officer's
certificate, in accordance with the
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provisions of Section 7.1. As used herein, "transaction" shall mean any
merger or consolidation as referred to in Section 8.3(a) and 8.3(c) or
any sale, transfer or other disposition as referred to in Section
8.3(b).
"Pro Rata Share" has the meaning given to such term in Section
11.17(h).
"Projections" has the meaning given to such term in Section
6.1(c).
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Qualified Stock" means any capital stock which, by its terms
(or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures
or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole
or in part on, or on or after, or is exchangeable for debt securities
of the Parent Company or any of its Subsidiaries on or after, the first
anniversary of the Termination Date.
"Quoted Rate" means, with respect to any Swingline Loan, the
percentage rate per annum offered by the Swingline Lender, if
available, and accepted by the Borrowers with respect to such Swingline
Loan as provided in accordance with the provisions of Section 2.3.
"Regulation D, G, T, U, or X" means Regulation D, G, T, U or
X, respectively, of the Board of Governors of the Federal Reserve
System as from time to time in effect and any successor to all or a
portion thereof.
"Reportable Event" means a "reportable event" as defined in
Section 4043(b) of ERISA with respect to which the notice requirements
to the PBGC have not been waived.
"Required Lenders" means Lenders holding in the aggregate more
than fifty (50%) of the Commitments (other than with respect to the
Letters of Credit and Swingline Loans), or if the aggregate Commitments
have been terminated, Lenders in the aggregate holding more than fifty
(50%) of the principal amount of Obligations then outstanding (provided
that in the case of Swingline Loans, the amount of each Lender's funded
participation interest in such Swingline Loans shall be considered for
purposes hereof as if it were a direct loan and not a participation
interest, and the aggregate amount of Swingline Loans owing to the
Swingline Lender shall be considered for purposes hereof as reduced by
the amount of such funded participation interests); provided, however,
that if any Lender shall be a Defaulting Lender at such time then there
shall be excluded from the determination of Required Lenders the amount
of such Defaulting Lender's Commitments or Obligations, as appropriate.
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"Requirements of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its material property or assets.
"Revolving Commitment" means, with respect to each Lender, the
commitment of such Lender to make Committed Revolving Loans in an
aggregate principal amount at any time outstanding up to such Lender's
Revolving Committed Amount as specified in Schedule 2.1(a), as such
amount may be increased or reduced from time to time in accordance with
the provisions hereof.
"Revolving Commitment Percentage" means, for each Lender, a
fraction (expressed as a percentage) the numerator of which is the
Revolving Commitment of such Lender at such time and the denominator of
which is the Revolving Committed Amount at such time, provided that if
the Revolving Commitment Percentage of any Lender is to be determined
after the Revolving Committed Amount has been terminated, then the
Revolving Commitment Percentage of such Lender shall be determined
immediately prior (and without giving effect) to such termination.
"Revolving Committed Amount" means, collectively, the
aggregate amount of all of the Revolving Commitments as referenced in
Section 2.1(a) and, individually, the amount of each Lender's Revolving
Commitment as specified in Schedule 2.1(a).
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA.
"Subject Properties" has the meaning given to such term in
Section 6.16(a).
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, any class
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by
such Person directly or indirectly through Subsidiaries, (b) any
partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than 50% of
the equity interest at any time and in which such Person possesses,
directly or indirectly, the power to direct or cause the direction of
the management and policies of such partnership, association, joint
venture or other entity, whether through the ownership of equity
interests, by contract or otherwise and (c) any corporation, general or
limited
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partnership or limited liability company in which such Person, or
any of its Subsidiaries, is a shareholder, partner or member and
which is consolidated with such Person in accordance with GAAP. Unless
otherwise specified, any reference to a Subsidiary is intended as a
reference to a Subsidiary of the Parent Company.
"Swingline Commitment" means the commitment of the Swingline
Lender to make Swingline Loans in an aggregate principal amount at any
time outstanding up to the Swingline Committed Amount, and the
commitment of the Lenders to purchase participation interests in the
Swingline Loans up to such Lender's Revolving Commitment Percentage as
provided in Section 2.3(b)(iii), as such amounts may be reduced from
time to time in accordance with the provisions hereof.
"Swingline Committed Amount" means the amount of the Swingline
Lender's Swingline Commitment as specified in Section 2.3(a).
"Swingline Lender" means NationsBank and its successors and
its permitted assigns in such capacity.
"Swingline Loan" means a swingline revolving loan made by the
Swingline Lender pursuant to the provisions of Section 2.3(a).
"Swingline Note" means the promissory note of the Borrowers in
favor of the Swingline Lender evidencing the Swingline Loans provided
pursuant to Section 2.3(d), as such promissory note may be amended,
modified, supplemented, extended, renewed or replaced from time to
time.
"Termination Date" has the meaning given to such term in
Section 2.1(a).
"Tranche A Credit Agreement" means this Credit Agreement, as
amended, modified, supplemented, extended, renewed or restated from
time to time.
"Tranche B Credit Agreement" means that Tranche B Credit
Agreement dated as of the date hereof among the Borrowers, the
Guarantors, the lenders named therein and party thereto and
NationsBank, N.A., as Agent, as amended, modified, supplemented,
extended, renewed or restated from time to time.
"UCP" has the meaning given to such term in Section 2.2(g).
"Underfunding" means an excess of all accrued benefits under a
Plan (based on those assumptions used to fund such Plan), determined as
of the most recent annual valuation date, over the value of the assets
of such Plan allocable to such accrued benefits.
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"Unsecured Senior Debt Rating" means the debt rating provided
by S&P and/or Moody's with respect to unsecured senior long term debt
of the Parent Company and its consolidated Subsidiaries.
1.2 COMPUTATION OF TIME PERIODS.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
1.3 ACCOUNTING TERMS.
The financial statements to be furnished by the Parent Company pursuant
hereto shall be made and prepared in accordance with GAAP consistently applied
throughout the periods involved (except as set forth in the notes thereto or as
otherwise disclosed in writing by the Parent Company to the Agent); provided,
that, except as otherwise specifically provided herein, all computations
determining compliance with Section 7.11 shall utilize accounting principles and
policies in conformity with those used to prepare the annual audited financial
statements referenced in Sections 6.1(a) and (b).
Notwithstanding the above, the parties hereto acknowledge and agree
that, for purposes of all calculations made in determining compliance for any
applicable period with the financial covenant set forth in Section 7.11(b)
hereof (including without limitation for purposes of the definition of
"Applicable Percentage" set forth in Section 1.1), the Borrowers shall have the
option of calculating the portion of Consolidated Adjusted EBITDA attributable
to an asset acquired within the four fiscal quarter period ending on the subject
calculation date on a Pro Forma Basis.
SECTION 2
CREDIT FACILITIES
2.1 COMMITTED REVOLVING LOANS.
(a) Revolving Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set
forth herein, each Lender severally agrees to make revolving credit
loans ("Committed Revolving Loans") to the Borrowers from time to time
from the Closing Date until December 19, 2002, or such later date if
such date is extended pursuant to this Section 2.1(a) or such earlier
date as the Revolving Commitments shall have been terminated as
provided herein (the "Termination Date") for the purposes hereinafter
set forth; provided, however, that (i) with regard to each Lender
individually, the sum of such Lender's share of outstanding Committed
Revolving Loans (other than Committed Revolving Loans made for the
purpose of repaying Swingline
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Loans or Competitive Loans or reimbursing the Issuing Lender for any
amount drawn under any Letter of Credit but not yet so applied) plus
such Lender's LOC Commitment Percentage of LOC Obligations plus such
Lender's Revolving Commitment Percentage of Swingline Loans shall not
exceed such Lender's Revolving Committed Amount, and (ii) with regard
to the Lenders collectively, the sum of the aggregate amount of
outstanding Committed Revolving Loans (other than Committed Revolving
Loans made for the purpose of repaying Swingline Loans or Competitive
Loans or reimbursing the Issuing Lender for any amount drawn under any
Letter of Credit but not yet so applied) plus the aggregate amount of
LOC Obligations plus the aggregate amount of Swingline Loans plus the
aggregate amount of Competitive Loans (other than Competitive Loans
made for the purpose of repaying Committed Revolving Loans or Swingline
Loans or reimbursing the Issuing Lender for any amount drawn under any
Letter of Credit but not yet so applied) shall not exceed SEVEN HUNDRED
FIFTY MILLION DOLLARS ($750,000,000) (as such aggregate maximum amount
may be reduced from time to time, the "Revolving Committed Amount").
Committed Revolving Loans may consist of Base Rate Loans or Eurodollar
Loans, or a combination thereof, as the Borrowers may request, and may
be prepaid or repaid and reborrowed in accordance with the provisions
hereof; provided, however, that no more than ten (10) Eurodollar Loans
shall be outstanding hereunder at any time. For purposes hereof,
Eurodollar Loans with different Interest Periods shall be considered as
separate Eurodollar Loans, even if they begin on the same date,
although borrowings, extensions and conversions may, in accordance with
the provisions hereof, be combined at the end of existing Interest
Periods to constitute a new Eurodollar Loan with a single Interest
Period. Either Borrower may, within ninety (90) days prior to December
19, 1998 and within ninety (90) days prior to each anniversary date
thereafter (December 19, 1998 and each anniversary date thereof being
referred to as an "Anniversary Date"), by notice to the Agent, make
written request of the Lenders to extend the Termination Date for an
additional period of one year. Each of the Lenders must consent to any
such extension (subject to the Borrowers' right to terminate or replace
the Commitments of non-consenting Lenders as set forth below). The
Agent will give prompt notice to each of the Lenders of its receipt of
any such request for extension of the Termination Date. Each Lender
shall make a determination not later than thirty (30) days prior to the
then applicable Anniversary Date as to whether or not it will agree to
extend the Termination Date as requested; provided, however, that
failure by any Lender to make a timely response to the Borrowers'
request for extension of the Termination Date shall be deemed to
constitute a refusal by the Lender to extend the Termination Date. If,
in response to a request for an extension of the Termination Date, each
of the Lenders agrees to the requested extension, then the Termination
Date shall be extended for the requested additional period of one year.
If, however, in response to a request for an extension of the
Termination Date, one or more Lenders shall fail to agree to the
requested extension (the "Disapproving Lenders"), then the Borrowers
shall have the right (so long as all Disapproving Lenders are treated
as described in either clauses (A) or (B) below) to either (A) replace
each such Disapproving Lender with one or more Replacement Lenders
pursuant to Section 3.15 so long as at the time of such replacement,
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each such Replacement Lender consents to the proposed extension of the
Termination Date or (B) terminate such Disapproving Lender's Commitment
(including its LOC Commitment to fund outstanding Letters of Credit)
and repay all outstanding Loans of such Disapproving Lender in
accordance with Sections 3.3(c) and 3.3(f), provided that, unless the
Commitments terminated and Loans repaid pursuant to the preceding
clause (B) are immediately replaced in full at such time through the
addition of new Lenders or the increase of the Commitments and/or
outstanding Loans of existing Lenders (who in each case must
specifically consent to any such increase), then in the case of any
action pursuant to the preceding clause (B), subject to the following
proviso, the Required Lenders (determined before giving effect to the
proposed action) shall specifically consent to such termination of
Commitment and repayment of Loans, provided further, notwithstanding
the foregoing proviso, each of the Lenders (other than the Lender whose
Commitment is being terminated) shall specifically consent to such
termination of Commitment and repayment of Loans if the aggregate
amount of Commitments terminated pursuant to this Section 2.1(a)
(including the proposed termination) plus the aggregate amount of
Commitments terminated pursuant to Section 3.17 plus the aggregate
amount of Commitments terminated pursuant to Section 11.6(b) shall
exceed $100,000,000. If, prior to the applicable Anniversary Date, the
Borrowers either replace or terminate the Commitments of the
Disapproving Lenders in accordance with the foregoing terms, then the
Termination Date shall be extended for the requested additional period
of one year. If, however, the Borrowers fail to either replace or
terminate the Commitments of the Disapproving Lenders prior to the
applicable Anniversary Date in accordance with the foregoing terms,
then the Termination Date shall not be extended for the requested
additional period of one year.
(b) Committed Revolving Loan Borrowings.
(i) Notice of Borrowing. The Borrowers shall
request a Committed Revolving Loan borrowing by written notice
(or telephone notice promptly confirmed in writing) from
either Borrower to the Agent not later than 11:00 A.M.
(Charlotte, North Carolina time) on the Business Day of the
requested borrowing in the case of Base Rate Loans, and on the
third Business Day prior to the date of the requested
borrowing in the case of Eurodollar Loans. Each such request
for borrowing shall be irrevocable and shall specify (A) that
a Committed Revolving Loan is requested, (B) the date of the
requested borrowing (which shall be a Business Day), (C) the
aggregate principal amount to be borrowed, and (D) whether the
borrowing shall be comprised of Base Rate Loans, Eurodollar
Loans or a combination thereof, and if Eurodollar Loans are
requested, the Interest Period(s) therefor. A form of Notice
of Borrowing (a "Notice of Borrowing") is attached as Schedule
2.1(b)(i). If the Borrower giving such Notice of Borrowing
shall fail to specify in any such Notice of Borrowing (I) an
applicable Interest Period in the case of a Eurodollar Loan,
then such notice shall be deemed to be a request for an
Interest Period of one month, or (II) the type of
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Committed Revolving Loan requested, then such notice shall be
deemed to be a request for a Base Rate Loan hereunder.
Promptly upon receipt of each Notice of Borrowing, the Agent
shall give notice to each Lender of the contents thereof and
each such Lender's Revolving Commitment Percentage thereof.
(ii) Minimum Amounts. Each Committed
Revolving Loan borrowing shall be in a minimum aggregate
amount of $5,000,000 and integral multiples of $1,000,000 in
excess thereof (or the remaining available amount of the
Revolving Commitment, if less, provided, however, that no
Eurodollar Loan shall be permitted for a principal amount less
than $5,000,000).
(iii) Advances. Each Lender will make its
Revolving Commitment Percentage of each Committed Revolving
Loan borrowing available to the Agent for the account of the
Borrowers at the office of the Agent specified in Schedule
11.1, or at such other office as the Agent may designate in
writing, by 10:00 A.M. (Charlotte, North Carolina time) on the
date specified in the applicable Notice of Borrowing in
Dollars (or by 1:00 P.M. (Charlotte, North Carolina time) on
such date if the applicable Notice of Borrowing is received on
the same date) and in funds immediately available to the
Agent. Such borrowing will then be made available to the
Borrowers by the Agent by crediting the account of the
Borrowers on the books of such office with the aggregate of
the amounts made available to the Agent by the Lenders and in
like funds as received by the Agent.
(c) Repayment. The principal amount of all Committed Revolving
Loans shall be due and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1,
Committed Revolving Loans shall bear interest at a per annum rate equal
to:
(i) Base Rate Loans. During such periods as Committed
Revolving Loans shall be comprised of Base Rate Loans, the sum
of the Base Rate plus the Applicable Percentage; and
(ii) Eurodollar Loans. During such periods as
Committed Revolving Loans shall be comprised of Eurodollar
Loans, the sum of the Eurodollar Rate plus the Applicable
Percentage.
Interest on Committed Revolving Loans shall be payable in arrears on
each Interest Payment Date.
(e) Committed Revolving Notes. The Committed Revolving Loans
made by each Lender shall be evidenced by a duly executed promissory
note of the Borrowers to each Lender substantially in the form of
Schedule 2.1(e).
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(f) Increase in Revolving Commitments. Subject to the terms
and conditions set forth herein, the Borrowers shall have the right, at
any time and from time to time from the Closing Date until the
Termination Date, to increase the Revolving Committed Amount by an
amount up to $200,000,000 in the aggregate. The following terms and
conditions shall apply to any such increase: (i) any such increase
shall be obtained from existing Lenders or from other banks or other
financial institutions, in each case in accordance with the terms set
forth below, (ii) the Revolving Commitment of any Lender may not be
increased without the prior written consent of such Lender, (iii) any
increase in the aggregate Revolving Committed Amount shall be in a
minimum principal amount of $10,000,000 and integral multiples of
$1,000,000 in excess thereof, (iv) Schedule 2.1(a) shall be amended to
reflect the revised Revolving Commitments and Revolving Commitment
Percentages, (v) the Borrowers shall execute Committed Revolving Notes
as are necessary to reflect the increase in the Revolving Commitments,
(vi) if any Committed Revolving Loans are outstanding at the time of
any such increase, the Borrowers shall make such payments and
adjustments on the Committed Revolving Loans (including payment of any
break-funding amount owing under Section 3.10) as necessary to give
effect to the revised commitment percentages and outstandings of the
Lenders, and (vii) the conditions to Extensions of Credit in Section
5.2(b) and (c) shall be true and correct. The amount of any increase in
the Revolving Committed Amount hereunder shall be offered first to the
existing Lenders, and in the event the additional commitments which
existing Lenders are willing to take shall exceed the amount requested
by the Borrowers, such excess shall be allocated in proportion to the
commitments of such existing Lenders willing to take additional
commitments. If the amount of the additional commitments requested by
the Borrowers shall exceed the additional commitments which the
existing Lenders are willing to take, then the Borrowers may invite
other banks and financial institutions reasonably acceptable to the
Agent to join this Tranche A Credit Agreement as Lenders hereunder for
the portion of commitments not taken by existing Lenders, provided that
such other banks and financial institutions shall constitute "Eligible
Assignees" and, in any such case, such other banks and financial
institutions shall enter into such joinder agreements to give effect
thereto as the Agent and the Borrowers may reasonably request.
2.2 LETTER OF CREDIT SUBFACILITY.
(a) Issuance. Subject to the terms and conditions hereof, the
Issuing Lender shall issue, and the Lenders shall participate in,
Letters of Credit for the account of the Borrowers, the Parent Company
or any of its Subsidiaries from time to time upon request from the
Closing Date until the Termination Date in a form customarily used by
the Issuing Lender or in such other form reasonably acceptable to the
Issuing Lender and delivered to the Issuing Lender and the Agent;
provided, however, that (i) the aggregate amount of LOC Obligations
shall not at any time exceed ONE HUNDRED MILLION DOLLARS ($100,000,000)
(the "LOC Committed Amount"), (ii) the sum of the
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aggregate amount of Committed Revolving Loans (other than Committed
Revolving Loans made for the purpose of repaying Swingline Loans or
Competitive Loans or reimbursing the Issuing Lender for any amount
drawn under any Letter of Credit but not yet so applied) plus the
aggregate amount of LOC Obligations plus the aggregate amount of
Swingline Loans plus the aggregate amount of Competitive Loans (other
than Competitive Loans made for the purpose of repaying Committed
Revolving Loans or Swingline Loans or reimbursing the Issuing Lender
for any amount drawn under any Letter of Credit but not yet so applied)
shall not at any time exceed the aggregate Revolving Committed Amount,
(iii) any Letter of Credit shall be issued in the ordinary course of
the business of the Parent Company and its Subsidiaries and (iv) all
Letters of Credit shall be denominated in U.S. Dollars. Except as
otherwise expressly agreed upon by all the Lenders, no Letter of Credit
shall have an original expiry date more than one year from the date of
issuance; provided, however, so long as no Default or Event of Default
has occurred and is continuing and subject to the other terms and
conditions to the issuance of Letters of Credit hereunder, the expiry
dates of Letters of Credit may be extended annually for an additional
one year period; provided, further, that no Letter of Credit, as
originally issued or as extended, shall have an expiry date extending
beyond the Termination Date unless, but only to the extent that, the
Borrowers shall provide cash collateral to the Issuing Lender on the
date of issuance or extension in an amount equal to the maximum amount
available to be drawn under such Letter of Credit. The issuance and
expiry date of each Letter of Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted by either Borrower to the Issuing
Lender with a copy to the Agent at least three (3) Business Days prior
to the requested date of issuance. The Issuing Lender will, at least
quarterly and more frequently upon request, provide to the Agent for
dissemination to the Lenders a detailed report specifying the Letters
of Credit which are then issued and outstanding and any activity with
respect thereto which may have occurred since the date of the prior
report, and including therein, among other things, the account party,
the beneficiary, the face amount, and expiry date, as well as any
payments or expirations which may have occurred. The Issuing Lender
will further provide to the Agent promptly upon request copies of the
Letters of Credit. The Issuing Lender will provide to the Agent at
least weekly, and more frequently upon request, a summary report of the
nature and extent of LOC Obligations then outstanding. Lenders may
obtain copies of any such reports from the Agent upon request.
(c) Participations. Each Lender, upon issuance of a Letter of
Credit, shall be deemed to have purchased without recourse a risk
participation from the Issuing Lender in such Letter of Credit and the
obligations arising thereunder and any collateral relating thereto, in
each case in an amount equal to its LOC Commitment Percentage of the
obligations under such Letter of Credit and shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and be obligated to pay to the Issuing Lender therefor and
discharge when due, its LOC Commitment Percentage of the
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<PAGE> 33
obligations arising under such Letter of Credit. Without limiting the
scope and nature of each Lender's participation in any Letter of
Credit, to the extent that the Issuing Lender has not been reimbursed
as required hereunder or under any such Letter of Credit, each such
Lender shall pay to the Issuing Lender its LOC Commitment Percentage of
such unreimbursed drawing in same day funds on the day of notification
by the Issuing Lender of an unreimbursed drawing pursuant to the
provisions of subsection (d) hereof. The obligation of each Lender to
so reimburse the Issuing Lender shall be absolute and unconditional and
shall not be affected by the occurrence of a Default, an Event of
Default or any other occurrence or event; provided, however, that a
Lender shall not be obligated to reimburse the Issuing Lender for any
wrongful payment made by such Issuing Lender as a result of acts or
omissions constituting willful misconduct or gross negligence on the
part of the Issuing Lender. Any such reimbursement shall not relieve or
otherwise impair the obligation of the Borrowers to reimburse the
Issuing Lender under any Letter of Credit, together with interest as
hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Issuing Lender will promptly notify the Borrowers
and the Agent. Unless the Borrowers shall immediately notify the
Issuing Lender of its intent to otherwise reimburse the Issuing Lender,
the Borrowers shall be deemed to have requested a Committed Revolving
Loan in the amount of the drawing as provided in subsection (e) hereof,
the proceeds of which will be used to satisfy the reimbursement
obligations. The Borrowers shall reimburse the Issuing Lender on the
day of drawing under any Letter of Credit (either with the proceeds of
a Committed Revolving Loan obtained hereunder or otherwise) in same day
funds as provided herein. If the Borrowers shall fail to reimburse the
Issuing Lender as provided hereinabove, the unreimbursed amount of such
drawing shall bear interest at a per annum rate equal to the Base Rate
plus two percent (2%). The Borrowers' reimbursement obligations
hereunder shall be absolute and unconditional under all circumstances
irrespective of any rights of set-off, counterclaim or defense to
payment either Borrower may claim or have against the Issuing Lender,
the Agent, the Lenders, the beneficiary of the Letter of Credit drawn
upon or any other Person, including, without limitation, any defense
based on any failure of the Borrowers to receive consideration or the
legality, validity, regularity or unenforceability of the Letter of
Credit; provided, however, that the Borrowers shall not be obligated to
reimburse the Issuing Lender for any wrongful payment made by such
Issuing Lender under a Letter of Credit as a result of acts or
omissions constituting willful misconduct or gross negligence on the
part of the Issuing Lender. The Issuing Lender will promptly notify the
other Lenders of the amount of any unreimbursed drawing and, subject to
the proviso in subsection (c) immediately above, each Lender shall
promptly pay (in accordance with subsection (e) immediately below) to
the Agent for the account of the Issuing Lender in Dollars and in
immediately available funds, the amount of such Lender's LOC Commitment
Percentage of such unreimbursed drawing. Such payment shall be made on
the day such notice is received by such Lender from the Issuing Lender
if such notice is received at or before 2:00 P.M. (Charlotte, North
Carolina time), otherwise such payment
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shall be made at or before 12:00 Noon (Charlotte, North Carolina time)
on the Business Day next succeeding the day such notice is received. If
such Lender does not pay such amount to the Issuing Lender in full
following such request in accordance with the preceding sentence, such
Lender shall, on demand, pay to the Agent for the account of the
Issuing Lender interest on the unpaid amount during the period from the
date of such drawing until such Lender pays such amount to the Issuing
Lender in full at a rate per annum equal to, if paid within two (2)
Business Days of the date of drawing, the Federal Funds Rate and
thereafter at a rate equal to the Base Rate. Each Lender's obligation
to make such payment to the Issuing Lender, and the right of the
Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance other than the
gross negligence or willful misconduct of the Issuing Lender and
without regard to the termination of this Credit Agreement or the
Commitments hereunder, the existence of a Default or Event of Default
or the acceleration of the Credit Party Obligations hereunder and shall
be made without any offset, abatement, withholding or reduction
whatsoever.
(e) Repayment with Committed Revolving Loans. On any day on
which the Borrowers shall have requested, or been deemed to have
requested, a Committed Revolving Loan borrowing to reimburse a drawing
under a Letter of Credit, the Agent shall give notice to the Lenders
that a Committed Revolving Loan has been requested or deemed requested
in connection with a drawing under a Letter of Credit, in which case a
Committed Revolving Loan borrowing comprised solely of Base Rate Loans
(each such borrowing, a "Mandatory Borrowing") shall be immediately
made from all Lenders (without giving effect to any termination of the
Commitments pursuant to Section 9.2) pro rata based on each Lender's
respective Revolving Commitment Percentage (determined before giving
effect to any termination of the Commitments pursuant to Section 9.2)
and the proceeds thereof shall be paid directly to the Issuing Lender
for application to the respective LOC Obligations. Each such Lender
hereby irrevocably agrees to make such Committed Revolving Loans
promptly upon any such request or deemed request on account of each
Mandatory Borrowing in the amount and in the manner specified in the
preceding sentence and on the same such date (or the next Business Day
if such notice is received after 2:00 P.M. (Charlotte, North Carolina
time)) notwithstanding (i) the amount of the Mandatory Borrowing may
not comply with the minimum amount for borrowings of Committed
Revolving Loans otherwise required hereunder, (ii) whether any
conditions specified in Section 5.2 are then satisfied, (iii) whether a
Default or an Event of Default then exists, (iv) failure of any such
request or deemed request for a Committed Revolving Loan to be made by
the time otherwise required in Section 2.1(b), (v) the date of such
Mandatory Borrowing (provided that such date must be a Business Day
occurring prior to the Termination Date), or (vi) any reduction in the
Revolving Committed Amount after any such Letter of Credit may have
been drawn upon; provided, however, that in the event any such
Mandatory Borrowing should be less than the minimum amount for
borrowings of Committed Revolving Loans otherwise provided in Section
2.1(b)(ii), the Borrowers shall pay to the Agent for its own
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account an administrative fee of $500. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement
of a proceeding under the Bankruptcy Code with respect to either
Borrower), then each such Lender hereby agrees that it shall forthwith
fund (as of the date the Mandatory Borrowing would otherwise have
occurred, but adjusted for any payments received from the Borrowers on
or after such date and prior to such purchase) its Participation
Interest in the outstanding LOC Obligations; provided, further, that in
the event any Lender shall fail to fund its Participation Interest on
the day the Mandatory Borrowing would otherwise have occurred, then the
amount of such Lender's unfunded Participation Interest therein shall
bear interest payable to the Issuing Lender upon demand, at the rate
equal to, if paid within two (2) Business Days of such date, the
Federal Funds Rate, and thereafter at a rate equal to the Base Rate.
(f) Modification, Extension. The issuance of any supplement,
modification, amendment, renewal, or extension to any Letter of Credit
shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(g) Uniform Customs and Practices. The Issuing Lender may have
the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP
may be incorporated therein and deemed in all respects to be a part
thereof.
2.3 SWINGLINE LOAN SUBFACILITY.
(a) Swingline Commitment. Subject to the terms and conditions
of this Section 2.3 and in reliance upon the representations and
warranties set forth herein, the Swingline Lender, in its individual
capacity, agrees to make certain revolving credit loans to the
Borrowers (each a "Swingline Loan" and, collectively, the "Swingline
Loans") from time to time from the Closing Date until the Termination
Date for the purposes hereinafter set forth; provided, however, (i) the
aggregate amount of Swingline Loans outstanding at any time shall not
exceed THIRTY FIVE MILLION DOLLARS ($35,000,000) (the "Swingline
Committed Amount"), and (ii) the sum of the aggregate amount of
Committed Revolving Loans (other than Committed Revolving Loans made
for the purpose of repaying Swingline Loans or Competitive Loans or
reimbursing the Issuing Lender for any amount drawn under any Letter of
Credit but not yet so applied) plus the aggregate amount of LOC
Obligations plus the aggregate amount of Swingline Loans plus the
aggregate amount of Competitive Loans (other than Competitive Loans
made for the purpose of repaying Committed Revolving Loans or Swingline
Loans or reimbursing the Issuing Lender for any amount drawn under any
Letter of Credit but not yet so applied) shall not exceed the aggregate
Revolving Committed Amount. Swingline Loans hereunder shall be made as
Base Rate Loans or may be requested to bear interest at the Quoted
Rate, as the Borrower may elect in accordance with the provisions of
this
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Section 2.3. Swingline Loans may be prepaid or repaid and
reborrowed in accordance with the provisions hereof.
(b) Swingline Loan Borrowings.
(i) Notice of Borrowing and Disbursement.
Either Borrower shall request a Swingline Loan borrowing by
written notice (or telephone notice promptly confirmed in
writing) to the Swingline Lender and the Agent not later than
12:00 Noon (Charlotte, North Carolina time) on the Business
Day of the requested Swingline Loan borrowing. Each such
request for borrowing shall be irrevocable and shall specify
(A) that a Swingline Loan borrowing is requested, (B) the date
of the requested Swingline Loan borrowing (which shall be a
Business Day) and (C) the aggregate principal amount of the
Swingline Loan borrowing requested. A form of Notice of
Borrowing is attached as Schedule 2.1(b)(i). Each Swingline
Loan shall bear interest at the Base Rate or at the Quoted
Rate as either Borrower shall request in such notice provided
such rate is available. The Swingline Lender will make each
Swingline Loan borrowing available to the Agent for the
account of the Borrowers at the office of the Agent specified
in Schedule 11.1, or at such other office as the Agent may
designate in writing, by 1:30 P.M. (Charlotte, North Carolina
time) on the date specified in the applicable Notice of
Borrowing in Dollars and in funds immediately available to the
Agent. Such borrowing will then be made available to the
Borrowers by the Agent by crediting the account of the
Borrowers on the books of such office with the amount of such
borrowing as made available to the Agent by the Swingline
Lender and in like funds as received by the Agent.
(ii) Minimum Amounts. Each Swingline Loan
borrowing shall be in a minimum principal amount of $250,000
and integral multiples of $100,000 in excess thereof.
(iii) Repayment of Swingline Loans. Each
Swingline Loan borrowing shall be due and payable on the
earliest of (A) 30 days from the date of borrowing thereof,
(B) the date of the next Committed Revolving Loan borrowing,
if sooner, or (C) the Termination Date. If, and to the extent,
any Swingline Loans shall be outstanding on the date of any
Committed Revolving Loan borrowing (other than an extension or
a conversion of such Committed Revolving Loan), such Swingline
Loans shall first be repaid from the proceeds of such
Committed Revolving Loan borrowing prior to disbursement to
the Borrowers. If, and to the extent, Committed Revolving
Loans or Competitive Loans are not requested prior to the
Termination Date or the end of any such 30 day period from the
date of any such Swingline Loan borrowing, or the date of the
next extension or conversion of a Committed Revolving Loan
after any such Swingline Loan borrowing, the Borrowers shall
be deemed to have requested a Committed Revolving Loan
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comprised entirely of Base Rate Loans in the amount of such
Swingline Loan borrowing then outstanding, the proceeds of
which shall be used to repay the Swingline Lender for such
Swingline Loan. In addition, the Swingline Lender may, at any
time, in its sole discretion, by written notice to the
Borrowers and the Agent, demand repayment of its Swingline
Loans by way of a Committed Revolving Loan borrowing, in which
case the Borrowers shall be deemed to have requested a
Committed Revolving Loan borrowing comprised entirely of Base
Rate Loans in the amount of such Swingline Loans; provided,
however, that any such demand shall be deemed to have been
given one Business Day prior to the Termination Date and upon
the occurrence of any Event of Default described in Section
9.1(f) and also upon acceleration of the Credit Party
Obligations hereunder, whether on account of an Event of
Default described in Section 9.1(f) or any other Event of
Default, and the exercise of remedies in accordance with the
provisions of Section 9.2 hereof (each such Committed
Revolving Loan borrowing made on account of any such deemed
request therefor as provided herein being hereinafter referred
to as a "Mandatory Borrowing"). Each Lender hereby irrevocably
agrees to make such Committed Revolving Loans promptly upon
any such request or deemed request on account of each
Mandatory Borrowing in the amount and in the manner specified
in the preceding sentence and on the same such date (or the
next Business Day if such notice is received after 2:00 P.M.
(Charlotte, North Carolina time)) notwithstanding (I) the
amount of Mandatory Borrowing may not comply with the minimum
amount for borrowings of Committed Revolving Loans otherwise
required hereunder, (II) whether any conditions specified in
Section 5.2 are then satisfied, (III) whether a Default or an
Event of Default then exists, (IV) failure of any such request
or deemed request for Committed Revolving Loan to be made by
the time otherwise required in Section 2.1(b)(i), (V) the date
of such Mandatory Borrowing (provided that such date must be a
Business Day occurring prior to the Termination Date), or (VI)
any reduction in the Revolving Committed Amount or termination
of the Commitments relating thereto immediately prior to such
Mandatory Borrowing or contemporaneous therewith. In the event
that any Mandatory Borrowing cannot for any reason be made on
the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code with respect to either Borrower),
then each Lender hereby agrees that it shall forthwith
purchase (as of the date the Mandatory Borrowing would
otherwise have occurred, but adjusted for any payments
received from the Borrowers on or after such date and prior to
such purchase) from the Swingline Lender such participations
in the outstanding Swingline Loans as shall be necessary to
cause each such Lender to share in such Swingline Loans
ratably based upon its respective Revolving Commitment
Percentage (determined before giving effect to any termination
of the Commitments pursuant to Section 9.2), provided that (A)
all interest payable on the Swingline Loans shall be for the
account of the Swingline Lender until the date as of which the
respective participation is
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purchased, and (B) at the time any purchase of participations
pursuant to this sentence is actually made, the purchasing
Lender shall be required to pay to the Swingline Lender
interest on the principal amount of participation purchased
for each day from and including the day upon which the
Mandatory Borrowing would otherwise have occurred to but
excluding the date of payment for such participation, at the
rate equal to, if paid within two (2) Business Days of the
date of the Mandatory Borrowing, the Federal Funds Rate, and
thereafter at a rate equal to the Base Rate.
(c) Interest on Swingline Loans. Subject to the provisions of
Section 3.1, Swingline Loans shall bear interest at a per annum rate
equal to the Base Rate or the Quoted Rate. Interest on Swingline Loans
shall be payable in arrears on each Interest Payment Date.
(d) Swingline Note. The Swingline Loans shall be evidenced by
a duly executed promissory note of the Borrowers to the Swingline
Lender in the original amount of the Swingline Committed Amount and
substantially in the form of Schedule 2.3(d).
2.4 COMPETITIVE LOAN SUBFACILITY.
(a) Competitive Loans. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, the
Borrowers may, from time to time from the Closing Date until the
Termination Date, request and each Lender may, in its sole discretion,
agree to make, loans to the Borrowers ("Competitive Loans"); provided,
however, (i) the aggregate amount of Competitive Loans shall not at any
time exceed the Revolving Committed Amount (the "Competitive Loan
Maximum Amount"), and (ii) the sum of the aggregate amount of Committed
Revolving Loans (other than Committed Revolving Loans made for the
purpose of repaying Swingline Loans or Competitive Loans or reimbursing
the Issuing Lender for any amount drawn under any Letter of Credit but
not yet so applied) plus the aggregate amount of LOC Obligations plus
the aggregate amount of Swingline Loans plus the aggregate amount of
Competitive Loans (other than Competitive Loans made for the purpose of
repaying Committed Revolving Loans or Swingline Loans or reimbursing
the Issuing Lender for any amount drawn under any Letter of Credit but
not yet so applied) shall not at any time exceed the aggregate
Revolving Committed Amount. Each Competitive Loan shall be not less
than $5,000,000 in the aggregate and integral multiples of $1,000,000
in excess thereof (or the remaining available portion of the
Competitive Loan Maximum Amount, if less). Competitive Loans may be
repaid and reborrowed in accordance with the provisions hereof.
(b) Competitive Bid Requests. The Borrowers may solicit
Competitive Bids by delivery of a Competitive Bid Request substantially
in the form of Schedule 2.4(b)-1
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to the Agent by 12:00 Noon (Charlotte, North Carolina time) on a
Business Day not less than two (2) nor more than ten (10) Business Days
prior to the date of a requested Competitive Loan borrowing. A
Competitive Bid Request shall specify (i) the date of the requested
Competitive Loan borrowing (which shall be a Business Day), (ii) the
amount of the requested Competitive Loan borrowing and (iii) the
applicable Interest Periods requested and shall be accompanied by
payment of the Competitive Bid Request Fee, if any. The Agent shall
promptly notify the Lenders of its receipt of a Competitive Bid Request
and the contents thereof and invite the Lenders to submit Competitive
Bids in response thereto. A form of such notice is provided in Schedule
2.4(b)-2. No more than ten (10) Competitive Bid Requests (e.g., the
Borrowers may request Competitive Bids for no more than ten (10)
different Interest Periods at a time) shall be submitted at any one
time and Competitive Bid Requests may be made no more frequently than
once every ten (10) Business Days.
(c) Competitive Bid Procedure. Each Lender may, in its sole
discretion, make one or more Competitive Bids to the Borrowers in
response to a Competitive Bid Request. Each Competitive Bid must be
received by the Agent not later than 10:00 A.M. (Charlotte, North
Carolina time) on the proposed date of a Competitive Loan borrowing;
provided, however, that should the Agent, in its capacity as a Lender,
desire to submit a Competitive Bid it shall notify the Borrowers of its
Competitive Bid and the terms thereof not later than 9:30 A.M.
(Charlotte, North Carolina time) on the proposed date of a Competitive
Loan borrowing. A Lender may offer to make all or part of the requested
Competitive Loan borrowing and may submit multiple Competitive Bids in
response to a Competitive Bid Request. The Competitive Bid shall
specify (i) the particular Competitive Bid Request as to which the
Competitive Bid is submitted, (ii) the minimum (which shall be not less
than $1,000,000 and integral multiples of $500,000 in excess thereof)
and maximum principal amounts of the requested Competitive Loan or
Loans as to which the Lender is willing to make, and (iii) the
applicable interest rate or rates and Interest Period or Periods
therefor. A form of such Competitive Bid is provided in Schedule
2.4(c). A Competitive Bid submitted by a Lender in accordance with the
provisions hereof shall be irrevocable (absent manifest error). The
Agent shall promptly notify the Borrowers of all Competitive Bids made
and the terms thereof. The Agent shall send a copy of each of the
Competitive Bids to the Borrowers for their records as soon as
practicable.
(d) Acceptance of Competitive Bids. Either Borrower may, in
its sole and absolute discretion, subject only to the provisions of
this subsection (d), accept or refuse any Competitive Bid offered to
it. To accept a Competitive Bid, either Borrower shall give written
notification in the form of Schedule 2.4(d) hereto (or telephone notice
promptly confirmed in writing) of its acceptance of any or all such
Competitive Bids to the Agent by 11:00 A.M. (Charlotte, North Carolina
time) on the proposed date of a Competitive Loan advance; provided,
however, (i) the failure by the Borrowers to give timely notice of
their acceptance of a Competitive Bid shall be deemed to be a refusal
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thereof, (ii) the Borrowers may accept Competitive Bids only in
ascending order of rates, (iii) the aggregate amount of Competitive
Bids accepted by the Borrowers shall not exceed the principal amount
specified in the Competitive Bid Request, (iv) the Borrowers may accept
a portion of a Competitive Bid in the event, and to the extent,
acceptance of the entire amount thereof would cause the Borrowers to
exceed the principal amount specified in the Competitive Bid Request,
subject however to the minimum amounts provided herein (and provided
that where two or more such Lenders may submit such a Competitive Bid
at the same such Competitive Bid Rate, then pro rata between or among
such Lenders) and (v) no bid shall be accepted for a Competitive Loan
unless such Competitive Loan is in a minimum principal amount of
$1,000,000 and integral multiples of $500,000 in excess thereof, except
that where a portion of a Competitive Bid is accepted in accordance
with the provisions of subsection (iv) hereof, then in a minimum
principal amount of $100,000 and integral multiples thereof (but not in
any event less than the minimum amount specified in the Competitive
Bid), and in calculating the pro rata allocation of acceptances of
portions of multiple bids at a particular Competitive Bid Rate pursuant
to subsection (iv) hereof, the amounts shall be rounded to integral
multiples of $100,000 in a manner which shall be in the discretion of
the Borrowers. A notice of acceptance of a Competitive Bid given by the
Borrowers in accordance with the provisions hereof shall be
irrevocable. The Agent shall, not later than 12:00 Noon (Charlotte,
North Carolina time) on the proposed date of a Competitive Loan
borrowing, 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), and each successful bidder will thereupon become
bound, subject to the other applicable conditions hereof, to make the
Competitive Loan in respect of which its bid has been accepted.
(e) Funding of Competitive Loans. Each Lender which is to make
a Competitive Loan shall make its Competitive Loan borrowing available
to the Agent for the account of the Borrowers at the office of the
Agent specified in Schedule 11.1, or at such other office as the Agent
may designate in writing, by 1:00 P.M. (Charlotte, North Carolina time)
on the date specified in the Competitive Bid Request in Dollars and in
funds immediately available to the Agent. Such borrowing will then be
made available to the Borrowers by crediting the account of the
Borrowers on the books of such office with the aggregate of the amount
made available to the Agent by the Competitive Loan Lenders and in like
funds as received by the Agent.
(f) Maturity of Competitive Loans. Each Competitive Loan shall
mature and be due and payable in full on the last day of the Interest
Period applicable thereto. Unless the Borrowers shall give notice to
the Agent otherwise, the Borrowers shall be deemed to have requested a
Committed Revolving Loan borrowing in the amount of the maturing
Competitive Loan, the proceeds of which will be used to repay such
Competitive Loan.
(g) Interest on Competitive Loans. Subject to the provisions
of Section 3.1, Competitive Loans shall bear interest in each case at
the Competitive Bid Rate applicable
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thereto. Interest on Competitive Loans shall be payable in arrears on
each Interest Payment Date.
(h) Competitive Loan Notes. The Competitive Loans shall be
evidenced by a duly executed promissory note of the Borrowers to each
Lender in an original principal amount equal to the Competitive Loan
Maximum Amount and substantially in the form of Schedule 2.4(h).
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 DEFAULT RATE.
Overdue principal and, to the extent permitted by law, overdue interest
in respect of each Loan and any other overdue amount payable hereunder or under
the other Credit Documents shall bear interest, payable on demand, at a per
annum rate 2% greater than the rate which would otherwise be applicable (or if
no rate is applicable, whether in respect of interest, fees or other amounts,
then 2% greater than the Base Rate).
3.2 EXTENSION AND CONVERSION.
The Borrowers shall have the option, on any Business Day, to extend
existing Committed Revolving Loans into a subsequent permissible Interest Period
or to convert Committed Revolving Loans of one type into Committed Revolving
Loans of another type; provided, however, that (a) except as provided in Section
3.7, Eurodollar Loans may be converted into Base Rate Loans only on the last day
of the Interest Period applicable thereto, (b) Eurodollar Loans may be extended,
and Base Rate Loans may be converted into Eurodollar Loans, only if no Default
or Event of Default is in existence on the date of extension or conversion, (c)
Loans extended as, or converted into, Eurodollar Loans shall be subject to the
terms of the definition of "Interest Period" set forth in Section 1.1 and shall
be in such minimum amounts as provided in Section 2.1(b)(ii), (d) no more than
ten (10) separate Eurodollar Loans shall be outstanding hereunder at any one
time and (e) any request for extension or conversion of a Eurodollar Loan which
shall fail to specify an Interest Period shall be deemed to be a request for an
Interest Period of one month. Swingline Loans and Competitive Loans may not be
extended or converted pursuant to this Section 3.2. Each such extension or
conversion shall be effected by either Borrower by giving a notice (a "Notice of
Extension/Conversion") in the form of Schedule 3.2 (or telephone notice promptly
confirmed in writing) to the Agent prior to 11:00 A.M. (Charlotte, North
Carolina time) on the Business Day of, in the case of the conversion of a
Eurodollar Loan into a Base Rate Loan, and on the third Business Day prior to,
in the case of the extension of a Eurodollar Loan as, or conversion of a Base
Rate Loan into, a Eurodollar Loan, the date of the proposed extension
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or conversion, specifying the date of the proposed extension or conversion, the
Committed Revolving Loans to be so extended or converted, the types of Committed
Revolving Loans into which such Committed Revolving Loans are to be converted
and, if appropriate, the applicable Interest Periods with respect thereto.
Multiple Eurodollar Loans with Interest Periods ending on the same date may be
combined and extended as one Eurodollar Loan, and a single Eurodollar Loan may
be extended as multiple Eurodollar Loans. Each request for extension of, or
conversion into, Eurodollar Loans, shall constitute a representation and
warranty by the Borrowers of the matters specified in Section 5.2(b) and (c). In
the event the Borrowers fail to request extension or conversion of any
Eurodollar Loan in accordance with this Section, or any such conversion or
extension is not permitted or required by this Section, then such Loans shall be
automatically converted into Base Rate Loans at the end of their Interest
Period. The Agent shall give each Lender notice as promptly as practicable of
any such proposed extension or conversion affecting any Loan.
3.3 REDUCTIONS IN COMMITMENTS AND PREPAYMENTS.
(a) Voluntary Reduction of Commitments. The Borrowers may from
time to time permanently reduce the Revolving Committed Amount, the LOC
Committed Amount and/or the Swingline Committed Amount in whole or in
part (in each such case in a minimum aggregate amount of $5,000,000 and
integral multiples of $1,000,000 in excess thereof) upon three (3)
Business Days' prior written notice to the Agent by either Borrower
and, in the case of a reduction of the LOC Committed Amount or the
Swingline Committed Amount, also to the Issuing Lenders or the
Swingline Lender, as appropriate.
(b) Allocation of Commitment Reductions. A reduction of the
Revolving Committed Amount pursuant to clause (a) of this Section 3.3
shall not effect a reduction in the LOC Committed Amount or the
Swingline Committed Amount (unless so elected by the Borrowers in their
sole discretion) until the Revolving Committed Amount has been reduced
to an amount equal to the sum of the LOC Committed Amount and the
Swingline Committed Amount and then only in the amounts determined by
the Borrowers in their sole discretion. In the event the Revolving
Committed Amount has been reduced to an amount that is less than the
sum of the LOC Committed Amount and the Swingline Committed Amount and
the Borrowers fail to direct the application of such deficiency to the
LOC Committed Amount and/or the Swingline Committed Amount, the amount
of such deficiency shall be deemed a reduction first of the Swingline
Committed Amount and then a reduction of the LOC Committed Amount.
(c) Termination of Individual Lender Commitment. In the event
any Lender becomes a Defaulting Lender, becomes a Disapproving Lender
or delivers a notice to the Borrowers pursuant to Section 3.5 or 3.8 or
in the event of certain refusals by a Lender to consent to certain
proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Lenders as
provided in Section 11.6(b), the Borrowers shall have the right, upon
three (3) Business Days' prior written notice to the Agent, to
terminate the Commitments of such Lender in accordance with the terms
of Section 2.1(a), 3.17 or 11.6(b), as the case may be. At such time as
any such termination shall become effective in accordance
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with the terms hereof, such Lender shall no longer constitute a
"Lender" for purposes of this Agreement, except with respect to
indemnifications under this Agreement which shall survive as to such
repaid Lender.
(d) Voluntary Prepayments. The Borrowers shall have the right
to prepay Loans in whole or in part from time to time without premium
or penalty; provided, however, that (i) Competitive Loans and Committed
Revolving Loans which are Eurodollar Loans may only be prepaid on three
Business Days' prior written notice to the Agent by either Borrower and
any prepayment of such Competitive Loans or Eurodollar Loans will be
subject to Section 3.10; and (ii) each such partial prepayment of Loans
shall be (A) in the minimum principal amount of $5,000,000 and integral
multiples of $1,000,000 in excess thereof for all Competitive Loans and
Committed Revolving Loans and (B) in the minimum principal amount of
$250,000 and integral multiples of $100,000 in excess thereof for
Swingline Loans.
(e) Mandatory Prepayments. If at any time (i) the sum of the
aggregate amount of outstanding Committed Revolving Loans (other than
Committed Revolving Loans made for the purpose of repaying Swingline
Loans or Competitive Loans or reimbursing the Issuing Lender for any
amount drawn under any Letter of Credit but not yet so applied) plus
the aggregate amount of LOC Obligations plus the aggregate amount of
Swingline Loans plus the aggregate amount of Competitive Loans (other
than Competitive Loans made for the purpose of repaying Committed
Revolving Loans or Swingline Loans or reimbursing the Issuing Lender
for any amount drawn under any Letter of Credit but not yet so applied)
shall exceed the aggregate Revolving Committed Amount, (ii) the
aggregate amount of LOC Obligations shall exceed the aggregate LOC
Committed Amount, (iii) the aggregate amount of Swingline Loans shall
exceed the Swingline Committed Amount, or (iv) the aggregate amount of
Competitive Loans shall exceed the Competitive Loan Maximum Amount, the
Borrowers shall immediately make payment on the Loans or in respect of
the LOC Obligations in an amount sufficient to eliminate such excess.
In the case of a mandatory prepayment required on account of subsection
(ii), (iii) or (iv), the amount required to be prepaid hereunder shall
serve to temporarily reduce the Revolving Committed Amount (for
purposes of borrowing availability hereunder, but not for purposes of
computation of fees) by the amount of the payment required until such
time as the situation described in subsection (ii), (iii) or (iv) shall
no longer exist. Payments required to be made hereunder shall be
applied first to Committed Revolving Loans, Swingline Loans or
Competitive Loans, as appropriate, and then to a cash collateral
account in respect of the LOC Obligations, and with respect to the
types of Loans, first to Base Rate Loans and then to Eurodollar Loans
in direct order of their Interest Period maturities. To the extent that
the Borrowers are required to make a mandatory prepayment of the Loans
which is required to be applied to Competitive Loans or to Committed
Revolving Loans which are Eurodollar Loans (following the operation of
the immediately preceding sentence) on a date other than the last day
of an
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Interest Period applicable thereto, at the option of the Borrowers, the
Agent shall hold the amount of such prepayment in an account in the
Agent's sole dominion and control. The Agent shall invest the amounts
held by it in such account as directed by the Borrowers. On the last
day of the Interest Period relating to the next-maturing Competitive
Loans or to Committed Revolving Loans which are Eurodollar Loans, as
appropriate, the Agent shall apply the amounts held by it in such
account to the prepayment of such maturing Loan and the Agent shall
notify the Borrowers of the application of such amounts. Upon the
direction of the Borrowers, the Agent shall apply any earnings on
amounts held in such account to the payment of accrued interest on such
Loans or shall release such earnings to the Borrowers.
(f) Prepayment of Loans of Individual Lender. In the event any
Lender becomes a Defaulting Lender, becomes a Disapproving Lender or
delivers a notice to the Borrowers pursuant to Section 3.5 or 3.8 or in
the event of certain refusals by a Lender to consent to certain
proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Lenders as
provided in Section 11.6(b), the Borrowers shall have the right, upon
three (3) Business Days' prior written notice to the Agent, to repay
all Loans, together with accrued and unpaid interest, fees and all
other amounts owing to such Lender, and cause all Letters of Credit
issued by such Lender to be replaced or fully collateralized with cash
or a letter of credit, each in accordance with the terms of Section
2.1(a), 3.17 or 11.6(b), as the case may be.
(g) Notice. Either Borrower will provide notice to the Agent
of any prepayment by 11:00 A.M. (Charlotte, North Carolina time) on the
day prior to the date of prepayment. Amounts paid on the Loans under
subsection (d) hereof may be reborrowed in accordance with the
provisions hereof.
3.4 FEES.
(a) Commitment Fee. In consideration of the Commitments by the
Lenders hereunder, the Borrowers agrees to pay to the Agent for the
ratable benefit of the Lenders a commitment fee (the "Commitment Fee")
equal to the Applicable Percentage per annum on the aggregate Revolving
Committed Amount in effect from time to time for the applicable period.
The Commitment Fee shall accrue from the date hereof and shall be
payable quarterly in arrears on the 15th day following the end of each
calendar quarter and on the Termination Date.
(b) Letter of Credit Fee. In consideration of the issuance or
maintenance of Letters of Credit hereunder, the Borrowers agree to pay
to the Issuing Lender for the ratable benefit of the Lenders a fee (the
"Letter of Credit Fee") equal to the Applicable Percentage per annum on
the average daily maximum amount available to be drawn under each such
Letter of Credit from the date of issuance (or, in the case of Existing
Letters of Credit, from the Closing Date) to and including the date of
expiration. The
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Issuing Lender shall promptly pay such Letter of Credit Fee to the
Agent for the benefit of and payment to the Lenders (including the
Issuing Lender). In addition, the Borrowers shall pay to the Issuing
Lender, for its own account without sharing by the other Lenders,
one-eighth of one percent (1/8%) per annum thereon. The Letter of
Credit Fees hereunder shall be payable quarterly in arrears on the 15th
day following the end of each calendar quarter and on the Termination
Date.
(c) Administrative Fees. The Borrowers agrees to pay to the
Agent, for its own account, the administrative and other fees referred
to in the Agent's Fee Letter (the "Agent's Fees").
(d) Competitive Bid Request Fee. The Borrowers shall make
payment to the Agent of the applicable Competitive Bid Request Fee, if
any, concurrently with delivery of such Competitive Bid Request
(whether or not any Competitive Bid is offered by a Lender, accepted by
the Borrowers or extended by the offering Lender pursuant thereto).
3.5 CAPITAL ADEQUACY.
If, after the date hereof, any Lender has determined that the adoption
after the date hereof of any applicable law, rule or regulation regarding
capital adequacy, or any change therein after the date hereof, or any change in
the interpretation or administration thereof after the date hereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Lender with any
request or directive arising after the date hereof regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or will have the effect of reducing the rate of return on
such Lender's or its parent company's capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which such Lender or
its parent company could have achieved but for such adoption or change (taking
into consideration such Lender's policies with respect to capital adequacy),
then, upon notice from such Lender, the Borrowers shall pay to such Lender such
additional amount or amounts as will compensate such Lender and its parent
company for such reduction; provided, however, that a Lender shall not be
entitled to avail itself of the benefit of this Section 3.5 to the extent that
any such reduction in return was incurred more than ninety (90) days prior to
the time it gives notice to the Borrowers of the relevant circumstances. In
determining the additional amount payable under this Section 3.5, each Lender
will act reasonably and in good faith and will use averaging and attribution
methods which are reasonable, provided, that such Lender's determination of
compensation owing under this Section 3.5 shall, absent manifest error, be final
and conclusive and binding on all parties hereto. Each Lender, upon determining
that any additional amounts will be payable pursuant to this Section 3.5, will
give prompt written notice thereof to the Borrowers, through the Agent, which
notice shall show the basis for calculation of such additional amounts.
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3.6 INABILITY TO DETERMINE INTEREST RATE.
If prior to the first day of any Interest Period, the Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrowers absent manifest error) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, the Agent shall give telecopy or
telephonic notice thereof to the Borrowers and the Lenders as soon as
practicable thereafter. If such notice is given (x) any Eurodollar Loans
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans and (y) any Loans that were to have been converted on the first
day of such Interest Period to or continued as Eurodollar Loans shall be
converted to or continued as Base Rate Loans. Until such notice has been
withdrawn by the Agent, no further Eurodollar Loans shall be made or continued
as such, nor shall the Borrowers have the right to convert Base Rate Loans to
Eurodollar Loans. This Section 3.6 shall not apply to Competitive Loans or
Swingline Loans.
3.7 ILLEGALITY.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrowers
and the Agent (which notice shall be withdrawn whenever such circumstances no
longer exist), (b) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert Base Rate Loans to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall no
longer be unlawful for such Lender to make or maintain Eurodollar Loans, such
Lender shall then have a commitment only to make a Base Rate Loan when a
Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on
the respective last days of the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrowers shall pay to
such Lender such amounts, if any, as may be required pursuant to Section 3.10.
Notwithstanding the foregoing, to the extent a circumstance described above
relates to a Eurodollar Loan then being requested by the Borrowers pursuant to a
Notice of Borrowing or a Notice of Conversion, the Borrowers shall have the
option to rescind such Notice of Borrowing or Notice of Conversion as to all
Lenders by either Borrower giving notice (in writing or by telephone confirmed
in writing) to the Agent of such rescission on the date on which the Lender
affected by such circumstances gives notice thereof as described above. This
Section 3.7 shall not apply to Competitive Loans or Swingline Loans.
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3.8 REQUIREMENTS OF LAW.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Lender, or compliance by
any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender):
(i) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit or any Eurodollar Loans
made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof (except
for Non-Excluded Taxes) covered by Section 3.9 (including Non-Excluded
Taxes imposed solely by reason of any failure of such Lender to comply
with its obligations under Section 3.9(b)) and Excluded Taxes;
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition
(excluding any tax of any kind) whatsoever;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrowers from such Lender,
through the Agent, in accordance herewith, the Borrowers shall promptly pay such
Lender, upon its demand, any additional amounts necessary to compensate such
Lender for such increased cost or reduced amount receivable, provided that, in
any such case, the Borrowers may elect to convert the Eurodollar Loans made by
such Lender hereunder to Base Rate Loans by either Borrower giving the Agent at
least one Business Day's notice of such election, in which case the Borrowers
shall promptly pay to such Lender, upon demand, without duplication, such
amounts, if any, as may be required pursuant to Section 3.10; provided, further,
however, that a Lender shall not be entitled to avail itself of the benefit of
this Section 3.8 to the extent that any such additional amounts were incurred
more than ninety (90) days prior to the time it gives notice to the Borrowers as
provided in the next sentence. If any Lender becomes entitled to claim any
additional amounts pursuant to this Section, it shall provide prompt notice
thereof to the Borrowers, through the Agent, certifying (x) that one of the
events described in this Section has occurred and describing in reasonable
detail the nature of such event, (y) as to the increased cost or reduced amount
resulting from such event and (z) as to the additional amount demanded by such
Lender and a reasonably detailed explanation of the calculation thereof. Such a
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certificate as to any additional amounts payable pursuant to this Section
submitted by such Lender, through the Agent, to the Borrowers shall be
conclusive in the absence of manifest error. This Section 3.8 shall not apply to
Competitive Loans or Swingline Loans.
3.9 TAXES.
(a) Except as provided below in this subsection (a), all
payments made by the Borrowers under this Credit Agreement and any
Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp
or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding taxes measured by or
imposed upon the overall net income or profits of any Lender or its
applicable lending office, or any branch or affiliate thereof, and all
franchise taxes, branch taxes, taxes on doing business or taxes on the
overall capital or net worth of any Lender or its applicable lending
office, or any branch or affiliate thereof, in each case imposed in
lieu of net income taxes, imposed: (i) by the jurisdiction under the
laws of which such Lender, applicable lending office, branch or
affiliate is organized or is located, or in which its principal
executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii)
by reason of any connection between the jurisdiction imposing such tax
and such Lender, applicable lending office, branch or affiliate other
than a connection arising solely from such Lender having executed,
delivered or performed its obligations, or received payment under or
enforced, this Credit Agreement or any Notes (such excluded taxes being
herein referred to as "Excluded Taxes"). If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from
any amounts payable to the Agent or any Lender hereunder or under any
Notes, the amounts so payable to the Agent or such Lender shall be
increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in
this Credit Agreement and any Notes, provided, however, that the
Borrowers shall be entitled to deduct and withhold any Non-Excluded
Taxes and shall not be required to increase any such amounts payable to
any Lender that is not organized under the laws of the United States of
America or a state thereof if such Lender fails to comply with the
requirements of subsection (b) below. Whenever any Non-Excluded Taxes
are payable by the Borrowers, as promptly as possible thereafter, the
Borrowers shall send to the Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an
original official receipt received by the Borrowers showing payment
thereof. If the Borrowers fail to pay any Non-Excluded Taxes when due
to the appropriate taxing authority or fails to remit to the Agent the
required receipts or other required documentary evidence, the Borrowers
shall indemnify the Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Agent or any
Lender as a result of any such failure. The
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agreements in this subsection (a) shall survive the termination of this
Credit Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(X) (i) on or before the date of any payment
by the Borrowers under this Credit Agreement or the Notes to
such Lender, deliver to the Borrowers and the Agent (A) two
duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, or successor applicable form, as
the case may be, certifying that it is entitled to receive
payments under this Credit Agreement and its Notes without
deduction or withholding of any United States federal income
taxes and (B) an Internal Revenue Service Form W-8 or W-9, or
successor applicable form, as the case may be, certifying that
it is entitled to an exemption from United States backup
withholding tax;
(ii) deliver to the Borrowers and the Agent
two further copies of any such form or certification
on or before the date that any such form or
certification expires or becomes obsolete and after
the occurrence of any event requiring a change in the
most recent form previously delivered by it to the
Borrowers; and
(iii) obtain such extensions of time for
filing and complete such forms or certifications as
may reasonably be requested by the Borrowers or the
Agent; or
(Y) in the case of any such Lender that is
not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code, (i) represent to the Borrowers (for the benefit of the
Borrowers and the Agent) that it is not a bank within the
meaning of Section 881(c)(3)(A) of the Code, (ii) agree to
furnish to the Borrowers on or before the date of any payment
by the Borrowers, with a copy to the Agent (A) a certificate
substantially in the form of Schedule 3.9 hereto (any such
certificate a "U.S. Tax Compliance Certificate") and (B) two
accurate and complete original signed copies of Internal
Revenue Service Form W-8, or successor applicable form
certifying to such Lender's legal entitlement at the date of
such certificate to an exemption from U.S. withholding tax
under the provisions of Section 881(c) of the Code with
respect to payments to be made under this Credit Agreement and
its Notes (and to deliver to the Borrowers and the Agent two
further copies of such form on or before the date it expires
or becomes obsolete and after the occurrence of any event
requiring a change in the most recently provided form and, if
necessary, obtain any extensions of time reasonably requested
by the Borrowers or the Agent for filing and completing such
forms), and (iii) agree, to the extent legally entitled to do
so, upon reasonable
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request by the Borrowers, to provide to the Borrowers (for the
benefit of the Borrowers and the Agent) such other forms as
may be reasonably required in order to establish the legal
entitlement of such Lender to an exemption from withholding
with respect to payments under this Credit Agreement and its
Notes;
unless in any such case any change in treaty, law or regulation has
occurred after the date such Person becomes a Lender hereunder which
renders all such forms inapplicable or which would prevent such Lender
from duly completing and delivering any such form with respect to it
and such Lender so advises the Borrowers and the Agent. Each Person
that shall become a Lender or a participant pursuant to Section 11.3
shall, upon the effectiveness of the related transfer, be required to
provide all of the forms, certifications and statements required
pursuant to this subsection, provided that in the case of a Participant
the obligations of such Participant pursuant to this subsection (b)
shall be determined as if the Participant were a Lender except that
such Participant shall furnish all such required forms, certifications
and statements to the Lender from which the related participation shall
have been purchased.
(c) If the Borrowers pay any additional amount under Section
3.9(a) to a Lender and such Lender determines that it has received or
realized in connection therewith any refund or any reduction of, or
credit against, its tax liabilities in or with respect to the taxable
year in which the additional amount is paid, such Lender shall pay to
the Borrowers an amount that the Lender shall reasonably determine is
equal to the net benefit, after tax, which was obtained by the Lender
in such taxable year as a consequence of such refund, reduction or
credit.
3.10 INDEMNITY.
The Borrowers agree to indemnify each Lender and to hold each Lender
harmless from any reasonable loss or expense which such Lender may sustain or
incur (other than through such Lender's gross negligence or willful misconduct)
as a consequence of (a) default by the Borrowers in making a borrowing of,
conversion into or continuation of Competitive Loans or Committed Revolving
Loans which are Eurodollar Loans after either Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrowers in making any prepayment of a Competitive Loan or a
Committed Revolving Loan which is a Eurodollar Loan after either Borrower has
given a notice thereof in accordance with the provisions of this Credit
Agreement or (c) the making of a prepayment of Competitive Loans or Committed
Revolving Loans which are Eurodollar Loans on a day which is not the last day of
an Interest Period with respect thereto other than pursuant to Section 3.11(c).
Such indemnification may include an amount equal to the excess, if any, of (i)
the amount of interest which would have accrued on the amount so prepaid, or not
so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or continue, the Interest Period that would have commenced on the
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date of such failure) in each case at the applicable rate of interest for such
Competitive Loan or a Committed Revolving Loan which is a Eurodollar Loan
provided for herein (excluding, however, the Applicable Percentage included
therein, if any) over (ii) the amount of interest (as reasonably determined by
such Lender) which would have accrued to such Lender on such amount by placing
such amount on deposit for a comparable period with leading banks in the
interbank eurodollar market. This covenant shall survive the termination of this
Credit Agreement and the payment of the Loans and all other amounts payable
hereunder. This Section 3.10 shall not apply to Swingline Loans.
3.11 PRO RATA TREATMENT.
Except to the extent otherwise provided herein:
(a) Committed Revolving Loans. Each Committed Revolving Loan
advance (including without limitation each Mandatory Borrowing), each
payment or prepayment of principal of any Committed Revolving Loan,
each payment of interest on the Committed Revolving Loans, each payment
of the Commitment Fee and the Letter of Credit Fee (other than the
portion of the Letter of Credit Fee retained by the Issuing Lender for
its own account), each reduction of the Revolving Committed Amount or
the LOC Committed Amount, and each conversion or continuation of any
Committed Revolving Loan, shall be allocated pro rata among the
relevant Lenders in accordance with the respective applicable Revolving
Committed Amounts (or, if the Commitments of such Lenders have expired
or been terminated, in accordance with the respective principal amounts
of the outstanding Loans and Participation Interests of such Lenders).
(b) Letters of Credit. Each payment of unreimbursed drawings
in respect of LOC Obligations shall be allocated to each Lender
entitled thereto pro rata in accordance with its LOC Commitment
Percentage; provided that, if any Lender shall have failed to pay its
applicable pro rata share of any drawing under any Letter of Credit,
then any amount to which such Lender would otherwise be entitled
pursuant to this subsection (b) shall instead be payable to the Issuing
Lender; provided further, that in the event any amount paid to any
Lender pursuant to this subsection (b) is rescinded or must otherwise
be returned by the Issuing Lender, each Lender shall, upon the request
of the Issuing Lender, repay to the Agent for the account of the
Issuing Lender the amount so paid to such Lender, with interest for the
period commencing on the date the Lender receives such request until
the date the Issuing Lender receives such repayment at a rate per annum
equal to, during the period to but excluding the date two (2) Business
Days after such request, the Federal Funds Rate, and thereafter, the
Base Rate plus two percent (2%).
(c) Funding. Unless the Agent shall have been notified in
writing by any Lender prior to a Committed Revolving Loan borrowing
that such Lender will not make the amount that would constitute its
Revolving Commitment Percentage of such
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borrowing available to the Agent, the Agent may assume that such Lender
is making such amount available to the Agent, and the Agent may, in
reliance upon such assumption, make available to the Borrowers a
corresponding amount. If such amount is not made available to the Agent
by the required time on the borrowing date therefor, such Lender shall
pay to the Agent, on demand, such amount with interest thereon at a
rate equal to the Federal Funds Rate for the period until such Lender
makes such amount immediately available to the Agent. A certificate of
the Agent submitted to any Lender with respect to any amounts owing
under this subsection shall be conclusive in the absence of manifest
error. If such Lender's Revolving Commitment Percentage of such
borrowing is not made available to the Agent by such Lender within
three Business Days of such borrowing date, (i) the Agent shall notify
the Borrowers of the failure of such Lender to make such amount
available to the Agent and the Agent shall also be entitled to recover
such amount with interest thereon at the rate per annum applicable to
Base Rate Loans hereunder, on demand, from the Borrowers and (ii) the
Borrowers may, without waiving any rights it may have against such
Lender, borrow a like amount on an unsecured basis from any commercial
bank for a period ending on the date upon which such Lender does in
fact make such borrowing available, provided that at the time such
borrowing is made and at all times while such amount is outstanding the
Borrowers would be permitted to borrow such amount pursuant to Section
2.1 of this Credit Agreement.
3.12 SHARING OF PAYMENTS.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, unreimbursed drawing with respect
to any LOC Obligations or any other obligation owing to such Lender under this
Credit Agreement through the exercise of a right of setoff, banker's lien or
counterclaim, 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, in excess
of its pro rata share of such payment as provided for in this Credit Agreement,
such Lender shall promptly purchase from the other Lenders a participation in
such Loans, LOC Obligations and other obligations in such amounts, and make such
other adjustments from time to time, as shall be equitable to the end that all
Lenders share such payment in accordance with their respective ratable shares as
provided for in this Credit Agreement. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of a
participation theretofore sold, return its share of that benefit (together with
its share of any accrued interest payable with respect thereto) to each Lender
whose payment shall have been rescinded or otherwise restored. The Borrowers
agree that any Lender so purchasing such a participation may, to the fullest
extent permitted by law, exercise all rights of payment, including setoff,
banker's lien or counterclaim, with respect to such participation as fully as if
such Lender were a holder of such Loan, LOC Obligation or other obligation in
the amount of such participation. Except as otherwise expressly
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provided in this Credit Agreement, if any Lender or the Agent shall fail to
remit to the Agent or any other Lender an amount payable by such Lender or the
Agent to the Agent or such other Lender pursuant to this Credit Agreement on the
date when such amount is due, such payments shall be made together with interest
thereon for each date from the date such amount is due until the date such
amount is paid to the Agent or such other Lender at a rate per annum equal to
the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section 3.12 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders under this Section 3.12 to share in the benefits of
any recovery on such secured claim.
3.13 PLACE AND MANNER OF PAYMENTS.
Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Agent in Dollars in immediately available funds,
without offset, deduction, counterclaim or withholding of any kind, at its
offices specified in Section 11.1 not later than 2:00 P.M. (Charlotte, North
Carolina time) on the date when due. Payments received after such time shall be
deemed to have been received on the next succeeding Business Day. The Agent may
(but shall not be obligated to) debit the amount of any such payment which is
not made by such time to any ordinary deposit account of the Borrowers
maintained with the Agent (with notice to the Borrowers). The Borrowers shall,
at the time it makes any payment under this Credit Agreement, specify to the
Agent the Loans, LOC Obligations, fees or other amounts payable by the Borrowers
hereunder to which such payment is to be applied (and in the event that it fails
so to specify, or if such application would be inconsistent with the terms
hereof, the Agent shall distribute such payment to the Lenders in the manner set
forth in Section 3.3(e) for mandatory prepayments). The Agent will distribute
such payments to such Lenders, if any such payment is received prior to 12:00
Noon (Charlotte, North Carolina time) on a Business Day in like funds as
received prior to the end of such Business Day and otherwise the Agent will
distribute such payment to such Lenders on the next succeeding Business Day.
Whenever any payment hereunder shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day (subject to accrual of interest and fees for the period of such
extension), except that in the case of Eurodollar Loans, if the extension would
cause the payment to be made in the next following calendar month, then such
payment shall instead be made on the next preceding Business Day. Except as
expressly provided otherwise herein, all computations of interest and fees shall
be made on the basis of actual number of days elapsed over a year of 360 days,
except with respect to computation of interest on Base Rate Loans which shall be
calculated based on a year of 365 or 366 days, as appropriate. Interest shall
accrue from and include the date of borrowing, but exclude the date of payment.
3.14 INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES.
(a) In addition to its other obligations under Section 2.2,
the Borrowers hereby agree to protect, indemnify, pay and save each
Issuing Lender harmless from and against
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any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees) that the
Issuing Lender may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any Letter of Credit or (B) the
failure of the Issuing Lender to honor a drawing under a Letter of
Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions, herein called
"Government Acts").
(b) As between the Borrowers and the Issuing Lender, the
Borrowers shall assume all risks of the acts, omissions or misuse of
any Letter of Credit by the beneficiary thereof. The Issuing Lender
shall not be responsible: (i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any
party in connection with the application for and issuance of any Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, that may
prove to be invalid or ineffective for any reason; (iii) for failure of
the beneficiary of a Letter of Credit to comply fully with conditions
required in order to draw upon a Letter of Credit; (iv) for errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not
they be in cipher; (v) for errors in interpretation of technical terms;
(vi) for any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under a Letter of Credit
or of the proceeds thereof; and (vii) for any consequences arising from
causes beyond the control of the Issuing Lender, including, without
limitation, any Government Acts. None of the above shall affect,
impair, or prevent the vesting of the Issuing Lender's rights or powers
hereunder.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted
by the Issuing Lender, under or in connection with any Letter of Credit
or the related certificates, if taken or omitted in good faith, shall
not put such Issuing Lender under any resulting liability to the
Borrowers. It is the intention of the parties that this Credit
Agreement shall be construed and applied to protect and indemnify the
Issuing Lender against any and all risks involved in the issuance of
the Letters of Credit, all of which risks are hereby assumed by the
Borrowers, including, without limitation, any and all risks of the acts
or omissions, whether rightful or wrongful, of any present or future
Government Acts. The Issuing Lender shall not, in any way, be liable
for any failure by the Issuing Lender or anyone else to pay any drawing
under any Letter of Credit as a result of any Government Acts or any
other cause beyond the control of the Issuing Lender.
(d) Nothing in this Section 3.14 is intended to limit the
reimbursement obligation of the Borrowers contained in Section 2.2(d)
hereof. The obligations of the
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Borrowers under this Section 3.14 shall survive the termination of this
Credit Agreement. No act or omissions of any current or prior
beneficiary of a Letter of Credit shall in any way affect or impair the
rights of the Issuing Lender to enforce any right, power or benefit
under this Credit Agreement.
(e) Notwithstanding anything to the contrary contained in this
Section 3.14, the Borrowers shall have no obligation to indemnify any
Issuing Lender in respect of any liability incurred by such Issuing
Lender (and the Issuing Lender shall retain all such liability) arising
out of the gross negligence or willful misconduct of the Issuing
Lender.
3.15 REPLACEMENT OF LENDERS.
If any Lender either (i) becomes a Defaulting Lender, (ii) becomes a
Disapproving Lender or (iii) delivers a notice to the Borrowers pursuant to
Sections 3.5 or 3.8, the Borrowers shall have the right, if no Default or Event
of Default then exists, to replace such Lender (the "Replaced Lender") with one
or more Eligible Assignees (collectively, the "Replacement Lender"), provided
that (A) at the time of any replacement pursuant to this Section 3.15, the
Replacement Lender shall enter into one or more assignment agreements
substantially in the form of Schedule 11.3(b) pursuant to, and in accordance
with the terms of, Section 11.3(b) (and with all fees payable pursuant to said
Section 11.3(b) to be paid by the Replacement Lender) pursuant to which the
Replacement Lender shall acquire all of the rights and obligations of the
Replaced Lender hereunder and, in connection therewith, shall pay to (1) the
Replaced Lender in respect thereof an amount equal to the sum of (a) the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Lender, (b) all unreimbursed drawings under the Letters of Credit that have been
funded by the Replaced Lender, together with all then unpaid interest with
respect thereto at such time and (c) all accrued but theretofore unpaid, fees
and other amounts owing to the Replaced Lender pursuant to Section 3.4 and (2)
each Issuing Lender an amount equal to such Replaced Lender's LOC Commitment
Percentage of any unreimbursed drawings under Letters of Credit issued by such
Issuing Lender to the extent such amount was not heretofore funded by Replaced
Lender, and (B) all obligations of the Borrowers owing to the Replaced Lender
(including all obligations, if any, owing pursuant to Section 3.5 or 3.8, but
excluding those obligations specifically described in clause (A) above in
respect of which the assignment purchase price has been, or is concurrently
being paid) shall be paid in full by the Borrowers to such Replaced Lender
concurrently with such replacement.
3.16 CHANGE OF LENDING OFFICE.
Each Lender agrees that on the occurrence of any event giving rise to
the operation of Sections 3.5, 3.8 or 3.9 with respect to such Lender, it will,
if requested by the Borrowers, use reasonable efforts to designate another
lending office for any Loans or Letters of Credit affected by such event,
provided that such designation is made on such terms that such Lender and its
lending office suffer no material economic, legal or regulatory disadvantage,
with the object of avoiding the consequence of the event giving rise to the
operation of such Section.
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3.17 ADDITIONAL TERMINATION OF COMMITMENT RIGHTS.
If any Lender either becomes a Defaulting Lender or delivers a notice
to the Borrowers pursuant to Section 3.5 or 3.8, the Borrowers shall have the
right (so long as all such Defaulting Lenders or delivering Lenders are treated
as described in either clauses (A) or (B) below) to either (A) replace each such
Defaulting Lender or delivering Lender with one or more Replacement Lenders
pursuant to Section 3.15 or (B) terminate such Defaulting Lender's or delivering
Lender's Commitment and repay all outstanding Loans of such Lender in accordance
with Sections 3.3(c) and 3.3(f), provided that, unless the Commitments
terminated and Loans repaid pursuant to the preceding clause (B) are immediately
replaced in full at such time through the addition of new Lenders or the
increase of the Commitments and/or outstanding Loans of existing Lenders (who in
each case must specifically consent to any such increase), then in the case of
any action pursuant to the preceding clause (B), subject to the following
proviso, the Required Lenders (determined before giving effect to the proposed
action) shall specifically consent to such termination of Commitment and
repayment of Loans, provided further, notwithstanding the foregoing proviso,
each of the Lenders (other than the Lender whose Commitment is being terminated)
shall specifically consent to such termination of Commitment and repayment of
Loans if the aggregate amount of Commitments terminated pursuant to this Section
3.17 (including the proposed termination) plus the aggregate amount of
Commitments terminated pursuant to Section 11.6(b) plus the aggregate amount of
Commitments terminated pursuant to Section 2.1(a) shall exceed $100,000,000.
SECTION 4
GUARANTY
4.1 THE GUARANTEE.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender and the Agent as hereinafter provided the prompt payment of the Credit
Party Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantors hereby further
agree that if any of the Credit Party Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as
mandatory cash collateralization or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, following receipt of demand therefor, and that
in the case of any extension of time of payment or renewal of any of the Credit
Party Obligations, the same will be promptly paid in full when due (whether at
extended maturity, as a mandatory prepayment, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.
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Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents, in the event of a bankruptcy or other similar
insolvency proceeding of a Guarantor, the obligations of each such Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its Credit Party Obligations hereunder subject to
avoidance under Section 548 of the Bankruptcy Code or any comparable provisions
of any applicable state law.
4.2 OBLIGATIONS UNCONDITIONAL.
The obligations of the Guarantors under Section 4.1 are joint and
several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents, or any
other agreement or instrument referred to therein, or any substitution, release
or exchange of any other guarantee of or security for any of the Credit Party
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 4.2 that the obligations of the Guarantors
hereunder shall be absolute and unconditional under any and all circumstances.
Without limiting the generality of the foregoing, it is agreed that, to the
fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder
which shall remain absolute and unconditional as described above:
(a) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of
the Credit Party Obligations shall be extended, or such performance or
compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of any
of the Credit Documents or any other agreement or instrument referred
to therein shall be done or omitted;
(c) the maturity of any of the Credit Party Obligations shall
be accelerated, or any of the Credit Party Obligations shall be
modified, supplemented or amended in any respect, or any right under
any of the Credit Documents or any other agreement or instrument
referred to therein shall be waived or any other guarantee of any of
the Credit Party Obligations or any security therefor shall be released
or exchanged in whole or in part or otherwise dealt with;
(d) any Lien granted to, or in favor of, the Agent or any
Lender or Lenders as security for any of the Credit Party Obligations
shall fail to attach or be perfected; or
(e) any of the Credit Party Obligations shall be determined to
be void or voidable (including, without limitation, for the benefit of
any creditor of any Guarantor) or shall be subordinated to the claims
of any Person (including, without limitation, any creditor of any
Guarantor).
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With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever (other than any notice specifically required hereunder), and any
requirement that the Agent or any Lender exhaust any right, power or remedy or
proceed against any Person under any of the Credit Documents or any other
agreement or instrument referred to therein, or against any other Person under
any other guarantee of, or security for, any of the Credit Party Obligations.
4.3 REINSTATEMENT.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, reasonable fees and expenses of counsel)
incurred by the Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
4.4 CERTAIN ADDITIONAL WAIVERS.
Without limiting the generality of the provisions of this Section 4,
each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat.
Sections 26-7 through 26-9, inclusive. Each of the Guarantors further agrees
that it shall have no right of subrogation, reimbursement or indemnity, nor any
right of recourse to security, if any, for the Credit Party Obligations so long
as any amounts payable to the Agent or the Lenders in respect of the Credit
Party Obligations shall remain outstanding and until all of the Commitments
shall have expired or been terminated.
4.5 REMEDIES.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Credit Party Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 hereof (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing such Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or such Credit Party
Obligations being deemed to have become automatically due and payable), such
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of said
Section 4.1.
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4.6 CONTINUING GUARANTEE.
The guarantee in this Section 4 is a continuing guarantee, and shall
apply to all Credit Party Obligations whenever arising.
SECTION 5
CONDITIONS
5.1 CONDITIONS TO INITIAL EXTENSIONS OF CREDIT.
The obligation of each Lender to make its initial Extensions of Credit
to the Borrowers are subject to the satisfaction of the following conditions on
or prior to the Closing Date:
(a) Executed Credit Documents. Receipt by the Agent of
executed counterparts of this Credit Agreement, the Notes and the other
Credit Documents.
(b) Tranche B Credit Agreement. Receipt by the Agent of copies
of the executed Tranche B Credit Agreement, the promissory notes issued
thereunder and the other collateral, security and other documents
relating thereto.
(c) No Default; Representations and Warranties. As of the
Closing Date (i) there shall exist no Default or Event of Default and
(ii) all representations and warranties contained herein and in the
other Credit Documents shall be true and correct in all material
respects.
(d) Opinion of Counsel. Receipt by the Agent of an opinion, or
opinions, satisfactory to the Agent, addressed to the Agent and the
Lenders and dated as of the Closing Date, from legal counsel to the
Credit Parties and in form reasonably acceptable to the Agent and the
Credit Parties.
(e) Corporate Documents. Receipt by the Agent of the
following:
(i) Charter Documents. Copies of the
articles or certificates of incorporation or other charter
documents of each Credit Party certified to be true and
complete as of a recent date by the appropriate Governmental
Authority of the state or other jurisdiction of its
incorporation and certified by a secretary or assistant
secretary of such Credit Party to be true and correct as of
the Closing Date.
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(ii) Bylaws. A copy of the bylaws of each
Credit Party certified by a secretary or assistant secretary
of such Credit Party to be true and correct as of the Closing
Date.
(iii) Resolutions. Copies of resolutions of
the Board of Directors of each Credit Party approving and
adopting the Credit Documents to which it is a party and the
transactions contemplated therein and authorizing execution
and delivery thereof, certified by a secretary or assistant
secretary of such Credit Party to be true and correct and in
force and effect as of the Closing Date.
(iv) Good Standing. Copies of (a)
certificates of good standing, existence or its equivalent
with respect to each Credit Party certified as of a recent
date by the appropriate Governmental Authorities of the state
or other jurisdiction of incorporation and each other
jurisdiction in which the failure to so qualify and be in good
standing would have a Material Adverse Effect and (b) to the
extent available, a certificate indicating payment of all
corporate franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities.
(f) Fees and Expenses. Provided the Borrowers have received
proper documentation and support therefor, payment by the Borrowers of
all fees and expenses owed by it to the Lenders and the Agent,
including, without limitation, payment to the Agent of the fees set
forth in the Agent's Fee Letter.
(g) Merger Agreement Transactions. The transactions
contemplated by the Merger Agreement shall have been consummated in
accordance with the terms of the Merger Agreement and the Agent shall
have received a copy of the final, executed Merger Agreement.
(h) Repayment of Existing Indebtedness. The Agent shall have
received evidence satisfactory to it that the Existing Credit
Agreements have been terminated and that all amounts due and owing
thereunder have been paid or will be paid with the proceeds of the
initial Extension of Credit hereunder.
(i) Consents. All material consents and approvals of the
boards of directors, shareholders, governmental and regulatory bodies
and other applicable third parties necessary in connection with the
transactions contemplated by the Merger Agreement and the financing
transactions contemplated under this Credit Agreement shall have been
obtained.
(j) Compliance with Law. The transactions contemplated by the
Merger Agreement and the financing transactions under this Credit
Agreement shall be in compliance with all applicable laws and
regulations (including applicable securities and banking laws, rules
and regulations).
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(k) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by the
Agent or the Required Lenders.
5.2 EACH EXTENSION OF CREDIT.
The obligation of each Lender to make any Extension of Credit,
including the conversion to or extension of any Eurodollar Loan (and including
the obligation of the Swingline Lender to make any Swingline Loan) is subject to
satisfaction of the following conditions in addition to the satisfaction on the
Closing Date of the conditions set forth in Section 5.1:
(a) (i) In the case of any Committed Revolving Loan, the Agent
shall have received an appropriate Notice of Borrowing or Notice of
Conversion/Extension; (ii) in the case of any Letter of Credit, the
Issuing Bank and the Agent shall have received an appropriate notice of
request for issuance of a Letter of Credit in accordance with the
provisions of Section 2.2(b), (iii) in the case of any Competitive
Loan, the applicable Competitive Loan Lender shall have received an
appropriate notice of acceptance of its related Competitive Bid; and
(iv) in the case of any Swingline Loan, the Swingline Lender shall have
received an appropriate Notice of Borrowing in accordance with the
provisions of Section 2.3(b)(i);
(b) The representations and warranties set forth in Section 6
hereof shall be true and correct in all material respects as of such
date (except for those which expressly relate to an earlier date); and
(c) No Default or Event of Default shall exist and be
continuing either prior to or after giving effect thereto.
The delivery of each Notice of Borrowing and each Notice of Conversion relating
to an extension of or conversion into Eurodollar Loans, each request for the
issuance or extension of a Letter of Credit, each request for a Competitive Bid
pursuant to a Competitive Bid Request and each request for a Swingline Loan
pursuant to Section 2.3(b)(i) shall constitute a representation and warranty by
the Borrowers of the correctness of the matters specified in subsections (b) and
(c) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
To induce the Agent and each Lender to make the Extensions of Credit
requested to be made by it on the Closing Date and on each Credit Date
thereafter, the Credit Parties hereby represent and warrant, on the Closing
Date, and on every Credit Date thereafter (except to the
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extent the following representations warranties relate to a specific date), to
the Agent and each Lender that:
6.1 FINANCIAL CONDITION.
(a) The audited consolidated balance sheet of Old PHC and its
consolidated Subsidiaries as of December 31, 1996 and the audited
consolidated statements of earnings and statements of cash flows for
the year ended December 31, 1996 have heretofore been furnished to the
Agent. Such financial statements (including the notes thereto) (i) have
been audited by Arthur Andersen LLP, (ii) have been prepared in
accordance with GAAP consistently applied throughout the periods
covered thereby and (iii) (on the basis disclosed in the footnotes to
such financial statements) present fairly, in all material respects,
the consolidated financial condition, results of operations and cash
flows of Old PHC and its consolidated Subsidiaries as of such date and
for such periods. The unaudited interim balance sheets of Old PHC and
its consolidated Subsidiaries as at the end of, and the related
unaudited interim statements of earnings and of cash flows for each of
the three fiscal quarters ending on or prior to September 30, 1997 have
heretofore been furnished to the Agent. Such interim financial
statements for each such quarterly period, (i) have been prepared in
accordance with GAAP consistently applied throughout the periods
covered thereby and (ii) (on the basis disclosed in the footnotes to
such financial statements) present fairly, in all material respects,
the consolidated financial condition, results of operations and cash
flows of Old PHC and its consolidated Subsidiaries as of such date and
for such periods subject to year-end and audit adjustments. During the
period from December 31, 1996 to and including the Closing Date, there
has been no sale, transfer or other disposition by Old PHC or any of
its Subsidiaries of any material part of the business or property of
Old PHC and its consolidated Subsidiaries, taken as a whole, and no
purchase or other acquisition by any of them of any business or
property (including any capital stock of any other person) material in
relation to the consolidated financial condition of Old PHC and its
consolidated Subsidiaries, taken as a whole, in each case, which, is
not reflected in the foregoing financial statements or in the notes
thereto or has not otherwise been disclosed in writing to the Lenders
on or prior to the Closing Date.
(b) The audited consolidated balance sheet of Doubletree and
its consolidated Subsidiaries as of December 31, 1996 and the audited
consolidated statements of earnings and statements of cash flows for
the year ended December 31, 1996 have heretofore been furnished to the
Agent. Such financial statements (including the notes thereto) (i) have
been audited by KPMG Peat Marwick LLP, (ii) have been prepared in
accordance with GAAP consistently applied throughout the periods
covered thereby and (iii) (on the basis disclosed in the footnotes to
such financial statements) present fairly, in all material respects,
the consolidated financial condition, results of operations and cash
flows of Doubletree and its consolidated Subsidiaries as of such date
and for such periods. The unaudited interim balance sheets of
Doubletree and its consolidated Subsidiaries as at the
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end of, and the related unaudited interim statements of earnings and of
cash flows for, each fiscal month and quarterly period ended after
September 30, 1997 and prior to the Closing Date have heretofore been
furnished to the Agent. Such interim financial statements for each such
quarterly period, (i) have been prepared in accordance with GAAP
consistently applied throughout the periods covered thereby and (ii)
(on the basis disclosed in the footnotes to such financial statements)
present fairly, in all material respects, the consolidated financial
condition, results of operations and cash flows of Doubletree and its
consolidated Subsidiaries as of such date and for such periods subject
to year-end and audit adjustments. During the period from December 31,
1996 to and including the Closing Date, there has been no sale,
transfer or other disposition by Doubletree or any of its Subsidiaries
of any material part of the business or property of Doubletree and its
consolidated Subsidiaries, taken as a whole, and no purchase or other
acquisition by any of them of any business or property (including any
capital stock of any other person) material in relation to the
consolidated financial condition of Doubletree and its consolidated
Subsidiaries, taken as a whole, in each case, which, is not reflected
in the foregoing financial statements or in the notes thereto or has
not otherwise been disclosed in writing to the Lenders on or prior to
the Closing Date.
(c) On and as of the Closing Date, (i) the financial
projections (the "Projections") prepared by the Parent Company and the
Borrowers and contained in the Confidential Offering Memorandum
delivered to the Lenders by the Agent prior to the Closing Date were
prepared based upon the assumptions concerning various industry trends
described therein for the periods presented, (ii) the Projections were
based on good faith assumptions and estimates, and (iii) although a
range of possible different assumptions and estimates might also be
reasonable, the Parent Company and the Borrowers are not aware of any
facts that would lead them to believe that the assumptions and
estimates on which the Projections were based are not reasonable;
provided that no assurance can be given that the projected results will
be realized or with respect to the ability of the Parent Company and
the Borrowers to achieve the projected results, and while the
Projections are necessarily presented with numerical specificity, the
actual results achieved during the periods presented in all likelihood
will differ from the projected results and such differences may be
material.
6.2 NO CHANGE.
Since December 31, 1996, there has been no development or event
relating to or affecting the Parent Company and its Subsidiaries which has had
or would be reasonably expected to have a Material Adverse Effect.
6.3 CORPORATE AND PARTNERSHIP EXISTENCE; COMPLIANCE WITH LAW.
Each of the Parent Company and its Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization except to the extent
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that the failure to be so organized, existing or in good standing would not be
reasonably expected to have a Material Adverse Effect, (b) has the corporate or
partnership power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, except to the extent that the failure
to have such legal right would not be reasonably expected to have a Material
Adverse Effect, (c) is duly qualified and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification, other than in such
jurisdictions where the failure to be so qualified and in good standing would
not be reasonably expected to have a Material Adverse Effect, and (d) is in
compliance with all Requirements of Law, except to the extent that the failure
to comply therewith would not, in the aggregate, be reasonably expected to have
a Material Adverse Effect.
6.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Each of the Credit Parties has the corporate power and authority, and
the legal right, to make, deliver and perform the Credit Documents to which it
is a party and to borrow and accept Extensions of Credit hereunder or to issue
the guarantee hereunder, and has taken all necessary corporate action to
authorize the borrowings or guarantees and Extensions of Credit or guarantee
such borrowings and Extensions of Credit, as appropriate, on the terms and
conditions of this Credit Agreement and any Notes and to authorize the
execution, delivery and performance of the Credit Documents to which it is a
party. No material consent or authorization of, filing with, notice to or other
similar act by or in respect of, any Governmental Authority or any other Person
is required to be obtained or made by or on behalf of either Borrower or either
Guarantor in connection with the borrowings or guarantees hereunder or with the
execution, delivery, performance, validity or enforceability of the Credit
Documents to which either Borrower or Guarantor is a party, except for material
consents, authorizations, notices and filings described in Schedule 6.4, all of
which have been obtained or made or have the status described in such Schedule
6.4. This Credit Agreement has been, and each other Credit Document to which it
is a party will be, duly executed and delivered on behalf of the Borrowers and
the Guarantors. This Credit Agreement constitutes, and each other Credit
Document to which it is a party when executed and delivered will constitute, a
legal, valid and binding obligation of the Borrowers and the Guarantors
enforceable against them in accordance with its respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.5 NO LEGAL BAR.
The execution, delivery and performance of the Credit Documents by the
Credit Parties, the borrowings and extensions of credit and the guarantees
thereof hereunder and the use thereof (a) will not violate any Requirement of
Law or Contractual Obligation of any Credit Party in any respect that would
reasonably be expected to have a Material Adverse Effect and (b) will not
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result in, or require, the creation or imposition of any Lien on any of its
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation other than Permitted Liens.
6.6 NO MATERIAL LITIGATION.
No litigation, investigation or proceeding of or before any arbitrator
or Governmental Authority is pending or, to the knowledge of any Credit Party,
threatened by or against the Parent Company, or any of its Subsidiaries or
against any of its or their respective properties or revenues which would be
reasonably expected to have a Material Adverse Effect.
6.7 NO DEFAULT.
Neither the Parent Company nor any of its Subsidiaries is in default
under or with respect to any of its Contractual Obligations in any respect which
would be reasonably expected to have a Material Adverse Effect. No Default or
Event of Default has occurred and is continuing.
6.8 OWNERSHIP OF PROPERTY; LIENS.
Except as would not have a Material Adverse Effect, except for
Permitted Liens or except as set forth in Schedule 6.8 hereto, the Parent
Company and each of its Subsidiaries has good record and sufficient title in fee
simple to, or a valid leasehold interest in, all its real property, and good
title to, or a valid leasehold interest in, all its other property. None of such
property is subject to any Lien, except for Permitted Liens.
6.9 INTELLECTUAL PROPERTY.
The Parent Company and each of its Subsidiaries owns, or has the legal
right to use, all United States trademarks, tradenames, copyrights, service
marks, technology, know-how and processes necessary for each of them to conduct
its business as currently conducted (the "Intellectual Property") except for
those the failure to own or have such legal right to use would not be reasonably
expected to have a Material Adverse Effect. Except as provided on Schedule 6.9,
no claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does any Credit Party know
of any such claim, and the use of such Intellectual Property by the Parent
Company and its Subsidiaries does not infringe on the rights of any Person,
except for such claims and infringements that in the aggregate, would not be
reasonably expected to have a Material Adverse Effect.
6.10 NO BURDENSOME RESTRICTIONS.
No Requirement of Law as to the Parent Company or any of its
Subsidiaries would be reasonably expected to have a Material Adverse Effect.
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6.11 TAXES.
The Parent Company and each of its Subsidiaries that are corporations
have filed or caused to be filed all United States federal income tax returns
and all other material tax returns which, to the knowledge of the Credit
Parties, are required to be filed and the failure to file could reasonably be
expected to have a Material Adverse Effect, and have paid (a) all taxes shown to
be due and payable on said returns and (b) any assessments of which the Parent
Company or any of its Subsidiaries has received notice made against the Parent
Company or any of its Subsidiaries or any of the property of the Parent Company
or any of its Subsidiaries and all other taxes, fees or other charges imposed on
the Parent Company or any of its Subsidiaries or any of the property of the
Parent Company or any of its Subsidiaries by any Governmental Authority (other
than any (i) taxes, fees or other charges with respect to which the failure to
pay, in the aggregate, would not have a Material Adverse Effect and (ii) taxes,
fees or other charges the amount or validity of which are currently being
contested and with respect to which reserves in conformity with GAAP have been
provided on the books of the Parent Company or any of such Subsidiaries, as the
case may be).
6.12 ERISA.
During the five year period prior to each date as of which this
representation is made, or deemed made (or, with respect to (vi) or (viii)
below, as of the date such representation is made or deemed made), none of the
following events or conditions, either individually or in the aggregate, has
resulted or is reasonably likely to result in a liability to the Parent Company
or any of its Subsidiaries which would be reasonably expected to have a Material
Adverse Effect: (i) a Reportable Event with respect to any Single Employer Plan;
(ii) an "accumulated funding deficiency" (within the meaning of Section 412 of
the Code or Section 302 of ERISA) with respect to any Single Employer Plan which
has not been waived; (iii) any material noncompliance with the application of
ERISA or the Code with respect to any Plan; (iv) a termination of a Single
Employer Plan (other than a standard termination pursuant to Section 4041(b) of
ERISA); (v) a Lien in favor of the PBGC with respect to any Single Employer Plan
or a Plan pursuant to Section 4068 or Section 302(f) of ERISA, respectively;
(vi) Underfunding with respect to any Single Employer Plan; (vii) a complete or
partial withdrawal from any Multiemployer Plan by the Parent Company, either
Borrower or any Commonly Controlled Entity; (viii) any liability of the Parent
Company, either Borrower or any Commonly Controlled Entity under ERISA if the
Parent Company, either Borrower or any such Commonly Controlled Entity were to
withdraw completely from all Multiemployer Plans as of the annual valuation date
most closely preceding the date on which their representation is made or deemed
made; (ix) the Plan Reorganization or Insolvency of any Multiemployer Plan; (x)
the excess of the present value (determined using actuarial and other
assumptions which are reasonable in respect of the benefits provided and the
employees participating) of the aggregate liability of the Parent Company, the
Borrowers or any of their Subsidiaries for post-retirement benefits to be
provided to their current and former employees (excluding benefits provided
pursuant to Section 4980B of the Code or Section 601 of ERISA), under Plans
which are welfare benefit plans (as determined in Section
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3(1) of ERISA) over the assets under all such Plans; and (xi) an event or
condition with respect to which the Parent Company, either Borrower or any
Commonly Controlled Entity could incur any liability in respect of a Former
Plan.
6.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS.
Neither Borrower is an "investment company", or a company "controlled"
by an "investment company", within the meaning of the Investment Company Act of
1940, as amended. Neither Borrower is subject to regulation under any Federal or
State statute or regulation which limits its ability to incur Indebtedness as
contemplated hereby.
6.14 SUBSIDIARIES.
Set forth in Schedule 6.14 is a complete and accurate list of all
Subsidiaries of the Parent Company immediately after the consummation of the
transactions contemplated by the Merger Agreement, which list is correct in all
material respects. Information on the attached Schedule, which is correct in all
material respects, includes jurisdiction of incorporation or organization; the
number of shares of each class of capital stock or other equity interest
outstanding; the number and percentage of outstanding shares of each class owned
(directly or indirectly); and the number and effect, if exercised, of all
outstanding options, warrants, rights of conversion or purchase and similar
rights. The outstanding capital stock of all such corporate Subsidiaries is
validly issued, fully paid and non-assessable and is owned by such Person,
directly or indirectly, free and clear of all Liens other than Permitted Liens.
6.15 PURPOSE OF LOANS.
Extensions of Credit and the proceeds therefrom shall be used to
refinance existing indebtedness of the Borrowers under the Existing Credit
Agreements, and for working capital, capital expenditures and other general
corporate purposes (including, without limitation, the support of commercial
paper and acquisitions permitted by Section 8.3(c)).
6.16 ENVIRONMENTAL MATTERS.
(a) To the knowledge of the Credit Parties, the facilities and
properties owned, leased or operated by the Parent Company or any of
its Subsidiaries (the "Subject Properties") and all operations at the
Subject Properties are in compliance with all applicable Environmental
Laws, and there is no violation of any Environmental Law with respect
to the business operated by the Parent Company or any of its
Subsidiaries (the "Business"), and there are no conditions relating to
the Business or Subject Properties that would be reasonably likely to
give rise to liability under any applicable Environmental Law, except
for any failure so to comply or violation or condition, or any
aggregation thereof, that would not be reasonably likely to result in
the payment of a Material Environmental Amount.
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(b) To the knowledge of the Credit Parties, the Subject
Properties do not contain any Materials of Environmental Concern at, on
or under the Subject Properties in amounts or concentrations that
constitute a violation of, or could reasonably give rise to liability
under, Environmental Laws, except insofar as the presence of any
Materials of Environmental Concern is not reasonably likely to result
in the payment of a Material Environmental Amount.
(c) Neither the Parent Company nor any of its Subsidiaries has
received any written notice of, or inquiry from any Governmental
Authority regarding, any violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Subject
Properties or the Business, nor does any Credit Party have knowledge
that any such notice will be received or is being threatened, except
insofar as such notice or threatened notice, or any aggregation
thereof, does not involve a matter or matters that is or are reasonably
likely to result in the payment of a Material Environmental Amount.
(d) No Credit Party has, nor to the knowledge of any Credit
Party have any other Persons, transported or disposed of Materials of
Environmental Concern from the Subject Properties, or generated,
treated, stored or disposed of at, on or under any of the Subject
Properties or any other location, in each case by or on behalf of the
Parent Company or any of its Subsidiaries in violation of, or in a
manner that would be reasonably likely to give rise to liability under,
any applicable Environmental Law, except insofar as any such violation
or liability referred to in this paragraph, or any aggregation thereof,
is not reasonably likely to result in the payment of a Material
Environmental Amount.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of any Credit Party, threatened,
under any Environmental Law to which the Parent Company or any of its
Subsidiaries is named as a party, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders,
or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Parent Company or any of its
Subsidiaries, the Subject Properties or the Business, except insofar as
such proceeding, action, decree, order or other requirement, or any
aggregation thereof, is not reasonably likely to result in the payment
of a Material Environmental Amount.
(f) To the knowledge of the Credit Parties, there has been no
release or threat of release of Materials of Environmental Concern at
or from the Subject Properties, or arising from or related to the
operations (including, without limitation, disposal) of the Parent
Company or any of its Subsidiaries in connection with the Subject
Properties or otherwise in connection with the Business, in violation
of or in amounts or in a manner that would be reasonably likely to give
rise to liability under Environmental Laws, except
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insofar as any such violation or liability referred to in this
paragraph, or any aggregation thereof, is not reasonably likely to
result in the payment of a Material Environmental Amount.
(g) To the knowledge of the Credit Parties, neither the Parent
Company nor any of its Subsidiaries has voluntarily assumed any
liability of any Person under any Environmental Law that is not subject
to indemnification and is reasonably likely to result in the payment of
a Material Environmental Amount.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that commencing with the
Closing Date and so long as this Credit Agreement is in effect and until the
Credit Party Obligations, together with interest, fees and other obligations
hereunder, have been paid in full and the Commitments hereunder shall have
terminated:
7.1 INFORMATION COVENANTS.
The Parent Company and the Borrowers will furnish, or cause to be
furnished, to the Lenders:
(a) Annual Financial Statements. As soon as available, and in
any event within 100 days after the close of each fiscal year of the
Parent Company, a consolidated balance sheet and income statement of
the Parent Company and its consolidated Subsidiaries (including the
Borrowers), as of the end of such fiscal year, together with related
consolidated statements of operations and retained earnings and of cash
flows for such fiscal year, setting forth in comparative form
consolidated figures for the preceding fiscal year, all such financial
information described above to be in reasonable form and detail and
audited by Arthur Andersen LLP or other independent certified public
accountants of recognized national standing and whose opinion shall be
to the effect that such financial statements have been prepared in
accordance with GAAP (except for changes with which such accountants
concur) and shall not be limited as to the scope of the audit or
qualified as to the status of the Credit Parties as a going concern.
(b) Quarterly Financial Statements. As soon as available, and
in any event within 50 days after the close of each fiscal quarter of
the Parent Company (other than the fourth fiscal quarter, in which case
100 days after the end thereof) a consolidated balance sheet and income
statement of the Parent Company and its consolidated Subsidiaries
(including the Borrowers), as of the end of such fiscal quarter,
together with related consolidated statements of operations and
retained earnings and of cash flows for such
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fiscal quarter in each case setting forth in comparative form
consolidated figures for the corresponding period of the preceding
fiscal year, all such financial information described above to be in
reasonable form and detail and reasonably acceptable to the Agent, and
accompanied by a certificate of the chief financial officer, treasurer
or controller of the Parent Company to the effect that such quarterly
financial statements fairly present in all material respects the
financial condition and results of operations of the Parent Company and
its consolidated Subsidiaries (including the Borrowers), and have been
prepared in accordance with GAAP, subject to changes resulting from
audit and normal year-end audit adjustments.
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of the chief financial officer, treasurer or controller
of the Parent Company substantially in the form of Schedule 7.1(c)
attached hereto, (i) demonstrating compliance with the financial
covenants contained in Section 7.11 by calculation thereof as of the
end of each such fiscal period and (ii) stating that no Default or
Event of Default exists, or if any Default or Event of Default does
exist, specifying the nature and extent thereof and what action the
Parent Company proposes to take with respect thereto.
(d) Accountant's Report. Within the period for delivery of the
annual financial statements provided in Section 7.1(a), a report of the
accountants conducting the annual audit stating that they have reviewed
Section 7.11 and stating further whether, in the course of their audit,
anything came to their attention to cause them to believe that the
Parent Company and its consolidated Subsidiaries were not in compliance
with Section 7.11, in so far as such Section 7.11 relates to accounting
matters, on the date of such statements.
(e) Reports. Promptly upon transmission or receipt thereof,
(a) copies of all registration statements (other than the exhibits
thereto and any registration statements on Form S-8 or its equivalent)
and reports on Forms 10-K, 10-Q and 8-K (or their equivalent) which the
Parent Company or any of its Subsidiaries shall file with the
Securities and Exchange Commission, or any successor agency, (b) if
requested by the Agent, copies of all financial statements, proxy
statements, notices and reports as the Parent Company or any of its
Subsidiaries shall send to its shareholders or to a holder of any
Indebtedness with a maximum principal amount exceeding $75,000,000 owed
by the Parent Company or any of its Subsidiaries in its capacity as
such a holder (other than reports of a routine or ministerial nature
which are not material) and (c) upon the request of the Agent, all
reports and written information to and from the United States
Environmental Protection Agency, or any state or local agency
responsible for enforcement of Environmental Laws (other than reports
of a routine or ministerial nature which are not material).
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(f) Notices. Upon any Credit Party obtaining knowledge
thereof, such Credit Party will give written notice to the Agent
immediately of (a) the occurrence of an event or condition consisting
of a Default or Event of Default, specifying the nature and existence
thereof and what action the Credit Party proposes to take with respect
thereto, and (b) the occurrence of any of the following (i) the
pendency or commencement of any litigation, arbitration or governmental
proceeding against the Parent Company or any of its Subsidiaries which
is reasonably likely to have a Material Adverse Effect, (ii) the
institution of any proceedings against the Parent Company or any of its
Subsidiaries with respect to, or the receipt of notice by such Person
of potential liability or responsibility for, violation, or alleged
violation of any Environmental Laws, the violation of which would
likely have a Material Adverse Effect, or (iii) any notice or
determination concerning the imposition of any withdrawal liability by
a Multiemployer Plan against the Parent Company or any of its
Subsidiaries or any of Commonly Controlled Entities of the Parent
Company or any of its Subsidiaries, the determination that a
Multiemployer Plan is, or is expected to be, in a Plan Reorganization
or the termination of any Plan in a distress termination under Section
4041(c) of ERISA.
(g) Other Information. With reasonable promptness upon any
such request, such other information regarding the business, properties
or financial condition of the Parent Company or any of its Subsidiaries
as the Agent or the Required Lenders may reasonably request.
7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
Each of the Credit Parties will do all things necessary to preserve and
keep in full force and effect its existence, rights, franchises and authority
except as permitted under Section 8.3 or where failure to do so would not
reasonably be expected to have a Material Adverse Effect.
7.3 BOOKS AND RECORDS.
The Parent Company will, and will cause each of its Subsidiaries to,
keep complete and accurate books and records of its transactions in accordance
with good accounting practices on the basis of GAAP (including the establishment
and maintenance of appropriate reserves).
7.4 COMPLIANCE WITH LAW.
The Parent Company will, and will cause each of its Subsidiaries to,
comply with all laws, rules, regulations and orders, and all applicable
restrictions imposed by all Governmental Authorities, applicable to it and its
property if noncompliance with any such law, rule, regulation, order or
restriction would have a Material Adverse Effect.
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7.5 PAYMENT OF TAXES AND OTHER CLAIMS.
The Parent Company will, and will cause each of its Subsidiaries to,
pay and discharge (i) all material taxes, assessments and governmental charges
or levies imposed upon it, or upon its income or profits, or upon any of its
properties, before a material penalty begins to accrue and (ii) all lawful
claims (including claims for labor, materials and supplies) which, if unpaid,
might give rise to a Lien upon any of its properties other than Permitted Liens;
provided, however, that there shall be no requirement to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith by
appropriate proceedings and as to which adequate reserves therefor have been
established in accordance with GAAP, unless the failure to make any such payment
(i) would give rise to an immediate right to foreclose on a Lien securing such
amounts or (ii) would have a Material Adverse Effect.
7.6 INSURANCE.
The Parent Company will, and will cause each of its Subsidiaries to, at
all times maintain in full force and effect insurance (including worker's
compensation insurance, liability insurance, casualty insurance and business
interruption insurance) in such amounts, covering such risks and liabilities and
with such deductibles or self-insurance retentions as are in accordance with
normal industry practice.
7.7 MAINTENANCE OF PROPERTY.
The Parent Company will, and will cause each of its Subsidiaries to,
maintain and preserve its properties and equipment material to the conduct of
its business in good repair, working order and condition, normal wear and tear
excepted, except where failure to do so would not have a Material Adverse Effect
and will make, or cause to be made, in such properties and equipment from time
to time all repairs, renewals, replacements, extensions, additions, betterments
and improvements thereto as may be needed or proper, to the extent and in the
manner customary for companies in similar businesses except where failure to do
so would not have a Material Adverse Effect.
7.8 PERFORMANCE OF OBLIGATIONS.
The Parent Company will, and will cause each of its Subsidiaries to,
perform in all material respects all of its obligations under the terms of all
material agreements, indentures, mortgages, security agreements or other debt
instruments to which it is a party or by which it is bound, except where failure
to do so would not have a Material Adverse Effect.
7.9 USE OF PROCEEDS.
The Extensions of Credit and the proceeds thereof may be used solely
for the purposes provided in Section 6.15.
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7.10 AUDITS/INSPECTIONS.
Upon reasonable prior notice, with reasonable frequency and during
normal business hours, the Parent Company will, and will cause each of its
Subsidiaries to, permit representatives appointed by the Agent, including,
without limitation, independent accountants, agents, attorneys, and appraisers
to visit and inspect its property, including its books and records, their
accounts receivable and inventory, its facilities and its other business assets,
and to make photocopies or photographs thereof and to write down and record any
information such representative obtains and shall permit the Agent or its
representatives to investigate and verify the accuracy of information provided
to the Lenders and to discuss all such matters with the officers of the Parent
Company and its Subsidiaries.
7.11 FINANCIAL COVENANTS.
(a) Consolidated Net Worth. There shall be maintained at all
times Consolidated Net Worth of at least $1,000,000,000; provided,
however, that the minimum Consolidated Net Worth required hereunder
shall be increased on the last day of each fiscal year to occur from
the Closing Date (other than the fiscal year ending December 31, 1997)
by an amount equal to 25% of Consolidated Net Income for the fiscal
year then ended (or if Consolidated Net Income is a deficit, then
zero).
(b) Leverage Ratio. The Leverage Ratio, as determined at the
end of each fiscal quarter for the four consecutive fiscal quarter
period then ended, shall not at any time exceed 3.75 to 1.0.
7.12 FEDERAL REGULATIONS.
No part of the proceeds of any Loans will be used in any manner which
might cause the Loans or the application of such proceeds to violate Regulation
U of the Board of Governors of the Federal Reserve System as now and from time
to time hereafter in effect. If requested by any Lender or the Agent, the Credit
Parties will furnish to the Agent and each Lender a statement to the foregoing
effect in conformity with the requirements of FR Form U-1 referred to in said
Regulation U.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that commencing with the
Closing Date and so long as this Credit Agreement is in effect and until the
Credit Party Obligations, together
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with interest, fees and other obligations hereunder, have been paid in full and
the Commitments hereunder shall have terminated:
8.1 LIENS.
The Parent Company will not, nor will it permit any of its Subsidiaries
to, contract, create, incur, assume or permit to exist any Lien with respect to
any of its Property, whether now owned or after acquired, except for Permitted
Liens.
8.2 NATURE OF BUSINESS.
No Credit Party will substantively alter the character or conduct of
the business conducted by it as of the Closing Date other than to enter into
other related businesses.
8.3 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS.
The Parent Company will not, nor will it permit any of its Subsidiaries
to:
(a) dissolve, liquidate or wind up its affairs, or enter into
any transaction of merger or consolidation; provided, however, the
Parent Company and its Subsidiaries shall be entitled to consummate the
transactions contemplated by the Merger Agreement; provided further
that, so long as no Default or Event of Default then exists or would be
directly or indirectly caused as a result thereof,
(i) any Subsidiary of the Parent Company (other than
either Borrower or Old PHC) may merge or consolidate with any
other Person;
(ii) either Borrower may merge or consolidate with
the other Borrower, the Parent Company, Old PHC or any other
Person provided that (A) in the case of the merger or
consolidation of either Borrower with the Parent Company or
Old PHC in which such Borrower is not the surviving
corporation, the Parent Company or Old PHC (as the case may
be) shall execute any and all documentation reasonably
requested by the Agent for the purpose of evidencing the
Parent Company's or Old PHC's (as the case may be) obligation
to assume the indebtedness, liabilities and obligations of
such Borrower under the Credit Documents and (B) in the case
of the merger or consolidation of either Borrower with any
other Person: (1) such Borrower is the surviving corporation;
and (2) in the case of any individual transaction (or series
of related transactions) where the acquisition price for such
transaction (whether a single transaction or a series of
related transactions) exceeds $200,000,000, then the Borrowers
must first demonstrate compliance with the financial covenants
under Section 7.11 on a Pro Forma Basis after giving effect to
such transaction,
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(iii) any Subsidiary of the Parent Company
(other than either Borrower) may dissolve, liquidate or wind
up its affairs at any time; and
(iv) Old PHC may merge with the Parent
Company, Doubletree or PHI;
(b) sell, transfer or otherwise dispose of any of its Property
(including without limitation pursuant to any sale and leaseback
transaction) except that the following shall be permitted: (i) the sale
of inventory for fair value in the ordinary course of business, (ii)
the sale or disposition of machinery and equipment no longer useful in
the conduct of such Person's business, (iii) transfers of Property by
and among the Parent Company and its Subsidiaries or between
Subsidiaries of the Parent Company, (iv) transfers of Property to
Affiliates of the Parent Company and its Subsidiaries so long as such
transfers are permitted by Section 8.5 hereof, (v) transfers of
Property in order to consummate the transactions contemplated by the
Merger Agreement, (vi) sales, transfers or other dispositions of Red
Lion hotels or former Red Lion hotels and (vii) other sales, transfers
or dispositions of Property to the extent that the aggregate net book
value of such Property sold, transferred or otherwise disposed of after
the Closing Date shall not exceed 50% of the net book value of
Consolidated Assets as of the date of any such sale, transfer or other
disposition on a cumulative basis; provided, however, that if any such
sales, transfers or other dispositions (other than any sale, transfer
or other disposition of Red Lion hotels or former Red Lion hotels) are
of, or relate to, any of the Credit Parties' material servicemarks,
trademarks, tradenames, tradedress or any license thereof or the
goodwill associated with the use of, and/or symbolized by, any such
intellectual property assets of the Borrowers, then the Borrowers shall
first demonstrate compliance with the financial covenants under Section
7.11 on a Pro Forma Basis after giving effect to such transaction;
(c) purchase or otherwise acquire (in a single transaction or
a series of related transactions) all or substantially all of the
Property of any other Person except where (i) no Default or Event of
Default then exists or would exist after giving effect thereto, (ii)
the purchase or acquisition does not require the solicitation of the
consent of the shareholders or other equity owners of the Person which
is the subject thereof against the recommendation of management, the
board of directors or other managing entity of such Person, (iii) the
Person, division, operations or Property which is the subject of the
acquisition is in a related line of business to that of the Parent
Company and the Borrowers, and (iv) if the acquisition price for such
transaction (whether a single transaction or a series of related
transactions) shall exceed $200,000,000, the Borrowers first
demonstrate compliance with the financial covenants under Section 7.11
on a Pro Forma Basis after giving effect to such transaction.
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8.4 INVESTMENTS.
The Parent Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, (i) make Investments in unrelated lines
of business or (ii) make Investments that are recorded on the Parent Company's
balance sheet as "investments in joint ventures and partnerships" if the
aggregate amount of such Investments at any one time exceeds 30% of Consolidated
Assets.
8.5 TRANSACTIONS WITH AFFILIATES.
The Parent Company will not, nor will it permit any of its Subsidiaries
to, enter into any transaction or series of transactions, whether or not in the
ordinary course of business, with any officer, director, shareholder or
Affiliate of the Parent Company or any of its Subsidiaries other than on terms
and conditions substantially as favorable as would be obtainable in a comparable
arm's-length transaction with a Person other than an officer, director,
shareholder or Affiliate, except that the restriction contained in this Section
8.5 shall not apply to (i) transactions and transfers among and between the
Parent Company and its Subsidiaries or between its Subsidiaries and (ii) the
payment of reasonable compensation and benefits and reimbursement of reasonable
expenses of officers and directors.
8.6 FISCAL YEAR.
The Parent Company will not, nor will it permit any of its material
Subsidiaries to, change its fiscal year.
8.7 NO DIVIDEND RESTRICTIONS.
No material Subsidiary of either Borrower or Guarantor shall agree to
or permit to exist, any restrictions or limitations on the declaration or
payment of Dividends.
SECTION 9
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
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(a) Payment. Any Credit Party shall
(i) default in the payment when due of any
principal of any of the Loans or of any reimbursement
obligations arising from drawings under Letters of Credit, or
in providing cash collateral when due pursuant to Section
9.2(iv), or the payment of any guaranty obligations in respect
thereof;
(ii) default, and such default shall
continue for five (5) or more days, in the payment when due of
any interest on the Loans or the payment of any guaranty
obligations in respect thereof; or
(iii) default, and such default shall
continue for five (5) or more days after notice from the
Agent, in the payment when due of any amounts hereunder or
under any of the other Credit Documents other than as provided
in subsections (i) and (ii) above, or the payment of any
guaranty obligations in respect thereof; or
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue
in any material respect on the date as of which it was deemed to have
been made; or
(c) Covenants. Any Credit Party shall:
(i) default in the due performance or
observance of any term, covenant or agreement contained in
Section 7.11, 8.1, 8.2, 8.3, 8.4, 8.6 or 8.7; or
(ii) default in the due performance or
observance of any term, covenant or agreement contained in
Sections 7.1(g) or 7.10 and such default shall continue
unremedied for a period of at least 5 days except for
information requests where more than 5 days are reasonably
required to comply; or
(iii) default in the due performance or
observance by it of any term, covenant or agreement (other
than those referred to in subsections (a), (b), (c)(i) or
(c)(ii) of this Section 9.1) contained in this Credit
Agreement or any of the other Credit Documents and such
default shall continue unremedied for a period of at least 30
days after notice thereof by the Agent; or
(d) Other Credit Documents. Any Credit Document shall fail to
be in full force and effect in all material respects or to give the
Agent and/or the Lenders the material liens, rights, powers and
privileges purported to be created thereby; or
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(e) Guaranties. The guaranty given by the Credit Parties
hereunder or any material provision thereof shall cease to be in full
force and effect, or any guarantor thereunder or any Person acting by
or on behalf of such guarantor shall deny or disaffirm such guarantor's
obligations under such guaranty, or any guarantor shall default in the
due performance or observance of any term, covenant or agreement on its
part to be performed or observed pursuant to any guaranty; or
(f) Bankruptcy, etc. Any Credit Party shall commence a
voluntary case concerning itself under the Bankruptcy Code; or an
involuntary case is commenced against any Credit Party under the
Bankruptcy Code and the petition is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of all or substantially all of
the property of any Credit Party; or any Credit Party commences any
other proceeding under any reorganization, arrangement, adjustment of
the debt, relief of creditors, dissolution, insolvency or similar law
of any jurisdiction whether now or hereafter in effect relating to any
Credit Party; or there is commenced against any Credit Party any such
proceeding which remains undismissed for a period of 60 days; or any
Credit Party is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered;
or any Credit Party suffers appointment of any custodian or the like
for it or for any substantial part of its property to continue
unchanged or unstayed for a period of 90 days; or any Credit Party
makes a general assignment for the benefit of creditors; or any
corporate action is taken by any Credit Party for the purpose of
effecting any of the foregoing; or
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Non-Recourse Indebtedness and Indebtedness
outstanding under this Credit Agreement) for which there is recourse
against the Parent Company and its Subsidiaries in excess of
$30,000,000 in the aggregate, (i) the Parent Company or any of its
Subsidiaries shall (A) default in any payment (beyond the applicable
grace period with respect thereto, if any) with respect to any such
Indebtedness, or (B) default in the observance or performance of any
covenant relating to such Indebtedness or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other
event or condition shall occur or condition exist, the effect of which
default or other event or condition is to cause, or permit, the holder
or holders of such Indebtedness (or trustee or agent on behalf of such
holders) to cause, any such Indebtedness to become due prior to its
stated maturity; or (ii) any such Indebtedness shall be declared due
and payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity thereof; or
(h) Judgments. One or more judgments or decrees shall be
entered against the Parent Company or any of their Subsidiaries
involving a liability of $25,000,000 or more in the aggregate (to the
extent not paid or covered by insurance) and any such judgments or
decrees shall not have been vacated, discharged, satisfied or stayed or
bonded pending
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appeal within the greater of 30 days or the time permitted by law from
the entry thereof; or
(i) ERISA. The Parent Company or any of its Subsidiaries shall
engage in any "prohibited transaction" (as defined in Section 406 of
ERISA or Section 4975 of the Code) involving any Plan, (ii) any
"accumulated funding deficiency" (as defined in Section 302 of ERISA),
which has not been waived, shall exist with respect to any Plan or any
Lien in favor of the PBGC or a Plan pursuant to Section 4068 or Section
302(f) of ERISA, respectively, shall arise on the assets of the Parent
Company, either Borrower or any Commonly Controlled Entity, (iii) a
Reportable Event shall occur with respect to, or proceedings shall
commence by the PBGC to have a trustee appointed, or a trustee shall be
appointed by the PBGC, to administer or terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is reasonably likely to result in the
termination of such Plan for purposes of Title IV of ERISA (other than
a standard termination pursuant to Section 4041(b) of ERISA), (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA
in a distress termination under Section 4041(c), (v) the Parent
Company, either Borrower or any Commonly Controlled Entity shall, or is
reasonably likely to, incur any liability in connection with a
withdrawal by the Parent Company, either Borrower or any Commonly
Controlled Entity from, or the Insolvency or Reorganization of, a
Multiemployer Plan, or (vi) the occurrence or expected occurrence of
any event or condition which results or is reasonably likely to result
in the Parent Company's, either Borrower's or any Commonly Controlled
Entity's becoming responsible for any liability in respect of a Former
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any,
would be reasonably expected to result in liability which could have a
Material Adverse Effect; provided, however, that the fact that a Plan
is underfunded shall not by itself constitute an Event of Default
unless and until another event or condition described in clause (i)
through (vi) affecting such underfunded Plan occurs and has a Material
Adverse Effect; or
(j) Change of Control. Either (i) a "person" or a "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended) hereafter becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of more than 25% of the then outstanding voting stock
of the Parent Company or (ii) a majority of the Board of Directors of
the Parent Company shall consist of individuals who are not Continuing
Directors; "Continuing Director" means, as of any date of
determination, (A) an individual who on the Closing Date or the date
two years prior to the date of determination (if such date of
determination is more than two years after the Closing Date) was a
member of the Parent Company's Board of Directors and (B) any new
director whose nomination for election by the Parent Company's
shareholders was approved by a vote of a majority of the directors then
still in office who either were directors on the Closing Date or the
date two years prior to such
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date of determination (if such date of determination is more than two
years after the Closing Date).
9.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the Required Lenders
or cured to the satisfaction of the Required Lenders (pursuant to the voting
procedures in Section 11.6), the Agent shall, upon the request and direction of
the Required Lenders, by written notice to the Borrowers, take any of the
following actions without prejudice to the rights of the Agent or any Lender to
enforce its claims against the Credit Parties, except as otherwise specifically
provided for herein:
(i) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(ii) Acceleration of Loans. Declare the unpaid principal of
and any accrued interest in respect of all Loans and unreimbursed
drawings in respect of LOC Obligations and any and all other
indebtedness or obligations of any and every kind owing by the
Borrowers to any of the Lenders hereunder to be due whereupon the same
shall be immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Borrowers.
(iii) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents and all
rights of set-off.
(iv) Collateral. Direct the Credit Parties to pay (and the
Credit Parties agree that upon receipt of such notice, or upon the
occurrence of an Event of Default under Section 9.1(f), they will
immediately pay) to the Agent additional cash, to be held by the Agent,
for the benefit of the Lenders, in a cash collateral account as
additional security for the LOC Obligations for subsequent drawings
under all then outstanding Letters of Credit in an amount equal to the
maximum aggregate amount which may be drawn under all Letters of Credit
then outstanding.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans and LOC Obligations, all accrued interest in respect thereof, all accrued
and unpaid fees and other indebtedness or obligations owing to the Lenders
hereunder shall immediately become due and payable without the giving of any
notice or other action by the Agent or the Lenders and the Credit Parties will
be required to pay on the guaranty hereunder and to deliver cash collateral in
respect of the LOC Obligations.
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SECTION 10
AGENCY PROVISIONS
10.1 APPOINTMENT.
Each Lender hereby designates and appoints NationsBank, N.A. as
administrative agent (in such capacity hereunder, the "Agent") of such Lender to
act as specified herein and the other Credit Documents, and each such Lender
hereby authorizes the Agent, as the agent for such Lender, to take such action
on its behalf under the provisions of this Credit Agreement and the other Credit
Documents and to exercise such powers and perform such duties as are expressly
delegated by the terms hereof and of the other Credit Documents, together with
such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere herein and in the other Credit Documents,
the Agent shall not have any duties or responsibilities, except those expressly
set forth herein and therein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Credit Agreement or any of the other Credit
Documents, or shall otherwise exist against the Agent. The provisions of this
Section (other than Section 10.9) are solely for the benefit of the Agent and
the Lenders, and the Borrowers and the other Credit Parties shall not have any
rights as a third party beneficiary of the provisions hereof. In performing its
functions and duties under this Credit Agreement and the other Credit Documents,
the Agent shall act solely as agent of the Lenders and does not assume and shall
not be deemed to have assumed any obligation or relationship of agency or trust
with or for either Borrower or any other Credit Party.
10.2 DELEGATION OF DUTIES.
The Agent may execute any of its duties hereunder or under the other
Credit Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
10.3 EXCULPATORY PROVISIONS.
Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection herewith or in connection with any of the other Credit Documents
(except for its or such Person's own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any of the Credit Parties
contained herein or in any of the other Credit Documents or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agent under or in connection herewith or in connection with the other
Credit Documents, or for any failure of the Borrowers to perform their
obligations hereunder or thereunder. The Agent
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shall not be responsible to any Lender for the effectiveness, genuineness,
validity, enforceability, collectability or sufficiency of this Credit
Agreement, or any of the other Credit Documents or for any representations,
warranties, recitals or statements made herein or therein or made by the
Borrowers or any Credit Party in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by the Agent to
the Lenders or by or on behalf of the Credit Parties to the Agent or any Lender
or be required to ascertain or inquire as to the performance or observance of
any of the terms, conditions, provisions, covenants or agreements contained
herein or therein or as to the use of the proceeds of the Loans or of the
existence or possible existence of any Default or Event of Default or to inspect
the properties, books or records of the Credit Parties.
10.4 RELIANCE ON COMMUNICATIONS.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrowers or any of the other Credit Parties,
independent accountants and other experts selected by the Agent with reasonable
care). The Agent may deem and treat the Lenders as the owner of their respective
interests hereunder for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Agent in
accordance with Section 11.3(b) hereof. The Agent (solely in its capacity as the
Agent) shall be fully justified in failing or refusing to take any action under
this Credit Agreement or under any of the other Credit Documents unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or under any
of the other Credit Documents in accordance with a request of the Required
Lenders (or to the extent specifically provided in Section 11.6, all the
Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and
assigns).
10.5 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or a Credit Party referring to the Credit
Document, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Lenders.
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10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the Agent or any
affiliate thereof hereafter taken, including any review of the affairs of the
Borrowers, shall be deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that it has,
independently 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
appraisal of and investigation into the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Borrowers
and made its own decision to make its Loans hereunder and enter into this Credit
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Agent 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 analysis, appraisals and decisions in taking or not taking action under
this Credit Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Borrowers. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, assets, property, financial or other
conditions, prospects or creditworthiness of the Borrowers which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
10.7 INDEMNIFICATION.
The Lenders agree to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Borrowers or another Credit Party and without
limiting the obligation of the Borrowers or another Credit Party to do so),
ratably according to their respective Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following the payment of the Credit
Party Obligations) be imposed on, incurred by or asserted against the Agent in
its capacities as such in any way relating to or arising out of this Credit
Agreement or the other Credit Documents or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
or any action taken or omitted by the Agent under or in connection with any of
the foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or willful misconduct of the Agent. If any indemnity furnished to the
Agent for any purpose shall, in the opinion of the Agent, be insufficient or
become impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished. The
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agreements in this Section shall survive the payment of the Credit Party
Obligations and all other amounts payable hereunder and under the other Credit
Documents.
10.8 AGENT IN ITS INDIVIDUAL CAPACITY.
The Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrowers or any other
Credit Party as though the Agent were not Agent hereunder. With respect to the
Loans made and all Credit Party Obligations owing to it, the Agent shall have
the same rights and powers under this Credit Agreement as any Lender and may
exercise the same as though they were not Agent, and the terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
10.9 SUCCESSOR AGENT.
(a) The Agent may resign from the performance of all its
functions and duties hereunder at any time by giving fifteen (15)
Business Day's prior written notice to the Borrowers and the Lenders.
Such resignation shall take effect upon the appointment of a successor
Agent pursuant to clause (b) or (c) below or as otherwise provided
below.
(b) Upon any such notice of resignation, the Borrowers shall
appoint a successor Agent hereunder who shall be a commercial bank or
trust company reasonably acceptable to the Required Lenders (it being
understood and agreed that any Lender is deemed to be acceptable to the
Required Lenders), provided that if a Default or an Event of Default
exists at the time of such resignation, the Required Lenders shall
appoint such successor Agent.
(c) If a successor Agent shall not have been so appointed
within such fifteen (15) Business Day period, the Agent, with the
consent of the Borrowers, shall then appoint a successor Agent who
shall serve as the Agent hereunder until such time, if any, as the
Borrowers or Required Lenders, as the case may be, appoint a successor
Agent as provided above.
(d) Upon the acceptance of any appointment as Agent hereunder
by a successor, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
resigning Agent (including, without limitation, duties as Swingline
Lender and Issuing Lender), and the resigning Agent shall be discharged
from its duties and obligations as Agent, as appropriate, under this
Credit Agreement and the other Credit Documents and the provisions of
this Section 10 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Credit
Agreement.
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10.10 CO AGENTS.
The Co-Agents, in such capacity, shall have no duties, liabilities,
obligations or rights under this Credit Agreement.
SECTION 11
MISCELLANEOUS
11.1 NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (iv)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case to the respective parties at
the address, in the case of the Borrower and the Agent, set forth below, and in
the case of the Lenders, set forth on Schedule 11.1, or at such other address as
such party may specify by written notice to the other parties hereto:
if to the Credit Parties:
c/o Promus Hotels, Inc.
755 Crossover Lane
Memphis, Tennessee 38117
Attn: Carol G. Champion
Telephone: (901) 374-5380
Telecopy: (901) 374-5379
if to the Agent:
NationsBank, N.A.
Independence Center, 15th Floor
NC1-001-15-04
101 N. Tryon Street
Charlotte, North Carolina 28255
Attn: Agency Services
Telephone: (704) 386-9368
Telecopy: (704) 386-9923
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11.2 RIGHT OF SET-OFF.
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender is authorized at any time and
from time to time, without presentment, demand, protest or other notice of any
kind (all of which rights being hereby expressly waived), to set-off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by such Lender (including, without
limitation, branches, agencies or affiliates of such Lender which are at least
50% owned by such Lender or its parent company wherever located) to or for the
credit or the account of either Borrower against obligations and liabilities of
such Borrower to such Lender hereunder, under the Notes, the other Credit
Documents or otherwise, irrespective of whether such Lender shall have made any
demand hereunder and although such obligations, liabilities or claims, or any of
them, may be contingent or unmatured, and any such set-off shall be deemed to
have been made immediately upon the occurrence of an Event of Default even
though such charge is made or entered on the books of such Lender subsequent
thereto. The Borrowers hereby agree that any Person purchasing a participation
in the Loans and Commitments hereunder pursuant to Section 11.3(c) or Section
3.12 may exercise all rights of set-off with respect to its participation
interest as fully as if such Person were a Lender hereunder.
11.3 BENEFIT OF AGREEMENT.
(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided that the Borrowers may not
assign or transfer any of their interests without prior written consent
of the Lenders; provided further that the rights of each Lender to
transfer, assign or grant participations in its rights and/or
obligations hereunder shall be limited as set forth in this Section
11.3, provided, however, that nothing herein shall prevent or prohibit
any Lender from (i) pledging its Loans hereunder to a Federal Reserve
Bank in support of borrowings made by such Lender from such Federal
Reserve Bank and (ii) granting assignments or participations in such
Lender's Loans and/or Commitments hereunder to its parent company
and/or to any affiliate of such Lender which is at least fifty percent
(50%) owned by such Lender or its parent company. To the extent
required in connection with a pledge of Loans by any Lender to a
Federal Reserve Bank, the Borrowers agree that, upon request of any
such Lender, it will promptly provide such Lender a promissory note
evidencing the repayment obligations of the Borrowers with respect to
the principal of and interest on the Loans of such Lender arising under
Section 2.1, 2.2, 2.3 and/or 2.4, as applicable, such promissory note
to be in a form reasonably satisfactory to the Borrowers and the
applicable Lender.
(b) Assignments by Lenders. Each Lender may assign all or a
portion of its rights and obligations hereunder and under the Tranche B
Credit Agreement pursuant to an assignment agreement substantially in
the form of Schedule 11.3(b) to one or more
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Eligible Assignees, provided that any such assignment shall be in a
minimum aggregate amount of $10,000,000 (or, if less, an amount equal
to 100% of the Commitment held by such Lender) of the Commitment,
together with the portion of the commitment under the Tranche B Credit
Agreement being assigned, and in integral multiples of $1,000,000 above
such amount, and that each such assignment shall be of a constant, and
not a varying, percentage of all of the assigning Lender's rights and
obligations under this Credit Agreement and under the Tranche B Credit
Agreement; provided, however, that so long as NationsBank, N.A. is the
Agent hereunder, NationsBank, N.A. and its affiliates which are at
least 50% owned by NationsBank, N.A., or its parent company, as a
group, shall continue to hold Commitments hereunder and under the
Tranche B Credit Agreement in a minimum aggregate amount of $40,000,000
at all times. Any assignment hereunder shall be effective upon delivery
to the Agent of written notice of the assignment together with a
transfer fee of $3,500 payable to the Agent for its own account;
provided that no such transfer fee shall be payable in connection with
an assignment by any Lender to its affiliates which are at least 50%
owned by such Lender or its parent company. The assigning Lender will
give prompt notice to the Agent and the Borrowers of any such
assignment. Upon the effectiveness of any such assignment (and after
notice to the Borrowers as provided herein), the assignee shall become
a "Lender" for all purposes of this Credit Agreement and the other
Credit Documents and, to the extent of such assignment, the assigning
Lender shall be relieved of its obligations hereunder to the extent of
the Loans and Commitment components being assigned. By executing and
delivering an assignment agreement in accordance with this Section
11.3(b), 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 and clear of any adverse claim; (ii) except as set forth
in clause (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 Credit
Agreement, any of the other Credit Documents or any other instrument or
document furnished pursuant hereto or thereto, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value
of this Credit Agreement, any of the other Credit Documents or any
other instrument or document furnished pursuant hereto or thereto or
the financial condition of any Credit Party or the performance or
observance by any Credit Party of any of its obligations under this
Credit Agreement, any of the other Credit Documents or any other
instrument or document furnished pursuant hereto or thereto; (iii) such
assignee represents and warrants that it is legally authorized to enter
into such assignment agreement; (iv) such assignee confirms that it has
received a copy of this Credit Agreement, the other Credit Documents
and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such
assignment agreement; (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 Credit Agreement
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and the other Credit Documents; (vi) such assignee appoints and
authorizes the Agent to take such action on its behalf and to exercise
such powers under this Credit Agreement or any other Credit Document as
are delegated to the Agent by the terms hereof or thereof, 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 Credit Agreement and the
other Credit Documents are required to be performed by it as a Lender.
(c) Participations. Each Lender may sell, transfer, grant or
assign participations in all or any part of such Lender's interests and
obligations hereunder to one or more Eligible Participants; provided
that (i) such selling Lender shall remain a "Lender" for all purposes
under this Credit Agreement and the other Credit Documents (such
selling Lender's obligations under this Credit Agreement remaining
unchanged) and the participant shall not constitute a Lender hereunder,
(ii) no such participant shall have, or be granted, rights to approve
any amendment or waiver relating to this Credit Agreement or any of the
other Credit Documents except with respect to any such amendment or
waiver which would, under the terms of Section 11.6, require the
consent of all of the Lenders and (iii) any such participations
(including subparticipations) shall be in a minimum aggregate amount of
$5,000,000 of the Commitments and in integral multiples of $1,000,000
in excess thereof. In the case of any such participation, the
participant shall not have any rights under this Credit Agreement or
under any of the other Credit Documents (the participant's rights
against the selling Lender in respect of such participation to be those
set forth in the participation agreement with such Lender creating such
participation) and all amounts payable by the Borrowers hereunder shall
be determined as if such Lender had not sold such participation,
provided, however, that such participant shall be entitled to receive
additional amounts under Sections 3.5 and 3.8 on the same basis as if
it were a Lender (limited to the extent that the selling Lender would
be able to receive additional amounts under Sections 3.5 and 3.8);
provided, further, in the event such participant exercises any rights
under Sections 3.5 or 3.8, the Borrowers shall be permitted to exercise
their rights pursuant to Section 3.15 with respect to the selling
Lender.
(d) Disclosure of Confidential Information. (i) Any Lender
may, in connection with any assignment pursuant to paragraph (b) above
or a participation pursuant to paragraph (c) above, disclose to the
assignee or the proposed assignee or the participant or the proposed
participant any information relating to the Credit Parties in
connection with this Credit Agreement, provided that, prior to any such
disclosure each such assignee or proposed assignee or participant or
proposed participant shall execute an agreement containing
substantially the terms of all then existing confidentiality agreements
entered into by the assigning or selling Lender with respect to the
Parent Company, Old PHC, the Borrowers and their Subsidiaries in
connection with this Credit Agreement, in each case whereby such
assignee or proposed assignee or participant or
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proposed participant shall agree to preserve the confidentiality of any
non-public, confidential or proprietary information relating to the
Credit Parties.
(e) Designated Lender. Any Lender may at any time designate
not more than one Designated Lender to fund Committed Revolving Loans
and/or Competitive Loans on behalf of such Lender subject to the terms
of this Section 11.3(e) and the provisions of Section 11.3(b) hereof
shall not apply to such designation; provided that each Designated
Lender which is a non-U.S. Lender shall comply with all of the
provisions of Section 3.9 hereof. No Lender may have more than one
Designated Lender at any time. Such designation may occur either by the
execution of the signature pages hereof by such Lender and Designated
Lender next to the appropriate "Designating Lender" and "Designated
Lender" captions, or by execution by such parties of a Designation
Agreement subsequent to the date hereof; provided, that any Lender and
its Designated Lender executing the signature pages hereof as
"Designating Lender" and "Designated Lender," respectively, on the date
hereof shall be deemed to have executed a Designation Agreement, and
shall be bound by the respective representations, warranties and
covenants contained therein, and such designation shall be conclusively
deemed to be accepted by the Borrowers and the Agent. The parties to
each such designation occurring subsequent to the execution date hereof
shall execute and deliver to the Agent and the Borrowers for their
acceptance a Designation Agreement. Upon such receipt of an
appropriately completed Designation Agreement executed by a Designating
Lender and a designee representing that it is a Designated Lender and
consented to by the Borrowers, the Agent will accept such Designation
Agreement and will give prompt notice thereof to the Borrowers and the
other Lenders, whereupon, (i) from and after the effective date
specified in the Designation Agreement, the Designated Lender shall
become a party to this Credit Agreement with a right to make Committed
Revolving Loans and Competitive Loans on behalf of its Designating
Lender pursuant to Sections 2.1 and 2.4, respectively, (ii) if so
requested by such Designated Lender, the Borrowers shall execute and
deliver to such Designated Lender a promissory note in accordance with
the terms hereof, and (iii) the Designated Lender shall not be required
to make payments with respect to any obligations and liabilities in
this Credit Agreement except to the extent of excess cash flow of such
Designated Lender which is not otherwise required to repay obligations
of such Designated Lender which are then due and payable; provided,
however, that regardless of such designation and assumption by the
Designated Lender, the Designating Lender shall be and remain obligated
to the Borrowers, the Agent and the Lenders for each and every of the
obligations of the Designating Lender and its related Designated Lender
with respect to this Credit Agreement, including, without limitation,
any actions taken by the Designated Lender with respect to this Credit
Agreement, any indemnification obligations hereunder and any sums
otherwise payable to the Borrowers by the Designated Lender. Each
Designating Lender, or a specified branch or affiliate thereof, shall
serve as the administrative agent of its Designated Lender and shall on
behalf of its Designated Lender: (i) receive any and all payments made
for the benefit of such Designated Lender and (ii) give and receive all
communications and notices and
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take all actions hereunder, including, without limitation, votes,
approvals, waivers, consents and amendments under or relating to this
Credit Agreement and the other Credit Documents. No designation of a
Designated Lender hereunder shall have the effect of restricting the
exercise of voting rights hereunder. Any such notice, communication,
vote, approval, waiver, consent or amendment shall be signed by a
Designating Lender, or specified branch or affiliate thereof, as
administrative agent for its Designated Lender and need not be signed
by such Designated Lender on its own behalf. The Borrowers, the Agent
and the Lenders may rely thereon without any requirement that the
Designated Lender sign or acknowledge the same. No Designated Lender
may assign or transfer all or any portion of its interest hereunder or
under any other Credit Document, other than via an assignment to its
Designating Lender, or otherwise in accordance with the provisions of
Section 11.3(b) or 11.3(c) hereof. All amounts payable by the Borrowers
hereunder shall be determined as if the Designating Lender had not
designated a Designated Lender; provided, however, that the Designated
Lender shall be entitled to receive additional amounts under Sections
3.5 and 3.8 on the same basis as if it were the Designating Lender
(limited to the extent that the Designating Lender would be able to
receive additional amounts under Sections 3.5 and 3.8); provided,
further, that in the event the Designated Lender exercises any rights
under Sections 3.5 or 3.8, the Borrowers shall be permitted to exercise
their rights pursuant to Section 3.15 with respect to the Designating
Lender.
11.4 NO WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between any Credit Party and the Agent or any
Lender shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and remedies
provided herein are cumulative and not exclusive of any rights or remedies which
the Agent or any Lender would otherwise have. No notice to or demand on any
Credit Party in any case shall entitle any Credit Party to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Agent or the Lenders to any other or further action in any
circumstances without notice or demand.
11.5 PAYMENT OF EXPENSES, ETC.
The Borrowers agree to: (i) pay all reasonable out-of-pocket costs and
expenses of the Agent in connection with the negotiation, preparation, execution
and delivery and administration (but as to administration, only administration
of the credit as among the Agent, the Borrowers, the other Credit Parties and
the Lenders and not as to any internal administration within the Agent) of this
Credit Agreement and the other Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and expenses of
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Moore & Van Allen, special counsel to the Agent) and any amendment, waiver or
consent relating hereto and thereto requested or required by the Borrowers
including, but not limited to, any such amendments, waivers or consents
resulting from or related to any work-out, renegotiation or restructure relating
to the performance by the Borrowers under this Credit Agreement and of the Agent
and the Lenders in connection with enforcement of the Credit Documents and the
documents and instruments referred to therein (including, without limitation, in
connection with any such enforcement, the reasonable fees and disbursements of
counsel for the Agent and each of the Lenders) provided, that for the purposes
of this Credit Agreement, "reasonable attorneys' fees" shall be limited by the
actual attorneys' fees incurred by a party without application of N.C. Gen.
Stat. Section 6-21.2 and without any presumption that such reasonable attorneys'
fees shall be a fixed percentage of the Commitments; (ii) pay and hold each of
the Lenders harmless from and against any and all present and future stamp,
documentary and mortgage recording taxes and other similar taxes with respect to
the foregoing matters and save each of the Lenders harmless from and against any
and all liabilities with respect to or resulting from any delay or omission
(other than to the extent attributable to such Lender) to pay such taxes; and
(iii) indemnify each Lender, its officers, directors, employees, representatives
and agents from and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses incurred by any of them as a result of,
or arising out of, or in any way related to, or by reason of, any investigation,
litigation or other proceeding (whether or not any Lender is a party thereto)
related to the entering into and/or performance of any Credit Document or the
use of proceeds of any Loans (including other extensions of credit) hereunder or
the consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of gross negligence or willful
misconduct on the part of the Person to be indemnified).
11.6 AMENDMENTS, WAIVERS AND CONSENTS.
(a) Neither this Credit Agreement nor any other Credit
Document nor any of the terms hereof or thereof may be amended,
changed, waived, discharged or terminated unless such amendment,
change, waiver, discharge or termination is in writing signed by the
Required Lenders, provided that no such amendment, change, waiver,
discharge or termination shall, without the consent of each Lender
affected, (i) extend the Termination Date (except in accordance with
the provisions hereof) or reduce the rate or extend the time of payment
of interest or principal (other than as a result of waiving the
applicability of any post-default increase in interest rates) on any
Loan or portion thereof or fees hereunder or reduce the principal
amount thereof, or increase the Commitment of any such Lender over the
amount thereof in effect (it being understood and agreed that a waiver
of any condition for an Extension of Credit, Default or Event of
Default or of a mandatory reduction in the total commitments shall not
constitute a change in the terms of any Commitment of any Lender and
any increase in the Commitment made pursuant to Section 2.1(f) hereof
shall not require the consent of any Lender other than the increasing
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Lender or Lenders) or issue or extend Letters of Credit with expiry
dates not permitted by the provisions of Section 2.2, (ii) release any
Guarantor from its guaranty obligations hereunder except in accordance
with the provisions of Section 8.3 hereof, (iii) amend, modify or waive
any provision of this Section or of Section 3.3(c) (provided that any
Lender to be terminated pursuant to Section 3.3(c) shall not be
required to consent to any such amendment, modification or waiver of
Section 3.3(c) necessary to effect such termination), (iv) reduce any
percentage specified in, or otherwise modify, the definition of
Required Lenders, or (v) consent to the assignment or transfer by any
Credit Party of any of its rights and obligations under (or in respect
of) this Credit Agreement or other Credit Documents except as permitted
hereunder. No provision of Section 10 may be amended without the
consent of the Agent. No provision affecting the duties and obligations
(and compensation) of the Issuing Lender may be amended without the
consent of the Issuing Lender. Notwithstanding anything to the contrary
contained above, any Letter of Credit may be modified by the respective
Issuing Lender so long as the terms thereof would be permitted in a
newly issued Letter of Credit in accordance with the terms hereof.
(b) If, in connection with any proposed change, waiver,
discharge or termination of any of the provisions of this Agreement as
contemplated by subclauses (i) through (iv), inclusive, of clause (a)
above, the consent of the Required Lenders is obtained but the consent
of one or more of such other Lenders whose consent is required is not
obtained, the Borrowers shall have the right (so long as all
non-consenting Lenders whose individual consent is required are treated
as described in either clauses (A) or (B) below) to either (A) replace
each such non-consenting Lender or Lenders with one or more Replacement
Lenders pursuant to Section 3.15 so long as at the time of such
replacement, each such Replacement Lender consents to the proposed
change, waiver, discharge or termination or (B) terminate such
non-consenting Lender's Commitment and repay all outstanding Loans of
such Lender in accordance with Sections 3.3(c) and 3.3(f), provided
that, unless the Commitments terminated and Loans repaid pursuant to
the preceding clause (B) are immediately replaced in full at such time
through the addition of new Lenders or the increase of the Commitments
and/or outstanding Loans of existing Lenders (who in each case must
specifically consent to any such increase), then in the case of any
action pursuant to the preceding clause (B), subject to the following
proviso, the Required Lenders (determined before giving effect to the
proposed action) shall specifically consent to such termination of
Commitment and repayment of Loans, provided further, notwithstanding
the foregoing proviso, each of the Lenders (other than the Lender whose
Commitment is being terminated) shall specifically consent to such
termination of Commitment and repayment of Loans if the aggregate
amount of Commitments terminated pursuant to this Section 11.6(b)
(including the proposed termination) plus the aggregate amount of
Commitments terminated pursuant to Section 2.1(a) plus the aggregate
amount of Commitments terminated pursuant to Section 3.17 shall exceed
$100,000,000, provided further, that in any event the Borrowers shall
not have the right to replace a Lender, terminate its Commitment or
repay its Loans solely as
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a result of the withholding of any required consent by such Lender to
any increase in the Commitment of such Lender.
11.7 COUNTERPARTS.
This Credit Agreement may be executed in any number of counterparts,
each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
11.8 HEADINGS.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 SURVIVAL OF INDEMNIFICATION.
All indemnities set forth herein, including, without limitation, in
Sections 3.5, 3.8, 3.9, 3.10, 3.14, 10.7 and 11.5 shall survive the execution
and delivery of this Credit Agreement, and the making of the Loans, the
repayment of the Credit Party Obligations and other obligations and the
termination of the Commitment hereunder.
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding
with respect to this Credit Agreement or any other Credit Document may
be brought in the courts of the State of North Carolina in Mecklenburg
County, or of the United States for the Western District of North
Carolina, and, by execution and delivery of this Credit Agreement, each
of the Credit Parties hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the
jurisdiction of such courts. Each of the Credit Parties further
irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to
it at the address set out for notices pursuant to Section 11.1, such
service to become effective 30 days after such mailing. Nothing herein
shall affect the right of the Agent to serve process in any other
manner permitted by law or to commence legal proceedings or to
otherwise proceed against the Borrower in any other jurisdiction.
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(b) Each of the Credit Parties hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in
connection with this Credit Agreement or any other Credit Document
brought in the courts referred to in subsection (a) hereof and hereby
further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
(c) EACH OF THE AGENTS, EACH OF THE LENDERS AND EACH OF THE
CREDIT PARTIES HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY
OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.11 SEVERABILITY.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 ENTIRETY.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made by the Borrowers herein shall
survive delivery of the Notes and the making of the Loans hereunder.
11.14 KNOWLEDGE STANDARD.
As used herein, the phrase "to the knowledge of any Credit Party" or
any similar phrase shall mean the knowledge of any of the following persons
(with such persons' titles following the Closing Date): Raymond E. Schultz, CEO
and Chairman; Richard M. Kelleher, President and COO; William L. Perocchi,
Executive V.P. and CFO; Ralph B. Lake, Executive V.P., General Counsel and
Secretary; Thomas L. Keltner, Executive V.P. and Chief Development Officer; and
Carol G. Champion, Vice President and Treasurer; or any other person succeeding
to the responsibilities of any such individual.
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11.15 CONFIDENTIALITY.
Each Lender agrees that it will use its best efforts not to disclose
without the prior consent of the Borrowers (other than to its employees,
auditors or counsel) any information with respect to the Parent Company or any
of its Subsidiaries which is now or in the future furnished pursuant to this
Agreement or any other Credit Document and which is designated by the Parent
Company or any of its Subsidiaries as confidential, provided that any Lender may
disclose any such information (a) as has become generally available to the
public, (b) as may be required in any report, statement or testimony submitted
to any municipal, state or Federal regulatory body having or claiming to have
jurisdiction over such Lender (including bank examiners) or to the Federal
Reserve Board or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their successors,
(c) as may be required in respect to any summons or subpoena or in connection
with any investigation by a Governmental Authority or litigation, (d) in order
to comply with any law, order, regulation or ruling applicable to such Lender,
and (e) to any prospective or actual transferee or participant of any rights and
interests hereunder provided such prospective transferee or participant executes
an agreement containing provisions substantially identical to those contained in
this Section.
11.16 AGENT'S AND LENDER'S COVENANT.
The Agent and each Lender hereby covenants that neither any Extension
of Credit nor any part of any Extension of Credit constitutes assets of an
"employment benefit plan" within the meaning of Section 3(3) of ERISA or a
"plan" within the meaning of Section 4975(e)(1) of the Code.
11.17 CONCERNING JOINT AND SEVERAL LIABILITY OF THE BORROWERS.
(a) Each of the Borrowers is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under this Credit Agreement, for the mutual
benefit, directly and indirectly, of each of the Borrowers and in
consideration of the undertakings of each of the Borrowers to accept
joint and several liability for the obligations of each of them.
(b) Each of the Borrowers jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Borrower with respect to the payment and performance of all of the
Credit Party Obligations, it being the intention of the parties hereto
that all the Credit Party Obligations shall be the joint and several
obligations of each of the Borrowers without preferences or distinction
between them.
(c) If and to the extent that either of the Borrowers shall
fail to make any payment with respect to any of the Credit Party
Obligations as and when due or to
90
<PAGE> 96
perform any of the Credit Party Obligations in accordance with the
terms thereof, then in each such event, the other Borrower will make
such payment with respect to, or perform, such Credit Party Obligation.
(d) The obligations of each Borrower under the provisions of
this Section 11.17 constitute full recourse obligations of such
Borrower, enforceable against it to the full extent of its properties
and assets, irrespective of the validity, regularity or enforceability
of this Credit Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided herein or required
by applicable law, each Borrower hereby waives notice of acceptance of
its joint and several liability, notice of the other Borrower's request
for any Loan under this Credit Agreement, notice of any Loan made under
this Credit Agreement, notice of occurrence of any Event of Default, or
of any demand for any payment under this Credit Agreement, notice of
any action at any time taken or omitted by any Lender under or in
respect of any of the Credit Party Obligations, any requirement of
diligence and, generally, all demands, notices and other formalities of
every kind in connection with this Credit Agreement. Each Borrower
hereby assents to, and waives notice of, any extension or postponement
of the time for the payment of any of the Credit Party Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other
action or acquiescence by any Lender at any time or times in respect of
any default by either Borrower in the performance or satisfaction of
any term, covenant, condition or provision of this Credit Agreement,
any and all other indulgences whatsoever by any Lender in respect of
any of the Credit Party Obligations, and the taking, addition,
substitution or release, in whole or in part, at any time or times, of
any security for any of the Credit Party Obligations or the addition,
substitution or release, in whole or in part, of either Borrower.
Without limiting the generality of the foregoing, each Borrower assents
to any other action or delay in acting or failure to act on the part of
any Lender, including, without limitation, any failure strictly or
diligently to assert any right or to pursue any remedy which might, but
for the provisions of this Section 11.17, afford grounds for
terminating, discharging or relieving such Borrower, in whole or in
part, from any of its obligations under this Section 11.17, it being
the intention of each Borrower that, so long as any of the Credit Party
Obligations remain unsatisfied, the obligations of such Borrower under
this Section 11.17 shall not be discharged except by performance and
then only to the extent of such performance. The Credit Party
Obligations of each Borrower under this Section 11.17 shall not be
diminished or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with
respect to either Borrower or any Lender. The joint and several
liability of the Borrowers hereunder shall continue in full force and
effect notwithstanding any absorption, merger, amalgamation or any
other change whatsoever in the name, membership, constitution or place
of formation of either Borrower or any Lender.
91
<PAGE> 97
(f) The provisions of this Section 11.17 are made for the
benefit of the Lenders and their respective successors and assigns, and
may be enforced by any such Person from time to time against either of
the Borrowers as often as occasion therefor may arise and without
requirement on the part of any Lender first to marshal any of its
claims or to exercise any of its rights against the other Borrower or
to exhaust any remedies available to it against the other Borrower or
to resort to any other source or means of obtaining payment of any of
the Credit Party Obligations or to elect any other remedy. The
provisions of this Section 11.17 shall remain in effect until all the
Credit Party Obligations shall have been paid in full or otherwise
fully satisfied. If at any time, any payment, or any part thereof, made
in respect of any of the Credit Party Obligations, is rescinded or must
otherwise be restored or returned by any Lender upon the insolvency,
bankruptcy or reorganization of either of the Borrowers, or otherwise,
the provisions of this Section 11.17 will forthwith be reinstated in
effect, as though such payment had not been made.
(g) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, to the extent the joint
obligations of either Borrower shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of
any applicable state or federal law relating to fraudulent conveyances
or transfers) then the obligations of each Borrower hereunder shall be
limited to the maximum amount that is permissible under applicable law
(whether federal or state and including, without limitation, the
federal Bankruptcy Code).
(h) The Borrowers hereby agree, as among themselves, that if
either Borrower shall become an Excess Funding Borrower (as defined
below), the other Borrower shall, on demand of such Excess Funding
Borrower (but subject to the next sentence hereof and to subsection (B)
below), pay to such Excess Funding Borrower an amount equal to such
Borrower's Pro Rata Share (as defined below and determined, for this
purpose, without reference to the properties, assets, liabilities and
debts of such Excess Funding Borrower) of such Excess Payment (as
defined below). The payment obligation of either Borrower to any Excess
Funding Borrower under this Section 11.17(h) shall be subordinate and
subject in right of payment to the prior payment in full of the
obligations of such Borrower under the other provisions of this Credit
Agreement, and such Excess Funding Borrower shall not exercise any
right or remedy with respect to such excess until payment and
satisfaction in full of all of such obligations. For purposes hereof,
(i) "Excess Funding Borrower" shall mean, in respect of any Credit
Party Obligations arising under the other provisions of this Credit
Agreement (hereafter, the "Joint Obligations"), either Borrower that
has paid an amount in excess of its Pro Rata Share of the Joint
Obligations; (ii) "Excess Payment" shall mean, in respect of any Joint
Obligations, the amount paid by an Excess Funding Borrower in excess of
its Pro Rata Share of such Joint Obligations; and (iii) "Pro Rata
Share", for the purposes of this Section 11.17(h), shall mean, for
either Borrower, the ratio (expressed as a percentage) of (A) the
amount by which the aggregate present fair saleable value of all of its
assets and properties exceeds the amount of all
92
<PAGE> 98
debts and liabilities of such Borrower (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Borrower hereunder) to (B) the amount by which
the aggregate present fair saleable value of all assets and other
properties of such Borrower and the other Borrower exceeds the amount
of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Borrower and the other Borrower hereunder) of
such Borrower and the other Borrower, all as of the Closing Date.
11.18 NO BANKRUPTCY PROCEEDINGS.
Each of the Company, the Borrower, the Guarantors and the Agent agrees
that it will not institute against any Designated Lender or join any other
Person in instituting against any Designated Lender any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding under any
federal or state bankruptcy or similar law, for one year and one day after the
payment in full of the latest maturing commercial paper note issued by such
Designated Lender.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
93
<PAGE> 99
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Tranche A Credit Agreement to be duly executed and delivered as of the
date first above written.
BORROWERS:
PROMUS HOTELS, INC.,
a Delaware corporation
By:
-----------------------------------
Title:
--------------------------------
DOUBLETREE CORPORATION,
a Delaware corporation
By:
-----------------------------------
Title:
--------------------------------
GUARANTORS: PROMUS HOTEL CORPORATION
(f/k/a Parent Holding Corp.),
a Delaware corporation
By:
-----------------------------------
Title:
--------------------------------
PROMUS OPERATING COMPANY, INC.
(f/k/a Promus Acquisition Corp.
f/k/a Promus Hotel Corporation),
a Delaware corporation
By:
-----------------------------------
Title:
--------------------------------
<PAGE> 100
LENDERS:
NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as Agent
By:
-----------------------------------
Title:
--------------------------------
BANKERS TRUST COMPANY,
individually in its capacity as a
Lender and in its capacity as a Co-Agent
By:
-----------------------------------
Title:
--------------------------------
THE BANK OF NOVA SCOTIA,
individually in its capacity as a
Lender and in its capacity as a Co-Agent
By:
-----------------------------------
Title:
--------------------------------
CANADIAN IMPERIAL BANK OF COMMERCE,
individually in its capacity as a
Lender and in its capacity as a Co-Agent
By:
-----------------------------------
Title:
--------------------------------
<PAGE> 101
THE BANK OF NEW YORK
By:
-----------------------------------
Title:
--------------------------------
THE CHASE MANHATTAN BANK
By:
-----------------------------------
Title:
--------------------------------
CREDIT LYONNAIS NEW YORK BRANCH
By:
-----------------------------------
Title:
--------------------------------
FIRST UNION NATIONAL BANK
By:
-----------------------------------
Title:
--------------------------------
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
-----------------------------------
Title:
--------------------------------
<PAGE> 102
WACHOVIA BANK, N.A.
By:
-----------------------------------
Title:
--------------------------------
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
By:
-----------------------------------
Title:
--------------------------------
By:
-----------------------------------
Title:
--------------------------------
SUNTRUST BANK, NASHVILLE, N.A.
By:
-----------------------------------
Title:
--------------------------------
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:
-----------------------------------
Title:
--------------------------------
<PAGE> 103
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLANDS BRANCH
By:
-----------------------------------
Title:
--------------------------------
FIRST AMERICAN NATIONAL BANK
By:
-----------------------------------
Title:
--------------------------------
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
-----------------------------------
Title:
--------------------------------
KEYBANK NATIONAL ASSOCIATION
By:
-----------------------------------
Title:
--------------------------------
<PAGE> 104
KREDIETBANK N.V., GRAND CAYMAN BRANCH
By:
-----------------------------------
Title:
--------------------------------
By:
-----------------------------------
Title:
--------------------------------
WELLS FARGO BANK, N.A.
By:
-----------------------------------
Title:
--------------------------------
THE FIFTH THIRD BANK
By:
-----------------------------------
Title:
--------------------------------
<PAGE> 1
TRANCHE B
CREDIT AGREEMENT
Dated as of December 19, 1997
among
DOUBLETREE CORPORATION,
as a Borrower,
PROMUS HOTELS, INC.,
as a Borrower,
PROMUS HOTEL CORPORATION (f/k/a Parent Holding Corp.) AND
PROMUS OPERATING COMPANY, INC. (f/k/a Promus Acquisition Corp.
f/k/a Promus Hotel Corporation),
as Guarantors,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTY HERETO,
BANKERS TRUST COMPANY, THE BANK OF NOVA SCOTIA and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Co-Syndication Agents,
AND
NATIONSBANK, N.A.,
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
SECTION 1 DEFINITIONS..................................................................1
1.1 Definitions................................................................1
1.2 Computation of Time Periods...............................................20
1.3 Accounting Terms..........................................................20
SECTION 2 CREDIT FACILITIES...........................................................21
2.1 Committed Revolving Loans.................................................21
2.2 [Intentionally Left Blank]................................................24
2.3 [Intentionally Left Blank]................................................25
2.4 Competitive Loan Subfacility..............................................25
2.5 Amortization of Loans Outstanding at the Termination Date.................27
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES..............................28
3.1 Default Rate..............................................................28
3.2 Extension and Conversion..................................................28
3.3 Reductions In Commitments and Prepayments.................................29
3.4 Fees......................................................................31
3.5 Capital Adequacy..........................................................32
3.6 Inability To Determine Interest Rate......................................32
3.7 Illegality................................................................33
3.8 Requirements of Law.......................................................33
3.9 Taxes.....................................................................34
3.10 Indemnity................................................................37
3.11 Pro Rata Treatment.......................................................37
3.12 Sharing of Payments......................................................38
3.13 Place and Manner of Payments.............................................39
3.14 [Intentionally Left Blank]...............................................40
3.15 Replacement of Lenders...................................................40
3.16 Change of Lending Office.................................................40
SECTION 4 GUARANTY....................................................................41
4.1 The Guarantee.............................................................41
4.2 Obligations Unconditional.................................................42
4.3 Reinstatement.............................................................43
4.4 Certain Additional Waivers................................................43
4.5 Remedies..................................................................43
4.6 Continuing Guarantee......................................................43
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5 CONDITIONS..................................................................44
5.1 Conditions to Initial Extensions of Credit................................44
5.2 Each Extension of Credit..................................................46
SECTION 6 REPRESENTATIONS AND WARRANTIES..............................................46
6.1 Financial Condition.......................................................46
6.2 No Change.................................................................48
6.3 Corporate and Partnership Existence; Compliance with Law..................48
6.4 Corporate Power; Authorization; Enforceable Credit Party Obligations .....49
6.5 No Legal Bar..............................................................49
6.6 No Material Litigation....................................................49
6.7 No Default................................................................50
6.8 Ownership of Property; Liens..............................................50
6.9 Intellectual Property.....................................................50
6.10 No Burdensome Restrictions...............................................50
6.11 Taxes....................................................................50
6.12 ERISA....................................................................51
6.13 Investment Company Act; Other Regulations................................51
6.14 Subsidiaries.............................................................52
6.15 Purpose of Loans.........................................................52
6.16 Environmental Matters....................................................52
SECTION 7 AFFIRMATIVE COVENANTS.......................................................54
7.1 Information Covenants.....................................................54
7.2 Preservation of Existence and Franchises..................................56
7.3 Books and Records.........................................................56
7.4 Compliance with Law.......................................................56
7.5 Payment of Taxes and Other Claims.........................................56
7.6 Insurance.................................................................57
7.7 Maintenance of Property...................................................57
7.8 Performance of Obligations................................................57
7.9 Use of Proceeds...........................................................57
7.10 Audits/Inspections.......................................................57
7.11 Financial Covenants......................................................58
7.12 Federal Regulations......................................................58
SECTION 8 NEGATIVE COVENANTS..........................................................58
8.1 Liens.....................................................................58
8.2 Nature of Business........................................................58
8.3 Consolidation, Merger, Sale or Purchase of Assets.........................59
8.4 Investments...............................................................60
8.5 Transactions with Affiliates..............................................60
8.6 Fiscal Year...............................................................61
8.7 No Dividend Restrictions..................................................61
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 9 EVENTS OF DEFAULT...........................................................61
9.1 Events of Default.........................................................61
9.2 Acceleration; Remedies....................................................64
SECTION 10 AGENCY PROVISIONS..........................................................65
10.1 Appointment..............................................................65
10.2 Delegation of Duties.....................................................65
10.3 Exculpatory Provisions...................................................66
10.4 Reliance on Communications...............................................66
10.5 Notice of Default........................................................67
10.6 Non-Reliance on Agent and Other Lenders..................................67
10.7 Indemnification..........................................................67
10.8 Agent in its Individual Capacity.........................................68
10.9 Successor Agent..........................................................68
10.10 Co Agents...............................................................69
SECTION 11 MISCELLANEOUS..............................................................69
11.1 Notices..................................................................69
11.2 Right of Set-Off.........................................................70
11.3 Benefit of Agreement.....................................................70
11.4 No Waiver; Remedies Cumulative...........................................74
11.5 Payment of Expenses, etc.................................................75
11.6 Amendments, Waivers and Consents.........................................75
11.7 Counterparts.............................................................77
11.8 Headings.................................................................77
11.9 Survival of Indemnification..............................................77
11.10 Governing Law; Submission to Jurisdiction; Venue........................77
11.11 Severability............................................................78
11.12 Entirety................................................................78
11.13 Survival of Representations and Warranties..............................78
11.14 Knowledge Standard......................................................78
11.15 Confidentiality.........................................................79
11.16 Agent's and Lender's Covenant...........................................79
11.17 Concerning Joint and Several Liability of the Borrowers.................79
11.18 No Bankruptcy Proceedings...............................................82
</TABLE>
iii
<PAGE> 5
Schedules
- - ---------
Schedule 2.1(a) Schedule of Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Tranche B Committed Revolving Note
Schedule 2.4(b)-1 Form of Tranche B Competitive Bid Request
Schedule 2.4(b)-2 Form of Notice of Tranche B Competitive Bid Request
Schedule 2.4(c) Form of Tranche B Competitive Bid
Schedule 2.4(d) Form of Tranche B Competitive Bid Accept/Reject Letter
Schedule 2.4(h) Form of Tranche B Competitive Loan Note
Schedule 3.2 Form of Notice of Extension/Conversion
Schedule 3.9 Form of U.S. Tax Compliance Certificate
Schedule 6.4 Consents
Schedule 6.8 Excluded Assets
Schedule 6.9 Intellectual Property Claims
Schedule 6.14 Subsidiaries
Schedule 7.1(c) Form of Officer's Compliance Certificate
Schedule 11.1 Schedule of Addresses
Schedule 11.3(b) Form of Tranche B Assignment and Acceptance
Schedule 11.3(e) Form of Designation Agreement
iv
<PAGE> 6
TRANCHE B
CREDIT AGREEMENT
THIS TRANCHE B CREDIT AGREEMENT dated as of December 19, 1997 (as amended,
restated, supplemented, modified and extended from time to time, the "Credit
Agreement" and sometimes, this "Credit Agreement"), is by and among DOUBLETREE
CORPORATION, a Delaware corporation ("Doubletree"), PROMUS HOTELS, INC., a
Delaware corporation ("PHI" --hereinafter Doubletree and PHI are sometimes
individually referred to as a "Borrower" or collectively referred to as the
"Borrowers"), PROMUS HOTEL CORPORATION (f/k/a Parent Holding Corp.), a Delaware
corporation (the "Parent Company"), PROMUS OPERATING COMPANY, INC. (f/k/a Promus
Acquisition Corp. f/k/a Promus Hotel Corporation), a Delaware corporation ("Old
PHC"--hereinafter the Parent Company and Old PHC are sometimes individually
referred to as a "Guarantor" or collectively referred to as "Guarantors"), the
several lenders identified on the signature pages hereto and such other lenders
as may from time to time become a party hereto (the "Lenders"), BANKERS TRUST
COMPANY, THE BANK OF NOVA SCOTIA AND CANADIAN IMPERIAL BANK OF COMMERCE, as
co-syndication agents (each in such capacity, a "Co-Agent") and NATIONSBANK,
N.A., as agent for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H
WHEREAS, the Borrowers have requested that the Lenders provide a senior
credit facility in the amount of $250,000,000; and
WHEREAS, the Lenders have agreed to make the requested senior credit
facility available on the terms and conditions set forth herein.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINITIONS.
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural number the singular:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all
directors and officers of such
<PAGE> 7
Person), controlled by or under direct or indirect common control with such
Person. A Person shall be deemed to control an entity if such Person
possesses, directly or indirectly, the power (i) to vote 10% or more of the
securities or other ownership interests having ordinary voting power for
the election of directors of such corporation or the members of the
managing body of such Person or (ii) to direct or cause direction of the
management and policies of such corporation or other entity, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means NationsBank, N.A. and any successors and permitted
assigns in such capacity.
"Agent's Fee Letter" means the letter agreement dated as of November
10, 1997 among NationsBank, N.A., NationsBanc/Montgomery Securities, Inc.
and the Borrowers, as amended, modified, supplemented or replaced from time
to time.
"Agent's Fees" has the meaning given to such term in Section 3.4(c).
"Applicable Percentage" means the appropriate applicable percentages
corresponding to the lowest Pricing Level available, as determined by
either the then current Leverage Ratio or the Unsecured Senior Debt Rating
in effect as of the most recent Calculation Date, as shown below:
<TABLE>
<CAPTION>
Applicable Percentage Applicable Percentage for
for Committed Revolving Committed Revolving Applicable
Pricing Leverage Unsecured Senior Loans Consisting of Loans Consisting of Percentage for
Level Ratio Debt Rating Eurodollar Loans Base Rate Loans Commitment Fee
------- -------- ---------------- ----------------------- ------------------------- --------------
<S> <C> <C> <C> <C> <C>
I Less than 1.25 to 1.0 Greater than A- or A3 .19% 0.0% .06%
II Equal to or greater Greater than or equal .25% 0.0% .075%
than 1.25 to 1.0 but to BBB+ or Baa1 but
less than 1.75 to 1.0 less than or equal to
A- or A3
III Equal to or greater Greater than or equal .27% 0.0% .105%
than 1.75 to 1.0 but to BBB or Baa2 but
less than 2.25 to 1.0 less than BBB+ or
Baa1
IV Equal to or greater Greater than or equal .325% 0.0% .125%
than 2.25 but less to BBB- or Baa3 but
than 2.75 to 1.0 less than BBB or
Baa2
V Equal to or greater Less than BBB- or .45% 0.0% .175%
than 2.75 to 1.0 Baa3
</TABLE>
The Applicable Percentage for Committed Revolving Loans and the
Commitment Fees shall, in each case, be determined and adjusted on the date
(each a "Calculation Date") not later than five Business Days after (x) the
date by which the Parent Company is required
2
<PAGE> 8
to provide the officer's certificate in accordance with the provisions of
Section 7.1(c) or (y) the date there is a change in the Unsecured Senior
Debt Rating; provided that the Applicable Percentage for Committed
Revolving Loans and the Commitment Fees shall be no more favorable to the
Borrowers than Pricing Level III (as shown above) until the Calculation
Date occurring immediately after the fiscal quarter of the Parent Company
ending on June 30, 1998; and provided further that if the Parent Company
fails to timely provide the officer's certificate required by Section
7.1(c), the Applicable Percentage for Committed Revolving Loans and the
Commitment Fees shall be based on the then current Unsecured Senior Debt
Rating until such time that an appropriate officer's certificate is
provided whereupon the Pricing Level shall be determined by the then
current Leverage Ratio or Unsecured Senior Debt Rating, as applicable. Each
determination of the Applicable Percentage shall be effective from one
Calculation Date until the next Calculation Date. Any adjustment in the
Applicable Percentage shall be applicable to all existing Committed
Revolving Loans and Letters of Credit as well as any new Committed
Revolving Loans made or Letters of Credit issued. For purposes of
determining the Applicable Percentage as of any Calculation Date, the then
current Leverage Ratio shall be the Leverage Ratio for the four (4)
consecutive fiscal quarterly periods most recently ended.
In the event the Unsecured Senior Debt Rating and the Leverage Ratio
would provide for two different Pricing Levels, the lowest Pricing Level
determined by reference to the Unsecured Senior Debt Rating or the Leverage
Ratio shall be applicable.
In the event the two Unsecured Senior Debt Ratings would provide for
two different Pricing Levels, the Pricing Level determined by reference to
the Unsecured Senior Debt Rating shall be the Pricing Level that is one
level lower (i.e. lower pricing) than the highest (i.e. most expensive)
Pricing Level indicated by either of the two Unsecured Senior Debt Ratings.
The Parent Company (or its Subsidiaries on behalf of the Parent
Company) shall promptly deliver to the Agent information regarding any
change in such Unsecured Senior Debt Ratings, as determined by S&P and
Moody's, that would change the existing Pricing Level pursuant to the
preceding paragraph. Under the column "Unsecured Senior Debt Rating" in the
table above, the ratings of A-, BBB+, BBB, and BBB- refer to S&P ratings
and the ratings of A3, Baa1, Baa2 and Baa3 refer to Moody's ratings.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
"Base Rate" means, for any day, the rate per annum (rounded upwards,
if necessary, to the nearest whole multiple of 1/1000 of 1%) equal to the
greater of (a) the Federal Funds Rate in effect on such day plus ? of 1% or
(b) the Prime Rate in effect on such day. If for any reason the Agent shall
have determined (which determination shall be conclusive absent manifest
error) that it is unable after due inquiry to ascertain the
3
<PAGE> 9
Federal Funds Rate for any reason, including the inability of the Agent to
obtain sufficient quotations in accordance with the terms hereof, the Base
Rate shall be determined without regard to clause (a) of the first sentence
of this definition until the circumstances giving rise to such inability no
longer exist. Any change in the Base Rate due to a change in the Prime Rate
or the Federal Funds Rate shall be effective on the effective date of such
change in the Prime Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate determined
by reference to the Base Rate.
"Borrowers" has the meaning given to such term in the introductory
paragraph hereof.
"Business" has the meaning given to such term in Section 6.16(a).
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in Charlotte, North Carolina and New York, New
York are authorized or required by law to close, except that, when used in
connection with a Eurodollar Loan, such day shall also be a day on which
dealings between banks are carried on in U.S. dollar deposits in London,
England and New York, New York.
"Calculation Date" has the meaning given to such term in the
definition of "Applicable Percentage".
"Capital Lease" means any lease of property, real or personal, the
obligations with respect to which are required to be capitalized on a
balance sheet of the lessee in accordance with GAAP.
"Closing Date" means the later of the date hereof or the date on which
the Lenders make their initial Loans.
"Co-Agents" has the meaning given to such term in the introductory
paragraph hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commitment" means the Revolving Commitment, individually or
collectively, as appropriate.
"Commitment Fee" has the meaning given to such term in Section 3.4(a).
"Commitment Percentage" means the Revolving Commitment Percentage.
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<PAGE> 10
"Committed Revolving Loans" has the meaning given to such term in
Section 2.1(a).
"Committed Revolving Note" or "Committed Revolving Notes" means the
promissory notes of the Borrowers in favor of each of the Lenders
evidencing the Committed Revolving Loans provided pursuant to Section
2.1(e), individually or collectively, as appropriate, as such promissory
notes may be amended, modified, supplemented, extended, renewed or replaced
from time to time.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with either Borrower within the
meaning of Section 4001(a)(14)(B) of ERISA or is part of a group which
includes either Borrower and which is treated as a single employer under
Section 414(b), (c) or (m) of the Code.
"Competitive Bid" means an offer by a Lender to make a Competitive
Loan pursuant to the terms of Section 2.4(c).
"Competitive Bid Rate" means, as to any Competitive Bid made by a
Lender in accordance with the provisions of Section 2.4, the fixed rate of
interest offered by the Lender making the Competitive Bid.
"Competitive Bid Request" means a request by the Borrowers for
Competitive Bids in accordance with the provisions of Section 2.4(b), a
form of which is attached at Schedule 2.4(b)-1.
"Competitive Bid Request Fee" means the administrative fee payable to
the Agent, if any, in connection with a Competitive Bid Request as provided
in the Agent's Fee Letter.
"Competitive Loan" means a loan made by a Lender pursuant to the
provisions of Section 2.4.
"Competitive Loan Lenders" means, at any time, those Lenders which
have Competitive Loans outstanding.
"Competitive Loan Maximum Amount" has the meaning given to such term
in Section 2.4(a).
"Competitive Loan Note" or "Competitive Loan Notes" means the
promissory notes of the Borrowers in favor of each of the Lenders
evidencing the Competitive Loans, if any, provided pursuant to Section
2.4(h), individually or collectively, as appropriate, as such promissory
notes may be amended, modified, supplemented, extended, renewed or replaced
from time to time.
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"Consolidated Adjusted EBITDA" means, for any period, the amount equal
to (i) the sum of Consolidated Net Income for such period plus Consolidated
Interest Expense for such period to the extent deducted in the calculation
of Consolidated Net Income plus the minority interest share of net income
for such period to the extent deducted in the calculation of Consolidated
Net Income minus the minority interest share of net loss for such period to
the extent included in the calculation of Consolidated Net Income plus all
provisions for any Federal, state or other income taxes plus depreciation
and amortization, in each case for the Parent Company and its Subsidiaries
on a consolidated basis, but excluding in each case the portion of such
components attributable to Joint Ventures, determined in accordance with
GAAP plus (ii) all cash distributions from Joint Ventures received by the
Parent Company, the Borrowers or any of their respective Subsidiaries for
such period.
"Consolidated Assets" means the assets of the Parent Company and its
Subsidiaries on a consolidated basis determined in accordance with GAAP.
"Consolidated Funded Debt" means Funded Debt of the Parent Company and
its Subsidiaries on a consolidated basis determined in accordance with
GAAP.
"Consolidated Interest Expense" means, for any period, all interest
expense, including the amortization of debt discount and premium and the
interest component under Capital Leases for the Parent Company and its
Subsidiaries on a consolidated basis determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income of the
Parent Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP, but excluding for purposes hereof extraordinary gains
or losses, and any taxes on such excluded gains and any tax deductions or
credits on account of any such excluded losses.
"Consolidated Net Worth" means total stockholders' equity for the
Parent Company and its Subsidiaries on a consolidated basis as determined
in accordance with GAAP.
"Contractual Obligation" means, as to any Person, any provision of any
material security issued by such Person or of any material agreement,
instrument or other undertaking to which such Person is a party or by which
it or any of its property is bound.
"Credit Date" means (i) the date of each request for an Extension of
Credit pursuant to a Notice of Borrowing or a Notice of Conversion, in the
case of Committed Revolving Loans, and a Competitive Bid Request, in the
case of Competitive Loans, and (ii) the date of any such Extension of
Credit relating thereto.
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<PAGE> 12
"Credit Documents" means this Credit Agreement, the Notes and all
other related agreements and documents executed by any Credit Party and
issued or delivered hereunder or thereunder or pursuant hereto or thereto.
"Credit Party" means any of the Borrowers and the Guarantors.
"Credit Party Obligations" means, without duplication, all of the
obligations of the Credit Parties to the Lenders and the Agent, whenever
arising, under this Credit Agreement, the Notes or any of the other Credit
Documents to which either Borrower or any other Credit Party is a party.
"Default" means any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, at such time
(a) has failed to make a Loan or fund a Participation Interest required
pursuant to the terms of this Credit Agreement, (b) has failed to pay to
the Agent or any Lender an amount owed by such Lender pursuant to the terms
of this Credit Agreement or (c) has been deemed insolvent or has become
subject to a bankruptcy or insolvency proceeding or to a receiver, trustee
or similar official.
"Designated Lender" means a special purpose corporation that is
identified as such on the signature pages hereto next to the caption
"Designated Lender" as well as each special purpose corporation that (i)
shall have become a party to this Credit Agreement pursuant to Section
11.3(e) hereof, and (ii) is not otherwise a Lender.
"Designating Lender" means each Lender that is identified as such on
the signature pages hereto next to the caption "Designating Lender" and
immediately below the signature of its Designated Lender as well as each
Lender that shall designate a Designated Lender pursuant to Section 11.3(e)
hereof.
"Designation Agreement" means a designation agreement in substantially
the form of Schedule 11.3(e) attached hereto entered into by a Lender and a
Designated Lender and accepted by the Borrowers and the Agent.
"Disapproving Lenders" has the meaning given to such term in Section
2.1(a).
"Disqualified Stock" means any capital stock which, by its terms (or
by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the option of the holder thereof, in whole or in part
on, or prior to, or is exchangeable for debt securities of the Parent
Company or any
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<PAGE> 13
of its Subsidiaries prior to, the first anniversary of the Termination Date
under the Tranche A Credit Agreement.
"Dividends" means any payment, distribution or dividend (other than a
dividend or distribution payable solely in stock of the Person making such
payment, distribution or dividend) on, or any payment on account of the
purchase, redemption or retirement of, or any other distribution in respect
of, any shares of any class of stock or other ownership interest in a
Person (including any such payment or distribution in cash or in property
or obligations).
"Dollars" and "$" means dollars in lawful currency of the United
States of America.
"Eligible Assignee" means (A) (i) a commercial bank or other financial
institution organized under the laws of the United States or any state
thereof and (ii) a commercial bank or other financial institution organized
under the laws of any other country, or a political subdivision thereof,
provided that (a) such bank or other financial institution is acting
through a branch or agency located in the United States or (b) such bank or
other financial institution is organized under the laws of a country that
is a member of the Organization for Economic Cooperation and Development or
a political subdivision of such country, in each case (under clauses (i)
and (ii) above) that is reasonably acceptable to the Agent and the
Borrowers and (B) any Lender or its parent company or any affiliate of such
Lender which is at least 50% owned by such Lender or its parent company. It
shall be deemed reasonable for the Borrowers to refuse to accept as an
"Eligible Assignee" any entity the inclusion of which as a Lender hereunder
would be reasonably likely to increase amounts payable by the Borrowers
under Sections 3.5, 3.8, 3.9 or 3.10 or give rise to the circumstances
described in Section 3.6.
"Eligible Participant" means any entity satisfying the requirements
set forth in the first sentence of the definition of "Eligible Assignee"
other than the requirement for the Borrowers' or the Agent's approval.
"Environmental Laws" means any and all lawful and applicable Federal,
state, local and foreign statutes, laws, regulations, ordinances, codes,
rules, judgments, orders, decrees, permits, licenses or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
wastes.
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<PAGE> 14
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"Eurodollar Loan" means any Loan bearing interest at a rate determined
by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar
Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate determined pursuant to
the following formula:
Eurodollar Rate = Interbank Offered Rate
---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any Interest Period, the
average daily percentage (expressed as a decimal) which is in effect from
time to time during such Interest Period under Regulation D of the Board of
Governors of the Federal Reserve System (or any successor), as such
regulation may be amended from time to time or any successor regulation, as
the maximum reserve requirement (including, without limitation, any basic,
supplemental, emergency, special, or marginal reserves) applicable with
respect to Eurocurrency liabilities as that term is defined in Regulation D
(or against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is determined),
whether or not any Lender has any Eurocurrency liabilities subject to such
reserve requirement at that time. Eurodollar Loans shall be deemed to
constitute Eurocurrency liabilities and as such shall be deemed subject to
reserve requirements without benefits of credits for proration, exceptions
or offsets that may be available from time to time to a Lender. The
Eurodollar Rate shall be adjusted automatically on and as of the effective
date of any change in the Eurodollar Reserve Percentage.
"Event of Default" has the meaning given to such term in Section 9.1.
"Excess Funding Borrower" has the meaning given to such term in
Section 11.17(h).
"Excess Payment" has the meaning given to such term in Section
11.17(h).
"Excluded Taxes" has the meaning given to such term in Section 3.9(a).
"Existing Credit Agreements" means (i) each of Tranche A and Tranche B
Credit Agreements dated as of June 7, 1995 among Embassy Suites, Inc.,
Promus Hotels, Inc., certain subsidiary guarantors, the several lenders
party thereto and NationsBank, N.A., f/k/a NationsBank, N.A. (Carolinas) as
Agent and (ii) the Credit Agreement dated as of
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<PAGE> 15
November 8, 1996 among Doubletree Corporation, the various banks party
thereto, Morgan Stanley Senior Funding, Inc., as Syndication Agent and as
Arranger, and The Bank of Nova Scotia, as Administrative Agent.
"Extension of Credit" means, as to any Lender, the making of a Loan by
such Lender.
"Federal Funds Rate" means, for any day, the rate of interest per
annum (rounded upwards, if necessary, to the nearest whole multiple of
1/1000 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day,
provided that (A) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day and (B) if no such rate is so published on such next
succeeding Business Day, the Federal Funds Rate for such day shall be the
average rate quoted to the Agent on such day on such transactions as
determined by the Agent.
"Former Plan" means any employee benefit plan in respect of which
either Borrower or a Commonly Controlled Entity has engaged in a
transaction described in Section 4069 or Section 4212(c) of ERISA and with
respect to which transaction either Borrower or Commonly Controlled Entity,
as applicable, has as its principal purpose the evasion of liability
described in such sections.
"Funded Debt" means, with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money, (ii) all purchase
money indebtedness of such Person, including, without limitation, the
principal portion of all obligations of such Person under Capital Leases,
(iii) all Guaranty Obligations of such Person (excluding any of such
obligations to maintain working capital, solvency or other balance sheet
condition of any other Person (including, without limitation, keep well
agreements, maintenance agreements, comfort letters or similar agreements
or arrangements)) and (iv) the amount of any Qualified Stock; provided
that, "Funded Debt" shall not include indebtedness owing under or in
connection with Joint Ventures to the extent such indebtedness is
Non-Recourse Indebtedness. The Funded Debt of any Person shall include the
Funded Debt of any partnership or joint venture in which such Person is a
general partner (except as set forth in the preceding proviso).
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Authority" means any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory
body.
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<PAGE> 16
"Guarantors" has the meaning given to such term in the introductory
paragraph hereof.
"Guaranty Obligations" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness of any
other Person in any manner, whether direct or indirect, and including,
without limitation, any obligation, whether or not contingent, (i) to
purchase any such Indebtedness or any Property constituting security
therefor, (ii) to advance or provide funds or other support for the payment
or purchase of any such Indebtedness or to maintain working capital,
solvency or other balance sheet condition of such other Person (including,
without limitation, keep well agreements, maintenance agreements, comfort
letters or similar agreements or arrangements) for the benefit of any
holder of Indebtedness of such other Person, (iii) to lease or purchase
Property, securities or services primarily for the purpose of assuring the
holder of such Indebtedness, or (iv) to otherwise assure or hold harmless
the holder of such Indebtedness against loss in respect thereof. The amount
of any Guaranty Obligation hereunder shall (subject to any limitations set
forth therein) be deemed to be an amount equal to the outstanding principal
amount (or maximum principal amount, if larger) of the Indebtedness in
respect of which such Guaranty Obligation is made.
"Indebtedness" of any Person means, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, or
upon which interest payments are customarily made, (iii) all obligations of
such Person under conditional sale or other title retention agreements
relating to Property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers entered
into in the ordinary course of business), (iv) all obligations of such
Person issued or assumed as the deferred purchase price of Property or
services purchased by such Person (other than trade debt incurred in the
ordinary course of business) which would appear as liabilities on a balance
sheet of such Person, (v) all obligations of such Person under take-or-pay
arrangements or under commodities agreements, (vi) 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, or
payable out of the proceeds or production from, Property owned or acquired
by such Person, whether or not the obligations secured thereby have been
assumed, (vii) all Guaranty Obligations of such Person, (viii) the
principal portion of all obligations of such Person under Capital Leases,
(ix) all obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements, commodity purchase or
option agreements or other interest or exchange rate or commodity price
hedging agreements, (x) the maximum amount of all letters of credit issued
or bankers' acceptances facilities created for the account of such Person
and, without duplication, all drafts drawn thereunder (to the extent
unreimbursed), and (xi) the amount of any Disqualified Stock. The
Indebtedness
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<PAGE> 17
of any Person shall include the Indebtedness of any partnership or joint
venture in which such Person is a general partner (except to the extent any
such Indebtedness is Non-Recourse Indebtedness).
"Insolvency" means with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245(b)(i) of ERISA.
"Interbank Offered Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/1000 of 1%) appearing on Telerate Page 3750 (or
any successor page) as the London interbank offered rate for deposits in
Dollars at approximately 11:00 A.M. (London time) two (2) Business Days
prior to the first day of such Interest Period for a term comparable to
such Interest Period. If for any reason such rate is not available, the
term "Interbank Offered Rate" shall mean, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/1000 of 1%) appearing on Reuters Screen LIBO
Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) two (2) Business Days prior to the
first day of such Interest Period for a term comparable to such Interest
Period; provided, however, if more than one rate is specified on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of all
such rates (rounded upwards, if necessary, to the nearest 1/1000 of 1%). If
for any reason neither of such rates is available, the term "Interbank
Offered Rate" shall mean, for any Eurodollar Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/1000 of 1%) equal to the rate at which deposits in Dollars approximately
equal in principal amount to the Eurodollar Loan of the Agent, in its
capacity as a Lender, included in such Eurodollar Loan, and for a maturity
comparable to such Interest Period are offered to the principal London
office of the Agent in immediately available funds in the London interbank
market at approximately 11:00 A.M.. (London time) on the date that is two
(2) Business Days prior to the first day of such Interest Period. If no
such offers or quotes are generally available for such amount, then the
Agent shall be entitled to determine the Eurodollar Rate by estimating in
its reasonable judgment the per annum rate (as described above) that would
be applicable if such quote or offers were generally available.
"Interest Payment Date" means (i) as to any Base Rate Loan, the last
day of each March, June, September and December, the date of repayment of
principal of such Loan and the Termination Date, (ii) as to any Eurodollar
Loan or any Competitive Loan, the last day of each Interest Period for such
Loan and the Termination Date, or the Term Loan Maturity Date, if
applicable, and in addition where the applicable Interest Period is more
than three (3) months, then also on the date three (3) months from the
beginning of the Interest Period, and each three (3) months thereafter. If
an Interest Payment Date falls on a date which is not a Business Day, such
Interest Payment Date shall be deemed to be the next succeeding Business
Day, except that in the case of Eurodollar Loans where the
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<PAGE> 18
next succeeding Business Day falls in the next succeeding calendar month,
then on the next preceding Business Day.
"Interest Period" means (i) with respect to any Eurodollar Loan, a
period of one, two, three or six months' duration, as the Borrower may
elect, commencing in each case on the date of the borrowing (including
extensions and conversions) and (ii) with respect to any Competitive Loan,
a period beginning on the date of borrowing and ending on the date
specified in the respective Competitive Bid whereby the offer to make such
Competitive Loan was extended, which shall be not less than seven (7) days
nor more than ninety (90) days' duration; provided, however, (A) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that in the case of Eurodollar Loans, where the next succeeding
Business Day falls in the next succeeding calendar month, then on the next
preceding Business Day), (B) no Interest Period shall extend beyond the
Termination Date, or if the Borrower has elected to amortize the payment of
the principal balance of Committed Revolving Loans and Competitive Loans
outstanding as of the Termination Date, in accordance with the provisions
of Section 2.5, then no Interest Period may extend beyond a Term Loan
Amortization Date (including the Term Loan Maturity Date) unless the
portion of Term Loans consisting of Base Rate Loans together with the
Eurodollar Loans with Interest Periods expiring prior to or concurrently
with the date such Term Loan Amortization Date is due, is at least equal to
the amount of such principal amortization payment due on such date, and (C)
in the case of Eurodollar Loans, where an Interest Period begins on a day
for which there is no numerically corresponding day in the calendar month
in which the Interest Period is to end, such Interest Period shall, subject
to clause (A) above, end on the last Business Day of such calendar month.
"Investment", in any Person, means any loan or advance to such Person,
any purchase or other acquisition of any capital stock, warrants, rights,
options, obligations or other securities of such Person, or any capital
contribution to such Person or any other similar investment in such Person.
"Joint Obligations" has the meaning given to such term in Section
11.17(h).
"Joint Venture" means any corporation, general or limited partnership
or limited liability company or any other entity similar to the foregoing
allowed to be formed under applicable law in which the Parent Company or
any of its Subsidiaries is a shareholder, partner, member or owner which is
not a Subsidiary of the Parent Company and is not consolidated with the
Parent Company in accordance with GAAP.
"Lenders" means each of the Persons identified as a "Lender" on the
signature pages hereto, and each Person which may become a Lender by way of
assignment in accordance with the terms hereof, together with their
successors and permitted assigns.
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"Leverage Ratio" means, for any period, the ratio of Consolidated
Funded Debt as of the end of such period to Consolidated Adjusted EBITDA
for such period.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the
Uniform Commercial Code as adopted and in effect in the relevant
jurisdiction or other similar recording or notice statute, and any lease in
the nature thereof).
"Loan" or "Loans" means a Committed Revolving Loan, a Term Loan and/or
a Competitive Loan, as appropriate.
"Material Adverse Effect" means a material adverse effect on (i) the
financial condition, operations or business of the Parent Company and its
Subsidiaries taken as a whole, (ii) the ability of the Borrowers and the
Guarantors taken as a whole to perform any material obligation under the
Credit Documents or (iii) the material rights and remedies of the Agent and
the Lenders under the Credit Documents.
"Material Environmental Amount" means any amount payable by the Parent
Company or its Subsidiaries not subject to payment or reimbursement by
another Person in respect of or under any Environmental Law for remedial
costs, compliance costs, compensatory damages, punitive damages, fines,
penalties or any combination thereof, that has a Material Adverse Effect.
"Materials of Environmental Concern" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Merger Agreement" means that certain Agreement and Plan of Merger,
dated as of September 1, 1997, by and among the Parent Company, Old PHC and
Doubletree.
"Moody's" means Moody's Investors Service, Inc., or any successor or
assignee of the business of such company in the business of rating
securities.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"NationsBank" means NationsBank, N.A. and its successors and permitted
assigns.
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"Non-Excluded Taxes" has the meaning given to such term in Section
3.9(a).
"Non-Recourse Indebtedness" means Indebtedness with respect to which
recourse for payment is limited to specific assets encumbered by a Lien
securing such Indebtedness; provided, however, that personal recourse of a
holder of Indebtedness against any obligor with respect thereto for fraud,
misrepresentation, misapplication of cash, waste and other circumstances
customarily excluded from non-recourse provisions in non-recourse financing
of real estate shall not, by itself, prevent any Indebtedness from being
characterized as Non-Recourse Indebtedness.
"Note" or "Notes" means the Committed Revolving Notes and/or the
Competitive Notes, collectively, separately or individually, as
appropriate.
"Notice of Borrowing" means the written notice of borrowing as
referenced and defined in Section 2.1(b)(i).
"Notice of Extension/Conversion" means the written notice of extension
or conversion as referenced and defined in Section 3.2.
"Obligations" means the Loans.
"Old PHC" has the meaning given to such term in the introductory
paragraph hereof.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA, and any successor thereto.
"Parent Company" has the meaning given to such term in the
introductory paragraph hereof
"Participation Interest" means the purchase by a Lender of a
participation interest in Committed Revolving Loans as provided in Section
3.12.
"Permitted Liens" means:
(i) Liens (other than Liens created or imposed by the PBGC under
ERISA) for taxes, assessments or governmental charges or levies not
yet due or Liens for taxes being contested in good faith by
appropriate proceedings for which adequate reserves determined in
accordance with GAAP have been established (and as to which the
Property subject to any such Lien is not yet subject to foreclosure,
sale or loss on account thereof);
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(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and suppliers and other liens
imposed by law or pursuant to customary reservations or retentions of
title arising in the ordinary course of business, provided that such
Liens secure only amounts not yet due and payable or, if due and
payable, are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP have
been established (and as to which the Property subject to any such
Lien is not yet subject to foreclosure, sale or loss on account
thereof);
(iii) Liens (other than Liens created or imposed by the PBGC
under ERISA) incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, bids, leases,
operating, reciprocal easement or similar agreements, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money);
(iv) Liens in connection with attachments or judgments (including
judgment or appeal bonds) in respect of which the Parent Company or
any of its Subsidiaries shall in good faith be prosecuting an appeal
or proceedings for review in respect of which there shall have been
secured a subsisting stay of execution pending such appeal or
proceeding;
(v) easements, rights-of-way, restrictions (including zoning
restrictions and operating, reciprocal easement or similar
agreements), and minor defects or irregularities in title and other
similar charges or encumbrances not, in any material respect,
impairing the use of the encumbered Property for its intended
purposes;
(vi) leases or subleases granted to others not interfering in any
material respect with the business of the Parent Company or any of its
Subsidiaries;
(vii) any interest or title of a lessor (including Liens and
underlying leases to which such lessor or its property may be subject)
under, and Liens arising from Uniform Commercial Code financing
statements (or equivalent filings, registrations or agreements in
foreign jurisdictions) relating to, leases permitted by this Credit
Agreement;
(viii) Liens deemed to exist in connection with Investments in
repurchase agreements;
(ix) normal and customary rights of setoff upon deposits of cash
in favor of banks or other depository institutions;
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(x) Liens on the equity interest in or assets of any Subsidiary
or Joint Venture that is not 100% owned directly or indirectly by the
Parent Company; and
(xi) Liens not otherwise permitted hereunder securing amounts in
an aggregate principal amount not to exceed 15% of Consolidated Assets
(excluding from the calculation thereof the Consolidated Assets of any
Person other than the Parent Company and its wholly-owned
Subsidiaries) at any one time outstanding.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated) or any Governmental Authority.
"Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA which is not a Multiemployer Plan and in respect of which the
Borrower or a Commonly Controlled Entity is an "employer" as defined in
Section 3(5) of ERISA.
"Plan Reorganization" means with respect to any Multiemployer Plan,
the condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Prime Rate" means the per annum rate of interest established and
announced from time to time by the Agent at its principal office in
Charlotte, North Carolina as its Prime Rate. Any change in the interest
rate resulting from a change in the Prime Rate shall become effective as of
12:01 A.M. of the Business Day on which each change in the Prime Rate is
announced by the Agent. The Prime Rate is a reference rate used by the
Agent in determining interest rates on certain loans and is not intended to
be the lowest rate of interest charged on any extension of credit to any
debtor.
"Pro Forma Basis" means, with respect to any transaction, that such
transaction shall be deemed to have occurred as of the first day of the
four fiscal-quarter period ending as of the last day of the fiscal quarter
most recently ended preceding the date of such transaction with respect to
which the Agent has received annual or quarterly financial information,
accompanied by an officer's certificate, in accordance with the provisions
of Section 7.1. As used herein, "transaction" shall mean any merger or
consolidation as referred to in Section 8.3(a) and 8.3(c) or any sale,
transfer or other disposition as referred to in Section 8.3(b).
"Pro Rata Share" has the meaning given to such term in Section
11.17(h).
"Projections" has the meaning given to such term in Section 6.1(c).
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"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Qualified Stock" means any capital stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or redeemable at the option of the holder thereof, in whole or in part on,
or on or after, or is exchangeable for debt securities of the Parent
Company or any of its Subsidiaries on or after, the first anniversary of
the Termination Date under the Tranche A Credit Agreement.
"Regulation D, G, T, U, or X" means Regulation D, G, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System as
from time to time in effect and any successor to all or a portion thereof.
"Reportable Event" means a "reportable event" as defined in Section
4043(b) of ERISA with respect to which the notice requirements to the PBGC
have not been waived.
"Required Lenders" means Lenders holding in the aggregate more than
fifty (50%) of the Commitments, or if the aggregate Commitments have been
terminated, Lenders in the aggregate holding more than fifty (50%) of the
principal amount of Obligations then outstanding; provided, however, that
if any Lender shall be a Defaulting Lender at such time then there shall be
excluded from the determination of Required Lenders the amount of such
Defaulting Lender's Commitments or Obligations, as appropriate.
"Requirements of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its material property
or assets.
"Revolving Commitment" means, with respect to each Lender, the
commitment of such Lender to make Committed Revolving Loans in an aggregate
principal amount at any time outstanding up to such Lender's Revolving
Committed Amount as specified in Schedule 2.1(a), as such amount may be
increased or reduced from time to time in accordance with the provisions
hereof.
"Revolving Commitment Percentage" means, for each Lender, a fraction
(expressed as a percentage) the numerator of which is the Revolving
Commitment of such Lender at such time and the denominator of which is the
Revolving Committed Amount at such time, provided that if the Revolving
Commitment Percentage of any Lender is to be determined after the Revolving
Committed Amount has been terminated,
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then the Revolving Commitment Percentage of such Lender shall be determined
immediately prior (and without giving effect) to such termination.
"Revolving Committed Amount" means, (i) prior to the Termination Date,
collectively, the aggregate amount of all of the Revolving Commitments as
referenced in Section 2.1(a) and, individually, the amount of each Lender's
Revolving Commitment as specified in Schedule 2.1(a) and (ii) on or after
the Termination Date, as provided in Section 2.5(a).
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., or any successor or assignee of the business of such division
in the business of rating securities.
"Single Employer Plan" means any Plan which is covered by Title IV of
ERISA.
"Subject Properties" has the meaning given to such term in Section
6.16(a).
"Subsidiary" means, as to any Person, (a) any corporation more than
50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time, any class or
classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person
directly or indirectly through Subsidiaries, (b) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries has more than 50% of the equity interest at
any time and in which such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of
such partnership, association, joint venture or other entity, whether
through the ownership of equity interests, by contract or otherwise and (c)
any corporation, general or limited partnership or limited liability
company in which such Person, or any of its Subsidiaries, is a shareholder,
partner or member and which is consolidated with such Person in accordance
with GAAP. Unless otherwise specified, any reference to a Subsidiary is
intended as a reference to a Subsidiary of the Parent Company.
"Term Loan Amortization Date" shall have the meaning given to such
term in Section 2.5(a).
"Term Loan Maturity Date" shall have the meaning given to such term in
Section 2.5(a).
"Term Loans" shall have the meaning given to such term in Section
2.5(a).
"Termination Date" has the meaning given to such term in Section
2.1(a).
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"Tranche A Credit Agreement" means that Tranche A Credit Agreement
dated as of the date hereof among the Borrowers, the Guarantors, the
lenders named therein and party thereto and NationsBank, N.A., as Agent, as
amended, modified, supplemented, extended, renewed or restated from time to
time.
"Tranche B Credit Agreement" means this Credit Agreement, as amended,
modified, supplemented, extended, renewed or restated from time to time.
"Underfunding" means an excess of all accrued benefits under a Plan
(based on those assumptions used to fund such Plan), determined as of the
most recent annual valuation date, over the value of the assets of such
Plan allocable to such accrued benefits.
"Unsecured Senior Debt Rating" means the debt rating provided by S&P
and/or Moody's with respect to unsecured senior long term debt of the
Parent Company and its consolidated Subsidiaries.
1.2 COMPUTATION OF TIME PERIODS.
For purposes of computation of periods of time hereunder, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."
1.3 ACCOUNTING TERMS.
The financial statements to be furnished by the Parent Company pursuant
hereto shall be made and prepared in accordance with GAAP consistently applied
throughout the periods involved (except as set forth in the notes thereto or as
otherwise disclosed in writing by the Parent Company to the Agent); provided,
that, except as otherwise specifically provided herein, all computations
determining compliance with Section 7.11 shall utilize accounting principles and
policies in conformity with those used to prepare the annual audited financial
statements referenced in Sections 6.1(a) and (b).
Notwithstanding the above, the parties hereto acknowledge and agree that,
for purposes of all calculations made in determining compliance for any
applicable period with the financial covenant set forth in Section 7.11(b)
hereof (including without limitation for purposes of the definition of
"Applicable Percentage" set forth in Section 1.1), the Borrowers shall have the
option of calculating Consolidated Adjusted EBITDA on a Pro Forma Basis.
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SECTION 2
CREDIT FACILITIES
2.1 COMMITTED REVOLVING LOANS.
(a) Revolving Commitment. Subject to the terms and conditions hereof
and in reliance upon the representations and warranties set forth herein,
each Lender severally agrees to make revolving credit loans ("Committed
Revolving Loans") to the Borrowers from time to time from the Closing Date
until the day 364 days after the date hereof, or such later date if such
date is extended pursuant to this Section 2.1(a) or such earlier date as
the Revolving Commitments shall have been terminated as provided herein
(the "Termination Date") for the purposes hereinafter set forth; provided,
however, that (i) with regard to each Lender individually, the sum of such
Lender's share of outstanding Committed Revolving Loans (other than
Committed Revolving Loans made for the purpose of repaying Competitive
Loans but not yet so applied) shall not exceed such Lender's Revolving
Committed Amount, and (ii) with regard to the Lenders collectively, the sum
of the aggregate amount of outstanding Committed Revolving Loans (other
than Committed Revolving Loans made for the purpose of repaying Competitive
Loans but not yet so applied) plus the aggregate amount of Competitive
Loans (other than Competitive Loans made for the purpose of repaying
Committed Revolving Loans but not yet so applied) shall not exceed TWO
HUNDRED FIFTY MILLION DOLLARS ($250,000,000) (as such aggregate maximum
amount may be reduced from time to time, the "Revolving Committed Amount").
Committed Revolving Loans may consist of Base Rate Loans or Eurodollar
Loans, or a combination thereof, as the Borrowers may request, and may be
prepaid or repaid and reborrowed in accordance with the provisions hereof;
provided, however, that no more than ten (10) Eurodollar Loans shall be
outstanding hereunder at any time. For purposes hereof, Eurodollar Loans
with different Interest Periods shall be considered as separate Eurodollar
Loans, even if they begin on the same date, although borrowings, extensions
and conversions may, in accordance with the provisions hereof, be combined
at the end of existing Interest Periods to constitute a new Eurodollar Loan
with a single Interest Period. Either Borrower may, within ninety (90) days
prior to the Termination Date, by notice to the Agent, make written request
of the Lenders to extend the Termination Date for an additional period of
364 days. Each of the Lenders must consent to any such extension (subject
to the Borrowers' right to terminate or replace the Commitments of
non-consenting Lenders as set forth below). The Agent will give prompt
notice to each of the Lenders of its receipt of any such request for
extension of the Termination Date. Each Lender shall make a determination
not later than thirty (30) days prior to the then applicable Termination
Date as to whether or not it will agree to extend the Termination Date as
requested; provided, however, that failure by any Lender to make a timely
response to the Borrowers' request for extension of the Termination Date
shall be deemed to constitute a refusal by the Lender to extend the
Termination Date. If, in response to a request for an extension of the
Termination Date,
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each of the Lenders agrees to the requested extension, then the Termination
Date shall be extended for the requested additional period of 364 days. If,
however, in response to a request for an extension of the Termination Date,
one or more Lenders shall fail to agree to the requested extension (the
"Disapproving Lenders"), then the Borrowers shall have the right (so long
as all Disapproving Lenders are treated as described in either clauses (A)
or (B) below) to either (A) replace each such Disapproving Lender with one
or more Replacement Lenders pursuant to Section 3.15 so long as at the time
of such replacement, each such Replacement Lender consents to the proposed
extension of the Termination Date or (B) terminate such Disapproving
Lender's Commitment and repay all outstanding Loans of such Disapproving
Lender in accordance with Sections 3.3(c) and 3.3(f), provided that, unless
the Commitments terminated and Loans repaid pursuant to the preceding
clause (B) are immediately replaced in full at such time through the
addition of new Lenders or the increase of the Commitments and/or
outstanding Loans of existing Lenders (who in each case must specifically
consent to any such increase), then in the case of any action pursuant to
the preceding clause (B), subject to the following proviso, the Required
Lenders (determined before giving effect to the proposed action) shall
specifically consent to such termination of Commitment and repayment of
Loans, provided further, notwithstanding the foregoing proviso, each of the
Lenders (other than the Lender whose Commitment is being terminated) shall
specifically consent to such termination of Commitment and repayment of
Loans if the aggregate amount of Commitments terminated pursuant to this
Section 2.1(a) (including the proposed termination) plus the aggregate
amount of Commitments terminated pursuant to Section 3.17 plus the
aggregate amount of Commitments terminated pursuant to Section 11.6(b)
shall exceed $35,000,000. If, prior to the applicable Termination Date, the
Borrowers either replace or terminate the Commitments of the Disapproving
Lenders in accordance with the foregoing terms, then the Termination Date
shall be extended for the requested additional period of 364 days. If,
however, the Borrowers fail to either replace or terminate the Commitments
of the Disapproving Lenders prior to the applicable Termination Date in
accordance with the foregoing terms, then the Termination Date shall not be
extended for the requested additional period of 364 days.
(b) Committed Revolving Loan Borrowings.
(i) Notice of Borrowing. The Borrowers shall request a Committed
Revolving Loan borrowing by written notice (or telephone notice
promptly confirmed in writing) from either Borrower to the Agent not
later than 11:00 A.M. (Charlotte, North Carolina time) on the Business
Day of the requested borrowing in the case of Base Rate Loans, and on
the third Business Day prior to the date of the requested borrowing in
the case of Eurodollar Loans. Each such request for borrowing shall be
irrevocable and shall specify (A) that a Committed Revolving Loan is
requested, (B) the date of the requested borrowing (which shall be a
Business Day), (C) the aggregate principal amount to be borrowed, and
(D) whether the borrowing shall be comprised of Base Rate Loans,
Eurodollar
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Loans or a combination thereof, and if Eurodollar Loans are requested,
the Interest Period(s) therefor. A form of Notice of Borrowing (a
"Notice of Borrowing") is attached as Schedule 2.1(b)(i). If the
Borrower giving such Notice of Borrowing shall fail to specify in any
such Notice of Borrowing (I) an applicable Interest Period in the case
of a Eurodollar Loan, then such notice shall be deemed to be a request
for an Interest Period of one month, or (II) the type of Committed
Revolving Loan requested, then such notice shall be deemed to be a
request for a Base Rate Loan hereunder. Promptly upon receipt of each
Notice of Borrowing, the Agent shall give notice to each Lender of the
contents thereof and each such Lender's Revolving Commitment
Percentage thereof.
(ii) Minimum Amounts. Each Committed Revolving Loan borrowing
shall be in a minimum aggregate amount of $5,000,000 and integral
multiples of $1,000,000 in excess thereof (or the remaining available
amount of the Revolving Commitment, if less, provided, however, that
no Eurodollar Loan shall be permitted for a principal amount less than
$5,000,000).
(iii) Advances. Each Lender will make its Revolving Commitment
Percentage of each Committed Revolving Loan borrowing available to the
Agent for the account of the Borrowers at the office of the Agent
specified in Schedule 11.1, or at such other office as the Agent may
designate in writing, by 10:00 A.M. (Charlotte, North Carolina time)
on the date specified in the applicable Notice of Borrowing in Dollars
(or by 1:00 P.M. (Charlotte, North Carolina time) on such date if the
applicable Notice of Borrowing is received on the same date) and in
funds immediately available to the Agent. Such borrowing will then be
made available to the Borrowers by the Agent by crediting the account
of the Borrowers on the books of such office with the aggregate of the
amounts made available to the Agent by the Lenders and in like funds
as received by the Agent.
(c) Repayment. The principal amount of all Committed Revolving Loans
shall be due and payable in full on the Termination Date except as
otherwise provided in Section 2.5.
(d) Interest. Subject to the provisions of Section 3.1, Committed
Revolving Loans shall bear interest at a per annum rate equal to:
(i) Base Rate Loans. During such periods as Committed Revolving
Loans shall be comprised of Base Rate Loans, the sum of the Base Rate
plus the Applicable Percentage; and
(ii) Eurodollar Loans. During such periods as Committed Revolving
Loans shall be comprised of Eurodollar Loans, the sum of the
Eurodollar Rate plus the Applicable Percentage.
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Interest on Committed Revolving Loans shall be payable in arrears on
each Interest Payment Date.
(e) Committed Revolving Notes. The Committed Revolving Loans made
by each Lender shall be evidenced by a duly executed promissory note
of the Borrowers to each Lender substantially in the form of Schedule
2.1(e).
(f) Increase in Revolving Commitments. Subject to the terms and
conditions set forth herein, the Borrowers shall have the right, at
any time and from time to time from the Closing Date until the
Termination Date, to increase the Revolving Committed Amount by an
amount up to $50,000,000 in the aggregate. The following terms and
conditions shall apply to any such increase: (i) any such increase
shall be obtained from existing Lenders or from other banks or other
financial institutions, in each case in accordance with the terms set
forth below, (ii) the Revolving Commitment of any Lender may not be
increased without the prior written consent of such Lender, (iii) any
increase in the aggregate Revolving Committed Amount shall be in a
minimum principal amount of $2,500,000 and integral multiples of
$250,000 in excess thereof, (iv) Schedule 2.1(a) shall be amended to
reflect the revised Revolving Commitments and Revolving Commitment
Percentages, (v) the Borrowers shall execute Committed Revolving Notes
as are necessary to reflect the increase in the Revolving Commitments,
(vi) if any Committed Revolving Loans are outstanding at the time of
any such increase, the Borrowers shall make such payments and
adjustments on the Committed Revolving Loans (including payment of any
break-funding amount owing under Section 3.10) as necessary to give
effect to the revised commitment percentages and outstandings of the
Lenders, and (vii) the conditions to Extensions of Credit in Section
5.2(b) and (c) shall be true and correct. The amount of any increase
in the Revolving Committed Amount hereunder shall be offered first to
the existing Lenders, and in the event the additional commitments
which existing Lenders are willing to take shall exceed the amount
requested by the Borrowers, such excess shall be allocated in
proportion to the commitments of such existing Lenders willing to take
additional commitments. If the amount of the additional commitments
requested by the Borrowers shall exceed the additional commitments
which the existing Lenders are willing to take, then the Borrowers may
invite other banks and financial institutions reasonably acceptable to
the Agent to join this Tranche A Credit Agreement as Lenders hereunder
for the portion of commitments not taken by existing Lenders, provided
that such other banks and financial institutions shall constitute
"Eligible Assignees" and, in any such case, such other banks and
financial institutions shall enter into such joinder agreements to
give effect thereto as the Agent and the Borrowers may reasonably
request.
2.2 [INTENTIONALLY LEFT BLANK].
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2.3 [INTENTIONALLY LEFT BLANK].
2.4 COMPETITIVE LOAN SUBFACILITY.
(a) Competitive Loans. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, the
Borrowers may, from time to time from the Closing Date until the
Termination Date, request and each Lender may, in its sole discretion,
agree to make, loans to the Borrowers ("Competitive Loans"); provided,
however, (i) the aggregate amount of Competitive Loans shall not at
any time exceed the Revolving Committed Amount (the "Competitive Loan
Maximum Amount"), and (ii) the sum of the aggregate amount of
Committed Revolving Loans (other than Committed Revolving Loans made
for the purpose of repaying Competitive Loans but not yet so applied)
plus the aggregate amount of Competitive Loans (other than Competitive
Loans made for the purpose of repaying Committed Revolving Loans but
not yet so applied) shall not at any time exceed the aggregate
Revolving Committed Amount. Each Competitive Loan shall be not less
than $5,000,000 in the aggregate and integral multiples of $1,000,000
in excess thereof (or the remaining available portion of the
Competitive Loan Maximum Amount, if less). Competitive Loans may be
repaid and reborrowed in accordance with the provisions hereof.
(b) Competitive Bid Requests. The Borrowers may solicit
Competitive Bids by delivery of a Competitive Bid Request
substantially in the form of Schedule 2.4(b)-1 to the Agent by 12:00
Noon (Charlotte, North Carolina time) on a Business Day not less than
two (2) nor more than ten (10) Business Days prior to the date of a
requested Competitive Loan borrowing. A Competitive Bid Request shall
specify (i) the date of the requested Competitive Loan borrowing
(which shall be a Business Day), (ii) the amount of the requested
Competitive Loan borrowing and (iii) the applicable Interest Periods
requested and shall be accompanied by payment of the Competitive Bid
Request Fee, if any. The Agent shall promptly notify the Lenders of
its receipt of a Competitive Bid Request and the contents thereof and
invite the Lenders to submit Competitive Bids in response thereto. A
form of such notice is provided in Schedule 2.4(b)-2. No more than ten
(10) Competitive Bid Requests (e.g., the Borrowers may request
Competitive Bids for no more than ten (10) different Interest Periods
at a time) shall be submitted at any one time and Competitive Bid
Requests may be made no more frequently than once every ten (10)
Business Days.
(c) Competitive Bid Procedure. Each Lender may, in its sole
discretion, make one or more Competitive Bids to the Borrowers in
response to a Competitive Bid Request. Each Competitive Bid must be
received by the Agent not later than 10:00 A.M. (Charlotte, North
Carolina time) on the proposed date of a Competitive Loan borrowing;
provided, however, that should the Agent, in its capacity as a Lender,
desire to submit a Competitive Bid it shall notify the Borrowers of
its Competitive Bid and the terms thereof not later than 9:30 A.M.
(Charlotte, North Carolina time) on the proposed date of
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a Competitive Loan borrowing. A Lender may offer to make all or part
of the requested Competitive Loan borrowing and may submit multiple
Competitive Bids in response to a Competitive Bid Request. The
Competitive Bid shall specify (i) the particular Competitive Bid
Request as to which the Competitive Bid is submitted, (ii) the minimum
(which shall be not less than $1,000,000 and integral multiples of
$500,000 in excess thereof) and maximum principal amounts of the
requested Competitive Loan or Loans as to which the Lender is willing
to make, and (iii) the applicable interest rate or rates and Interest
Period or Periods therefor. A form of such Competitive Bid is provided
in Schedule 2.4(c). A Competitive Bid submitted by a Lender in
accordance with the provisions hereof shall be irrevocable (absent
manifest error). The Agent shall promptly notify the Borrowers of all
Competitive Bids made and the terms thereof. The Agent shall send a
copy of each of the Competitive Bids to the Borrowers for their
records as soon as practicable.
(d) Acceptance of Competitive Bids. Either Borrower may, in its
sole and absolute discretion, subject only to the provisions of this
subsection (d), accept or refuse any Competitive Bid offered to it. To
accept a Competitive Bid, either Borrower shall give written
notification in the form of Schedule 2.4(d) hereto (or telephone
notice promptly confirmed in writing) of its acceptance of any or all
such Competitive Bids to the Agent by 11:00 A.M. (Charlotte, North
Carolina time) on the proposed date of a Competitive Loan advance;
provided, however, (i) the failure by the Borrowers to give timely
notice of their acceptance of a Competitive Bid shall be deemed to be
a refusal thereof, (ii) the Borrowers may accept Competitive Bids only
in ascending order of rates, (iii) the aggregate amount of Competitive
Bids accepted by the Borrowers shall not exceed the principal amount
specified in the Competitive Bid Request, (iv) the Borrowers may
accept a portion of a Competitive Bid in the event, and to the extent,
acceptance of the entire amount thereof would cause the Borrowers to
exceed the principal amount specified in the Competitive Bid Request,
subject however to the minimum amounts provided herein (and provided
that where two or more such Lenders may submit such a Competitive Bid
at the same such Competitive Bid Rate, then pro rata between or among
such Lenders) and (v) no bid shall be accepted for a Competitive Loan
unless such Competitive Loan is in a minimum principal amount of
$1,000,000 and integral multiples of $500,000 in excess thereof,
except that where a portion of a Competitive Bid is accepted in
accordance with the provisions of subsection (iv) hereof, then in a
minimum principal amount of $100,000 and integral multiples thereof
(but not in any event less than the minimum amount specified in the
Competitive Bid), and in calculating the pro rata allocation of
acceptances of portions of multiple bids at a particular Competitive
Bid Rate pursuant to subsection (iv) hereof, the amounts shall be
rounded to integral multiples of $100,000 in a manner which shall be
in the discretion of the Borrowers. A notice of acceptance of a
Competitive Bid given by the Borrowers in accordance with the
provisions hereof shall be irrevocable. The Agent shall, not later
than 12:00 Noon (Charlotte, North Carolina time) on the proposed date
of a Competitive Loan borrowing, notify each bidding Lender whether or
not its Competitive Bid has been accepted (and if
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so, in what amount and at what Competitive Bid Rate), and each
successful bidder will thereupon become bound, subject to the other
applicable conditions hereof, to make the Competitive Loan in respect
of which its bid has been accepted.
(e) Funding of Competitive Loans. Each Lender which is to make a
Competitive Loan shall make its Competitive Loan borrowing available
to the Agent for the account of the Borrowers at the office of the
Agent specified in Schedule 11.1, or at such other office as the Agent
may designate in writing, by 1:00 P.M. (Charlotte, North Carolina
time) on the date specified in the Competitive Bid Request in Dollars
and in funds immediately available to the Agent. Such borrowing will
then be made available to the Borrowers by crediting the account of
the Borrowers on the books of such office with the aggregate of the
amount made available to the Agent by the Competitive Loan Lenders and
in like funds as received by the Agent.
(f) Maturity of Competitive Loans. Each Competitive Loan shall
mature and be due and payable in full on the last day of the Interest
Period applicable thereto. Unless the Borrowers shall give notice to
the Agent otherwise, the Borrowers shall be deemed to have requested a
Committed Revolving Loan borrowing in the amount of the maturing
Competitive Loan, the proceeds of which will be used to repay such
Competitive Loan.
(g) Interest on Competitive Loans. Subject to the provisions of
Section 3.1, Competitive Loans shall bear interest in each case at the
Competitive Bid Rate applicable thereto. Interest on Competitive Loans
shall be payable in arrears on each Interest Payment Date.
(h) Competitive Loan Notes. The Competitive Loans shall be
evidenced by a duly executed promissory note of the Borrowers to each
Lender in an original principal amount equal to the Competitive Loan
Maximum Amount and substantially in the form of Schedule 2.4(h).
2.5 AMORTIZATION OF LOANS OUTSTANDING AT THE TERMINATION DATE.
(a) Election to Amortize. The Borrowers shall have the option to
pay all or a portion of the outstanding principal balance of the
Committed Revolving Loans (including Competitive Loans outstanding as
of the Termination Date which are repaid with borrowings of Committed
Revolving Loans) in sixteen (16) equal consecutive quarterly
installments on the last day of each March, June, September and
December commencing with the first of such dates to occur after the
Termination Date (each such date referred to herein as a "Term Loan
Amortization Date" and the last such date referred to herein as the
"Term Loan Maturity Date"). Either Borrower may exercise such option
by giving written notice to the Agent at least fifteen (15) days prior
to the Termination Date. If the Agent does not receive such
notification within the time period specified in the preceding
sentence, the principal amount of all Committed Revolving
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Loans and Competitive Loans shall be due and payable on the Termination
Date. All Committed Revolving Loans and Competitive Loans remaining
outstanding after the Termination Date in accordance with the terms of this
Section 2.5 shall be referred to collectively as the "Term Loans". The Term
Loans may be comprised of Base Rate Loans and Eurodollar Loans as the
Borrowers may elect in accordance with the provisions hereof. Amounts
repaid or prepaid on the Term Loans may not be reborrowed by the Borrowers.
For purposes of this Credit Agreement, where the Borrowers shall elect to
amortize amounts outstanding under the Committed Revolving Loans and the
Competitive Loans in accordance herewith, then on and after the Termination
Date, references herein to the "Revolving Committed Amount" shall mean the
aggregate principal amount of the Term Loans as of the Termination Date
less all payments made or required to be made with respect to the Term
Loans hereunder, whether scheduled amortization payment, voluntary or
optional prepayment, mandatory prepayment or otherwise.
(b) Interest on Term Loans. It is the intention of the parties hereto
that the Term Loans bear interest on the same terms as apply to Committed
Revolving Loans prior to the Termination Date. In furtherance thereof, the
parties hereto agree that upon and after the occurrence of the Termination
Date and the Borrowers' election to amortize the payment of the outstanding
principal balance of the Term Loans, the Borrowers shall continue to have
all of the same rights with respect to the Term Loans as they had prior to
the Termination Date to extend and/or convert Committed Revolving Loans
under Section 3.2, subject to the limitations of Section 2.5(a).
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 DEFAULT RATE.
Overdue principal and, to the extent permitted by law, overdue interest in
respect of each Loan and any other overdue amount payable hereunder or under the
other Credit Documents shall bear interest, payable on demand, at a per annum
rate 2% greater than the rate which would otherwise be applicable (or if no rate
is applicable, whether in respect of interest, fees or other amounts, then 2%
greater than the Base Rate).
3.2 EXTENSION AND CONVERSION.
The Borrowers shall have the option, on any Business Day, to extend
existing Committed Revolving Loans into a subsequent permissible Interest Period
or to convert Committed Revolving Loans of one type into Committed Revolving
Loans of another type; provided, however, that (a) except as provided in Section
3.7, Eurodollar Loans may be converted into
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Base Rate Loans only on the last day of the Interest Period applicable thereto,
(b) Eurodollar Loans may be extended, and Base Rate Loans may be converted into
Eurodollar Loans, only if no Default or Event of Default is in existence on the
date of extension or conversion, (c) Loans extended as, or converted into,
Eurodollar Loans shall be subject to the terms of the definition of "Interest
Period" set forth in Section 1.1 and shall be in such minimum amounts as
provided in Section 2.1(b)(ii), (d) no more than ten (10) separate Eurodollar
Loans shall be outstanding hereunder at any one time and (e) any request for
extension or conversion of a Eurodollar Loan which shall fail to specify an
Interest Period shall be deemed to be a request for an Interest Period of one
month. Competitive Loans may not be extended or converted pursuant to this
Section 3.2. Each such extension or conversion shall be effected by either
Borrower by giving a notice (a "Notice of Extension/Conversion") in the form of
Schedule 3.2 (or telephone notice promptly confirmed in writing) to the Agent
prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in
the case of the conversion of a Eurodollar Loan into a Base Rate Loan, and on
the third Business Day prior to, in the case of the extension of a Eurodollar
Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of
the proposed extension or conversion, specifying the date of the proposed
extension or conversion, the Committed Revolving Loans to be so extended or
converted, the types of Committed Revolving Loans into which such Committed
Revolving Loans are to be converted and, if appropriate, the applicable Interest
Periods with respect thereto. Multiple Eurodollar Loans with Interest Periods
ending on the same date may be combined and extended as one Eurodollar Loan, and
a single Eurodollar Loan may be extended as multiple Eurodollar Loans. Each
request for extension of, or conversion into, Eurodollar Loans, shall constitute
a representation and warranty by the Borrowers of the matters specified in
Section 5.2(b) and (c). In the event the Borrowers fail to request extension or
conversion of any Eurodollar Loan in accordance with this Section, or any such
conversion or extension is not permitted or required by this Section, then such
Loans shall be automatically converted into Base Rate Loans at the end of their
Interest Period. The Agent shall give each Lender notice as promptly as
practicable of any such proposed extension or conversion affecting any Loan.
3.3 REDUCTIONS IN COMMITMENTS AND PREPAYMENTS.
(a) Voluntary Reduction of Commitments. The Borrowers may from time to
time permanently reduce the Revolving Committed Amount in whole or in part
(in each such case in a minimum aggregate amount of $5,000,000 and integral
multiples of $1,000,000 in excess thereof) upon three (3) Business Days'
prior written notice to the Agent by either Borrower.
(b) [Intentionally Left Blank].
(c) Termination of Individual Lender Commitment. In the event any
Lender becomes a Defaulting Lender, becomes a Disapproving Lender or
delivers a notice to the Borrowers pursuant to Section 3.5 or 3.8 or in the
event of certain refusals by a Lender to consent to certain proposed
changes, waivers, discharges or terminations with respect to
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this Agreement which have been approved by the Required Lenders as provided
in Section 11.6(b), the Borrowers shall have the right, upon three (3)
Business Days' prior written notice to the Agent, to terminate the
Commitments of such Lender in accordance with the terms of Section 2.1(a),
3.17 or 11.6(b), as the case may be. At such time as any such termination
shall become effective in accordance with the terms hereof, such Lender
shall no longer constitute a "Lender" for purposes of this Agreement,
except with respect to indemnifications under this Agreement which shall
survive as to such repaid Lender.
(d) Voluntary Prepayments. The Borrowers shall have the right to
prepay Loans in whole or in part from time to time without premium or
penalty; provided, however, that (i) Competitive Loans and Committed
Revolving Loans which are Eurodollar Loans may only be prepaid on three
Business Days' prior written notice to the Agent by either Borrower and any
prepayment of such Competitive Loans or Eurodollar Loans will be subject to
Section 3.10; and (ii) each such partial prepayment of Loans shall be in
the minimum principal amount of $5,000,000 and integral multiples of
$1,000,000 in excess thereof for all Competitive Loans and Committed
Revolving Loans.
(e) Mandatory Prepayments. If at any time (i) the sum of the aggregate
amount of outstanding Committed Revolving Loans (other than Committed
Revolving Loans made for the purpose of repaying Competitive Loans but not
yet so applied) plus the aggregate amount of Competitive Loans (other than
Competitive Loans made for the purpose of repaying Committed Revolving
Loans but not yet so applied) shall exceed the aggregate Revolving
Committed Amount, or (ii) the aggregate amount of Competitive Loans shall
exceed the Competitive Loan Maximum Amount, the Borrowers shall immediately
make payment on the Loans in an amount sufficient to eliminate such excess.
In the case of a mandatory prepayment required on account of subsection
(ii), the amount required to be prepaid hereunder shall serve to
temporarily reduce the Revolving Committed Amount (for purposes of
borrowing availability hereunder, but not for purposes of computation of
fees) by the amount of the payment required until such time as the
situation described in subsection (ii) shall no longer exist. Payments
required to be made hereunder shall be applied first to Committed Revolving
Loans or Competitive Loans, as appropriate, and with respect to the types
of Loans, first to Base Rate Loans and then to Eurodollar Loans in direct
order of their Interest Period maturities. To the extent that the Borrowers
are required to make a mandatory prepayment of the Loans which is required
to be applied to Competitive Loans or to Committed Revolving Loans which
are Eurodollar Loans (following the operation of the immediately preceding
sentence) on a date other than the last day of an Interest Period
applicable thereto, at the option of the Borrowers, the Agent shall hold
the amount of such prepayment in an account in the Agent's sole dominion
and control. The Agent shall invest the amounts held by it in such account
as directed by the Borrowers. On the last day of the Interest Period
relating to the next-maturing Competitive Loans or to Committed Revolving
Loans which are Eurodollar Loans, as appropriate, the Agent shall apply the
amounts held by it in such account to the prepayment of such maturing Loan
and the Agent shall
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notify the Borrowers of the application of such amounts. Upon the direction
of the Borrowers, the Agent shall apply any earnings on amounts held in
such account to the payment of accrued interest on such Loans or shall
release such earnings to the Borrowers.
(f) Prepayment of Loans of Individual Lender. In the event any Lender
becomes a Defaulting Lender, becomes a Disapproving Lender or delivers a
notice to the Borrowers pursuant to Section 3.5 or 3.8 or in the event of
certain refusals by a Lender to consent to certain proposed changes,
waivers, discharges or terminations with respect to this Agreement which
have been approved by the Required Lenders as provided in Section 11.6(b),
the Borrowers shall have the right, upon three (3) Business Days' prior
written notice to the Agent, to repay all Loans, together with accrued and
unpaid interest, fees and all other amounts owing to such Lender, each in
accordance with the terms of Section 2.1(a), 3.17 or 11.6(b), as the case
may be.
(g) Notice. Either Borrower will provide notice to the Agent of any
prepayment by 11:00 A.M. (Charlotte, North Carolina time) on the day prior
to the date of prepayment. Amounts paid on the Loans under subsection (d)
hereof may be reborrowed in accordance with the provisions hereof.
3.4 FEES.
(a) Commitment Fee. In consideration of the Commitments by the Lenders
hereunder, the Borrowers agrees to pay to the Agent for the ratable benefit
of the Lenders a commitment fee (the "Commitment Fee") equal to the
Applicable Percentage per annum on (i) prior to the Termination Date the
aggregate Revolving Committed Amount in effect from time to time for the
applicable period and (ii) after the Termination Date the Term Loans
outstanding from time to time during the applicable period. The Commitment
Fee shall accrue from the date hereof and shall be payable quarterly in
arrears on the 15th day following the end of each calendar quarter and on
the Termination Date or, if the Borrowers have elected to amortize payment
of the principal balance of Committed Revolving Loans as of the Termination
Date in accordance with the provisions of Section 2.5(a), then the Term
Loan Maturity Date, as appropriate.
(b) [Intentionally Left Blank].
(c) Administrative Fees. The Borrowers agrees to pay to the Agent, for
its own account, the administrative and other fees referred to in the
Agent's Fee Letter (the "Agent's Fees").
(d) Competitive Bid Request Fee. The Borrowers shall make payment to
the Agent of the applicable Competitive Bid Request Fee, if any,
concurrently with delivery
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of such Competitive Bid Request (whether or not any Competitive Bid is
offered by a Lender, accepted by the Borrowers or extended by the offering
Lender pursuant thereto).
3.5 CAPITAL ADEQUACY.
If, after the date hereof, any Lender has determined that the adoption
after the date hereof of any applicable law, rule or regulation regarding
capital adequacy, or any change therein after the date hereof, or any change in
the interpretation or administration thereof after the date hereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Lender with any
request or directive arising after the date hereof regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or will have the effect of reducing the rate of return on
such Lender's or its parent company's capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which such Lender or
its parent company could have achieved but for such adoption or change (taking
into consideration such Lender's policies with respect to capital adequacy),
then, upon notice from such Lender, the Borrowers shall pay to such Lender such
additional amount or amounts as will compensate such Lender and its parent
company for such reduction; provided, however, that a Lender shall not be
entitled to avail itself of the benefit of this Section 3.5 to the extent that
any such reduction in return was incurred more than ninety (90) days prior to
the time it gives notice to the Borrowers of the relevant circumstances. In
determining the additional amount payable under this Section 3.5, each Lender
will act reasonably and in good faith and will use averaging and attribution
methods which are reasonable, provided, that such Lender's determination of
compensation owing under this Section 3.5 shall, absent manifest error, be final
and conclusive and binding on all parties hereto. Each Lender, upon determining
that any additional amounts will be payable pursuant to this Section 3.5, will
give prompt written notice thereof to the Borrowers, through the Agent, which
notice shall show the basis for calculation of such additional amounts.
3.6 INABILITY TO DETERMINE INTEREST RATE.
If prior to the first day of any Interest Period, the Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrowers absent manifest error) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, the Agent shall give telecopy or
telephonic notice thereof to the Borrowers and the Lenders as soon as
practicable thereafter. If such notice is given (x) any Eurodollar Loans
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans and (y) any Loans that were to have been converted on the first
day of such Interest Period to or continued as Eurodollar Loans shall be
converted to or continued as Base Rate Loans. Until such notice has been
withdrawn by the Agent, no further Eurodollar Loans shall be made or continued
as such, nor shall the Borrowers have the right to convert Base Rate Loans to
Eurodollar Loans. This Section 3.6 shall not apply to Competitive Loans.
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3.7 ILLEGALITY.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrowers
and the Agent (which notice shall be withdrawn whenever such circumstances no
longer exist), (b) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert Base Rate Loans to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall no
longer be unlawful for such Lender to make or maintain Eurodollar Loans, such
Lender shall then have a commitment only to make a Base Rate Loan when a
Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on
the respective last days of the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrowers shall pay to
such Lender such amounts, if any, as may be required pursuant to Section 3.10.
Notwithstanding the foregoing, to the extent a circumstance described above
relates to a Eurodollar Loan then being requested by the Borrowers pursuant to a
Notice of Borrowing or a Notice of Conversion, the Borrowers shall have the
option to rescind such Notice of Borrowing or Notice of Conversion as to all
Lenders by either Borrower giving notice (in writing or by telephone confirmed
in writing) to the Agent of such rescission on the date on which the Lender
affected by such circumstances gives notice thereof as described above. This
Section 3.7 shall not apply to Competitive Loans.
3.8 REQUIREMENTS OF LAW.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Lender, or compliance by
any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender):
(i) shall subject such Lender to any tax of any kind whatsoever with
respect to any Eurodollar Loans made by it or its obligation to make
Eurodollar Loans, or change the basis of taxation of payments to such
Lender in respect thereof (except for Non-Excluded Taxes) covered by
Section 3.9 (including Non-Excluded Taxes imposed solely by reason of any
failure of such Lender to comply with its obligations under Section 3.9(b))
and Excluded Taxes;
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities
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in or for the account of, advances, loans or other extensions of credit by,
or any other acquisition of funds by, any office of such Lender which is
not otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition (excluding any
tax of any kind) whatsoever;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, upon notice to the
Borrowers from such Lender, through the Agent, in accordance herewith, the
Borrowers shall promptly pay such Lender, upon its demand, any additional
amounts necessary to compensate such Lender for such increased cost or reduced
amount receivable, provided that, in any such case, the Borrowers may elect to
convert the Eurodollar Loans made by such Lender hereunder to Base Rate Loans by
either Borrower giving the Agent at least one Business Day's notice of such
election, in which case the Borrowers shall promptly pay to such Lender, upon
demand, without duplication, such amounts, if any, as may be required pursuant
to Section 3.10; provided, further, however, that a Lender shall not be entitled
to avail itself of the benefit of this Section 3.8 to the extent that any such
additional amounts were incurred more than ninety (90) days prior to the time it
gives notice to the Borrowers as provided in the next sentence. If any Lender
becomes entitled to claim any additional amounts pursuant to this Section, it
shall provide prompt notice thereof to the Borrowers, through the Agent,
certifying (x) that one of the events described in this Section has occurred and
describing in reasonable detail the nature of such event, (y) as to the
increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Lender and a reasonably detailed explanation
of the calculation thereof. Such a certificate as to any additional amounts
payable pursuant to this Section submitted by such Lender, through the Agent, to
the Borrowers shall be conclusive in the absence of manifest error. This Section
3.8 shall not apply to Competitive Loans.
3.9 TAXES.
(a) Except as provided below in this subsection (a), all payments made
by the Borrowers under this Credit Agreement and any Notes shall be made
free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding taxes measured by or imposed upon the overall net
income or profits of any Lender or its applicable lending office, or any
branch or affiliate thereof, and all franchise taxes, branch taxes, taxes
on doing business or taxes on the overall capital or net worth of any
Lender or its applicable lending office, or any branch or affiliate
thereof, in each case imposed in lieu of net income taxes, imposed: (i) by
the jurisdiction under the laws of which such Lender, applicable lending
office, branch or
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affiliate is organized or is located, or in which its principal executive
office is located, or any nation within which such jurisdiction is located
or any political subdivision thereof; or (ii) by reason of any connection
between the jurisdiction imposing such tax and such Lender, applicable
lending office, branch or affiliate other than a connection arising solely
from such Lender having executed, delivered or performed its obligations,
or received payment under or enforced, this Credit Agreement or any Notes
(such excluded taxes being herein referred to as "Excluded Taxes"). If any
such non-excluded taxes, levies, imposts, duties, charges, fees, deductions
or withholdings ("Non-Excluded Taxes") are required to be withheld from any
amounts payable to the Agent or any Lender hereunder or under any Notes,
the amounts so payable to the Agent or such Lender shall be increased to
the extent necessary to yield to the Agent or such Lender (after payment of
all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Credit Agreement
and any Notes, provided, however, that the Borrowers shall be entitled to
deduct and withhold any Non-Excluded Taxes and shall not be required to
increase any such amounts payable to any Lender that is not organized under
the laws of the United States of America or a state thereof if such Lender
fails to comply with the requirements of subsection (b) below. Whenever any
Non-Excluded Taxes are payable by the Borrowers, as promptly as possible
thereafter, the Borrowers shall send to the Agent for its own account or
for the account of such Lender, as the case may be, a certified copy of an
original official receipt received by the Borrowers showing payment
thereof. If the Borrowers fail to pay any Non-Excluded Taxes when due to
the appropriate taxing authority or fails to remit to the Agent the
required receipts or other required documentary evidence, the Borrowers
shall indemnify the Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Agent or any Lender as
a result of any such failure. The agreements in this subsection (a) shall
survive the termination of this Credit Agreement and the payment of the
Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(X) (i) on or before the date of any payment by the Borrowers
under this Credit Agreement or the Notes to such Lender, deliver to
the Borrowers and the Agent (A) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be, certifying that it is entitled to
receive payments under this Credit Agreement and its Notes without
deduction or withholding of any United States federal income taxes and
(B) an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be, certifying that it is entitled to
an exemption from United States backup withholding tax;
(ii) deliver to the Borrowers and the Agent two further
copies of any such form or certification on or before the date
that any such form
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or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrowers; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by
the Borrowers or the Agent; or
(Y) in the case of any such Lender that is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Code, (i) represent to the
Borrowers (for the benefit of the Borrowers and the Agent) that it is
not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(ii) agree to furnish to the Borrowers on or before the date of any
payment by the Borrowers, with a copy to the Agent (A) a certificate
substantially in the form of Schedule 3.9 hereto (any such certificate
a "U.S. Tax Compliance Certificate") and (B) two accurate and complete
original signed copies of Internal Revenue Service Form W-8, or
successor applicable form certifying to such Lender's legal
entitlement at the date of such certificate to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Code
with respect to payments to be made under this Credit Agreement and
its Notes (and to deliver to the Borrowers and the Agent two further
copies of such form on or before the date it expires or becomes
obsolete and after the occurrence of any event requiring a change in
the most recently provided form and, if necessary, obtain any
extensions of time reasonably requested by the Borrowers or the Agent
for filing and completing such forms), and (iii) agree, to the extent
legally entitled to do so, upon reasonable request by the Borrowers,
to provide to the Borrowers (for the benefit of the Borrowers and the
Agent) such other forms as may be reasonably required in order to
establish the legal entitlement of such Lender to an exemption from
withholding with respect to payments under this Credit Agreement and
its Notes;
unless in any such case any change in treaty, law or regulation has
occurred after the date such Person becomes a Lender hereunder which
renders all such forms inapplicable or which would prevent such Lender from
duly completing and delivering any such form with respect to it and such
Lender so advises the Borrowers and the Agent. Each Person that shall
become a Lender or a participant pursuant to Section 11.3 shall, upon the
effectiveness of the related transfer, be required to provide all of the
forms, certifications and statements required pursuant to this subsection,
provided that in the case of a Participant the obligations of such
Participant pursuant to this subsection (b) shall be determined as if the
Participant were a Lender except that such Participant shall furnish all
such required forms, certifications and statements to the Lender from which
the related participation shall have been purchased.
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(c) If the Borrowers pay any additional amount under Section 3.9(a) to
a Lender and such Lender determines that it has received or realized in
connection therewith any refund or any reduction of, or credit against, its
tax liabilities in or with respect to the taxable year in which the
additional amount is paid, such Lender shall pay to the Borrowers an amount
that the Lender shall reasonably determine is equal to the net benefit,
after tax, which was obtained by the Lender in such taxable year as a
consequence of such refund, reduction or credit.
3.10 INDEMNITY.
The Borrowers agree to indemnify each Lender and to hold each Lender
harmless from any reasonable loss or expense which such Lender may sustain or
incur (other than through such Lender's gross negligence or willful misconduct)
as a consequence of (a) default by the Borrowers in making a borrowing of,
conversion into or continuation of Competitive Loans or Committed Revolving
Loans which are Eurodollar Loans after either Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrowers in making any prepayment of a Competitive Loan or a
Committed Revolving Loan which is a Eurodollar Loan after either Borrower has
given a notice thereof in accordance with the provisions of this Credit
Agreement or (c) the making of a prepayment of Competitive Loans or Committed
Revolving Loans which are Eurodollar Loans on a day which is not the last day of
an Interest Period with respect thereto other than pursuant to Section 3.11(c).
Such indemnification may include an amount equal to the excess, if any, of (i)
the amount of interest which would have accrued on the amount so prepaid, or not
so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Competitive
Loan or a Committed Revolving Loan which is a Eurodollar Loan provided for
herein (excluding, however, the Applicable Percentage included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. This covenant shall survive the termination of this Credit Agreement and
the payment of the Loans and all other amounts payable hereunder.
3.11 PRO RATA TREATMENT.
Except to the extent otherwise provided herein:
(a) Committed Revolving Loans. Each Committed Revolving Loan advance,
each payment or prepayment of principal of any Committed Revolving Loan,
each payment of interest on the Committed Revolving Loans, each payment of
the Commitment Fee, each reduction of the Revolving Committed Amount, and
each conversion or continuation of any Committed Revolving Loan, shall be
allocated pro rata
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among the relevant Lenders in accordance with the respective applicable
Revolving Committed Amounts (or, if the Commitments of such Lenders have
expired or been terminated, in accordance with the respective principal
amounts of the outstanding Loans and Participation Interests of such
Lenders).
(b) [Intentionally Left Blank].
(c) Funding. Unless the Agent shall have been notified in writing by
any Lender prior to a Committed Revolving Loan borrowing that such Lender
will not make the amount that would constitute its Revolving Commitment
Percentage of such borrowing available to the Agent, the Agent may assume
that such Lender is making such amount available to the Agent, and the
Agent may, in reliance upon such assumption, make available to the
Borrowers a corresponding amount. If such amount is not made available to
the Agent by the required time on the borrowing date therefor, such Lender
shall pay to the Agent, on demand, such amount with interest thereon at a
rate equal to the Federal Funds Rate for the period until such Lender makes
such amount immediately available to the Agent. A certificate of the Agent
submitted to any Lender with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error. If such
Lender's Revolving Commitment Percentage of such borrowing is not made
available to the Agent by such Lender within three Business Days of such
borrowing date, (i) the Agent shall notify the Borrowers of the failure of
such Lender to make such amount available to the Agent and the Agent shall
also be entitled to recover such amount with interest thereon at the rate
per annum applicable to Base Rate Loans hereunder, on demand, from the
Borrowers and (ii) the Borrowers may, without waiving any rights it may
have against such Lender, borrow a like amount on an unsecured basis from
any commercial bank for a period ending on the date upon which such Lender
does in fact make such borrowing available, provided that at the time such
borrowing is made and at all times while such amount is outstanding the
Borrowers would be permitted to borrow such amount pursuant to Section 2.1
of this Credit Agreement.
3.12 SHARING OF PAYMENTS.
The Lenders agree among themselves that, in the event that any Lender shall
obtain payment in respect of any Loan, or any other obligation owing to such
Lender under this Credit Agreement through the exercise of a right of setoff,
banker's lien or counterclaim, 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, in excess of its pro rata share of such payment as provided for in
this Credit Agreement, such Lender shall promptly purchase from the other
Lenders a participation in such Loans and other obligations in such amounts, and
make such other adjustments from time to time, as shall be equitable to the end
that all Lenders share such payment in accordance with their respective ratable
shares as provided for in this Credit Agreement. The Lenders further agree among
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themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of a
participation theretofore sold, return its share of that benefit (together with
its share of any accrued interest payable with respect thereto) to each Lender
whose payment shall have been rescinded or otherwise restored. The Borrowers
agree that any Lender so purchasing such a participation may, to the fullest
extent permitted by law, exercise all rights of payment, including setoff,
banker's lien or counterclaim, with respect to such participation as fully as if
such Lender were a holder of such Loan or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit Agreement,
if any Lender or the Agent shall fail to remit to the Agent or any other Lender
an amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Credit Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such amount is due until the date such amount is paid to the Agent or such
other Lender at a rate per annum equal to the Federal Funds Rate. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.12 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.12 to share in the benefits of any recovery on such secured claim.
3.13 PLACE AND MANNER OF PAYMENTS.
Except as otherwise specifically provided herein, all payments hereunder
shall be made to the Agent in Dollars in immediately available funds, without
offset, deduction, counterclaim or withholding of any kind, at its offices
specified in Section 11.1 not later than 2:00 P.M. (Charlotte, North Carolina
time) on the date when due. Payments received after such time shall be deemed to
have been received on the next succeeding Business Day. The Agent may (but shall
not be obligated to) debit the amount of any such payment which is not made by
such time to any ordinary deposit account of the Borrowers maintained with the
Agent (with notice to the Borrowers). The Borrowers shall, at the time it makes
any payment under this Credit Agreement, specify to the Agent the Loans, fees or
other amounts payable by the Borrowers hereunder to which such payment is to be
applied (and in the event that it fails so to specify, or if such application
would be inconsistent with the terms hereof, the Agent shall distribute such
payment to the Lenders in the manner set forth in Section 3.3(e) for mandatory
prepayments). The Agent will distribute such payments to such Lenders, if any
such payment is received prior to 12:00 Noon (Charlotte, North Carolina time) on
a Business Day in like funds as received prior to the end of such Business Day
and otherwise the Agent will distribute such payment to such Lenders on the next
succeeding Business Day. Whenever any payment hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day (subject to accrual of interest and fees for
the period of such extension), except that in the case of Eurodollar Loans, if
the extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day. Except as expressly provided otherwise herein, all computations
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of interest and fees shall be made on the basis of actual number of days elapsed
over a year of 360 days, except with respect to computation of interest on Base
Rate Loans which shall be calculated based on a year of 365 or 366 days, as
appropriate. Interest shall accrue from and include the date of borrowing, but
exclude the date of payment.
3.14 [INTENTIONALLY LEFT BLANK].
3.15 REPLACEMENT OF LENDERS.
If any Lender either (i) becomes a Defaulting Lender, (ii) becomes a
Disapproving Lender or (iii) delivers a notice to the Borrowers pursuant to
Sections 3.5 or 3.8, the Borrowers shall have the right, if no Default or Event
of Default then exists, to replace such Lender (the "Replaced Lender") with one
or more Eligible Assignees (collectively, the "Replacement Lender"), provided
that (A) at the time of any replacement pursuant to this Section 3.15, the
Replacement Lender shall enter into one or more assignment agreements
substantially in the form of Schedule 11.3(b) pursuant to, and in accordance
with the terms of, Section 11.3(b) (and with all fees payable pursuant to said
Section 11.3(b) to be paid by the Replacement Lender) pursuant to which the
Replacement Lender shall acquire all of the rights and obligations of the
Replaced Lender hereunder and, in connection therewith, shall pay to the
Replaced Lender in respect thereof an amount equal to the sum of (a) the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Lender and (b) all accrued but theretofore unpaid, fees and other amounts owing
to the Replaced Lender pursuant to Section 3.4, and (B) all obligations of the
Borrowers owing to the Replaced Lender (including all obligations, if any, owing
pursuant to Section 3.5 or 3.8, but excluding those obligations specifically
described in clause (A) above in respect of which the assignment purchase price
has been, or is concurrently being paid) shall be paid in full by the Borrowers
to such Replaced Lender concurrently with such replacement.
3.16 CHANGE OF LENDING OFFICE.
Each Lender agrees that on the occurrence of any event giving rise to the
operation of Sections 3.5, 3.8 or 3.9 with respect to such Lender, it will, if
requested by the Borrowers, use reasonable efforts to designate another lending
office for any Loans affected by such event, provided that such designation is
made on such terms that such Lender and its lending office suffer no material
economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of such Section.
3.17 ADDITIONAL TERMINATION OF COMMITMENT RIGHTS.
If any Lender either becomes a Defaulting Lender or delivers a notice to
the Borrowers pursuant to Section 3.5 or 3.8, the Borrowers shall have the right
(so long as all such Defaulting Lenders or delivering Lenders are treated as
described in either clauses (A) or (B) below) to either (A) replace each such
Defaulting Lender or delivering Lender with one or more Replacement Lenders
pursuant to Section 3.15 or (B) terminate such Defaulting Lender's or
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delivering Lender's Commitment and repay all outstanding Loans of such Lender in
accordance with Sections 3.3(c) and 3.3(f), provided that, unless the
Commitments terminated and Loans repaid pursuant to the preceding clause (B) are
immediately replaced in full at such time through the addition of new Lenders or
the increase of the Commitments and/or outstanding Loans of existing Lenders
(who in each case must specifically consent to any such increase), then in the
case of any action pursuant to the preceding clause (B), subject to the
following proviso, the Required Lenders (determined before giving effect to the
proposed action) shall specifically consent to such termination of Commitment
and repayment of Loans, provided further, notwithstanding the foregoing proviso,
each of the Lenders (other than the Lender whose Commitment is being terminated)
shall specifically consent to such termination of Commitment and repayment of
Loans if the aggregate amount of Commitments terminated pursuant to this Section
3.17 (including the proposed termination) plus the aggregate amount of
Commitments terminated pursuant to Section 11.6(b) plus the aggregate amount of
Commitments terminated pursuant to Section 2.1(a) shall exceed $35,000,000.
SECTION 4
GUARANTY
4.1 THE GUARANTEE.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender and the Agent as hereinafter provided the prompt payment of the Credit
Party Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantors hereby further
agree that if any of the Credit Party Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as
mandatory cash collateralization or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, following receipt of demand therefor, and that
in the case of any extension of time of payment or renewal of any of the Credit
Party Obligations, the same will be promptly paid in full when due (whether at
extended maturity, as a mandatory prepayment, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents, in the event of a bankruptcy or other similar
insolvency proceeding of a Guarantor, the obligations of each such Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its Credit Party Obligations hereunder subject to
avoidance under Section 548 of the Bankruptcy Code or any comparable provisions
of any applicable state law.
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4.2 OBLIGATIONS UNCONDITIONAL.
The obligations of the Guarantors under Section 4.1 are joint and several,
absolute and unconditional, irrespective of the value, genuineness, validity,
regularity or enforceability of any of the Credit Documents, or any other
agreement or instrument referred to therein, or any substitution, release or
exchange of any other guarantee of or security for any of the Credit Party
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 4.2 that the obligations of the Guarantors
hereunder shall be absolute and unconditional under any and all circumstances.
Without limiting the generality of the foregoing, it is agreed that, to the
fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder
which shall remain absolute and unconditional as described above:
(a) at any time or from time to time, without notice to any Guarantor,
the time for any performance of or compliance with any of the Credit Party
Obligations shall be extended, or such performance or compliance shall be
waived;
(b) any of the acts mentioned in any of the provisions of any of the
Credit Documents or any other agreement or instrument referred to therein
shall be done or omitted;
(c) the maturity of any of the Credit Party Obligations shall be
accelerated, or any of the Credit Party Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents or any other agreement or instrument referred to therein
shall be waived or any other guarantee of any of the Credit Party
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with;
(d) any Lien granted to, or in favor of, the Agent or any Lender or
Lenders as security for any of the Credit Party Obligations shall fail to
attach or be perfected; or
(e) any of the Credit Party Obligations shall be determined to be void
or voidable (including, without limitation, for the benefit of any creditor
of any Guarantor) or shall be subordinated to the claims of any Person
(including, without limitation, any creditor of any Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever (other than any notice specifically required hereunder), and any
requirement that the Agent or any Lender exhaust any right, power or remedy or
proceed against any Person under any of the Credit Documents or any other
agreement or instrument referred to therein, or against any other Person under
any other guarantee of, or security for, any of the Credit Party Obligations.
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4.3 REINSTATEMENT.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, reasonable fees and expenses of counsel)
incurred by the Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
4.4 CERTAIN ADDITIONAL WAIVERS.
Without limiting the generality of the provisions of this Section 4, each
Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. Sections
26-7 through 26-9, inclusive. Each of the Guarantors further agrees that it
shall have no right of subrogation, reimbursement or indemnity, nor any right of
recourse to security, if any, for the Credit Party Obligations so long as any
amounts payable to the Agent or the Lenders in respect of the Credit Party
Obligations shall remain outstanding and until all of the Commitments shall have
expired or been terminated.
4.5 REMEDIES.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Credit Party Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 hereof (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing such Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or such Credit Party
Obligations being deemed to have become automatically due and payable), such
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of said
Section 4.1.
4.6 CONTINUING GUARANTEE.
The guarantee in this Section 4 is a continuing guarantee, and shall apply
to all Credit Party Obligations whenever arising.
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SECTION 5
CONDITIONS
5.1 CONDITIONS TO INITIAL EXTENSIONS OF CREDIT.
The obligation of each Lender to make its initial Extensions of Credit to
the Borrowers are subject to the satisfaction of the following conditions on or
prior to the Closing Date:
(a) Executed Credit Documents. Receipt by the Agent of executed
counterparts of this Credit Agreement, the Notes and the other Credit
Documents.
(b) Tranche A Credit Agreement. Receipt by the Agent of copies of the
executed Tranche A Credit Agreement, the promissory notes issued thereunder
and the other collateral, security and other documents relating thereto.
(c) No Default; Representations and Warranties. As of the Closing Date
(i) there shall exist no Default or Event of Default and (ii) all
representations and warranties contained herein and in the other Credit
Documents shall be true and correct in all material respects.
(d) Opinion of Counsel. Receipt by the Agent of an opinion, or
opinions, satisfactory to the Agent, addressed to the Agent and the Lenders
and dated as of the Closing Date, from legal counsel to the Credit Parties
and in form reasonably acceptable to the Agent and the Credit Parties.
(e) Corporate Documents. Receipt by the Agent of the following:
(i) Charter Documents. Copies of the articles or certificates of
incorporation or other charter documents of each Credit Party
certified to be true and complete as of a recent date by the
appropriate Governmental Authority of the state or other jurisdiction
of its incorporation and certified by a secretary or assistant
secretary of such Credit Party to be true and correct as of the
Closing Date.
(ii) Bylaws. A copy of the bylaws of each Credit Party certified
by a secretary or assistant secretary of such Credit Party to be true
and correct as of the Closing Date.
(iii) Resolutions. Copies of resolutions of the Board of
Directors of each Credit Party approving and adopting the Credit
Documents to which it is a party and the transactions contemplated
therein and authorizing execution and
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delivery thereof, certified by a secretary or assistant secretary of
such Credit Party to be true and correct and in force and effect as of
the Closing Date.
(iv) Good Standing. Copies of (a) certificates of good standing,
existence or its equivalent with respect to each Credit Party
certified as of a recent date by the appropriate Governmental
Authorities of the state or other jurisdiction of incorporation and
each other jurisdiction in which the failure to so qualify and be in
good standing would have a Material Adverse Effect and (b) to the
extent available, a certificate indicating payment of all corporate
franchise taxes certified as of a recent date by the appropriate
governmental taxing authorities.
(f) Fees and Expenses. Provided the Borrowers have received proper
documentation and support therefor, payment by the Borrowers of all fees
and expenses owed by it to the Lenders and the Agent, including, without
limitation, payment to the Agent of the fees set forth in the Agent's Fee
Letter.
(g) Merger Agreement Transactions. The transactions contemplated by
the Merger Agreement shall have been consummated in accordance with the
terms of the Merger Agreement and the Agent shall have received a copy of
the final, executed Merger Agreement.
(h) Repayment of Existing Indebtedness. The Agent shall have received
evidence satisfactory to it that the Existing Credit Agreements have been
terminated and that all amounts due and owing thereunder have been paid or
will be paid with the proceeds of the initial Extension of Credit
hereunder.
(i) Consents. All material consents and approvals of the boards of
directors, shareholders, governmental and regulatory bodies and other
applicable third parties necessary in connection with the transactions
contemplated by the Merger Agreement and the financing transactions
contemplated under this Credit Agreement shall have been obtained.
(j) Compliance with Law. The transactions contemplated by the Merger
Agreement and the financing transactions under this Credit Agreement shall
be in compliance with all applicable laws and regulations (including
applicable securities and banking laws, rules and regulations).
(k) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by the Agent
or the Required Lenders.
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5.2 EACH EXTENSION OF CREDIT.
The obligation of each Lender to make any Extension of Credit, including
the conversion to or extension of any Eurodollar Loan is subject to satisfaction
of the following conditions in addition to the satisfaction on the Closing Date
of the conditions set forth in Section 5.1:
(a) (i) In the case of any Committed Revolving Loan, the Agent shall
have received an appropriate Notice of Borrowing or Notice of
Conversion/Extension; and (ii) in the case of any Competitive Loan, the
applicable Competitive Loan Lender shall have received an appropriate
notice of acceptance of its related Competitive Bid;
(b) The representations and warranties set forth in Section 6 hereof
shall be true and correct in all material respects as of such date (except
for those which expressly relate to an earlier date); and
(c) No Default or Event of Default shall exist and be continuing
either prior to or after giving effect thereto.
The delivery of each Notice of Borrowing and each Notice of Conversion relating
to an extension of or conversion into Eurodollar Loans and each request for a
Competitive Bid pursuant to a Competitive Bid Request shall constitute a
representation and warranty by the Borrowers of the correctness of the matters
specified in subsections (b) and (c) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
To induce the Agent and each Lender to make the Extensions of Credit
requested to be made by it on the Closing Date and on each Credit Date
thereafter, the Credit Parties hereby represent and warrant, on the Closing
Date, and on every Credit Date thereafter (except to the extent the following
representations warranties relate to a specific date), to the Agent and each
Lender that:
6.1 FINANCIAL CONDITION.
(a) The audited consolidated balance sheet of Old PHC and its
consolidated Subsidiaries as of December 31, 1996 and the audited
consolidated statements of earnings and statements of cash flows for the
year ended December 31, 1996 have heretofore been furnished to the Agent.
Such financial statements (including the notes thereto) (i) have been
audited by Arthur Andersen LLP, (ii) have been prepared in accordance with
GAAP consistently applied throughout the periods covered thereby and (iii)
(on the basis disclosed in the footnotes to such financial statements)
present fairly, in all material
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respects, the consolidated financial condition, results of operations and
cash flows of Old PHC and its consolidated Subsidiaries as of such date and
for such periods. The unaudited interim balance sheets of Old PHC and its
consolidated Subsidiaries as at the end of, and the related unaudited
interim statements of earnings and of cash flows for each of the three
fiscal quarters ending on or prior to September 30, 1997 have heretofore
been furnished to the Agent. Such interim financial statements for each
such quarterly period, (i) have been prepared in accordance with GAAP
consistently applied throughout the periods covered thereby and (ii) (on
the basis disclosed in the footnotes to such financial statements) present
fairly, in all material respects, the consolidated financial condition,
results of operations and cash flows of Old PHC and its consolidated
Subsidiaries as of such date and for such periods subject to year-end and
audit adjustments. During the period from December 31, 1996 to and
including the Closing Date, there has been no sale, transfer or other
disposition by Old PHC or any of its Subsidiaries of any material part of
the business or property of Old PHC and its consolidated Subsidiaries,
taken as a whole, and no purchase or other acquisition by any of them of
any business or property (including any capital stock of any other person)
material in relation to the consolidated financial condition of Old PHC and
its consolidated Subsidiaries, taken as a whole, in each case, which, is
not reflected in the foregoing financial statements or in the notes thereto
or has not otherwise been disclosed in writing to the Lenders on or prior
to the Closing Date.
(b) The audited consolidated balance sheet of Doubletree and its
consolidated Subsidiaries as of December 31, 1996 and the audited
consolidated statements of earnings and statements of cash flows for the
year ended December 31, 1996 have heretofore been furnished to the Agent.
Such financial statements (including the notes thereto) (i) have been
audited by KPMG Peat Marwick LLP, (ii) have been prepared in accordance
with GAAP consistently applied throughout the periods covered thereby and
(iii) (on the basis disclosed in the footnotes to such financial
statements) present fairly, in all material respects, the consolidated
financial condition, results of operations and cash flows of Doubletree and
its consolidated Subsidiaries as of such date and for such periods. The
unaudited interim balance sheets of Doubletree and its consolidated
Subsidiaries as at the end of, and the related unaudited interim statements
of earnings and of cash flows for, each fiscal month and quarterly period
ended after September 30, 1997 and prior to the Closing Date have
heretofore been furnished to the Agent. Such interim financial statements
for each such quarterly period, (i) have been prepared in accordance with
GAAP consistently applied throughout the periods covered thereby and (ii)
(on the basis disclosed in the footnotes to such financial statements)
present fairly, in all material respects, the consolidated financial
condition, results of operations and cash flows of Doubletree and its
consolidated Subsidiaries as of such date and for such periods subject to
year-end and audit adjustments. During the period from December 31, 1996 to
and including the Closing Date, there has been no sale, transfer or other
disposition by Doubletree or any of its Subsidiaries of any material part
of the business or property of Doubletree and its consolidated
Subsidiaries, taken as a whole, and no purchase or other
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acquisition by any of them of any business or property (including any
capital stock of any other person) material in relation to the consolidated
financial condition of Doubletree and its consolidated Subsidiaries, taken
as a whole, in each case, which, is not reflected in the foregoing
financial statements or in the notes thereto or has not otherwise been
disclosed in writing to the Lenders on or prior to the Closing Date.
(c) On and as of the Closing Date, (i) the financial projections (the
"Projections") prepared by the Parent Company and the Borrowers and
contained in the Confidential Offering Memorandum delivered to the Lenders
by the Agent prior to the Closing Date were prepared based upon the
assumptions concerning various industry trends described therein for the
periods presented, (ii) the Projections were based on good faith
assumptions and estimates, and (iii) although a range of possible different
assumptions and estimates might also be reasonable, the Parent Company and
the Borrowers are not aware of any facts that would lead them to believe
that the assumptions and estimates on which the Projections were based are
not reasonable; provided that no assurance can be given that the projected
results will be realized or with respect to the ability of the Parent
Company and the Borrowers to achieve the projected results, and while the
Projections are necessarily presented with numerical specificity, the
actual results achieved during the periods presented in all likelihood will
differ from the projected results and such differences may be material.
6.2 NO CHANGE.
Since December 31, 1996, there has been no development or event relating to
or affecting the Parent Company and its Subsidiaries which has had or would be
reasonably expected to have a Material Adverse Effect.
6.3 CORPORATE AND PARTNERSHIP EXISTENCE; COMPLIANCE WITH LAW.
Each of the Parent Company and its Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization except to the extent that the failure to be so organized, existing
or in good standing would not be reasonably expected to have a Material Adverse
Effect, (b) has the corporate or partnership power and authority, and the legal
right, to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently engaged, except to
the extent that the failure to have such legal right would not be reasonably
expected to have a Material Adverse Effect, (c) is duly qualified and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and in good standing would not be reasonably expected to have a
Material Adverse Effect, and (d) is in compliance with all Requirements of Law,
except to the extent that the failure to comply therewith would not, in the
aggregate, be reasonably expected to have a Material Adverse Effect.
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6.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE CREDIT PARTY OBLIGATIONS.
Each of the Credit Parties has the corporate power and authority, and the
legal right, to make, deliver and perform the Credit Documents to which it is a
party and to borrow and accept Extensions of Credit hereunder or to issue the
guarantee hereunder, and has taken all necessary corporate action to authorize
the borrowings or guarantees and Extensions of Credit or guarantee such
borrowings and Extensions of Credit, as appropriate, on the terms and conditions
of this Credit Agreement and any Notes and to authorize the execution, delivery
and performance of the Credit Documents to which it is a party. No material
consent or authorization of, filing with, notice to or other similar act by or
in respect of, any Governmental Authority or any other Person is required to be
obtained or made by or on behalf of either Borrower or either Guarantor in
connection with the borrowings or guarantees hereunder or with the execution,
delivery, performance, validity or enforceability of the Credit Documents to
which either Borrower is a party, except for material consents, authorizations,
notices and filings described in Schedule 6.4, all of which have been obtained
or made or have the status described in such Schedule 6.4. This Credit Agreement
has been, and each other Credit Document to which it is a party will be, duly
executed and delivered on behalf of the Borrowers and the Guarantors. This
Credit Agreement constitutes, and each other Credit Document to which it is a
party when executed and delivered will constitute, a legal, valid and binding
obligation of the Borrowers and the Guarantors enforceable against them in
accordance with its respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
6.5 NO LEGAL BAR.
The execution, delivery and performance of the Credit Documents by the
Credit Parties, the borrowings and extensions of credit and the guarantees
thereof hereunder and the use thereof (a) will not violate any Requirement of
Law or Contractual Obligation of any Credit Party in any respect that would
reasonably be expected to have a Material Adverse Effect and (b) will not result
in, or require, the creation or imposition of any Lien on any of its properties
or revenues pursuant to any such Requirement of Law or Contractual Obligation
other than Permitted Liens.
6.6 NO MATERIAL LITIGATION.
No litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of any Credit Party,
threatened by or against the Parent Company, or any of its Subsidiaries or
against any of its or their respective properties or revenues which would be
reasonably expected to have a Material Adverse Effect.
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6.7 NO DEFAULT.
Neither the Parent Company nor any of its Subsidiaries is in default under
or with respect to any of its Contractual Obligations in any respect which would
be reasonably expected to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
6.8 OWNERSHIP OF PROPERTY; LIENS.
Except as would not have a Material Adverse Effect, except for Permitted
Liens or except as set forth in Schedule 6.8 hereto, the Parent Company and each
of its Subsidiaries has good record and sufficient title in fee simple to, or a
valid leasehold interest in, all its real property, and good title to, or a
valid leasehold interest in, all its other property. None of such property is
subject to any Lien, except for Permitted Liens.
6.9 INTELLECTUAL PROPERTY.
The Parent Company and each of its Subsidiaries owns, or has the legal
right to use, all United States trademarks, tradenames, copyrights, service
marks, technology, know-how and processes necessary for each of them to conduct
its business as currently conducted (the "Intellectual Property") except for
those the failure to own or have such legal right to use would not be reasonably
expected to have a Material Adverse Effect. Except as provided on Schedule 6.9,
no claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does any Credit Party know
of any such claim, and the use of such Intellectual Property by the Parent
Company and its Subsidiaries does not infringe on the rights of any Person,
except for such claims and infringements that in the aggregate, would not be
reasonably expected to have a Material Adverse Effect.
6.10 NO BURDENSOME RESTRICTIONS.
No Requirement of Law as to the Parent Company or any of its Subsidiaries
would be reasonably expected to have a Material Adverse Effect.
6.11 TAXES.
The Parent Company and each of its Subsidiaries that are corporations have
filed or caused to be filed all United States federal income tax returns and all
other material tax returns which, to the knowledge of the Credit Parties, are
required to be filed and the failure to file could reasonably be expected to
have a Material Adverse Effect, and have paid (a) all taxes shown to be due and
payable on said returns and (b) any assessments of which the Parent Company or
any of its Subsidiaries has received notice made against the Parent Company or
any of its Subsidiaries or any of the property of the Parent Company or any of
its Subsidiaries and all other taxes, fees or other charges imposed on the
Parent Company or any of its Subsidiaries or any of
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the property of the Parent Company or any of its Subsidiaries by any
Governmental Authority (other than any (i) taxes, fees or other charges with
respect to which the failure to pay, in the aggregate, would not have a Material
Adverse Effect and (ii) taxes, fees or other charges the amount or validity of
which are currently being contested and with respect to which reserves in
conformity with GAAP have been provided on the books of the Parent Company or
any of such Subsidiaries, as the case may be).
6.12 ERISA.
During the five year period prior to each date as of which this
representation is made, or deemed made (or, with respect to (vi) or (viii)
below, as of the date such representation is made or deemed made), none of the
following events or conditions, either individually or in the aggregate, has
resulted or is reasonably likely to result in a liability to the Parent Company
or any of its Subsidiaries which would be reasonably expected to have a Material
Adverse Effect: (i) a Reportable Event with respect to any Single Employer Plan;
(ii) an "accumulated funding deficiency" (within the meaning of Section 412 of
the Code or Section 302 of ERISA) with respect to any Single Employer Plan which
has not been waived; (iii) any material noncompliance with the application of
ERISA or the Code with respect to any Plan; (iv) a termination of a Single
Employer Plan (other than a standard termination pursuant to Section 4041(b) of
ERISA); (v) a Lien in favor of the PBGC with respect to any Single Employer Plan
or a Plan pursuant to Section 4068 or Section 302(f) of ERISA, respectively;
(vi) Underfunding with respect to any Single Employer Plan; (vii) a complete or
partial withdrawal from any Multiemployer Plan by the Parent Company, either
Borrower or any Commonly Controlled Entity; (viii) any liability of the Parent
Company, either Borrower or any Commonly Controlled Entity under ERISA if the
Parent Company, either Borrower or any such Commonly Controlled Entity were to
withdraw completely from all Multiemployer Plans as of the annual valuation date
most closely preceding the date on which their representation is made or deemed
made; (ix) the Plan Reorganization or Insolvency of any Multiemployer Plan; (x)
the excess of the present value (determined using actuarial and other
assumptions which are reasonable in respect of the benefits provided and the
employees participating) of the aggregate liability of the Parent Company, the
Borrowers or any of their Subsidiaries for post-retirement benefits to be
provided to their current and former employees (excluding benefits provided
pursuant to Section 4980B of the Code or Section 601 of ERISA), under Plans
which are welfare benefit plans (as determined in Section 3(1) of ERISA) over
the assets under all such Plans; and (xi) an event or condition with respect to
which the Parent Company, either Borrower or any Commonly Controlled Entity
could incur any liability in respect of a Former Plan.
6.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS.
Neither Borrower is an "investment company", or a company "controlled" by
an "investment company", within the meaning of the Investment Company Act of
1940, as amended. Neither Borrower is subject to regulation under any Federal or
State statute or regulation which limits its ability to incur Indebtedness as
contemplated hereby.
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6.14 SUBSIDIARIES.
Set forth in Schedule 6.14 is a complete and accurate list of all
Subsidiaries of the Parent Company immediately after the consummation of the
transactions contemplated by the Merger Agreement, which list is correct in all
material respects. Information on the attached Schedule, which is correct in all
material respects, includes jurisdiction of incorporation or organization; the
number of shares of each class of capital stock or other equity interest
outstanding; the number and percentage of outstanding shares of each class owned
(directly or indirectly); and the number and effect, if exercised, of all
outstanding options, warrants, rights of conversion or purchase and similar
rights. The outstanding capital stock of all such corporate Subsidiaries is
validly issued, fully paid and non-assessable and is owned by such Person,
directly or indirectly, free and clear of all Liens other than Permitted Liens.
6.15 PURPOSE OF LOANS.
Extensions of Credit and the proceeds therefrom shall be used to refinance
existing indebtedness of the Borrowers under the Existing Credit Agreements, and
for working capital, capital expenditures and other general corporate purposes
(including, without limitation, the support of commercial paper and acquisitions
permitted by Section 8.3(c)).
6.16 ENVIRONMENTAL MATTERS.
(a) To the knowledge of the Credit Parties, the facilities and
properties owned, leased or operated by the Parent Company or any of its
Subsidiaries (the "Subject Properties") and all operations at the Subject
Properties are in compliance with all applicable Environmental Laws, and
there is no violation of any Environmental Law with respect to the business
operated by the Parent Company or any of its Subsidiaries (the "Business"),
and there are no conditions relating to the Business or Subject Properties
that would be reasonably likely to give rise to liability under any
applicable Environmental Law, except for any failure so to comply or
violation or condition, or any aggregation thereof, that would not be
reasonably likely to result in the payment of a Material Environmental
Amount.
(b) To the knowledge of the Credit Parties, the Subject Properties do
not contain any Materials of Environmental Concern at, on or under the
Subject Properties in amounts or concentrations that constitute a violation
of, or could reasonably give rise to liability under, Environmental Laws,
except insofar as the presence of any Materials of Environmental Concern is
not reasonably likely to result in the payment of a Material Environmental
Amount.
(c) Neither the Parent Company nor any of its Subsidiaries has
received any written notice of, or inquiry from any Governmental Authority
regarding, any violation,
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alleged violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws with
regard to any of the Subject Properties or the Business, nor does any
Credit Party have knowledge that any such notice will be received or is
being threatened, except insofar as such notice or threatened notice, or
any aggregation thereof, does not involve a matter or matters that is or
are reasonably likely to result in the payment of a Material Environmental
Amount.
(d) No Credit Party has, nor to the knowledge of any Credit Party have
any other Persons, transported or disposed of Materials of Environmental
Concern from the Subject Properties, or generated, treated, stored or
disposed of at, on or under any of the Subject Properties or any other
location, in each case by or on behalf of the Parent Company or any of its
Subsidiaries in violation of, or in a manner that would be reasonably
likely to give rise to liability under, any applicable Environmental Law,
except insofar as any such violation or liability referred to in this
paragraph, or any aggregation thereof, is not reasonably likely to result
in the payment of a Material Environmental Amount.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of any Credit Party, threatened, under any
Environmental Law to which the Parent Company or any of its Subsidiaries is
named as a party, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental
Law with respect to the Parent Company or any of its Subsidiaries, the
Subject Properties or the Business, except insofar as such proceeding,
action, decree, order or other requirement, or any aggregation thereof, is
not reasonably likely to result in the payment of a Material Environmental
Amount.
(f) To the knowledge of the Credit Parties, there has been no release
or threat of release of Materials of Environmental Concern at or from the
Subject Properties, or arising from or related to the operations
(including, without limitation, disposal) of the Parent Company or any of
its Subsidiaries in connection with the Subject Properties or otherwise in
connection with the Business, in violation of or in amounts or in a manner
that would be reasonably likely to give rise to liability under
Environmental Laws, except insofar as any such violation or liability
referred to in this paragraph, or any aggregation thereof, is not
reasonably likely to result in the payment of a Material Environmental
Amount.
(g) To the knowledge of the Credit Parties, neither the Parent Company
nor any of its Subsidiaries has voluntarily assumed any liability of any
Person under any Environmental Law that is not subject to indemnification
and is reasonably likely to result in the payment of a Material
Environmental Amount.
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SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that commencing with the
Closing Date and so long as this Credit Agreement is in effect and until the
Credit Party Obligations , together with interest, fees and other obligations
hereunder, have been paid in full and the Commitments hereunder shall have
terminated:
7.1 INFORMATION COVENANTS.
The Parent Company and the Borrowers will furnish, or cause to be
furnished, to the Lenders:
(a) Annual Financial Statements. As soon as available, and in any
event within 100 days after the close of each fiscal year of the Parent
Company, a consolidated balance sheet and income statement of the Parent
Company and its consolidated Subsidiaries (including the Borrowers), as of
the end of such fiscal year, together with related consolidated statements
of operations and retained earnings and of cash flows for such fiscal year,
setting forth in comparative form consolidated figures for the preceding
fiscal year, all such financial information described above to be in
reasonable form and detail and audited by Arthur Andersen LLP or other
independent certified public accountants of recognized national standing
and whose opinion shall be to the effect that such financial statements
have been prepared in accordance with GAAP (except for changes with which
such accountants concur) and shall not be limited as to the scope of the
audit or qualified as to the status of the Credit Parties as a going
concern.
(b) Quarterly Financial Statements. As soon as available, and in any
event within 50 days after the close of each fiscal quarter of the Parent
Company (other than the fourth fiscal quarter, in which case 100 days after
the end thereof) a consolidated balance sheet and income statement of the
Parent Company and its consolidated Subsidiaries (including the Borrowers),
as of the end of such fiscal quarter, together with related consolidated
statements of operations and retained earnings and of cash flows for such
fiscal quarter in each case setting forth in comparative form consolidated
figures for the corresponding period of the preceding fiscal year, all such
financial information described above to be in reasonable form and detail
and reasonably acceptable to the Agent, and accompanied by a certificate of
the chief financial officer, treasurer or controller of the Parent Company
to the effect that such quarterly financial statements fairly present in
all material respects the financial condition and results of operations of
the Parent Company and its consolidated Subsidiaries (including the
Borrowers), and have been prepared in accordance with GAAP, subject to
changes resulting from audit and normal year-end audit adjustments.
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(c) Officer's Certificate. At the time of delivery of the financial
statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate
of the chief financial officer, treasurer or controller of the Parent
Company substantially in the form of Schedule 7.1(c) attached hereto, (i)
demonstrating compliance with the financial covenants contained in Section
7.11 by calculation thereof as of the end of each such fiscal period and
(ii) stating that no Default or Event of Default exists, or if any Default
or Event of Default does exist, specifying the nature and extent thereof
and what action the Parent Company proposes to take with respect thereto.
(d) Accountant's Report. Within the period for delivery of the annual
financial statements provided in Section 7.1(a), a report of the
accountants conducting the annual audit stating that they have reviewed
Section 7.11 and stating further whether, in the course of their audit,
anything came to their attention to cause them to believe that the Parent
Company and its consolidated Subsidiaries were not in compliance with
Section 7.11, in so far as such Section 7.11 relates to accounting matters,
on the date of such statements.
(e) Reports. Promptly upon transmission or receipt thereof, (a) copies
of all registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on Forms
10-K, 10-Q and 8-K (or their equivalent) which the Parent Company or any of
its Subsidiaries shall file with the Securities and Exchange Commission, or
any successor agency, (b) if requested by the Agent, copies of all
financial statements, proxy statements, notices and reports as the Parent
Company or any of its Subsidiaries shall send to its shareholders or to a
holder of any Indebtedness with a maximum principal amount exceeding
$75,000,000 owed by the Parent Company or any of its Subsidiaries in its
capacity as such a holder (other than reports of a routine or ministerial
nature which are not material) and (c) upon the request of the Agent, all
reports and written information to and from the United States Environmental
Protection Agency, or any state or local agency responsible for enforcement
of Environmental Laws (other than reports of a routine or ministerial
nature which are not material).
(f) Notices. Upon any Credit Party obtaining knowledge thereof, such
Credit Party will give written notice to the Agent immediately of (a) the
occurrence of an event or condition consisting of a Default or Event of
Default, specifying the nature and existence thereof and what action the
Credit Party proposes to take with respect thereto, and (b) the occurrence
of any of the following (i) the pendency or commencement of any litigation,
arbitration or governmental proceeding against the Parent Company or any of
its Subsidiaries which is reasonably likely to have a Material Adverse
Effect, (ii) the institution of any proceedings against the Parent Company
or any of its Subsidiaries with respect to, or the receipt of notice by
such Person of potential liability or responsibility for, violation, or
alleged violation of any Environmental Laws, the violation of which would
likely have a Material Adverse Effect, or (iii) any notice or determination
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concerning the imposition of any withdrawal liability by a Multiemployer
Plan against the Parent Company or any of its Subsidiaries or any of
Commonly Controlled Entities of the Parent Company or any of its
Subsidiaries, the determination that a Multiemployer Plan is, or is
expected to be, in a Plan Reorganization or the termination of any Plan in
a distress termination under Section 4041(c) of ERISA.
(g) Other Information. With reasonable promptness upon any such
request, such other information regarding the business, properties or
financial condition of the Parent Company or any of its Subsidiaries as the
Agent or the Required Lenders may reasonably request.
7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
Each of the Credit Parties will do all things necessary to preserve and
keep in full force and effect its existence, rights, franchises and authority
except as permitted under Section 8.3 or where failure to do so would not
reasonably be expected to have a Material Adverse Effect.
7.3 BOOKS AND RECORDS.
The Parent Company will, and will cause each of its Subsidiaries to, keep
complete and accurate books and records of its transactions in accordance with
good accounting practices on the basis of GAAP (including the establishment and
maintenance of appropriate reserves).
7.4 COMPLIANCE WITH LAW.
The Parent Company will, and will cause each of its Subsidiaries to, comply
with all laws, rules, regulations and orders, and all applicable restrictions
imposed by all Governmental Authorities, applicable to it and its property if
noncompliance with any such law, rule, regulation, order or restriction would
have a Material Adverse Effect.
7.5 PAYMENT OF TAXES AND OTHER CLAIMS.
The Parent Company will, and will cause each of its Subsidiaries to, pay
and discharge (i) all material taxes, assessments and governmental charges or
levies imposed upon it, or upon its income or profits, or upon any of its
properties, before a material penalty begins to accrue and (ii) all lawful
claims (including claims for labor, materials and supplies) which, if unpaid,
might give rise to a Lien upon any of its properties other than Permitted Liens;
provided, however, that there shall be no requirement to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith by
appropriate proceedings and as to which adequate reserves therefor have been
established in accordance with GAAP, unless the failure to make any such payment
(i) would give rise to an immediate right to foreclose on a Lien securing such
amounts or (ii) would have a Material Adverse Effect.
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7.6 INSURANCE.
The Parent Company will, and will cause each of its Subsidiaries to, at all
times maintain in full force and effect insurance (including worker's
compensation insurance, liability insurance, casualty insurance and business
interruption insurance) in such amounts, covering such risks and liabilities and
with such deductibles or self-insurance retentions as are in accordance with
normal industry practice.
7.7 MAINTENANCE OF PROPERTY.
The Parent Company will, and will cause each of its Subsidiaries to,
maintain and preserve its properties and equipment material to the conduct of
its business in good repair, working order and condition, normal wear and tear
excepted, except where failure to do so would not have a Material Adverse Effect
and will make, or cause to be made, in such properties and equipment from time
to time all repairs, renewals, replacements, extensions, additions, betterments
and improvements thereto as may be needed or proper, to the extent and in the
manner customary for companies in similar businesses except where failure to do
so would not have a Material Adverse Effect.
7.8 PERFORMANCE OF OBLIGATIONS.
The Parent Company will, and will cause each of its Subsidiaries to,
perform in all material respects all of its obligations under the terms of all
material agreements, indentures, mortgages, security agreements or other debt
instruments to which it is a party or by which it is bound, except where failure
to do so would not have a Material Adverse Effect.
7.9 USE OF PROCEEDS.
The Extensions of Credit and the proceeds thereof may be used solely for
the purposes provided in Section 6.15.
7.10 AUDITS/INSPECTIONS.
Upon reasonable prior notice, with reasonable frequency and during normal
business hours, the Parent Company will, and will cause each of its Subsidiaries
to, permit representatives appointed by the Agent, including, without
limitation, independent accountants, agents, attorneys, and appraisers to visit
and inspect its property, including its books and records, their accounts
receivable and inventory, its facilities and its other business assets, and to
make photocopies or photographs thereof and to write down and record any
information such representative obtains and shall permit the Agent or its
representatives to investigate and verify the accuracy of information provided
to the Lenders and to discuss all such matters with the officers of the Parent
Company and its Subsidiaries.
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7.11 FINANCIAL COVENANTS.
(a) Consolidated Net Worth. There shall be maintained at all times
Consolidated Net Worth of at least $1,000,000,000; provided, however, that
the minimum Consolidated Net Worth required hereunder shall be increased on
the last day of each fiscal year to occur from the Closing Date (other than
the fiscal year ending December 31, 1997) by an amount equal to 25% of
Consolidated Net Income for the fiscal year then ended (or if Consolidated
Net Income is a deficit, then zero).
(b) Leverage Ratio. The Leverage Ratio, as determined at the end of
each fiscal quarter for the four consecutive fiscal quarter period then
ended, shall not at any time exceed 3.75 to 1.0.
7.12 FEDERAL REGULATIONS.
No part of the proceeds of any Loans will be used in any manner which might
cause the Loans or the application of such proceeds to violate Regulation U of
the Board of Governors of the Federal Reserve System as now and from time to
time hereafter in effect. If requested by any Lender or the Agent, the Credit
Parties will furnish to the Agent and each Lender a statement to the foregoing
effect in conformity with the requirements of FR Form U-1 referred to in said
Regulation U.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that commencing with the
Closing Date and so long as this Credit Agreement is in effect and until the
Credit Party Obligations, together with interest, fees and other obligations
hereunder, have been paid in full and the Commitments hereunder shall have
terminated:
8.1 LIENS.
The Parent Company will not, nor will it permit any of its Subsidiaries to,
contract, create, incur, assume or permit to exist any Lien with respect to any
of its Property, whether now owned or after acquired, except for Permitted
Liens.
8.2 NATURE OF BUSINESS.
No Credit Party will substantively alter the character or conduct of the
business conducted by it as of the Closing Date other than to enter into other
related businesses.
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8.3 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS.
The Parent Company will not, nor will it permit any of its Subsidiaries to:
(a) dissolve, liquidate or wind up its affairs, or enter into any
transaction of merger or consolidation; provided, however, the Parent
Company and its Subsidiaries shall be entitled to consummate the
transactions contemplated by the Merger Agreement; provided further that,
so long as no Default or Event of Default then exists or would be directly
or indirectly caused as a result thereof,
(i) any Subsidiary of the Parent Company (other than either
Borrower or Old PHC) may merge or consolidate with any other Person;
(ii) either Borrower may merge or consolidate with the other
Borrower, the Parent Company, Old PHC or any other Person provided
that (A) in the case of the merger or consolidation of either Borrower
with the Parent Company or Old PHC in which such Borrower is not the
surviving corporation, the Parent Company or Old PHC (as the case may
be) shall execute any and all documentation reasonably requested by
the Agent for the purpose of evidencing the Parent Company's or Old
PHC's (as the case may be) obligation to assume the indebtedness,
liabilities and obligations of such Borrower under the Credit
Documents and (B) in the case of the merger or consolidation of either
Borrower with any other Person: (1) such Borrower is the surviving
corporation; and (2) in the case of any individual transaction (or
series of related transactions) where the acquisition price for such
transaction (whether a single transaction or a series of related
transactions) exceeds $200,000,000, then the Borrowers must first
demonstrate compliance with the financial covenants under Section 7.11
on a Pro Forma Basis after giving effect to such transaction,
(iii) any Subsidiary of the Parent Company (other than either
Borrower) may dissolve, liquidate or wind up its affairs at any time;
and
(iv) Old PHC may merge with the Parent Company, Doubletree or
PHI;
(b) sell, transfer or otherwise dispose of any of its Property
(including without limitation pursuant to any sale and leaseback
transaction) except that the following shall be permitted: (i) the sale of
inventory for fair value in the ordinary course of business, (ii) the sale
or disposition of machinery and equipment no longer useful in the conduct
of such Person's business, (iii) transfers of Property by and among the
Parent Company and its Subsidiaries or between Subsidiaries of the Parent
Company, (iv) transfers of Property to Affiliates of the Parent Company and
its Subsidiaries so long as such transfers are permitted by Section 8.5
hereof, (v) transfers of Property in order to consummate the transactions
contemplated by the Merger Agreement, (vi) sales, transfers or other
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dispositions of Red Lion hotels or former Red Lion hotels and (vii) other
sales, transfers or dispositions of Property to the extent that the
aggregate net book value of such Property sold, transferred or otherwise
disposed of after the Closing Date shall not exceed 50% of the net book
value of Consolidated Assets as of the date of any such sale, transfer or
other disposition on a cumulative basis; provided, however, that if any
such sales, transfers or other dispositions (other than any sale, transfer
or other disposition of Red Lion hotels or former Red Lion hotels) are of,
or relate to, any of the Credit Parties' material servicemarks, trademarks,
tradenames, tradedress or any license thereof or the goodwill associated
with the use of, and/or symbolized by, any such intellectual property
assets of the Borrowers, then the Borrowers shall first demonstrate
compliance with the financial covenants under Section 7.11 on a Pro Forma
Basis after giving effect to such transaction;
(c) purchase or otherwise acquire (in a single transaction or a series
of related transactions) all or substantially all of the Property of any
other Person except where (i) no Default or Event of Default then exists or
would exist after giving effect thereto, (ii) the purchase or acquisition
does not require the solicitation of the consent of the shareholders or
other equity owners of the Person which is the subject thereof against the
recommendation of management, the board of directors or other managing
entity of such Person, (iii) the Person, division, operations or Property
which is the subject of the acquisition is in a related line of business to
that of the Parent Company and the Borrowers, and (iv) if the acquisition
price for such transaction (whether a single transaction or a series of
related transactions) shall exceed $200,000,000, the Borrowers first
demonstrate compliance with the financial covenants under Section 7.11 on a
Pro Forma Basis after giving effect to such transaction.
8.4 INVESTMENTS.
The Parent Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, (i) make Investments in unrelated lines of business
or (ii) make Investments that are recorded on the Parent Company's balance sheet
as "investments in joint ventures and partnerships" if the aggregate amount of
such Investments at any one time exceeds 30% of Consolidated Assets.
8.5 TRANSACTIONS WITH AFFILIATES.
The Parent Company will not, nor will it permit any of its Subsidiaries to,
enter into any transaction or series of transactions, whether or not in the
ordinary course of business, with any officer, director, shareholder or
Affiliate of the Parent Company or any of its Subsidiaries other than on terms
and conditions substantially as favorable as would be obtainable in a comparable
arm's-length transaction with a Person other than an officer, director,
shareholder or Affiliate, except that the restriction contained in this Section
8.5 shall not apply to (i) transactions and transfers among and between the
Parent Company and its Subsidiaries or between its
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Subsidiaries and (ii) the payment of reasonable compensation and benefits and
reimbursement of reasonable expenses of officers and directors.
8.6 FISCAL YEAR.
The Parent Company will not, nor will it permit any of its material
Subsidiaries to, change its fiscal year.
8.7 NO DIVIDEND RESTRICTIONS.
No material Subsidiary of either Borrower or Guarantor shall agree to or
permit to exist, any restrictions or limitations on the declaration or payment
of Dividends.
SECTION 9
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the following
specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal of any of
the Loans or the payment of any guaranty obligations in respect
thereof;
(ii) default, and such default shall continue for five (5) or
more days, in the payment when due of any interest on the Loans or the
payment of any guaranty obligations in respect thereof; or
(iii) default, and such default shall continue for five (5) or
more days after notice from the Agent, in the payment when due of any
amounts hereunder or under any of the other Credit Documents other
than as provided in subsections (i) and (ii) above, or the payment of
any guaranty obligations in respect thereof; or
(b) Representations. Any representation, warranty or statement made or
deemed to be made by any Credit Party herein, in any of the other Credit
Documents, or in any statement or certificate delivered or required to be
delivered pursuant hereto or thereto shall prove untrue in any material
respect on the date as of which it was deemed to have been made; or
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(c) Covenants. Any Credit Party shall:
(i) default in the due performance or observance of any term,
covenant or agreement contained in Section 7.11, 8.1, 8.2, 8.3, 8.4,
8.6 or 8.7; or
(ii) default in the due performance or observance of any term,
covenant or agreement contained in Sections 7.1(g) or 7.10 and such
default shall continue unremedied for a period of at least 5 days
except for information requests where more than 5 days are reasonably
required to comply; or
(iii) default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in
subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1) contained
in this Credit Agreement or any of the other Credit Documents and such
default shall continue unremedied for a period of at least 30 days
after notice thereof by the Agent; or
(d) Other Credit Documents. Any Credit Document shall fail to be in
full force and effect in all material respects or to give the Agent and/or
the Lenders the material liens, rights, powers and privileges purported to
be created thereby; or
(e) Guaranties. The guaranty given by the Credit Parties hereunder or
any material provision thereof shall cease to be in full force and effect,
or any guarantor thereunder or any Person acting by or on behalf of such
guarantor shall deny or disaffirm such guarantor's obligations under such
guaranty, or any guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed
or observed pursuant to any guaranty; or
(f) Bankruptcy, etc. Any Credit Party shall commence a voluntary case
concerning itself under the Bankruptcy Code; or an involuntary case is
commenced against any Credit Party under the Bankruptcy Code and the
petition is not dismissed within 60 days, after commencement of the case;
or a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of all or substantially all of the property of any Credit
Party; or any Credit Party commences any other proceeding under any
reorganization, arrangement, adjustment of the debt, relief of creditors,
dissolution, insolvency or similar law of any jurisdiction whether now or
hereafter in effect relating to any Credit Party; or there is commenced
against any Credit Party any such proceeding which remains undismissed for
a period of 60 days; or any Credit Party is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or any Credit Party suffers appointment of any
custodian or the like for it or for any substantial part of its property to
continue unchanged or unstayed for a period of 90 days; or any Credit Party
makes a general assignment for the benefit of creditors; or any corporate
action is taken by any Credit Party for the purpose of effecting any of the
foregoing; or
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(g) Defaults under Other Agreements. With respect to any Indebtedness
(other than Non-Recourse Indebtedness and Indebtedness outstanding under
this Credit Agreement) for which there is recourse against the Parent
Company and its Subsidiaries in excess of $30,000,000 in the aggregate, (i)
the Parent Company or any of its Subsidiaries shall (A) default in any
payment (beyond the applicable grace period with respect thereto, if any)
with respect to any such Indebtedness, or (B) default in the observance or
performance of any covenant relating to such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or
any other event or condition shall occur or condition exist, the effect of
which default or other event or condition is to cause, or permit, the
holder or holders of such Indebtedness (or trustee or agent on behalf of
such holders) to cause, any such Indebtedness to become due prior to its
stated maturity; or (ii) any such Indebtedness shall be declared due and
payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof; or
(h) Judgments. One or more judgments or decrees shall be entered
against the Parent Company or any of their Subsidiaries involving a
liability of $25,000,000 or more in the aggregate (to the extent not paid
or covered by insurance) and any such judgments or decrees shall not have
been vacated, discharged, satisfied or stayed or bonded pending appeal
within the greater of 30 days or the time permitted by law from the entry
thereof; or
(i) ERISA. The Parent Company or any of its Subsidiaries shall engage
in any "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), which has not been
waived, shall exist with respect to any Plan or any Lien in favor of the
PBGC or a Plan pursuant to Section 4068 or Section 302(f) of ERISA,
respectively, shall arise on the assets of the Parent Company, either
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence by the PBGC to have a
trustee appointed, or a trustee shall be appointed by the PBGC, to
administer or terminate, any Single Employer Plan, which Reportable Event
or commencement of proceedings or appointment of a trustee is reasonably
likely to result in the termination of such Plan for purposes of Title IV
of ERISA (other than a standard termination pursuant to Section 4041(b) of
ERISA), (iv) any Single Employer Plan shall terminate for purposes of Title
IV of ERISA in a distress termination under Section 4041(c), (v) the Parent
Company, either Borrower or any Commonly Controlled Entity shall, or is
reasonably likely to, incur any liability in connection with a withdrawal
by the Parent Company, either Borrower or any Commonly Controlled Entity
from, or the Insolvency or Reorganization of, a Multiemployer Plan, or (vi)
the occurrence or expected occurrence of any event or condition which
results or is reasonably likely to result in the Parent Company's, either
Borrower's or any Commonly Controlled Entity's becoming responsible for any
liability in respect of a Former Plan;
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and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, would
be reasonably expected to result in liability which could have a Material
Adverse Effect; provided, however, that the fact that a Plan is underfunded
shall not by itself constitute an Event of Default unless and until another
event or condition described in clause (i) through (vi) affecting such
underfunded Plan occurs and has a Material Adverse Effect; or
(j) Change of Control. Either (i) a "person" or a "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) hereafter becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of more
than 25% of the then outstanding voting stock of the Parent Company or (ii)
a majority of the Board of Directors of the Parent Company shall consist of
individuals who are not Continuing Directors; "Continuing Director" means,
as of any date of determination, (A) an individual who on the Closing Date
or the date two years prior to the date of determination (if such date of
determination is more than two years after the Closing Date) was a member
of the Parent Company's Board of Directors and (B) any new director whose
nomination for election by the Parent Company's shareholders was approved
by a vote of a majority of the directors then still in office who either
were directors on the Closing Date or the date two years prior to such date
of determination (if such date of determination is more than two years
after the Closing Date).
9.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the Required Lenders
or cured to the satisfaction of the Required Lenders (pursuant to the voting
procedures in Section 11.6), the Agent shall, upon the request and direction of
the Required Lenders, by written notice to the Borrowers, take any of the
following actions without prejudice to the rights of the Agent or any Lender to
enforce its claims against the Credit Parties, except as otherwise specifically
provided for herein:
(i) Termination of Commitments. Declare the Commitments terminated
whereupon the Commitments shall be immediately terminated.
(ii) Acceleration of Loans. Declare the unpaid principal of and any
accrued interest in respect of all Loans and any and all other indebtedness
or obligations of any and every kind owing by the Borrowers to any of the
Lenders hereunder to be due whereupon the same shall be immediately due and
payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers.
(iii) Enforcement of Rights. Enforce any and all rights and interests
created and existing under the Credit Documents and all rights of set-off.
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Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all accrued interest in respect thereof, all accrued and unpaid fees and
other indebtedness or obligations owing to the Lenders hereunder shall
immediately become due and payable without the giving of any notice or other
action by the Agent or the Lenders and the Credit Parties will be required to
pay on the guaranty hereunder.
SECTION 10
AGENCY PROVISIONS
10.1 APPOINTMENT.
Each Lender hereby designates and appoints NationsBank, N.A. as
administrative agent (in such capacity hereunder, the "Agent") of such Lender to
act as specified herein and the other Credit Documents, and each such Lender
hereby authorizes the Agent, as the agent for such Lender, to take such action
on its behalf under the provisions of this Credit Agreement and the other Credit
Documents and to exercise such powers and perform such duties as are expressly
delegated by the terms hereof and of the other Credit Documents, together with
such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere herein and in the other Credit Documents,
the Agent shall not have any duties or responsibilities, except those expressly
set forth herein and therein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Credit Agreement or any of the other Credit
Documents, or shall otherwise exist against the Agent. The provisions of this
Section (other than Section 10.9) are solely for the benefit of the Agent and
the Lenders, and the Borrowers and the other Credit Parties shall not have any
rights as a third party beneficiary of the provisions hereof. In performing its
functions and duties under this Credit Agreement and the other Credit Documents,
the Agent shall act solely as agent of the Lenders and does not assume and shall
not be deemed to have assumed any obligation or relationship of agency or trust
with or for either Borrower or any other Credit Party.
10.2 DELEGATION OF DUTIES.
The Agent may execute any of its duties hereunder or under the other Credit
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
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10.3 EXCULPATORY PROVISIONS.
Neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
herewith or in connection with any of the other Credit Documents (except for its
or such Person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any of the Credit Parties contained herein
or in any of the other Credit Documents or in any certificate, report, statement
or other document referred to or provided for in, or received by the Agent under
or in connection herewith or in connection with the other Credit Documents, or
for any failure of the Borrowers to perform their obligations hereunder or
thereunder. The Agent shall not be responsible to any Lender for the
effectiveness, genuineness, validity, enforceability, collectability or
sufficiency of this Credit Agreement, or any of the other Credit Documents or
for any representations, warranties, recitals or statements made herein or
therein or made by the Borrowers or any Credit Party in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Agent to the Lenders or by or on behalf of the Credit
Parties to the Agent or any Lender or be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or of the existence or possible existence of any Default
or Event of Default or to inspect the properties, books or records of the Credit
Parties.
10.4 RELIANCE ON COMMUNICATIONS.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrowers or any of the other Credit Parties,
independent accountants and other experts selected by the Agent with reasonable
care). The Agent may deem and treat the Lenders as the owner of their respective
interests hereunder for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Agent in
accordance with Section 11.3(b) hereof. The Agent (solely in its capacity as the
Agent) shall be fully justified in failing or refusing to take any action under
this Credit Agreement or under any of the other Credit Documents unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or under any
of the other Credit Documents in accordance with a request of the Required
Lenders (or to the extent specifically provided in Section 11.6, all the
Lenders)
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and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders (including their successors and assigns).
10.5 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless the Agent has received
notice from a Lender or a Credit Party referring to the Credit Document,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Agent receives such a notice, the
Agent shall give prompt notice thereof to the Lenders. The Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders.
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agent or any
affiliate thereof hereafter taken, including any review of the affairs of the
Borrowers, shall be deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that it has,
independently 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
appraisal of and investigation into the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Borrowers
and made its own decision to make its Loans hereunder and enter into this Credit
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Agent 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 analysis, appraisals and decisions in taking or not taking action under
this Credit Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Borrowers. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, assets, property, financial or other
conditions, prospects or creditworthiness of the Borrowers which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
10.7 INDEMNIFICATION.
The Lenders agree to indemnify the Agent in its capacity as such (to the
extent not reimbursed by the Borrowers or another Credit Party and without
limiting the obligation of the Borrowers or another Credit Party to do so),
ratably according to their respective Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
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judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including without limitation at any time following the payment
of the Credit Party Obligations ) be imposed on, incurred by or asserted against
the Agent in its capacities as such in any way relating to or arising out of
this Credit Agreement or the other Credit Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished. The agreements in this Section shall
survive the payment of the Credit Party Obligations and all other amounts
payable hereunder and under the other Credit Documents.
10.8 AGENT IN ITS INDIVIDUAL CAPACITY.
The Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrowers or any other Credit
Party as though the Agent were not Agent hereunder. With respect to the Loans
made and all Credit Party Obligations owing to it, the Agent shall have the same
rights and powers under this Credit Agreement as any Lender and may exercise the
same as though they were not Agent, and the terms "Lender" and "Lenders" shall
include the Agent in its individual capacity.
10.9 SUCCESSOR AGENT.
(a) The Agent may resign from the performance of all its functions and
duties hereunder at any time by giving fifteen (15) Business Day's prior
written notice to the Borrowers and the Lenders. Such resignation shall
take effect upon the appointment of a successor Agent pursuant to clause
(b) or (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Borrowers shall appoint a
successor Agent hereunder who shall be a commercial bank or trust company
reasonably acceptable to the Required Lenders (it being understood and
agreed that any Lender is deemed to be acceptable to the Required Lenders),
provided that if a Default or an Event of Default exists at the time of
such resignation, the Required Lenders shall appoint such successor Agent.
(c) If a successor Agent shall not have been so appointed within such
fifteen (15) Business Day period, the Agent, with the consent of the
Borrowers, shall then appoint a successor Agent who shall serve as the
Agent hereunder until such time, if any, as the Borrowers or Required
Lenders, as the case may be, appoint a successor Agent as provided above.
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(d) Upon the acceptance of any appointment as Agent hereunder by a
successor, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the resigning
Agent, and the resigning Agent shall be discharged from its duties and
obligations as Agent, as appropriate, under this Credit Agreement and the
other Credit Documents and the provisions of this Section 10 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it
was Agent under this Credit Agreement.
10.10 CO AGENTS.
The Co-Agents, in such capacity, shall have no duties, liabilities,
obligations or rights under this Credit Agreement.
SECTION 11
MISCELLANEOUS
11.1 NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (iv)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case to the respective parties at
the address, in the case of the Borrower and the Agent, set forth below, and in
the case of the Lenders, set forth on Schedule 11.1, or at such other address as
such party may specify by written notice to the other parties hereto:
if to the Credit Parties:
c/o Promus Hotels, Inc.
755 Crossover Lane
Memphis, Tennessee 38117
Attn: Carol G. Champion
Telephone: (901) 374-5380
Telecopy: (901) 374-5379
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if to the Agent:
NationsBank, N.A.
Independence Center, 15th Floor
NC1-001-15-04
101 N. Tryon Street
Charlotte, North Carolina 28255
Attn: Agency Services
Telephone: (704) 386-9368
Telecopy: (704) 386-9923
11.2 RIGHT OF SET-OFF.
In addition to any rights now or hereafter granted under applicable law or
otherwise, and not by way of limitation of any such rights, upon the occurrence
of an Event of Default, each Lender is authorized at any time and from time to
time, without presentment, demand, protest or other notice of any kind (all of
which rights being hereby expressly waived), to set-off and to appropriate and
apply any and all deposits (general or special) and any other indebtedness at
any time held or owing by such Lender (including, without limitation, branches,
agencies or affiliates of such Lender which are at least 50% owned by such
Lender or its parent company wherever located) to or for the credit or the
account of either Borrower against obligations and liabilities of such Borrower
to such Lender hereunder, under the Notes, the other Credit Documents or
otherwise, irrespective of whether such Lender shall have made any demand
hereunder and although such obligations, liabilities or claims, or any of them,
may be contingent or unmatured, and any such set-off shall be deemed to have
been made immediately upon the occurrence of an Event of Default even though
such charge is made or entered on the books of such Lender subsequent thereto.
The Borrowers hereby agree that any Person purchasing a participation in the
Loans and Commitments hereunder pursuant to Section 11.3(c) or Section 3.12 may
exercise all rights of set-off with respect to its participation interest as
fully as if such Person were a Lender hereunder.
11.3 BENEFIT OF AGREEMENT.
(a) Generally. This Credit Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided that the Borrowers may not assign
or transfer any of their interests without prior written consent of the
Lenders; provided further that the rights of each Lender to transfer,
assign or grant participations in its rights and/or obligations hereunder
shall be limited as set forth in this Section 11.3, provided, however, that
nothing herein shall prevent or prohibit any Lender from (i) pledging its
Loans hereunder to a Federal Reserve Bank in support of borrowings made by
such Lender from such Federal Reserve Bank and (ii) granting assignments or
participations in such Lender's Loans and/or Commitments hereunder to its
parent company and/or to any affiliate of such Lender
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which is at least fifty percent (50%) owned by such Lender or its parent
company. To the extent required in connection with a pledge of Loans by any
Lender to a Federal Reserve Bank, the Borrowers agree that, upon request of
any such Lender, it will promptly provide such Lender a promissory note
evidencing the repayment obligations of the Borrowers with respect to the
principal of and interest on the Loans of such Lender arising under Section
2.1, 2.2, 2.3 and/or 2.4, as applicable, such promissory note to be in a
form reasonably satisfactory to the Borrowers and the applicable Lender.
(b) Assignments by Lenders. Each Lender may assign all or a portion of
its rights and obligations hereunder and under the Tranche A Credit
Agreement pursuant to an assignment agreement substantially in the form of
Schedule 11.3(b) to one or more Eligible Assignees, provided that any such
assignment shall be in a minimum aggregate amount of $10,000,000 (or, if
less, an amount equal to 100% of the Commitment held by such Lender) of the
Commitment, together with the portion of the commitment under the Tranche A
Credit Agreement being assigned, and in integral multiples of $1,000,000
above such amount, and that each such assignment shall be of a constant,
and not a varying, percentage of all of the assigning Lender's rights and
obligations under this Credit Agreement and under the Tranche A Credit
Agreement; provided, however, that so long as NationsBank, N.A. is the
Agent hereunder, NationsBank, N.A. and its affiliates which are at least
50% owned by NationsBank, N.A., or its parent company, as a group, shall
continue to hold Commitments hereunder and under the Tranche A Credit
Agreement in a minimum aggregate amount of $40,000,000 at all times. Any
assignment hereunder shall be effective upon delivery to the Agent of
written notice of the assignment together with a transfer fee of $3,500
payable to the Agent for its own account; provided that no such transfer
fee shall be payable in connection with an assignment by any Lender to its
affiliates which are at least 50% owned by such Lender or its parent
company. The assigning Lender will give prompt notice to the Agent and the
Borrowers of any such assignment. Upon the effectiveness of any such
assignment (and after notice to the Borrowers as provided herein), the
assignee shall become a "Lender" for all purposes of this Credit Agreement
and the other Credit Documents and, to the extent of such assignment, the
assigning Lender shall be relieved of its obligations hereunder to the
extent of the Loans and Commitment components being assigned. By executing
and delivering an assignment agreement in accordance with this Section
11.3(b), 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 and clear
of any adverse claim; (ii) except as set forth in clause (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 Credit Agreement, any of
the other Credit Documents or any other instrument or document furnished
pursuant hereto or thereto, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit Agreement,
any of the other Credit Documents or any other instrument or document
furnished pursuant
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hereto or thereto or the financial condition of any Credit Party or the
performance or observance by any Credit Party of any of its obligations
under this Credit Agreement, any of the other Credit Documents or any other
instrument or document furnished pursuant hereto or thereto; (iii) such
assignee represents and warrants that it is legally authorized to enter
into such assignment agreement; (iv) such assignee confirms that it has
received a copy of this Credit Agreement, the other Credit Documents and
such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such assignment
agreement; (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 Credit Agreement and the other Credit Documents; (vi) such
assignee appoints and authorizes the Agent to take such action on its
behalf and to exercise such powers under this Credit Agreement or any other
Credit Document as are delegated to the Agent by the terms hereof or
thereof, 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 Credit Agreement
and the other Credit Documents are required to be performed by it as a
Lender.
(c) Participations. Each Lender may sell, transfer, grant or assign
participations in all or any part of such Lender's interests and
obligations hereunder to one or more Eligible Participants; provided that
(i) such selling Lender shall remain a "Lender" for all purposes under this
Credit Agreement and the other Credit Documents (such selling Lender's
obligations under this Credit Agreement remaining unchanged) and the
participant shall not constitute a Lender hereunder, (ii) no such
participant shall have, or be granted, rights to approve any amendment or
waiver relating to this Credit Agreement or any of the other Credit
Documents except with respect to any such amendment or waiver which would,
under the terms of Section 11.6, require the consent of all of the Lenders,
and (iii) any such participations (including subparticipations) shall be in
a minimum aggregate amount of $5,000,000 of the Commitments and in integral
multiples of $1,000,000 in excess thereof. In the case of any such
participation, the participant shall not have any rights under this Credit
Agreement or under any of the other Credit Documents (the participant's
rights against the selling Lender in respect of such participation to be
those set forth in the participation agreement with such Lender creating
such participation) and all amounts payable by the Borrowers hereunder
shall be determined as if such Lender had not sold such participation,
provided, however, that such participant shall be entitled to receive
additional amounts under Sections 3.5 and 3.8 on the same basis as if it
were a Lender (limited to the extent that the selling Lender would be able
to receive additional amounts under Sections 3.5 and 3.8); provided,
further, in the event such participant exercises any rights under Sections
3.5 or 3.8, the Borrowers shall be permitted to exercise their rights
pursuant to Section 3.15 with respect to the selling Lender.
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(d) Disclosure of Confidential Information. (i) Any Lender may, in
connection with any assignment pursuant to paragraph (b) above or a
participation pursuant to paragraph (c) above, disclose to the assignee or
the proposed assignee or the participant or the proposed participant any
information relating to the Credit Parties in connection with this Credit
Agreement, provided that, prior to any such disclosure each such assignee
or proposed assignee or participant or proposed participant shall execute
an agreement containing substantially the terms of all then existing
confidentiality agreements entered into by the assigning or selling Lender
with respect to the Parent Company, Old PHC, the Borrowers and their
Subsidiaries in connection with this Credit Agreement, in each case whereby
such assignee or proposed assignee or participant or proposed participant
shall agree to preserve the confidentiality of any non-public, confidential
or proprietary information relating to the Credit Parties.
(e) Designated Lender. Any Lender may at any time designate not more
than one Designated Lender to fund Committed Revolving Loans and/or
Competitive Loans on behalf of such Lender subject to the terms of this
Section 11.3(e) and the provisions of Section 11.3(b) hereof shall not
apply to such designation; provided that each Designated Lender which is a
non-U.S. Lender shall comply with all of the provisions of Section 3.9
hereof. No Lender may have more than one Designated Lender at any time.
Such designation may occur either by the execution of the signature pages
hereof by such Lender and Designated Lender next to the appropriate
"Designating Lender" and "Designated Lender" captions, or by execution by
such parties of a Designation Agreement subsequent to the date hereof;
provided, that any Lender and its Designated Lender executing the signature
pages hereof as "Designating Lender" and "Designated Lender," respectively,
on the date hereof shall be deemed to have executed a Designation
Agreement, and shall be bound by the respective representations, warranties
and covenants contained therein, and such designation shall be conclusively
deemed to be accepted by the Borrowers and the Agent. The parties to each
such designation occurring subsequent to the execution date hereof shall
execute and deliver to the Agent and the Borrowers for their acceptance a
Designation Agreement. Upon such receipt of an appropriately completed
Designation Agreement executed by a Designating Lender and a designee
representing that it is a Designated Lender and consented to by the
Borrowers, the Agent will accept such Designation Agreement and will give
prompt notice thereof to the Borrowers and the other Lenders, whereupon,
(i) from and after the effective date specified in the Designation
Agreement, the Designated Lender shall become a party to this Credit
Agreement with a right to make Committed Revolving Loans and Competitive
Loans on behalf of its Designating Lender pursuant to Sections 2.1 and 2.4,
respectively, (ii) if so requested by such Designated Lender, the Borrowers
shall execute and deliver to such Designated Lender a promissory note in
accordance with the terms hereof, and (iii) the Designated Lender shall not
be required to make payments with respect to any obligations and
liabilities in this Credit Agreement except to the extent of excess cash
flow of such Designated Lender which is not otherwise required to repay
obligations of such Designated Lender which are then due and payable;
provided, however, that
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<PAGE> 79
regardless of such designation and assumption by the Designated Lender, the
Designating Lender shall be and remain obligated to the Borrowers, the
Agent and the Lenders for each and every of the obligations of the
Designating Lender and its related Designated Lender with respect to this
Credit Agreement, including, without limitation, any actions taken by the
Designated Lender with respect to this Credit Agreement, any
indemnification obligations hereunder and any sums otherwise payable to the
Borrowers by the Designated Lender. Each Designating Lender, or a specified
branch or affiliate thereof, shall serve as the administrative agent of its
Designated Lender and shall on behalf of its Designated Lender: (i) receive
any and all payments made for the benefit of such Designated Lender and
(ii) give and receive all communications and notices and take all actions
hereunder, including, without limitation, votes, approvals, waivers,
consents and amendments under or relating to this Credit Agreement and the
other Credit Documents. No designation of a Designated Lender hereunder
shall have the effect of restricting the exercise of voting rights
hereunder. Any such notice, communication, vote, approval, waiver, consent
or amendment shall be signed by a Designating Lender, or specified branch
or affiliate thereof, as administrative agent for its Designated Lender and
need not be signed by such Designated Lender on its own behalf. The
Borrowers, the Agent and the Lenders may rely thereon without any
requirement that the Designated Lender sign or acknowledge the same. No
Designated Lender may assign or transfer all or any portion of its interest
hereunder or under any other Credit Document, other than via an assignment
to its Designating Lender, or otherwise in accordance with the provisions
of Section 11.3(b) or 11.3(c) hereof. All amounts payable by the Borrowers
hereunder shall be determined as if the Designating Lender had not
designated a Designated Lender; provided, however, that the Designated
Lender shall be entitled to receive additional amounts under Sections 3.5
and 3.8 on the same basis as if it were the Designating Lender (limited to
the extent that the Designating Lender would be able to receive additional
amounts under Sections 3.5 and 3.8); provided, further, that in the event
the Designated Lender exercises any rights under Sections 3.5 or 3.8, the
Borrowers shall be permitted to exercise their rights pursuant to Section
3.15 with respect to the Designating Lender.
11.4 NO WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Agent or any Lender in exercising
any right, power or privilege hereunder or under any other Credit Document and
no course of dealing between any Credit Party and the Agent or any Lender shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights and remedies provided herein
are cumulative and not exclusive of any rights or remedies which the Agent or
any Lender would otherwise have. No notice to or demand on any Credit Party in
any case shall entitle any Credit Party to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights
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<PAGE> 80
of the Agent or the Lenders to any other or further action in any circumstances
without notice or demand.
11.5 PAYMENT OF EXPENSES, ETC.
The Borrowers agree to: (i) pay all reasonable out-of-pocket costs and
expenses of the Agent in connection with the negotiation, preparation, execution
and delivery and administration (but as to administration, only administration
of the credit as among the Agent, the Borrowers, the other Credit Parties and
the Lenders and not as to any internal administration within the Agent) of this
Credit Agreement and the other Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and expenses of Moore & Van Allen, special counsel to the Agent) and any
amendment, waiver or consent relating hereto and thereto requested or required
by the Borrowers including, but not limited to, any such amendments, waivers or
consents resulting from or related to any work-out, renegotiation or restructure
relating to the performance by the Borrowers under this Credit Agreement and of
the Agent and the Lenders in connection with enforcement of the Credit Documents
and the documents and instruments referred to therein (including, without
limitation, in connection with any such enforcement, the reasonable fees and
disbursements of counsel for the Agent and each of the Lenders) provided, that
for the purposes of this Credit Agreement, "reasonable attorneys' fees" shall be
limited by the actual attorneys' fees incurred by a party without application of
N.C. Gen. Stat. Section 6-21.2 and without any presumption that such reasonable
attorneys' fees shall be a fixed percentage of the Commitments; (ii) pay and
hold each of the Lenders harmless from and against any and all present and
future stamp, documentary and mortgage recording taxes and other similar taxes
with respect to the foregoing matters and save each of the Lenders harmless from
and against any and all liabilities with respect to or resulting from any delay
or omission (other than to the extent attributable to such Lender) to pay such
taxes; and (iii) indemnify each Lender, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses incurred by any of them as
a result of, or arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or not any Lender is a
party thereto) related to the entering into and/or performance of any Credit
Document or the use of proceeds of any Loans (including other extensions of
credit) hereunder or the consummation of any other transactions contemplated in
any Credit Document, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of gross negligence
or willful misconduct on the part of the Person to be indemnified).
11.6 AMENDMENTS, WAIVERS AND CONSENTS.
(a) Neither this Credit Agreement nor any other Credit Document nor
any of the terms hereof or thereof may be amended, changed, waived,
discharged or terminated unless such amendment, change, waiver, discharge
or termination is in writing signed by
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<PAGE> 81
the Required Lenders, provided that no such amendment, change, waiver,
discharge or termination shall, without the consent of each Lender
affected, (i) extend the Termination Date (except in accordance with the
provisions hereof) or reduce the rate or extend the time of payment of
interest or principal (other than as a result of waiving the applicability
of any post-default increase in interest rates) on any Loan or portion
thereof or fees hereunder or reduce the principal amount thereof, or
increase the Commitment of any such Lender over the amount thereof in
effect (it being understood and agreed that a waiver of any condition for
an Extension of Credit, Default or Event of Default or of a mandatory
reduction in the total commitments shall not constitute a change in the
terms of any Commitment of any Lender and any increase in Commitment made
pursuant to Section 2.1(f) hereof shall not require the consent of any
Lender other than the increasing Lender or Lenders), (ii) release any
Guarantor from its guaranty obligations hereunder except in accordance with
the provisions of Section 8.3 hereof, (iii) amend, modify or waive any
provision of this Section or of Section 3.3(c) (provided that any Lender to
be terminated pursuant to Section 3.3(c) shall not be required to consent
to any such amendment, modification or waiver of Section 3.3(c) necessary
to effect such termination), (iv) reduce any percentage specified in, or
otherwise modify, the definition of Required Lenders, or (v) consent to the
assignment or transfer by any Credit Party of any of its rights and
obligations under (or in respect of) this Credit Agreement or other Credit
Documents except as permitted hereunder. No provision of Section 10 may be
amended without the consent of the Agent.
(b) If, in connection with any proposed change, waiver, discharge or
termination of any of the provisions of this Agreement as contemplated by
subclauses (i) through (iv), inclusive, of clause (a) above, the consent of
the Required Lenders is obtained but the consent of one or more of such
other Lenders whose consent is required is not obtained, the Borrowers
shall have the right (so long as all non-consenting Lenders whose
individual consent is required are treated as described in either clauses
(A) or (B) below) to either (A) replace each such non-consenting Lender or
Lenders with one or more Replacement Lenders pursuant to Section 3.15 so
long as at the time of such replacement, each such Replacement Lender
consents to the proposed change, waiver, discharge or termination or (B)
terminate such non-consenting Lender's Commitment and repay all outstanding
Loans of such Lender in accordance with Sections 3.3(c) and 3.3(f),
provided that, unless the Commitments terminated and Loans repaid pursuant
to the preceding clause (B) are immediately replaced in full at such time
through the addition of new Lenders or the increase of the Commitments
and/or outstanding Loans of existing Lenders (who in each case must
specifically consent to any such increase), then in the case of any action
pursuant to the preceding clause (B), subject to the following proviso, the
Required Lenders (determined before giving effect to the proposed action)
shall specifically consent to such termination of Commitment and repayment
of Loans, provided further, notwithstanding the foregoing proviso, each of
the Lenders (other than the Lender whose Commitment is being terminated)
shall specifically consent to such termination of Commitment and repayment
of Loans if the aggregate amount of
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<PAGE> 82
Commitments terminated pursuant to this Section 11.6(b) (including the
proposed termination) plus the aggregate amount of Commitments terminated
pursuant to Section 2.1(a) plus the aggregate amount of Commitments
terminated pursuant to Section 3.17 shall exceed $35,000,000, provided
further, that in any event the Borrowers shall not have the right to
replace a Lender, terminate its Commitment or repay its Loans solely as a
result of the withholding of any required consent by such Lender to any
increase in the Commitment of such Lender.
11.7 COUNTERPARTS.
This Credit Agreement may be executed in any number of counterparts, each
of which where so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
11.8 HEADINGS.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 SURVIVAL OF INDEMNIFICATION.
All indemnities set forth herein, including, without limitation, in
Sections 3.5, 3.8, 3.9, 3.10, 3.14, 10.7 and 11.5 shall survive the execution
and delivery of this Credit Agreement, and the making of the Loans, the
repayment of the Credit Party Obligations and other obligations and the
termination of the Commitment hereunder.
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NORTH CAROLINA. Any legal action or proceeding with respect to
this Credit Agreement or any other Credit Document may be brought in the
courts of the State of North Carolina in Mecklenburg County, or of the
United States for the Western District of North Carolina, and, by execution
and delivery of this Credit Agreement, each of the Credit Parties hereby
irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of such courts. Each of the Credit
Parties further irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid,
to it at the address set out for notices pursuant to Section
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<PAGE> 83
11.1, such service to become effective 30 days after such mailing. Nothing
herein shall affect the right of the Agent to serve process in any other
manner permitted by law or to commence legal proceedings or to otherwise
proceed against the Borrower in any other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Credit Agreement or any other Credit Document brought in the courts
referred to in subsection (a) hereof and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient
forum.
(c) EACH OF THE AGENTS, EACH OF THE LENDERS AND EACH OF THE CREDIT
PARTIES HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER
CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.11 SEVERABILITY.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 ENTIRETY.
This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.
11.13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made by the Borrowers herein shall
survive delivery of the Notes and the making of the Loans hereunder.
11.14 KNOWLEDGE STANDARD.
As used herein, the phrase "to the knowledge of any Credit Party" or any
similar phrase shall mean the knowledge of any of the following persons (with
such persons' titles following
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<PAGE> 84
the Closing Date): Raymond E. Schultz, CEO and Chairman; Richard M. Kelleher,
President and COO; William L. Perocchi, Executive V.P. and CFO; Ralph B. Lake,
Executive V.P., General Counsel and Secretary; Thomas L. Keltner, Executive V.P.
and Chief Development Officer; and Carol G. Champion, Vice President and
Treasurer; or any other person succeeding to the responsibilities of any such
individual.
11.15 CONFIDENTIALITY.
Each Lender agrees that it will use its best efforts not to disclose
without the prior consent of the Borrowers (other than to its employees,
auditors or counsel) any information with respect to the Parent Company or any
of its Subsidiaries which is now or in the future furnished pursuant to this
Agreement or any other Credit Document and which is designated by the Parent
Company or any of its Subsidiaries as confidential, provided that any Lender may
disclose any such information (a) as has become generally available to the
public, (b) as may be required in any report, statement or testimony submitted
to any municipal, state or Federal regulatory body having or claiming to have
jurisdiction over such Lender (including bank examiners) or to the Federal
Reserve Board or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their successors,
(c) as may be required in respect to any summons or subpoena or in connection
with any investigation by a Governmental Authority or litigation, (d) in order
to comply with any law, order, regulation or ruling applicable to such Lender,
and (e) to any prospective or actual transferee or participant of any rights and
interests hereunder provided such prospective transferee or participant executes
an agreement containing provisions substantially identical to those contained in
this Section.
11.16 AGENT'S AND LENDER'S COVENANT.
The Agent and each Lender hereby covenants that neither any Extension of
Credit nor any part of any Extension of Credit constitutes assets of an
"employment benefit plan" within the meaning of Section 3(3) of ERISA or a
"plan" within the meaning of Section 4975(e)(1) of the Code.
11.17 CONCERNING JOINT AND SEVERAL LIABILITY OF THE BORROWERS.
(a) Each of the Borrowers is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided by
the Lenders under this Credit Agreement, for the mutual benefit, directly
and indirectly, of each of the Borrowers and in consideration of the
undertakings of each of the Borrowers to accept joint and several liability
for the obligations of each of them.
(b) Each of the Borrowers jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Borrower with respect to the
payment and performance of all of the Credit Party Obligations, it being
the intention of the parties hereto that all the Credit
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<PAGE> 85
Party Obligations shall be the joint and several obligations of each of
the Borrowers without preferences or distinction between them.
(c) If and to the extent that either of the Borrowers shall fail to
make any payment with respect to any of the Credit Party Obligations as and
when due or to perform any of the Credit Party Obligations in accordance
with the terms thereof, then in each such event, the other Borrower will
make such payment with respect to, or perform, such Credit Party
Obligation.
(d) The obligations of each Borrower under the provisions of this
Section 11.17 constitute full recourse obligations of such Borrower,
enforceable against it to the full extent of its properties and assets,
irrespective of the validity, regularity or enforceability of this Credit
Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided herein or required by
applicable law, each Borrower hereby waives notice of acceptance of its
joint and several liability, notice of the other Borrower's request for any
Loan under this Credit Agreement, notice of any Loan made under this Credit
Agreement, notice of occurrence of any Event of Default, or of any demand
for any payment under this Credit Agreement, notice of any action at any
time taken or omitted by any Lender under or in respect of any of the
Credit Party Obligations, any requirement of diligence and, generally, all
demands, notices and other formalities of every kind in connection with
this Credit Agreement. Each Borrower hereby assents to, and waives notice
of, any extension or postponement of the time for the payment of any of the
Credit Party Obligations, the acceptance of any partial payment thereon,
any waiver, consent or other action or acquiescence by any Lender at any
time or times in respect of any default by either Borrower in the
performance or satisfaction of any term, covenant, condition or provision
of this Credit Agreement, any and all other indulgences whatsoever by any
Lender in respect of any of the Credit Party Obligations, and the taking,
addition, substitution or release, in whole or in part, at any time or
times, of any security for any of the Credit Party Obligations or the
addition, substitution or release, in whole or in part, of either Borrower.
Without limiting the generality of the foregoing, each Borrower assents to
any other action or delay in acting or failure to act on the part of any
Lender, including, without limitation, any failure strictly or diligently
to assert any right or to pursue any remedy which might, but for the
provisions of this Section 11.17, afford grounds for terminating,
discharging or relieving such Borrower, in whole or in part, from any of
its obligations under this Section 11.17, it being the intention of each
Borrower that, so long as any of the Credit Party Obligations remain
unsatisfied, the obligations of such Borrower under this Section 11.17
shall not be discharged except by performance and then only to the extent
of such performance. The Credit Party Obligations of each Borrower under
this Section 11.17 shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, reconstruction or
similar proceeding with respect to either Borrower or any Lender. The joint
and several liability of the Borrowers hereunder shall continue in full
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force and effect notwithstanding any absorption, merger, amalgamation or
any other change whatsoever in the name, membership, constitution or place
of formation of either Borrower or any Lender.
(f) The provisions of this Section 11.17 are made for the benefit of
the Lenders and their respective successors and assigns, and may be
enforced by any such Person from time to time against either of the
Borrowers as often as occasion therefor may arise and without requirement
on the part of any Lender first to marshal any of its claims or to exercise
any of its rights against the other Borrower or to exhaust any remedies
available to it against the other Borrower or to resort to any other source
or means of obtaining payment of any of the Credit Party Obligations or to
elect any other remedy. The provisions of this Section 11.17 shall remain
in effect until all the Credit Party Obligations shall have been paid in
full or otherwise fully satisfied. If at any time, any payment, or any part
thereof, made in respect of any of the Credit Party Obligations, is
rescinded or must otherwise be restored or returned by any Lender upon the
insolvency, bankruptcy or reorganization of either of the Borrowers, or
otherwise, the provisions of this Section 11.17 will forthwith be
reinstated in effect, as though such payment had not been made.
(g) Notwithstanding any provision to the contrary contained herein or
in any other of the Credit Documents, to the extent the joint obligations
of either Borrower shall be adjudicated to be invalid or unenforceable for
any reason (including, without limitation, because of any applicable state
or federal law relating to fraudulent conveyances or transfers) then the
obligations of each Borrower hereunder shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state
and including, without limitation, the federal Bankruptcy Code).
(h) The Borrowers hereby agree, as among themselves, that if either
Borrower shall become an Excess Funding Borrower (as defined below), the
other Borrower shall, on demand of such Excess Funding Borrower (but
subject to the next sentence hereof and to subsection (B) below), pay to
such Excess Funding Borrower an amount equal to such Borrower's Pro Rata
Share (as defined below and determined, for this purpose, without reference
to the properties, assets, liabilities and debts of such Excess Funding
Borrower) of such Excess Payment (as defined below). The payment obligation
of either Borrower to any Excess Funding Borrower under this Section
11.17(h) shall be subordinate and subject in right of payment to the prior
payment in full of the obligations of such Borrower under the other
provisions of this Credit Agreement, and such Excess Funding Borrower shall
not exercise any right or remedy with respect to such excess until payment
and satisfaction in full of all of such obligations. For purposes hereof,
(i) "Excess Funding Borrower" shall mean, in respect of any Credit Party
Obligations arising under the other provisions of this Credit Agreement
(hereafter, the "Joint Obligations"), either Borrower that has paid an
amount in excess of its Pro Rata Share of the Joint Obligations; (ii)
"Excess Payment" shall mean, in respect of any Joint Obligations, the
amount paid by
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an Excess Funding Borrower in excess of its Pro Rata Share of such Joint
Obligations; and (iii) "Pro Rata Share", for the purposes of this Section
11.17(h), shall mean, for either Borrower, the ratio (expressed as a
percentage) of (A) the amount by which the aggregate present fair saleable
value of all of its assets and properties exceeds the amount of all debts
and liabilities of such Borrower (including contingent, subordinated,
unmatured, and unliquidated liabilities, but excluding the obligations of
such Borrower hereunder) to (B) the amount by which the aggregate present
fair saleable value of all assets and other properties of such Borrower and
the other Borrower exceeds the amount of all of the debts and liabilities
(including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of such Borrower and the other
Borrower hereunder) of such Borrower and the other Borrower, all as of the
Closing Date.
11.18 NO BANKRUPTCY PROCEEDINGS.
Each of the Company, the Borrower, the Guarantors and the Agent agrees that
it will not institute against any Designated Lender or join any other Person in
instituting against any Designated Lender any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding under any federal or state
bankruptcy or similar law, for one year and one day after the payment in full of
the latest maturing commercial paper note issued by such Designated Lender.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Tranche B Credit Agreement to be duly executed and delivered as of the
date first above written.
BORROWERS:
PROMUS HOTELS, INC.,
a Delaware corporation
By
------------------------------------
Title
--------------------------------
DOUBLETREE CORPORATION,
a Delaware corporation
By
------------------------------------
Title
--------------------------------
GUARANTORS: PROMUS HOTEL CORPORATION
(f/k/a Parent Holding Corp.),
a Delaware corporation
By
------------------------------------
Title
--------------------------------
PROMUS OPERATING COMPANY, INC.
(f/k/a Promus Acquisition Corp. f/k/a Promus Hotel
Corporation), a Delaware corporation
By
------------------------------------
Title
--------------------------------
<PAGE> 89
LENDERS:
NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as Agent
By:
------------------------------------
Title:
--------------------------------
BANKERS TRUST COMPANY,
individually in its capacity as a
Lender and in its capacity as a Co-Agent
By:
------------------------------------
Title:
--------------------------------
THE BANK OF NOVA SCOTIA,
individually in its capacity as a
Lender and in its capacity as a Co-Agent
By:
------------------------------------
Title:
--------------------------------
CANADIAN IMPERIAL BANK OF COMMERCE,
individually in its capacity as a
Lender and in its capacity as a Co-Agent
By:
------------------------------------
Title:
--------------------------------
<PAGE> 90
THE BANK OF NEW YORK
By:
------------------------------------
Title:
--------------------------------
THE CHASE MANHATTAN BANK
By:
------------------------------------
Title:
--------------------------------
CREDIT LYONNAIS NEW YORK BRANCH
By:
------------------------------------
Title:
--------------------------------
FIRST UNION NATIONAL BANK
By:
------------------------------------
Title:
--------------------------------
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
------------------------------------
Title:
--------------------------------
<PAGE> 91
WACHOVIA BANK, N.A.
By:
------------------------------------
Title:
--------------------------------
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
By:
------------------------------------
Title:
--------------------------------
By:
------------------------------------
Title:
--------------------------------
SUNTRUST BANK, NASHVILLE, N.A.
By:
------------------------------------
Title:
--------------------------------
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:
------------------------------------
Title:
--------------------------------
<PAGE> 92
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLANDS BRANCH
By:
------------------------------------
Title:
--------------------------------
FIRST AMERICAN NATIONAL BANK
By:
------------------------------------
Title:
--------------------------------
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
------------------------------------
Title:
--------------------------------
KEYBANK NATIONAL ASSOCIATION
By:
------------------------------------
Title:
--------------------------------
<PAGE> 93
KREDIETBANK N.V., GRAND CAYMAN BRANCH
By:
------------------------------------
Title:
--------------------------------
By:
------------------------------------
Title:
--------------------------------
WELLS FARGO BANK, N.A.
By:
------------------------------------
Title:
--------------------------------
THE FIFTH THIRD BANK
By:
------------------------------------
Title:
--------------------------------
<PAGE> 1
Exhibit 11
PROMUS HOTEL CORPORATION
COMPUTATIONS OF PER SHARE EARNINGS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Income before extraordinary items $61,551 $90,658 $95,436
Extraordinary items, net of tax 2,819 - -
------- ------- -------
Net income $64,370 $90,658 $95,436
======= ======= =======
Basic Earnings per Share:
Weighted average outstanding shares 69,351 72,581 86,573
======= ======= =======
Income before extraordinary items $ 0.89 $ 1.25 $ 1.10
Extraordinary items, net 0.04 - -
------- ------- -------
Net income $ 0.93 $ 1.25 $ 1.10
======= ======= =======
Diluted Earnings per Share:
Weighted average outstanding shares 69,351 72,581 86,573
Effect of dilutive securities:
Restricted stock 38 14 15
Stock options and warrants 531 984 1,316
------- ------- -------
Weighted average shares assuming
conversion 69,920 73,579 87,904
======= ======= =======
Income before extraordinary items $ 0.88 $ 1.23 $ 1.09
Extraordinary items, net 0.04 - -
------- ------- -------
Net income $ 0.92 $ 1.23 $ 1.09
======= ======= =======
</TABLE>
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES
PROMUS HOTEL CORPORATION
<TABLE>
<CAPTION>
JURISDICTION PERCENTAGE DATE
OF OF OF FEIN
NAME INCORPORATION OWNERSHIP INCORPORATION NUMBER
---- ------------- --------- ------------- ------
<S> <C> <C> <C> <C>
Candlewood Hotel Company, Inc.* Delaware 27% 11/05/96 48-1188025
Doubletree Hotels Corporation Arizona 100% 06/01/73 86-0276041
Desert Sun Insurance Company Vermont 100% 08/06/97 04-3385464
Doubletree of Phoenix, Inc. Delaware 100% 07/08/69 86-0223721
DT Management, Inc. Arizona 100% 06/29/87 86-0594279
Arizona DTM Florida, Inc. Florida 100% 12/06/94 86-0827400
Arizona DTM Pasadena, Inc. California 100% 04/29/88 86-0607774
DTM Antlers, Inc. Arizona 100% 03/16/89 86-0636943
DTM Burlingame, Inc. Arizona 100% 02/09/90 93-1053497
DTM Cambridge, Inc. Massachusetts 100% 03/29/91 86-0678310
DTM Coconut Grove, Inc. Arizona 100% 05/28/87 86-0582711
DTM Largo, Inc. Arizona 100% 06/19/85 86-0636941
DTM Maryland, Inc. Arizona 100% 01/20/89 86-0575855
DTM Nashville, Inc. Arizona 100% 03/09/87 86-0575855
DTM Oklahoma, Inc. Arizona 100% 12/10/87 86-0596398
DTM Palm Springs, Inc. Arizona 100% 12/12/88 33-0413279
DTM St. Louis, Inc. Arizona 100% 04/22/85 86-0512992
DTM Salt Lake City, Inc. Utah 100% 11/26/86 86-0565966
DTM Santa Clara, Inc. Arizona 100% 04/12/83 86-0506691
DTM Tampa, Inc. Florida 100% 12/18/86 86-0565967
DTM Tulsa, Inc. Arizona 100% 03/30/82 86-0452247
DTM Ventura, Inc. Arizona 100% 06/29/87 86-0583712
DTM Walnut Creek, Inc. Arizona 100% 02/09/90 86-0653973
DT Real Estate, Inc. Arizona 100% 06/29/87 86-0594278
Compri Realty Corporation No. 1 Arizona 100% 01/06/84 86-0474442
DT Investments, Inc. Arizona 100% 06/21/66 86-0206735
DTR Cambridge, Inc. Arizona 100% 05/16/90 86-0659218
DTR FCH Holdings, Inc Arizona 100% 04/12/83 86-0506692
DTR Sonoran Holding, Inc. Arizona 100% 11/09/94 86-0803674
DTM Atlanta/Legacy, Inc. Arizona 100% 11/09/94 86-0803816
DTR Boston Heights, Inc. Arizona 80% 11/09/94 86-0803673
DTR Houston, Inc. Arizona 80% 11/09/94 86-0803672
DTR Independence, Inc. Arizona 100% 11/09/94 86-0803670
DTR North Canton, Inc. Arizona 100% 11/09/94 86-0803814
DTR PAH Holding, Inc. Arizona 100% 11/22/96 86-0843169
DTR San Antonio, Inc. Arizona 100% 11/09/94 86-0803669
Doubletree de Mexico, S.A. de C.V. Mexico 50% 09/26/95 -
DTR West Montrose, Inc. Arizona 100% 11/09/94 86-0803816
DTR TM Holdings, Inc. Arizona 100% 05/08/94 86-0358342
Doubletree Hotel Ventures, Inc. Arizona 100% 08/28/78 86-0538339
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
JURISDICTION PERCENTAGE DATE
OF OF OF FEIN
NAME INCORPORATION OWNERSHIP INCORPORATION NUMBER
---- ------------- --------- ------------- ------
<S> <C> <C> <C> <C>
Doubletree, Inc. of California Arizona 100% 08/12/70 86-0250743
Houston Airport Doubletree, Inc. Texas 100% 03/17/87 86-0575817
Scottsdale Plaza Doubletree, Inc. Arizona 100% 06/14/74 86-0289142
Tuk Inns, Inc. Washington 100% 06/14/74 86-0217030
Doubletree Hotel Systems, Inc. Arizona 100% 01/10/68 86-0630796
Compris Hotel Corporation Delaware 100% 02/06/89 86-0471065
DTR RFS Lessee, Inc. California 100% 11/01/85 86-0532314
Hotel Clubs of Corporate Woods, Inc. Kansas 100% 09/28/81 48-0930357
HOSCO Corporation Arizona 100% 01/06/84 86-0474308
INNCO Corporation Arizona 100% 01/09/84 83-0274645
Harrison Conference Associates, Inc. Delaware 100% 1967 -
Promus Operating Company, Inc. Delaware 100% 03/02/95 62-1596939
Promus Hotels, Inc. Delaware 100% 05/10/95 62-1602678
Buckleigh, Inc. Delaware 100% 08/24/87 74-2493006
Compass, Inc. Tennessee 100% 11/16/94 62-1590142
EJP Corporation Delaware 100% 10/31/91 62-1489071
Suite Life, Inc. Delaware 100% 07/11/86 75-2123392
Embassy Development Corporation Delaware 100% 08/24/87 74-2479161
Embassy Equity Development Corp. Delaware 100% 08/24/87 74-2479160
Embassy Syracuse Development Corp. Delaware 100% 03/06/91 62-1469277
Southfield Hotel Management, Inc.** Florida 100% 09/10/91 62-1476762
Embassy Memphis Corporation Tennessee 100% 12/03/92 62-1523545
Embassy Pacific Equity Corporation Delaware 100% 01/24/89 62-1401635
Embassy Suites Club No. 1, Inc. Kansas 100% 01/19/84 75-1947366
Embassy Suites Club No. Two, Inc. Texas 49% 03/13/84 75-1946866
Embassy Suites Club No. Three, Inc. Louisiana 100% 11/03/94 62-1584888
Embassy Suites de Mexico, S.A. DE*** Mexico 96% 08/01/90 -
Embassy Suites (Isla Verde), Inc. Delaware 100% 12/21/93 62-1555786
Embassy Suites (Puerto Rico), Inc. Delaware 100% 05/25/89 62-1395012
Embassy Vacation Resorts, Inc. Delaware 100% 03/03/94 62-1558894
EPAM Corporation Delaware 100% 01/24/89 62-1401630
ESI Mortgage Development Corporation Delaware 100% 04/10/89 62-1392204
ESI Mortgage Development Corporation II Delaware 100% 03/24/92 62-1522996
Hampton Inns, Inc. Delaware 100% 03/23/84 62-1194362
GOL (Texas), Inc. Texas 49% 02/28/89 75-2309742
Pacific Hotels, Inc. Tennessee 100% 11/03/88 62-1371344
ATM Hotels Pty Limited*** Australia 100% 05/25/90 -
Promus Hospitality Corporation Delaware 100% 08/17/94 62-1577257
Promus Hotel Services, Inc. Delaware 100% 05/12/95 62-1602738
Promus Hotels Florida, Inc. Delaware 100% 05/12/95 62-1602737
Promus Hotels Minneapolis, Inc. Delaware 100% 10/31/95 62-1619978
Red Lion Hotels, Inc. Delaware 100% 01/09/84 91-1634199
Betty MacWilliam & Company Texas 49% 03/29/94 76-0285192
Boise-Red Lion Downtowner, Inc. Idaho 100% 07/24/89 82-0371213
Boise-Red Lion Motor Inn, Inc. Idaho 100% 11/20/79 82-0371211
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
JURISDICTION PERCENTAGE DATE
OF OF OF FEIN
NAME INCORPORATION OWNERSHIP INCORPORATION NUMBER
---- ------------- --------- ------------- ------
<S> <C> <C> <C> <C>
Red Lion Hotel Systems, Inc. Arizona 100% 08/20/79 86-0880191
Red Lion Properties, Inc. Delaware 100% 06/20/97 91-1366134
SALC, Inc. Texas 100% 12/17/86 74-2782384
RFS, Inc. Tennessee 100% 10/10/79 62-1071048
RFS Leasing, Inc. Tennessee 100% 10/25/96 62-1659239
Samantha Hotel Corporation Delaware 100% 12/11/89 04-3070970
Harbor Hotel Corporation Delaware 100% 03/19/91 04-3148423
Ziwa Insurance, Inc. Vermont 100% 05/03/96 03-0351750
</TABLE>
*Candlewood Hotel Company, Inc. is publicly held (traded on NASDAQ).
Doubletree Corporation holds 2,587,500 of the 9,025,000 Candlewood shares
outstanding.
**In process of being dissolved
***50% Pacific Hotels, Inc., 50% Promus Hotels, Inc.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 4, 1998, included in the Form 10-K for the year
ended December 31, 1997, into the Company's previously filed Registration
Statements File Nos. 333-14023-01, 333-42603, 333-42605.
ARTHUR ANDERSEN LLP
Memphis, Tennessee
March 24, 1998
65
<TABLE> <S> <C>
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<S> <C>
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<PERIOD-END> DEC-31-1997
<CASH> 24,066
<SECURITIES> 0
<RECEIVABLES> 78,941
<ALLOWANCES> 0
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<CURRENT-ASSETS> 146,229
<PP&E> 1,086,239
<DEPRECIATION> 126,008
<TOTAL-ASSETS> 2,379,046
<CURRENT-LIABILITIES> 266,944
<BONDS> 671,978
0
0
<COMMON> 861
<OTHER-SE> 1,094,874
<TOTAL-LIABILITY-AND-EQUITY> 2,379,046
<SALES> 0
<TOTAL-REVENUES> 1,038,011
<CGS> 0
<TOTAL-COSTS> 854,109
<OTHER-EXPENSES> (43,330)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,027
<INCOME-PRETAX> 175,100
<INCOME-TAX> 79,664
<INCOME-CONTINUING> 95,436
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 95,436
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 29,288
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<RECEIVABLES> 69,246
<ALLOWANCES> 0
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<CURRENT-ASSETS> 118,227
<PP&E> 1,082,465
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<BONDS> 789,174
0
0
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<OTHER-EXPENSES> (4,439)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,647
<INCOME-PRETAX> 149,784
<INCOME-TAX> 59,126
<INCOME-CONTINUING> 90,658
<DISCONTINUED> 0
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<NET-INCOME> 90,658
<EPS-PRIMARY> 1.25
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</TABLE>
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0
0
<COMMON> 872
<OTHER-SE> 1,090,315
<TOTAL-LIABILITY-AND-EQUITY> 2,387,588
<SALES> 0
<TOTAL-REVENUES> 259,486
<CGS> 0
<TOTAL-COSTS> 184,665
<OTHER-EXPENSES> (2,108)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,421
<INCOME-PRETAX> 63,740
<INCOME-TAX> 24,838
<INCOME-CONTINUING> 38,902
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,902
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.44
</TABLE>
<TABLE> <S> <C>
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<CURRENT-ASSETS> 123,138
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<DEPRECIATION> 131,188
<TOTAL-ASSETS> 2,367,921
<CURRENT-LIABILITIES> 180,001
<BONDS> 720,164
0
0
<COMMON> 866
<OTHER-SE> 1,109,055
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<CGS> 0
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<OTHER-EXPENSES> (23,164)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,656
<INCOME-PRETAX> 141,376
<INCOME-TAX> 55,098
<INCOME-CONTINUING> 86,278
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<EPS-PRIMARY> 0.99
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</TABLE>
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0
0
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0
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0
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</TABLE>
