U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR (15)d OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
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Commission file number 001-13957
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CAVANAUGHS HOSPITALITY CORPORATION
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(Exact name of registrant as specified in its charter)
Washington 91-1032187
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 W. North River Drive, Suite 100, Spokane, WA 99201
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(Address of principal executive office)
(509) 459-6100
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
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 No X
----- -----
As of April 30, 1998, there were 13,046,503 shares of the
Registrant's common stock outstanding.
<PAGE>
CAVANAUGHS HOSPITALITY CORPORATION
Form 10-Q
For the Quarter Ended March 31, 1998
INDEX
Part I - Financial Information
Item 1 - Financial Statements:
- Consolidated Balance Sheets -- December 31, 1997
and March 31, 1998
- Consolidated Statements of Operations and
Comprehensive Loss -- Three Months Ended March 31,
1997 and 1998
- Consolidated Statements of Cash Flows -- Three
Months Ended March 31, 1997 and 1998
- Notes to Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - Other Information
<PAGE>
Part I - Financial Information
ITEM 1. FINANCIAL STATEMENTS
CAVANAUGHS HOSPITALITY CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
December 31, 1997 and March 31, 1998
(in thousands, except share data)
December 31, March 31,
1997 1998
------------ ---------
ASSETS
Current assets:
Cash and cash equivalents $ 4,955 $ 8,206
Accounts receivable 2,785 2,652
Inventories 427 483
Prepaid expenses and deposits 1,100 2,160
-------- --------
Total current assets 9,267 13,501
Property and equipment, net 112,234 137,559
Other assets, net 3,616 3,726
-------- --------
Total assets $125,117 $154,786
======== ========
LIABILITIES AND STOCKHOLDERS' AND
PARTNERS' EQUITY
Current liabilities:
Payable to affiliate $ 1,133 $ 933
Note payable to bank 1,075 3,000
Accounts payable 3,234 3,235
Accrued payroll and related benefits 983 1,039
Accrued interest payable 689 832
Other accrued expenses 2,882 4,378
Long-term debt, due within one year 3,590 1,241
Capital lease obligations, due within
one year 502 508
-------- --------
Total current liabilities 14,088 15,166
Long-term debt, due after one year 94,419 123,253
Capital lease obligations, due after
one year 2,139 2,023
Deferred income taxes 5,415 5,415
Minority interest in partnerships 524 484
-------- --------
Total liabilities 116,585 146,341
-------- --------
Commitments and contingencies
<PAGE>
CAVANAUGHS HOSPITALITY CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED), CONTINUED
December 31, 1997 and March 31, 1998
(in thousands, except share data)
December 31, March 31,
1997 1998
------------ ---------
Stockholders' and partners' equity:
Preferred stock - 5,000,000 shares author-
ized, $0.01 par value, -0- shares issued
and outstanding $ -- $ --
Common stock - 50,000,000 shares author-
ized, $0.01 par value; 7,072,025 and
7,084,253 shares issued and outstanding 71 71
Partners' deficit (879) 0
Additional paid-in capital 3,935 3,056
Retained earnings 5,405 5,318
-------- --------
Total stockholders' and partners'
equity 8,532 8,445
-------- --------
Total liabilities and stockholders'
and partners' equity $125,117 $154,786
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
CAVANAUGHS HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
for the three months ended March 31, 1997 and 1998
(in thousands, except per share data)
1997 1998
-------- --------
Revenues:
Hotels and restaurants
Rooms $ 4,391 $ 6,884
Food and beverage 2,895 4,175
Other 615 782
-------- --------
Total hotels and restaurants 7,901 11,841
Entertainment, management and services 1,012 1,018
Rental operations 1,618 1,776
-------- --------
Total revenues 10,531 14,635
-------- --------
Operating expenses:
Direct:
Hotels and restaurants:
Rooms 1,427 2,091
Food and beverage 2,446 3,558
Other 226 337
-------- --------
Total hotels and restaurants 4,099 5,986
Entertainment, management and services 615 697
Rental operations 367 385
-------- --------
Total direct expenses 5,081 7,068
-------- --------
Undistributed operating expenses:
Selling, general and administrative 1,720 1,996
Property operating costs 1,245 1,796
Depreciation and amortization 1,136 1,338
-------- --------
Total undistributed operating expenses 4,101 5,130
-------- --------
Total expenses 9,182 12,198
-------- --------
Operating income 1,349 2,437
Other income (expense):
Interest expense, net of amounts capitalized (2,355) (2,679)
Interest income 93 70
Other income 346 --
Minority interest in partnerships 49 40
-------- --------
<PAGE>
CAVANAUGHS HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED), CONTINUED
for the three months ended March 31, 1997 and 1998
(in thousands, except per share data)
1997 1998
-------- --------
Loss before income taxes $ (518) $ (132)
Income tax benefit (173) (45)
-------- --------
Net loss $ (345) $ (87)
======== ========
Comprehensive loss $ (345) $ (87)
======== ========
Net loss per share basic and diluted $ (0.05) $ (0.01)
======== ========
Weighted-average shares outstanding 7,072 7,084
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
CAVANAUGHS HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
for the three months ended March 31, 1997 and 1998
(in thousands)
1997 1998
-------- --------
Operating activities:
Net loss $ (345) $ (87)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,136 1,319
Minority interest in partnerships (49) (40)
Change in:
Accounts receivable 543 133
Inventories 11 (56)
Prepaid expenses and deposits (355) (1,060)
Accounts payable (67) --
Accrued payroll and related benefits 56 56
Accrued interest payable 57 143
Other accrued expenses (599) 1,497
-------- --------
Net cash provided by operating
activities 388 1,905
-------- --------
Investing activities:
Additions to property and equipment (1,897) (5,664)
Proceeds from disposition of property and
equipment 703
Other, net (170) (249)
-------- --------
Net cash used in investing activities (1,364) (5,913)
-------- --------
Financing activities:
Distributions to stockholders and partners (144) --
Dividends to stockholders (106) --
Proceeds from note payable to bank 34 1,925
Proceeds from long-term debt 2,694 6,406
Repayment of long-term debt (1,003) (744)
Purchase and retirement of common stock (163) --
Principal payments on capital lease
obligations (109) (128)
Advances from (payments to) affiliate (233) (200)
-------- --------
Net cash provided by (used in) financing
activities 970 7,259
-------- --------
Change in cash and cash equivalents:
Net increase (decrease) in cash and cash
equivalents (6) 3,251
Cash and cash equivalents at beginning of
period 5,703 4,955
-------- --------
Cash and cash equivalents at end of period $ 5,697 $ 8,206
======== ========
<PAGE>
CAVANAUGHS HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), CONTINUED
and the three months ended March 31, 1997 and 1998
(in thousands)
1997 1998
-------- --------
Supplemental disclosure of cash flow
information:
Cash paid during period for:
Interest (net of amount capitalized) $ 2,298 $ 2,550
Income taxes 125 --
Noncash investing and financing activities:
Issuance of operating partnership units
for Lincoln Building 880
Acquisition of property through assumption
of debt and capital leases 20,841
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
CAVANAUGHS HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. QUARTERLY INFORMATION:
The unaudited consolidated financial statements included herein
have been prepared by Cavanaughs Hospitality Corporation (the
Company) pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC). Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted as permitted by such rules and
regulations. The balance sheet as of December 31, 1997 has been
compiled from the audited balance sheet as of such date. The
Company believes that the disclosures included herein are
adequate; however, these consolidated statements should be read
in conjunction with the financial statements and the notes
thereto for the period ended December 31, 1997 previously filed
with the SEC on Form S-1 which was effective in April 1998.
In the opinion of management, these unaudited consolidated
financial statements contain all of the adjustments normal and
recurring in nature, necessary to present fairly the consolidated
financial position of the Company at March 31, 1998 and the
consolidated results of operations and cash flows for the three
months ended March 31, 1998 and 1997. The results of operations
for the periods presented may not be indicative of those which
may be expected for a full year.
2. ORGANIZATION:
At March 31, 1997, the Company controlled and operated (through
ownership or lease with purchase option agreements) seven hotel
properties. At March 31, 1998, the Company controlled and
operated eleven hotel properties in Seattle, Spokane, Yakima and
Kennewick, Washington; Post Falls and Idaho Falls, Idaho; and
Kalispell, Montana under its Cavanaughs(TM) brand. Additionally,
the Company provides computerized ticketing for entertainment
events and arranges Broadway and other entertainment event
productions. The Company also leases retail and office space in
buildings owned by the Company and manages residential and
commercial properties in Washington, Idaho and Montana. The
Company's operations are classified into three divisions: (1)
hotels and restaurants, (2) entertainment, management and
services, and (3) rental operations.
Prior to January 1, 1998, the financial statements included the
combined operations of Cavanaughs Hospitality Corporation
(including its merged and predecessor entities) and G&B: Lincoln
Building Limited Partnership (Lincoln Building). On January 1,
1998, the Company issued common stock and units in the Cavanaughs
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. ORGANIZATION, CONTINUED:
Hospitality Operating Partnership (OP Units) to the partners of
Lincoln Building in exchange for the assets and liabilities of
Lincoln Building. Therefore, consolidated financial statements
of the Company are presented at March 31, 1998.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Earnings Per Share
------------------
In February 1997, Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share," was issued. SFAS No. 128
establishes standards for computing and presenting earnings per
share (EPS) and simplifies the existing standards. This
standard replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires the dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of
the diluted EPS computation. The Company did not have any
dilutive securities outstanding for any of the periods
presented. Therefore, there are no differences between basic
and diluted earnings per share.
New Accounting Pronouncements
-----------------------------
In June 1997, SFAS No. 130, "Reporting Comprehensive Income",
was issued. This Statement requires that comprehensive income
be reported in a financial statement that is displayed with the
same prominence as other financial statements. This Statement
does not require a specific format for the financial statement,
but requires that an enterprise display net income as a
component of comprehensive income in the financial statements.
Comprehensive income is defined as the change in equity of a
business enterprise arising from non-owner sources. The
classifications of comprehensive income under current
accounting standards include foreign currency items, minimum
pension liability adjustments, and unrealized gains and losses
on certain investments in debt and equity securities. The
implementation of this standard on January 1, 1998 did not have
a material impact on the presentation of the Company's
consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued
SFAS No. 131, "Disclosures about Segments for an Enterprise and
Related Information". This Statement will change the way
public companies report information about segments of their
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
New Accounting Pronouncements, Continued
----------------------------------------
business in their annual financial statements and requires them
to report selected segment information in their quarterly
reports issued to shareholders. It also requires entity-wide
disclosures about the products and services an entity provides,
and its major customers. The implementation of SFAS No. 131 on
January 1, 1998 did not have a material impact on the
consolidated financial statements.
4. INITIAL PUBLIC OFFERING:
In April 1998, the Company completed an initial public offering
(Offering) of 5,951,250 shares of common stock. The proceeds,
after deducting the underwriting discount and before offering
expenses, of approximately $83.0 million will be used to repay
certain debt.
5. 1998 ACQUISITIONS:
In January 1998, the Company entered into a lease with purchase
option to acquire certain assets of a hotel in Spokane,
Washington for approximately $11.5 million and acquired certain
assets of a hotel in Idaho Falls, Idaho for approximately $3.8
million. In February 1998, the Company acquired certain assets
of a hotel in Post Falls, Idaho for approximately $9.5 million.
In April 1998, the Company acquired certain assets of a hotel in
Hillsboro, Oregon for approximately $5.5 million. Also, in April
1998, the purchase option on the Spokane, Washington hotel was
exercised. All of these acquisitions have been accounted for
using the purchase method of accounting. Accordingly, the
results of operations of these hotels have been included in the
consolidated statement of operations since their respective dates
of acquisition. The excess purchase price of the assets over
their historical cost bases has been allocated to property and
equipment and is being depreciated over the estimated useful life
of the related assets. Pro forma disclosures reflecting these
acquisitions have been included in the Company's Form S-1 as
previously filed with the SEC.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. LONG-TERM DEBT AND LINE OF CREDIT:
The Company used the net proceeds of the initial public offering
to repay $68.6 million of debt. Due to the repayment in April
1998, $2.6 million of short-term debt was reclassified and
reported as long-term debt at March 31, 1998. In connection with
the debt repayment, approximately $725,000 of deferred loan fees
and prepayment penalties have been charged to operations in April
1998 and will be presented as an extraordinary item.
In May 1998, the Company obtained an $80 million revolving
secured credit facility with a bank. The credit facility
requires that the Company maintain certain financial ratios and
minimum levels of cash flows. Any outstanding borrowings will
bear interest based on prime rate or LIBOR. The credit facility
matures in five years. The credit facility requires the payment
of a 1% fee plus an annual standby fee of 0.25%.
7. CONTINGENCIES:
In 1994, the Company was sued by the contractor who constructed
one of the Company's hotel properties asserting lack of payment
of cost overruns. The Company filed a counter claim for the
recovery of various damages. The Company obtained summary
judgment for most of the claims. As of March 31, 1998, the
amount of claims against the Company which have not been
dismissed or are subject to appeal is $233,000, plus interest.
The Company's counter claims which have not been dismissed are
$419,000. Management believes that the ultimate resolution of
this matter will not have a material effect on the Company's
results of operations, financial condition or cash flows.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. EARNINGS PER SHARE:
In accordance with SFAS No. 128, the following table presents a
reconciliation of the numerators and denominators used in the
basic and diluted EPS computations (in thousands, except per
share amounts).
<TABLE>
<CAPTION>
Weighted-Average
Net Loss Shares Per Share
(Numerator) (Denominator) Amount
----------- ---------------- ---------
<S> <C> <C> <C>
March 31, 1998:
Net loss per share - basic
and diluted:
Net loss $ (87)
=====
Weighted average shares
outstanding 7,084
=====
Per share $(0.01)
======
March 31, 1997:
Net loss per share - basic
and diluted:
Net loss $(345)
=====
Weighted average shares
outstanding 7,072
=====
Per share $(0.05)
======
</TABLE>
<PAGE>
CAVANAUGHS HOSPITALITY CORPORATION
Part I - Financial Information
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
-------
The following discussion and analysis addresses the results of
operations for the Company for the three months ended March 31, 1997
and 1998. The following should be read in conjunction with the
unaudited Combined Financial Statements and the notes thereto. In
addition to historical information, the following Management's
Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ
significantly from those anticipated in these forward-looking
statements as a result of certain factors, including those discussed
in "Risk Factors" and elsewhere in the Prospectus filed originally by
the Company.
The Company's revenues are derived primarily from the Hotels and
reflect revenue from rooms, food and beverage and other sources,
including telephone, guest services, banquet room rentals, gift shops
and other amenities. Hotel revenues accounted for 80.9% of total
revenue in the three months ended March 31, 1998 and increased 49.9%
from $7.9 million in 1997 to $11.8 million in 1998. This increase was
primarily the result of the addition of four hotels in the quarter and
an increase in pro forma revenue per available room (REVPAR) from
$29.37 in 1997 to $34.42 in 1998. The balance of the Company's
revenues are derived from its entertainment, management and services
and rental operations divisions. These revenues are generated from
ticket distribution handling fees, real estate management fees, sales
commissions and rents. In the three months ended March 31, 1998,
entertainment, management and services accounted for 7.0% of total
revenues and rental operations accounted for 12.1% of total revenues.
These two divisions are expected to represent a smaller percent of
total revenues in the future as the Company continues to pursue its
hotel growth strategy.
As is typical in the hospitality industry, REVPAR, average daily rates
(ADR) and occupancy levels are important performance measures. The
Company's operating strategy is focused on enhancing revenue and
operating margins by increasing REVPAR, ADR, occupancy and operating
efficiencies of the Hotels. These performance measures are impacted
by a variety of factors, including national, regional and local
economic conditions, degree of competition with other hotels in their
respective market areas and, in the case of occupancy levels, changes
in travel patterns.
<PAGE>
The following table sets forth selected items from the combined
statements of operations as a percent of total revenues and certain
other selected data:
Three Months
Ended March 31,
----------------
1997 1998
------ ------
Revenues:
Hotels and restaurants 75.0% 80.9%
Entertainment, management and services 9.6 7.0
Rental operations 15.4 12.1
----- -----
Total revenues 100.0% 100.0%
===== =====
Direct operating expenses 48.2% 48.3%
Undistributed operating expenses:
Selling, general and administrative 16.3 13.6
Property operating costs 11.8 12.3
Depreciation and amortization 10.8 9.1
----- -----
Total undistributed operating expenses 38.9 35.0
Operating income 12.8 16.7
Interest expense (net) 21.5 17.8
Loss before income taxes (4.9) (0.9)
Income tax benefit (1.6) (0.3)
----- -----
Net and comprehensive loss (3.3)% (0.6)%
===== =====
Pro forma Actual
--------- ------
REVPAR $29.37 $34.42
ADR $60.56 $69.85
Occupancy 49.7% 50.1%
RESULTS OF OPERATIONS
---------------------
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 TO THREE MONTHS ENDED
MARCH 31, 1997
Total revenues increased $4.1 million, or 39.0%, from $10.5 million in
1997 to $14.6 million in 1998. This increase is attributed primarily
to revenue generated from increases in total rooms occupied and REVPAR
and the addition of four hotels.
<PAGE>
Total hotel and restaurant revenues increased $3.9 million, or 49.9%,
from $7.9 million in 1997 to $11.8 million in 1998. ADR increased
$9.29, or 15.3%, from a pro forma $60.56 in 1997 to $69.85 in 1998.
Available room nights increased 48.7% in 1998. REVPAR increased
$5.05, or 17.2% from the pro forma $29.37 in 1997 to $34.42 in 1998.
The results reflect the addition of Cavanaughs Gateway Hotel,
Cavanaughs Ridpath Hotel, Cavanaughs on the Falls, and Cavanaughs
Templin's Resort which contributed, in part, to this increase in
revenues. The pro forma hotel statistics include the four acquired
properties' performance for the three months ended March 31, 1997.
Entertainment, management and services revenues increased $6,000, or
0.6% in 1998. Management and services revenue increased from the
addition of new third-party management contracts.
Rental income increased $0.2 million, or 9.8%, from $1.6 million in
1997 to $1.8 million in 1998. This increase is due primarily the
addition of leased space in the Crescent Court property to The
Travelers company which commenced occupancy in January 1998.
Direct operating expenses increased $2.0 million, or 39.1%, from $5.1
million in 1997 to $7.1 million in 1998, primarily due to the increase
in the number of hotel guests served and the addition of four hotels.
This represents an increase in direct operating expenses as a
percentage of total revenues from 48.2% in 1997 to 48.3% in 1998.
Total undistributed operating expenses increased $1.0 million, or
25.1%, from $4.1 million in 1997 to $5.1 million in 1998. Total
undistributed operating expenses include selling, general and
administrative expenses, which increased 16.0% from $1.7 million in
1997 to $2.0 million in 1998, and depreciation and amortization, which
increased 17.8% from $1.1 million in 1997 to $1.3 million in 1998.
Total undistributed operating expenses as a percentage of total
revenues decreased 3.9% from 38.9% in 1997 to 35.0% in 1998. The
decrease in undistributed operating expenses as a percentage of total
revenues is primarily attributed to the increased REVPAR and the
company controlling sales and administrative expenses.
Operating income increased $1.1 million, or 80.7%, from $1.3 million
in 1997 to $2.4 million in 1998. As a percentage of total revenues,
operating income increased from 12.8% in 1997 to 16.7% in 1998. This
increase is due primarily to an increase in REVPAR, the addition of
four hotels and improvements in the undistributed operating expense
margins.
Interest expense increased $0.3 million, or 13.8%, from $2.4 million
in 1997 to $2.7 million in 1998. This increase is primarily related
to the issuance of additional debt used for funding the acquisition of
the four hotels and other corporate purposes. Interest expense is
initially anticipated to decline as a result of the application of the
net proceeds of the Offering to repay certain indebtedness, but is
expected to increase in the future due to the funding of hotel
acquisitions with additional debt.
<PAGE>
Income tax benefit decreased 74%, from $0.2 million in 1997 to $45,000
in 1998, due to the decrease in the loss before income taxes. The
effective income tax rate for both years was 34%.
Net loss decreased $258,000, or 74.8%, from $345,000 in 1997 to
$87,000 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's principal sources of liquidity are cash on hand, cash
generated by operations and borrowings under a $3.0 million working
capital credit facility. Cash generated by operations in excess of
operating expenses is used for capital expenditures and to reduce
amounts outstanding under the working capital credit facility. Hotel
acquisitions, development and expansion have been and will be financed
through a combination of internally generated cash, borrowing under
credit facilities, and the issuance of common stock or OP Units.
The Company's short-term capital needs include food and beverage
inventory, payroll and the repayment of interest expense on
outstanding mortgage indebtedness. Historically, the Company has met
these needs through internally generated cash.
The Company's long-term capital needs include funds for property
acquisitions, scheduled debt maturities and renovations and other non-
recurring capital improvements. The Company anticipates meeting its
future long-term capital needs through the borrowing of additional
debt financing secured by the Hotels, unsecured private or public debt
offerings, additional equity offerings or the issuances of OP Units,
along with cash generated from internal operations. In April 1998,
the Company completed its initial public offering of 5,951,250 shares
at $15.00. The proceeds to the Company after deducting the
underwriter's commission, but before other expenses, was $83.0
million. In April, the Company used the proceeds from the offering to
repay approximately $68.6 million of debt, the balance was used to
fund the acquisition of the fee interest in the Cavanaughs Ridpath and
to acquire the Cavanaughs Hillsboro Hotel. On a pro forma basis as of
March 31, 1998, after giving effect to the Offering and OP Units
issued in April 1998, the application of the net proceeds thereof,
total outstanding indebtedness decreased from $127.0 million on March
31, 1998 to approximately $57.5 million.
At March 31, 1998, the Company had $8.2 million in cash and cash
equivalents, an increase of $3.2 million from $5.0 million on
December 31, 1997. The Company has acquired three hotels during the
three months ended March 31, 1998 and has expended $26.5 million for
these acquisitions and capital expenditures. The Company establishes
reserves for capital replacement in the amount of 4.0% of the prior
year's actual gross income to maintain the Hotels at acceptable
levels. Acquired hotel properties have a separate capital budget for
purchase, construction, renovation, and branding costs. Capital
expenditures planned for Hotels in 1998 are expected to be
<PAGE>
approximately $3.0 million. Management believes the consistent
renovation and upgrading of the Hotels and other properties is
imperative to its long-term reputation and customer satisfaction.
To fund its acquisition program and meet its working capital needs,
the Company has received an $80 million Revolving Credit Facility from
U.S. Bank which was consummated on May 5, 1998. During the 12 months
following the Offering, the Company will have approximately $50.0
million available to be drawn under the Revolving Credit Facility,
which amount may be increased to the full amount available thereunder
with the lender's consent, at an interest rate of 185 basis points
over LIBOR and declining to 165 basis points after six months if the
Company maintains certain earnings before interest, taxes,
depreciation and amortization (EBITDA) to debt ratios. The Revolving
Credit Facility has an initial term of five years and an annualized
fee for the unutilized portion of the facility. The Company selects
from four different interest rates when it draws funds: the lender's
prime rate or one, three, or six month LIBOR plus the applicable
margin of 165 to 235 basis points, depending on the ratio of EBITDA to
total funded debt. The Revolving Credit Facility has covenants that
allow for the Company to draw funds based on the trailing 12 months
performance on a pro forma basis for both acquired and owned
properties. The Revolving Credit Facility allows the Company to
choose which properties are part of the collateral base and,
therefore, gives the Company the ability to utilize other long-term
credit facilities that may be more favorable to the Company. Funds
from the Revolving Credit Facility may be used for acquisitions,
renovations, construction and general corporate purposes. The Company
believes the structure and availability of funds under the Revolving
Credit Facility will be sufficient to meet the Company's long-term
growth plans.
The Revolving Credit Facility contains various representations,
warranties, covenants and events of default deemed appropriate for
financing of a similar size and nature. Covenants and provisions in
the definitive agreements governing the Revolving Credit Facility
include, among other things, limitations on: (i) substantive changes
in the Company's current business activities, (ii) liquidation,
dissolution, mergers, consolidations, dispositions of material
property or assets and acquisitions of property or assets of others,
(iii) the creation or existence of liens on property or assets, (iv)
the addition or existence of indebtedness, including guarantees and
other contingent obligations, (v) loans and advances to others and
investments in others, redemption of subordinated debt, (vi) amendment
or modification of certain material documents or of the Articles in a
manner adverse to the interests of the lenders under the Revolving
Credit Facility, (vii) payment of dividends or distributions on the
Company's capital stock, and (viii) maintenance of certain financial
ratios. Each of the covenants described above will provide for
certain ordinary course of business and other exceptions. If the
Company breaches any of these covenants and does not obtain a waiver
of that breach, the breach will constitute an event of default under
the Revolving Credit Facility.
<PAGE>
As of March 31, 1998, the Company had debt outstanding of $127.0
million consisting of primarily variable and fixed rate debt secured
by individual properties. The Company had a working capital credit
facility of $3.0 million with $3.0 million drawn as of March 31, 1998.
In April 1998, the Company completed its initial public offering and
entered into the $80.0 million Revolving Credit Facility.
The Company believes that cash generated by operations will be
sufficient to fund the Company's operating strategy for the
foreseeable future, and that any remaining cash generated by
operations, together with capital available under the Revolving Credit
Facility (subject to the terms and covenants included therein) and the
remaining proceeds from the Offering, will be adequate to fund the
Company's growth strategy in the near term. Thereafter, the Company
expects that future capital needs, including property acquisitions,
will be met through a combination of net cash provided by operations,
borrowings and additional issuances of Common Stock or OP Units.
SEASONALITY
-----------
The lodging industry is affected by normally recurring seasonal
patterns. At most Hotels, demand is higher in the late spring through
and early fall (May through October) than during the balance of the
year. Demand also changes on different days of the week, with Sunday
generally having the lowest occupancy. Accordingly, the Company's
revenue, operating profit and cash flow are lower during the first and
fourth calendar quarters and higher during the second and third
calendar quarters.
INFLATION
---------
The effect of inflation, as measured by fluctuations in the Consumer
Price Index, has not had a material impact on the Company's revenues
or net loss during the periods under review.
YEAR 2000
---------
The Company does not believe that the costs of converting its computer
systems to address the advent of the year 2000 will be material.
NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In June 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 131,
Disclosures about Segments for an Enterprise and Related Information
("SFAS 131"). This Statement requires public companies to report
selected segment information in their quarterly and annual reports
issued to shareholders, and entity wide disclosures about products and
services and major customers. The statement was adopted by the
Company on January 1, 1998.
<PAGE>
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. This Statement requires that comprehensive income be reported
in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income is defined as the
change in equity of a business enterprise arising from non-owner
sources. This Statement was adopted by the Company on January 1,
1998.
Part II - Other Information
---------------------------
ITEM 1. LEGAL PROCEEDINGS
In 1994, the Company was sued by the contractor who constructed one of
the Company's hotel properties asserting lack of payment of cost
overruns. The Company filed a counter claim for the recovery of
various damages. The Company obtained summary judgment for most of
the claims. As of March 31, 1998, the amount of claims against the
Company which have not been dismissed or are subject to appeal is
$233,000, plus interest. The Company's counter claims which have not
been dismissed are $419,000. Management believes that the ultimate
resolution of this matter will not have a material effect on the
Company's results of operations, financial condition or cash flows.
ITEMS 2, 3, 4 and 5 of Part II are omitted from this report as they
are not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.6 Revolving Credit Facility
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months
ended March 31, 1998.
<PAGE>
CAVANAUGHS HOSPITALITY CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
CAVANAUGHS HOSPITALITY CORPORATION
(Registrant)
Date: May 14, 1998 By: /s/ Arthur M. Coffey
--------------------- -----------------------------------
Arthur M. Coffey, Executive Vice
President and Chief Financial
Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 8206
<SECURITIES> 0
<RECEIVABLES> 2775
<ALLOWANCES> (123)
<INVENTORY> 483
<CURRENT-ASSETS> 13501
<PP&E> 175960
<DEPRECIATION> (35626)
<TOTAL-ASSETS> 154786
<CURRENT-LIABILITIES> 15166
<BONDS> 125276
0
0
<COMMON> 71
<OTHER-SE> 8374
<TOTAL-LIABILITY-AND-EQUITY> 154756
<SALES> 14635
<TOTAL-REVENUES> 14635
<CGS> 7068
<TOTAL-COSTS> 12198
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2679
<INCOME-PRETAX> (132)
<INCOME-TAX> (45)
<INCOME-CONTINUING> (87)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (87)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
EXHIBIT 10.6
------------
CREDIT AGREEMENT
Dated as of May 5, 1998
among
CAVANAUGHS HOSPITALITY LIMITED PARTNERSHIP,
U. S. BANK NATIONAL ASSOCIATION
as Administrative Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
<PAGE>
CONTENTS
ARTICLE I. DEFINITIONS
1.1 Certain Defined Terms
1.2 Other Interpretive Provisions
1.3 Accounting Principles
ARTICLE II.THE LOANS
2.1 Revolving Line of Credit
2.2 Manner of Borrowing
2.3 Agent's Right to Fund
2.4 Loan Accounts
2.5 Interest Rate Elections
2.6 Mandatory Prepayments of Loans
(a) Asset Dispositions
(b) Event of Loss
(c) Debt Issuance
(d) General
(e) Reduction in Commitment
2.7 Repayment
2.8 Interest
2.9 Agency and Underwriting Fees
2.10 Commitment Fees
2.11 Late Charge
2.12 Computation of Interest and Fees
2.13 Payments by the Borrower
2.14 Sharing of Payments, Etc.
2.15 Security
2.16 Borrowing Base
2.17 No Prepayment Charges
ARTICLE III. LETTERS OF CREDIT
3.1 Letters of Credit
3.2 Manner of Requesting Letters of Credit
3.3 Indemnification; Increased Costs
3.4 Payment by the Borrower
ARTICLE IV. TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes
4.2 Illegality
4.3 Increased Costs and Reduction of Return
4.4 Funding Losses
4.5 Inability to Determine Rates
4.6 Certificates of Lenders
4.7 Survival
<PAGE>
ARTICLE V. CONDITIONS PRECEDENT
5.1 Conditions of Initial Loans
(a) Credit Agreement and Note
(b) Resolutions; Incumbency
(c) Organization Documents; Good Standing
(d) Legal Opinions
(e) Payment of Fees
(f) Collateral Documents
(g) Insurance Policies
(h) Certificate
(i) Compliance Certificate
(j) Initial Public Offering
(k) Notice of Borrowing; Reimbursement Agreement
(l) Guaranty
(m) Other Documents
(n) Payment of Indebtedness
(o) Eligible Real Property
5.2 Conditions to Subsequent Loans
(a) Interest Rate Notice
(b) Notice of Borrowing; Reimbursement Agreement
(c) Continuation of Representations and
Warranties
(d) No Existing Default
(e) Satisfaction of Previous Conditions
(f) Further Assurances
5.3 Conditions to Become Eligible Real Property
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
6.1 Existence and Power
6.2 Authorization; No Contravention
6.3 Governmental Authorization
6.4 Binding Effect
6.5 Litigation
6.6 No Default
6.7 ERISA Compliance
6.8 Use of Proceeds; Margin Regulations
6.9 Title to Properties
6.10 Taxes
6.11 Financial Condition
6.12 Environmental Matters
6.13 Collateral Documents
6.14 Regulated Entities
6.15 No Burdensome Restrictions
6.16 Copyrights, Patents, Trademarks and Licenses,
Etc.
6.17 Subsidiaries
6.18 Insurance
6.19 Solvency
6.20 Full Disclosure
<PAGE>
ARTICLE VII. AFFIRMATIVE COVENANTS
7.1 Financial Statements
7.2 Certificates; Other Information
7.3 Notices
7.4 Preservation of Existence, Etc.
7.5 Maintenance of Property
7.6 Insurance
7.7 Payment of Obligations
7.8 Compliance With Laws
7.9 Compliance With ERISA
7.10 Inspection of Property and Books and Records
7.11 Environmental Laws
7.12 Use of Proceeds
7.13 Appraisals
7.14 Further Assurances
7.15 Minimum Number of Parcels
ARTICLE VIII. NEGATIVE COVENANTS
8.1 Limitation on Liens
8.2 Disposition of Assets
8.3 Consolidations and Mergers
8.4 Loans and Investments
8.5 Limitation on Indebtedness
8.6 Transactions With Affiliates
8.7 Use of Proceeds
8.8 Contingent Obligations
8.9 Lease Obligations
8.10 Restricted Payments
8.11 ERISA
8.12 Change in Business
8.13 Accounting Changes
8.14 Financial Covenants
(a) Funded Debt Ratio
(b) Interest Coverage Ratio
(c) Fixed Charge Coverage Ratio
(d) Capitalization Ratio
(e) Total Assets
8.15 Subordinated Debt
ARTICLE IX. EVENTS OF DEFAULT
9.1 Event of Default
(a) Nonpayment
(b) Representation or Warranty
(c) Specific Defaults
(d) Other Defaults
(e) Cross-Default
(f) Insolvency; Voluntary Proceedings
(g) Involuntary Proceedings
<PAGE>
(h) ERISA
(i) Monetary Judgments
(j) Nonmonetary Judgments
(k) Violation of Lock-up Agreement
(l) Adverse Change
(m) Invalidity of Subordination Provisions
(n) Collateral
9.2 Remedies
9.3 Rights Not Exclusive
9.4 Certain Financial Covenant Defaults
ARTICLE X. THE AGENT
10.1 Appointment and Authorization
10.2 Delegation of Duties
10.3 Liability of Agent
10.4 Reliance by Agent
10.5 Notice of Default
10.6 Credit Decision
10.7 Indemnification of Agent
10.8 Agent in Individual Capacity
10.9 Successor Agent
10.10 Withholding Tax
10.11 Collateral Matters
ARTICLE XI. LETTER OF CREDIT RISK PARTICIPATIONS
11.1 Sale of Risk Participations
11.2 Procedure for Purchases
11.3 Payment Obligations
(c) Reimbursements to Lenders
ARTICLE XII. MISCELLANEOUS
12.1 Amendments and Waivers
12.2 Notices
12.3 No Waiver; Cumulative Remedies
12.4 Costs and Expenses
12.5 Borrower Indemnification
12.6 Marshalling; Payments Set Aside
12.7 Successors and Assigns
12.8 Assignments, Participations, Etc.
12.9 Set-off
12.10 Automatic Debits of Fees
12.11 Notification of Addresses, Lending Offices, Etc.
12.12 Counterparts
12.13 Severability
12.14 No Third Parties Benefited
12.15 Conditions Not Fulfilled
12.16 Governing Law and Jurisdiction
12.17 Waiver of Jury Trial
12.18 Entire Agreement
<PAGE>
SCHEDULES
Schedule 2.1 Commitments
Schedule 6.5 Litigation
Schedule 6.7 ERISA
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.17 Subsidiaries and Minority Interests
Schedule 6.18 Insurance Matters
Schedule 7.14 Filing Jurisdictions
Schedule 8.1 Permitted Liens
Schedule 8.5 Permitted Indebtedness
Schedule 8.8 Contingent Obligations
Schedule 12.2 Lending Offices, Addresses for Notices
EXHIBITS
Exhibit A Form of Compliance Certificate
Exhibit B Form of Deed of Trust
Exhibit C Form of Guaranty
Exhibit D Form of Indemnification Agreement
Exhibit E Form of Interest Rate Notice
Exhibit F Form of Note
Exhibit G Form of Security Agreements
Exhibit H Form of Legal Opinion of Borrower's Counsel
Exhibit I Form of Assignment and Acceptance
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of May 5, 1998, among
CAVANAUGHS HOSPITALITY LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Borrower"), the several financial institutions from
time to time party to this Agreement (collectively, the "Lenders";
individually, a "Lender"), and U. S. BANK NATIONAL ASSOCIATION, as
administrative agent for the Lenders.
WHEREAS, the Lenders have agreed to make available to the Borrower a
secured revolving loan facility upon the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I. DEFINITIONS
1.1 Certain Defined Terms
---------------------
The following Terms have the following meanings:
"Acquisition" means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of a Person, or
of any business or division of a Person, (b) the acquisition of in
excess of 50% of the capital stock, partnership interests, membership
interests or equity of any Person, or otherwise causing any Person to
become a Subsidiary, or (c) a merger or consolidation or any other
combination with another Person (other than a Person that is a
Subsidiary) provided that the Borrower or the Subsidiary is the
surviving entity.
"Adjusted Net Income" means, for any applicable period, the aggregate
of all amounts which, in accordance with GAAP, would be included as
net income (or net loss (including any extraordinary losses other than
extraordinary noncash losses)) on a consolidated statement of income
of CHC and its Subsidiaries for such period; provided, however, that
"Adjusted Net Income" shall exclude (a) the effect of any
extraordinary or other nonrecurring gain outside the ordinary course
of business, (b) any write-up in the value of any asset (to the extent
such write-up exceeds any write-down taken in connection with the same
transaction or event which gave rise to such write-up), and (c) any
adjustments to net income for minority ownership interests in other
Persons.
"Adjusted Tangible Net Worth" means the sum of (a) the total net worth
of CHC and its Subsidiaries determined in accordance with GAAP, less
(b) the amount of all intangible assets, plus (c) the Adjustment to
Book Value.
<PAGE>
"Adjustment to Book Value" means an amount equal to (a) the appraised
value of all real property (including improvements thereon) owned by
CHC and its Subsidiaries as of the last day of the applicable period,
less (b) the net book value of such real property (including
improvements thereon), less (c) an amount equal to all federal, state
and local income and gross receipts taxes that would be payable in the
event that such real property (including improvements thereon) were
sold during the applicable period, assuming for purposes of such
calculation that the amount of the gain is an amount equal to the
amount of clause (a) less the amount of clause (b). For purposes of
determining the appraised value of such real property, the most recent
M.A.I. appraisals of such real property that have been approved by the
Agent in writing in its reasonable discretion shall be used. The
Agent reserves the right, in its discretion or at the request of the
Required Lenders, to require reappraisals of any real property at the
Borrower's sole cost, provided that once an appraisal of a parcel of
real property has been approved by the Agent in writing, the Agent may
not require a reappraisal of such real property for one year from the
date of the approved appraisal. In the event that there is no
approved appraisal of any parcel of real property, then there shall be
no Adjustment to Book Value for such parcel of real property.
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common
control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, membership interests, by contract, or
otherwise.
"Agent" means U. S. Bank in its capacity as administrative agent for
the Lenders hereunder, and any successor administrative agent arising
under Section 10.9.
"Agent-Related Persons" means U. S. Bank and any successor agent
arising under Section 10.9, together with their respective Affiliates,
and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.
"Agent's Payment Office" means the address for payments set forth on
Schedule 12.2 in relation to the Agent, or such other address as the
Agent may from time to time specify.
"Agreement" means this Credit Agreement.
"Approved Appraised Value" means the most recent M.A.I. appraised
value of an Eligible Real Property that (a) was ordered by the Agent,
(b) has been approved by the Agent in writing in its reasonable
discretion, and (c) is in compliance with the Financial Institutions
Reform, Recovery and Enforcement Act.
<PAGE>
"Assignee" has the meaning specified in Section 12.8(a).
"Attorney Costs" means and includes all fees and disbursements of any
law firm or other external counsel.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, et seq.).
"Borrowing" means a borrowing hereunder consisting of Loans of the
same Type made to the Borrower on the same day by the Lenders under
Article II, and, other than in the case of Reference Rate Loans,
having the same Interest Period.
"Borrowing Base" means an amount equal to 60% of the Collateral Pool
Value.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in Seattle, Washington are authorized or
required by law to close and, if the applicable Business Day relates
to any LIBOR Rate Loan, means such a day on which dealings are carried
on in the London interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Capitalization Ratio" means, as of the last day of the applicable
period, the ratio of (a) the Indebtedness of CHC and its Subsidiaries
to (b) the sum of (i) the Indebtedness of CHC and its Subsidiaries,
plus (ii) Adjusted Tangible Net Worth.
"Cash Equivalents" means (i) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof,
(ii) certificates of deposit, eurodollar time deposits, overnight bank
deposits, bankers' acceptances and repurchase agreements of any Lender
or any other commercial bank whose unsecured long-term debt
obligations are rated at least A-1 by Standard & Poor's Ratings
Service Group, a division of the McGraw Hill Companies, Inc., and any
successor thereto ("S&P") or A-3 by Moody's Investors Service, Inc.
having maturities of one year or less from the date of acquisition,
and (iii) commercial paper rated at least A-1 by S&P or P-1 by Moody's
Investors Service, Inc., or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating
agencies cease publishing ratings of investments.
"CERCLA" has the meaning specified in the definition of "Environmental
Laws."
"CHC" means Cavanaughs Hospitality Corporation, a Washington
corporation, and its successors.
<PAGE>
"Closing Date" means the date on which all conditions precedent set
forth in Section 5.1 are satisfied or waived by all Lenders (or, in
the case of Section 5.1(e), waived by the Person entitled to receive
such payment).
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by the Borrower, CHC and its
Subsidiaries in or upon which a lien now or hereafter exists in favor
of the Lenders, or the Agent on behalf of the Lenders, whether under
this Agreement or under any other documents executed by any such
Person and delivered to the Agent or the Lenders.
"Collateral Documents" means, collectively, (i) the Security
Agreements, the Deeds of Trust, and all other security agreements,
mortgages, deeds of trust, patent and trademark assignments, lease
assignments, guarantees and other similar agreements between the
Borrower, CHC or any Subsidiary and the Lenders or the Agents for the
benefit of the Lenders now or hereafter delivered to the Lenders or
the Agent pursuant to or in connection with the transactions
contemplated hereby, and all financing statements (or comparable
documents now or hereafter filed in accordance with the Uniform
Commercial Code or comparable law) against the Borrower, CHC or any
Subsidiary as debtor in favor of the Lenders or the Agent for the
benefit of the Lenders as secured party, and (ii) any amendments,
supplements, modifications, renewals, replacements, consolidations,
substitutions and extensions of any of the foregoing.
"Collateral Pool Value" means the sum of the Approved Appraised Values
of all Eligible Real Property from time to time.
"Commitment" means $80,000,000 less the aggregate amount of mandatory
prepayments made in accordance with Section 2.6.
"Commitment Fee Percentage" means the percentage determined in
accordance with the following matrix and based upon the quarterly
financial statements of the Borrower provided to the Agent in
accordance with the terms of this Agreement for the preceding fiscal
quarter; provided, however, that if the Borrower has not delivered its
financial statements for the previous fiscal quarter as of the date
that the commitment fee is payable pursuant to Section 2.10, then a
Commitment Fee Percentage of .30% shall apply:
Level Level I Level II Level III Level IV
----------------- ------- ---------- --------- --------
Funded Debt Ratio <3.00 >3.00<3.50 >3.50<4.0 >4.0
- -
Commitment Fee
Percentage .25% .25% .25% .30%
> means greater than or equal to
-
< means less than
<PAGE>
"Commitment Letter" means that certain letter dated as of November 26,
1997, between the Agent and the Borrower, together with all amendments
to the Commitment Letter.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit A.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary
obligation") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to
assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation");
(b) with respect to any Surety Instrument issued for the account of
that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services of, another
Person if the relevant contract or other related document or
obligation requires that payment for such materials, supplies or other
property, or for such services, shall be made regardless of whether
delivery of such materials, supplies or other property is ever made or
tendered, or such services are ever performed or tendered, or (d) in
respect of any Swap Contract. The amount of any Contingent Obligation
shall, in the case of Guaranty Obligations, be deemed equal to the
stated or determinable amount of the primary obligation in respect of
which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in
respect thereof, and in the case of other Contingent Obligation, shall
be equal to the maximum reasonably anticipated liability in respect
thereof.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument,
document or agreement to which such Person is a party or by which it
or any of its property is bound.
"Deed of Trust" means a deed of trust or mortgage executed by the
Borrower or a Subsidiary in favor the Agent as agent for the Lenders
pursuant to Section 5.3, in a form approved by the Agent, as well as
<PAGE>
all amendments to the foregoing. Any Deeds of Trust encumbering real
property in the State of Washington and executed concurrently with the
execution of this Agreement shall be substantially in the form of
Exhibit B.
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Disposition" means (a) the sale, lease, conveyance or other
disposition of any property, other than sales or other dispositions
expressly permitted under Section 8.2(a)(i), (ii), (iii) or (iv), and
(b) the sale or transfer by the Borrower, CHC or any Subsidiary of the
Borrower of any equity securities issued by any Subsidiary of the
Borrower and held by such transferor Person for cash or cash
equivalents.
"Dollars," "dollars" and "$" each mean lawful money of the United
States.
"EBITDA" means, with respect to the CHC and its Subsidiaries for any
applicable period, Adjusted Net Income for such period, plus, to the
extent deducted in determining Adjusted Net Income for such period,
the aggregate amount of (i) Interest Expense, (ii) federal, state,
local and foreign income taxes and (iii) depletion, depreciation and
amortization of tangible and intangible assets. In the event that the
Borrower has consummated any Acquisition during the applicable period,
"EBITDA" shall include the EBITDA from the Person acquired (or the
portion thereof allocable to the portion of the Person acquired) for
such period, provided that the Borrower has delivered to the Agent
documentation deemed adequate by the Agent to verify such EBITDA, as
well as a Compliance Certificate on a pro forma basis and pro forma
financial statements on a consolidating basis approved by the Agent.
Subject to approval of the Required Lenders confirmed in writing by
the Agent, any such pro forma Compliance Certificate and pro forma
financial statements may exclude expenses of the acquired Person that
will terminate upon completion of the Acquisition. An example of such
an expense that may be excluded is the franchise fee under a franchise
agreement that will be terminated upon completion of the Acquisition.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof; (b) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or
a political subdivision of any such country, and having a combined
capital and surplus of at least $100,000,000, provided that such bank
is acting through a branch or agency located in the country in which
it is organized or another country which is also a member of the OECD;
(c) a Person that is primarily engaged in the business of commercial
banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of
a Person of which a Lender is a Subsidiary, or (iii) a Person of which
<PAGE>
a Lender is a Subsidiary; or (d) a finance company, insurance company,
other financial institution or fund, reasonably acceptable to the
Agent, which has a combined capital and surplus in excess of
$100,000,000, which is regularly engaged in making, purchasing or
investing in loans of the Type proposed to be assigned to such
assignee; provided, however, that no Eligible Assignee shall be an
Affiliate or competitor of the Borrower, or an Affiliate of such
competitor.
"Eligible Real Property" means each parcel of real property and
related improvements (a) that has been approved by the Agent in
writing in its sole discretion, (b) the fee title interest of which is
owned by the Borrower, (c) that is fully developed and improved and
with respect to which there has been issued a certificate of
occupancy, (d) in which the Agent, for the benefit of the Lenders,
holds a first priority Deed of Trust to secure the Obligations,
(e) with respect to which the Agent has obtained the Collateral
Documents described in Section 5.3, (f) with respect to which the
Approved Appraised Value has been established, and (g) that is not
encumbered by any Liens other than Permitted Liens.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release
or injury to the environment or threat to public health, personal
injury (including sickness, disease or death), property damage,
natural resources damage, or otherwise alleging liability or
responsibility for damages (punitive or otherwise), cleanup, removal,
remedial or response costs, restitution, civil or criminal penalties,
injunctive relief, or other type of relief, resulting from or based
upon the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent,
sudden or non-sudden, accidental or non-accidental, placement, spills,
leaks, discharges, emissions or releases) of any Hazardous Material
at, in or from property owned or in the possession or control of the
Borrower, CHC or any Subsidiary.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety
and land use matters; including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Clean
Air Act, the Federal Water Pollution Control Act of 1972, the Solid
Waste Disposal Act, the Federal Resource Conservation and Recovery
Act, the Toxic Substance Control Act, and the Emergency Planning and
Community Right-to-Know Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
<PAGE>
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Borrower within the
meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and
(o) of the Code for purposes of provisions relating to Section 412 of
the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension
Plan; (b) a withdrawal by the Borrower, CHC or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in
Section 4001(a)(2) of ERISA) or a cessation of operations which is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a
complete or partial withdrawal by the Borrower, CHC or any ERISA
Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of
intent to terminate, the treatment of a Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement
of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (e) an event or condition which might reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; or (f) the imposition of any
liability under Title IV of ERISA, other than PBGC premiums due but
not delinquent under Section 4007 of ERISA, upon the Borrower, CHC or
any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified in the
definition of "LIBOR Rate."
"Event of Default" means any of the events or circumstances specified
in Section 9.1.
"Event of Loss" means, with respect to any Eligible Real Property, any
of the following: (a) any loss, destruction or damage of such
property; (b) any pending or threatened institution of any proceedings
for the condemnation or seizure of such property or for the exercise
of any right of eminent domain; or (c) any actual condemnation,
seizure or taking, by exercise of the power of eminent domain or
otherwise, of such property, or confiscation of such property or the
requisition of the use of such property.
"Exchange Act" means the Securities and Exchange Act of 1934, and
regulations promulgated thereunder.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York on the
preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day
will be the arithmetic mean as determined by the Agent of the rates
<PAGE>
for the last transaction in overnight Federal funds arranged prior to
9:00 a.m. (New York City time) on that day by each of three leading
brokers of Federal funds transactions in New York City selected by the
Agent.
"Financial Covenants" means the financial covenants set forth in
Section 8.14.
"Financial Transaction Liability" means (a) any overdraft on any
account maintained by the Borrower with Agent, (b) liabilities owing
by the Borrower to the Agent with respect to bank card services and
(c) liabilities incurred by the Agent as a result of automated
clearing house transactions for the account of the Borrower.
"Fixed Charge Coverage Ratio" means the ratio of (a) for the
applicable period, the sum of (i) EBITDA less (ii) an amount equal to
4% of the aggregate of all amounts which, in accordance with GAAP,
would be included as gross revenue on a consolidated statement of
income of CHC and its Subsidiaries, to (b) for the applicable period,
the sum of (i) scheduled payments of principal on Indebtedness of CHC
and its Subsidiaries (including the portion of payments on capitalized
leases allocable to principal, but excluding (A) mandatory prepayments
of the Loans required under Section 2.6, and (B) balloon payments made
with the proceeds of Indebtedness permitted pursuant to Section 8.5),
whether or not made, (ii) Interest Expense, (iii) income and gross
receipts taxes paid in cash or cash equivalents, (iv) dividends and
distributions paid in cash or cash equivalents (excluding
distributions of cash made by the Borrower to CHC in an amount
necessary to allow CHC to pay income and gross receipts taxes on the
taxable income of the Borrower that is recognized by CHC for tax
purposes), plus (v) payments made to redeem or otherwise acquire for
value any partnership units of the Borrower or shares of capital stock
of CHC or any warrants, rights or options to acquire such partnership
units or shares.
"FRB" means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal
functions.
"Funded Debt Ratio" means the ratio of (a) the Indebtedness of CHC and
its Subsidiaries as of the last day of the applicable period, to (b)
EBITDA for the applicable period.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances at the
applicable time.
<PAGE>
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other
entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Guaranty" means a guaranty executed by CHC and in favor Agent as
agent for the Lenders pursuant to Section 5.1(l), in substantially the
form of Exhibit C, together with all amendments thereto.
"Guaranty Obligation" has the meaning specified in the definition of
"Contingent Obligation."
"Hazardous Materials" means all those substances that are regulated
by, or which may form the basis of liability under, any Environmental
Law, including all substances identified under any Environmental Law
as a pollutant, contaminant, hazardous waste, hazardous constituent,
special waste, hazardous substance, hazardous material, or toxic
substance, or petroleum or petroleum-derived substance or waste.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary
course of business on ordinary terms); (c) all noncontingent
reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses;
(e) all indebtedness created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in either
case with respect to property acquired by the Person (even though the
rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such
property); (f) all obligation with respect to capital leases; (g) all
net obligations with respect to Swap Contracts; (h) all reimbursement
obligations under outstanding Letters of Credit; (i) all indebtedness
referred to in clauses (a) through (g) above secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including
accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness; and (j) all Guaranty Obligation in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above.
"Indemnification Agreement" means an indemnification agreement
executed by the Borrower in favor Agent as agent for the Lenders
pursuant to Section 5.3, in substantially the form of Exhibit D,
together with all amendments thereto.
"Indemnified Liabilities" has the meaning specified in Section 12.5.
<PAGE>
"Indemnified Person" has the meaning specified in Section 12.5.
"Independent Auditor" has the meaning specified in Section 7.1(a).
"Insolvency Proceeding" means (a) any case, action or proceeding
before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors;
undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Interest Coverage Ratio" means the ratio of (a) EBITDA for the
applicable period, to (b) Interest Expense for the applicable period.
"Interest Expense" means, for any applicable period, the aggregate
consolidated interest expense (both cash and non-cash and determined
without regard to original issue discount) of CHC and its Subsidiaries
for such period, as determined in accordance with GAAP, including, to
the extent allocable to interest expense in accordance with GAAP,
(a) all other fees paid or owed with respect to the issuance or
maintenance of Contingent Obligations (including letters of credit of
CHC and its Subsidiaries), (b) net costs or benefit under Swap
Contracts of CHC and its Subsidiaries and (c) the portion of any
payments made in respect of obligation in respect of capitalized
leases of CHC and its Subsidiaries allocable to interest expense.
"Interest Margin" means the number of basis points per annum
determined in accordance with the following matrix and based upon the
quarterly financial statements of the Borrower provided to the Agent
in accordance with the terms of this Agreement for the preceding
fiscal quarter. Adjustments shall be made 45 days after the end of
each fiscal quarter (when quarterly financial statements are required
to be delivered to the Agent); provided, however, that if the Borrower
has not delivered its financial statements for the previous fiscal
quarter within 45 days of the end of such fiscal quarter, then the
Interest Margin in effect for the previous fiscal quarter shall
continue to apply unless the Agent exercises its right to impose
interest at the default rate as provided for in this Agreement:
Level Level I Level II Level III Level IV
----------------- ------- ---------- --------- --------
Funded Debt Ratio < 3.00 >3.00<3.50 >3.50<4.0 >4.0
- - -
Reference Margin 0 0 25 37.5
LIBOR Margin 165 185 210 235
> means greater than or equal to
-
< means less than
<PAGE>
The margins set forth above shall apply unless there exists an Event
of Default, in which case the Agent may elect to impose the default
rate as provided for in this Agreement. Notwithstanding the
foregoing, the Interest Margin for the first six months following the
date of the initial advance of a Loan to the Borrower, shall be the
higher of (a) the Interest Margin applicable in accordance with the
matrix set forth above or (b) the Interest Margin applicable under
Level II of the matrix set forth above.
"Interest Payment Date" means, as to any Loan other than a Reference
Rate Loan, the last day of each Interest Period applicable to such
Loan and, as to any Reference Rate Loan, the last Business Day of each
calendar quarter and each date such Loan is converted into another
Type of Loan; provided, however, that if any Interest Period for a
LIBOR Rate Loan exceeds three months, the date that falls three months
after the beginning of such Interest Period and after each Interest
Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, as to any LIBOR Rate Loan, the period
commencing on the Interest Rate Election Date on which the Loan is
made, converted into or continued as a LIBOR Rate Loan, and ending on
the date one, two, three or six months thereafter as selected by the
Borrower in its Interest Rate Notice; provided that:
(a) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the
following Business Day unless, in the case of a LIBOR Rate Loan,
the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(b) any Interest Period pertaining to a LIBOR Rate Loan that begins
on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest
Period; and
(c) no Interest Period shall extend beyond the Maturity Date.
"Interest Rate Election Date" means any date as of which, under
Section 2.5, the Borrower (a) obtains Loans, (b) converts Loans of one
Type to another Type, or (c) continues as Loans of the same Type, but
with a new Interest Period, Loans having Interest Periods expiring on
such date.
"Interest Rate Notice" means a notice in substantially the form of
Exhibit E.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
<PAGE>
"Lender" has the meaning specified in the introductory clause hereto.
"Lending Office" means, as to any Lender, the office or offices of
such Lender specified as its "Lending Office" or "Domestic Lending
Office" or "LIBOR Lending Office," as the case may be, on
Schedule 12.2, or such other office or offices as the Lender may from
time to time notify the Borrower and the Agent.
"Letter of Credit" means a stand-by letter of credit issued by the
Agent pursuant to Section 3.2 hereof for the account of the Borrower.
"Letter of Credit Usage" means as of any date of determination, the
sum of (a) the aggregate face amount of all outstanding unmatured
Letters of Credit, plus (b) the aggregate amount of all payments made
by Agent under Letters of Credit and not yet reimbursed by the
Borrower pursuant to Section 3.4 hereof.
"LIBOR Rate" means, for any Interest Period, with respect to LIBOR
Rate Loans comprising part of the same Borrowing, the rate of interest
per annum (rounded upward to the next 1/16th of 1%) determined by the
Agent as follows:
LIBOR Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect on
such day (whether or not applicable to any Lender) under
regulations issued from time to time by the FRB for determining
the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect
to Eurocurrency funding (currently referred to as "Eurocurrency
liabilities"); and
"LIBOR" means the average offered rate for deposits in United
States Dollars (rounded upwards, if necessary, to the nearest
1/16 of 1%) for delivery of such deposits on the first day of an
Interest Period of a LIBOR Rate Loan, for the number of days
comprised therein, which appears on the Reuters Screen LIBO Page
as of 11:00 a.m., London time (or such other time as of which
such rate appears) on the day that is two Business Days preceding
the first day of the Interest Period or the rate for such
deposits determined by the Agent at such time based on such other
published service of general application as shall be selected by
the Agent for such purpose; provided, that in lieu of determining
the rate in the foregoing manner, the Agent may determine the
rate based on rates offered to the Agent for deposits in United
States Dollars (rounded upwards, if necessary, to the nearest
1/16 of 1%) in the interbank eurodollar market at such time for
delivery on the first day of the Interest Period for the number
of days comprised therein.
<PAGE>
The LIBOR Rate shall be adjusted automatically as to all LIBOR
Rate Loans then outstanding as of the effective date of any
change in the Eurodollar Reserve Percentage.
"LIBOR Rate Loan" means a Loan that bears interest based on the LIBOR
Rate.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance,
lien (statutory or other) or preferential arrangement of any kind or
nature whatsoever in respect of any property (including those created
by, arising under or evidenced by any conditional sale or other title
retention agreement, the interest of a lessor under a capital lease,
any financing lease having substantially the same economic effect as
any of the foregoing, or the filing of any financing statement naming
the owner of the asset to which such lien relates as debtor, under the
Uniform Commercial Code or any comparable law) and any contingent or
other agreement to provide any of the foregoing, but not including the
interest of a lessor under an operating lease.
"Loan" means an extension of credit by a Lender to the Borrower under
Article II, and may be a Reference Rate Loan or a LIBOR Rate Loan
(each, a "Type" of Loan).
"Loan Documents" means this Agreement, the Note, the Collateral
Documents, the Guaranty, the Reimbursement Agreements, the Commitment
Letter and all other documents delivered to the Agent or any Lender in
connection herewith.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Borrower or the
Borrower, CHC and its Subsidiaries taken as a whole; (b) a material
impairment of the ability of the Borrower, CHC or any Subsidiary to
perform under any Loan Document and to avoid any Event of Default; or
(c) a material adverse effect upon (i) the legality, validity, binding
effect or enforceability against the Borrower, CHC or any Subsidiary
of any Loan Document, or (ii) the perfection or priority of any lien
granted under any of the Collateral Documents.
"Maturity Date" means the earlier of (i) May 5, 2003 and (ii) the date
the Obligations are accelerated pursuant to Section 9.2 hereof.
"Multiemployer Plan" means a "multiemployer plan," within the meaning
of Section 4001(a)(3) of ERISA, to which the Borrower, CHC or any
ERISA Affiliate makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has made,
or been obligated to make, contributions.
<PAGE>
"Net Issuance Proceeds" means, as to any issuance of debt by any
Person, cash proceeds and non-cash proceeds received or receivable by
such Person in connection therewith, net of reasonable out-of-pocket
costs and expenses paid or incurred in connection therewith in favor
of any Person not an Affiliate of such Person.
"Net Proceeds" means, as to any Disposition by a Person, proceeds in
cash, checks or other cash equivalent financial instruments as and
when received by such Person, net of: (a) the direct costs relating
to such Disposition excluding amounts payable to such Person or any
Affiliate of such Person, (b) sale, use or other transaction taxes
paid or payable by such Person as a direct result thereof, and (c) the
amount required to be applied to repay principal, interest and
prepayment premiums and penalties on Indebtedness secured by a lien on
the asset which is the subject of such Disposition to the extent such
Lien is permitted hereunder. "Net Proceeds" shall also include
proceeds paid on account of any Event of Loss, net of (x) all money
actually applied to repair or reconstruct the damaged property or
property affected by the condemnation or taking, (y) all of the costs
and expenses reasonably incurred in connection with the collection of
such proceeds, award or other payments, and (z) any amounts retained
by or paid to parties having superior rights to such proceeds, awards
or other payments. Notwithstanding the foregoing, "Net Proceeds" of a
Disposition described in Section 8.2(a)(v) shall be an amount equal to
the amount calculated in accordance with Section 8.2(a)(v)(A).
"Nonrecourse Indebtedness" means Indebtedness with respect to which
there is no recourse to any of the assets of the Borrower, CHC or any
Subsidiary other than the assets encumbered by a Permitted Lien, with
customary exceptions to the nonrecourse nature of such Indebtedness
approved by the Agent in writing, which approval shall not be
unreasonably withheld.
"Note" means a promissory note executed by the Borrower and payable to
the Agent for the benefit of the Lenders pursuant to Section 2.4, in
substantially the form of Exhibit F, together with all renewals and
amendments thereto.
"Notice of Borrowing" means a written or oral request for a Loan from
the Borrower delivered to the Agent in the manner, at the time, and
containing the information required by the terms of Section 2.2
hereof.
"Obligation" means all advances, debts, liabilities, obligation,
covenants and duties arising under any Loan, Letter of Credit or Loan
Document owing by the Borrower, CHC or any Subsidiary to any Lender,
the Agent, or any Indemnified Person, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising.
<PAGE>
"Organization Documents" means (a) for any limited partnership, the
limited partnership agreement, the certificate of formation, and all
applicable resolutions of the board of directors (or any committee
thereof) of such limited partnership and (b) for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights or similar
agreement, and all applicable resolutions of the board of directors
(or any committee thereof) of such corporation.
"Other Taxes" means any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery
or registration of, or otherwise with respect to, this Agreement or
any other Loan Documents.
"Participant" has the meaning specified in Section 12.8(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Borrower sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 8.1.
"Person" means an individual, partnership, corporation, limited
liability company, limited liability partnership, business trust,
joint stock company, trust, unincorporated association, joint venture
or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Borrower sponsors or maintains or to which the
Borrower makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Reference Rate" means, for any day, the rate of interest in effect
for such day as publicly announced from time to time by U. S. Bank, as
its "reference lending rate." The "reference lending rate" shall mean
the rate announced by U. S. Bank from time to time as its reference
lending rate for commercial loans within the United States (but is not
intended to be the lowest rate of interest charged by U. S. Bank in
connection with extensions of credit to debtors or any classification
of debtors). Any change in the reference rate announced by U. S. Bank
shall take effect at the opening of business on the day specified in
the public announcement of such change.
<PAGE>
"Reference Rate Loan" means a Loan that bears interest based on the
Reference Rate.
"Pro Rata Share" means, as to any Lender at any time, the percentage
interest (expressed as a decimal, rounded to the ninth decimal place)
at such time of such Lender in the combined Commitments of all
Lenders.
"Reimbursement Agreement" has the meaning specified in Section 3.2(c).
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has
been waived in regulations issued by the PBGC.
"Required Lenders" means at any time Lenders then holding in excess of
66 2/3% of the then aggregate unpaid principal amount of the Loans,
or, if no such principal amount is then outstanding, Lenders then
having Pro Rata Shares greater than 66 2/3% of the Commitments.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding
upon the Person or any of its property or to which the Person or any
of its property is subject.
"Responsible Officer" means the chief executive officer or the
president of the Borrower, or any other officer having substantially
the same authority and responsibility; or, with respect to compliance
with financial covenants, the chief financial officer or the treasurer
of the Borrower, or any other officer having substantially the same
authority and responsibility.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Security Agreements" means the security agreements executed by the
Borrower and CHC and in favor Agent as agent for the Lenders pursuant
to Section 5.1(f), in substantially the form of Exhibit G, together
with all amendments thereto.
"Solvent" means, as to any Person at any time, that (a) the fair value
of the property of such Person is greater than the amount of such
Person's liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated
for purposes of Section 101(31) of the Bankruptcy Code and, in the
alternative, for purposes of the Washington Uniform Fraudulent
Transfer Act; (b) the present fair saleable value of the property of
such Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become
absolute and matured; (c) such Person is able to realize upon its
<PAGE>
property and pay its debts and other liabilities (including disputed,
contingent and unliquidated liabilities) as they mature in the normal
course of business; (d) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature; and (e) such
Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Subordinated Debt" shall mean Indebtedness of the Borrower or CHC
which is subordinated to the Obligations of the Borrower, CHC and the
Subsidiaries hereunder in right of payment, exercise of remedies or
both, on terms and conditions agreed to in writing by the Agent and
the Required Lenders.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, limited liability partnership,
joint venture or other business entity of which more than 50% of the
voting stock membership interests or other equity interests (in the
case of Persons other than corporations), is owned or controlled
directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the
context otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Borrower.
"Surety Instruments" means all letters of credit (including standby
and commercial), banker's acceptances, bank guaranties, surety bonds
and similar instruments.
"Swap Contract" means any agreement (including any master agreement
and any agreement, whether or not in writing, relating to any single
transaction) that is an interest rate swap agreement, basis swap,
forward rate agreement, commodity swap, commodity option, equity or
equity index swap or option, bond option, interest rate option,
forward foreign exchange agreement, rate cap, collar or floor
agreement, currency swap agreement, cross-currency rate swap
agreement, currency option or any other, similar agreement (including
any option to enter into any of the foregoing).
"Taxes" means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, such
taxes (including income taxes or franchise taxes) as are imposed on or
measured by each Lender's net income by the jurisdiction (or any
political subdivision thereof) under the laws of which such Lender or
the Agent, as the case may be, is organized or maintains a lending
office.
"Title Insurance Policy" means an American Land Title Association
extended coverage mortgagee's policy of title insurance (1992 form)
insuring the validity and first priority (subject only to exceptions
agreed to in writing by the Agent) of the lien of the applicable Deed
<PAGE>
of Trust against the real property described therein, in an amount
equal to or greater than 60% of the Approved Appraised Value, and with
such endorsements as the Agent deems necessary in its sole discretion,
issued by a title insurance company reasonably acceptable to the
Agent, dated as of the date of the recording of such Deed of Trust,
and in a form acceptable to the Agent.
"Type" has the meaning specified in the definition of "Loan."
"UCC" means the Uniform Commercial Code as in effect in the State of
Washington.
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Plan's assets, determined in accordance with the assumptions
used for funding the Pension Plan pursuant to Section 412 of the Code
for the applicable plan year.
"United States" and "U.S." each means the United States of America.
"U. S. Bank" means U. S. Bank National Association, a national
banking association.
1.2 Other Interpretive Provisions
-----------------------------
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar words
refer to this Agreement as a whole and not to any particular
provision of this Agreement; and subsection, Section,
Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means
"from and including"; the words "to" and "until" each
mean "to but excluding," and the word "through" means "to
and including."
(iv) The term "property" includes any kind of property or
asset, real, personal or mixed, tangible or intangible.
<PAGE>
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent
amendments and other modifications thereto, but only to the
extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and
(ii) references to any statute or regulation are to be
construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of
this Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the
same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in
accordance with their terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the
Agent, the Borrower, CHC and the other parties, and are the
products of all parties. Accordingly, they shall not be
construed against the Lenders or the Agent merely because of
the Agent's or Lenders' involvement in their preparation.
(h) Each reference hereunder to Subsidiaries is effective at such
time and to the extent that the Borrower has existing
Subsidiaries (as defined herein).
1.3 Accounting Principles
---------------------
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be
made, in accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer
to such fiscal periods of the Borrower or CHC (as the case may
be).
(c) In the event that GAAP changes during the term of this
Agreement such that the Financial Covenants contained in
Section 8.14 would then be calculated in a different manner or
with different components or with components that are
calculated differently, (i) the parties hereto agree to enter
into negotiations with respect to amendments to this Agreement
to conform those covenants as criteria for evaluating CHC's and
its Subsidiaries' financial condition to substantially the same
criteria as were effective prior to such change in GAAP, and
(ii) the Borrower and CHC shall be deemed to be in compliance
<PAGE>
with the affected Financial Covenants contained in Section 8.14
during the 60 days following any change in GAAP if and to the
extent that the Borrower would have been in compliance
therewith under GAAP as in effect immediately before such
change; provided, however, that this paragraph shall not be
deemed to require the Borrower, the Agent or the Lenders to
agree to modify any provision of this Agreement or any of the
other Loan Documents to reflect any such change to GAAP and,
if, after such 60 days, the parties, in their sole discretion,
fail to reach agreement on such modifications, the terms of
this Agreement will remain unchanged and the compliance by the
Borrower and CHC with the Financial Covenants contained in
Section 8.14 will be calculated in accordance with GAAP as in
effect immediately before such change.
ARTICLE II. THE LOANS
2.1 Revolving Line of Credit
------------------------
(a) Subject to the terms and conditions of this Agreement, each
Lender hereby severally agrees to make loans (each such loan, a
"Loan") to the Borrower from time to time on Business Days
prior to the Maturity Date in amounts equal to such Lender's
Pro Rata Share of each requested loan, provided that, after
giving effect to any requested loan the aggregate of all Loans
from such Lender will not exceed at any one time outstanding
(a) such Lender's Pro Rata Share of the Commitment less (b) its
Pro Rata Share of the Letter of Credit Usage. The Loans
described in this Section 2.1 constitute a revolving credit and
within the amount and time specified, the Borrower may pay,
prepay and reborrow. The amount of each Lender's Pro Rata
Share of the Commitment is set forth in Schedule 2.1.
(b) Upon not fewer than ten days' prior written notice to the
Agent, the Borrower may elect to reduce the amount of the
Commitment; provided, however that any such reduction in the
Commitment shall be permanent.
2.2 Manner of Borrowing
-------------------
For each requested Loan, the Borrower shall give the Agent a Notice of
Borrowing specifying the date of a requested borrowing and the amount
thereof. Borrower may give a written or oral Notice of Borrowing on
the same day it wishes any Reference Rate Loan to be made if said
Notice of Borrowing is received by Agent no later than 10:00 a.m.
(Seattle time) on the date of the requested borrowing. If the
Borrower shall elect to have interest accrue on a Loan at a rate
indexed to the LIBOR Rate by giving an Interest Rate Notice in respect
of such borrowing, the Notice of Borrowing shall be given prior to
10:00 a.m. (Seattle time) on a Business Day at least three Business
Days prior to the requested date of borrowing. Requests for
<PAGE>
borrowing, or confirmations thereof, received after the designated
hour will be deemed received on the next succeeding Business Day.
Each such Notice of Borrowing shall be irrevocable and shall be deemed
to constitute a representation and warranty by Borrower that as of the
date of such notice the statements set forth in Article VI are true
and correct in all material respects and that no Default or Event of
Default has occurred and is continuing. On receipt of a Notice of
Borrowing, the Agent shall promptly notify each Lender by telephone,
telex or facsimile of the date of the requested borrowing and the
amount thereof. Each Lender shall before 12:00 noon (Seattle time) on
the date of the requested borrowing, pay such Lender's Pro Rata Share
of the aggregate principal amount of the requested borrowing in
immediately available funds to the Agent at 1420 Fifth Avenue,
Seattle, Washington 98101. Upon fulfillment to the Agent's
satisfaction of the applicable conditions set forth in Article V, and
after receipt by the Agent of such funds, the Agent will either
(a) promptly make such funds available to the Borrower at a general
checking account maintained by the Borrower at the Agent, or at such
other place as may be designated by the Borrower in a writing
delivered to the Agent; (b) if requested by the Borrower in writing to
do so, will apply such funds against the Borrower's obligations to
make payments of interest accruing under this Agreement, the Note or
any other Loan Document; or (c) at the Agent's election, apply such
proceeds to the satisfaction of Borrower's obligations arising under
Section 3.4.
2.3 Agent's Right to Fund
---------------------
Unless the Agent shall have received notice from a Lender prior to
12:00 noon (Seattle time) on the date of any requested borrowing that
such Lender will not make available to the Agent its Pro Rata Share of
the requested Borrowing, the Agent may assume that such Lender has
made such funds available to the Agent on the date such Loan is to be
made in accordance with Section 2.2 hereof and the Agent may, in
reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender
shall not have so made such portion available to the Agent, the
Borrower and such Lender, jointly and severally, agree to pay to the
Agent forthwith on demand such corresponding amount, together with
interest thereon for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Agent, at (a) in the case of the Borrower, the interest rate
applicable to such Loan and (b) in the case of such Lender, the
Federal Funds Rate. Any such repayment by the Borrower shall be
without prejudice to any rights it may have against a Lender that has
failed to make available its funds for any requested borrowing. The
failure of any Lender to make available its Pro Rata Share of a
requested Borrowing shall not relieve any other Lender of any
obligation hereunder to make available its Pro Rata Share of a
requested Borrowing, but no Lender shall be responsible for the
failure of any other Lender to make available such Lender's Pro Rata
Share of a requested Borrowing.
<PAGE>
2.4 Loan Accounts
-------------
The Loan made by each Lender shall be evidenced by the Note and one or
more loan accounts or records maintained by such Lender in the
ordinary course of business. The loan accounts or records maintained
by the Agent and each Lender shall be conclusive absent manifest error
of the amount of the Loans made by the Lenders to the Borrower and the
interest and payments thereon. Any failure so to record or any error
in doing so shall not, however, limit or otherwise affect the
obligation of the Borrower hereunder to pay any amount owing with
respect to the Loans.
2.5 Interest Rate Elections
-----------------------
(a) The Borrower may, upon irrevocable written notice to the Agent
in accordance with Section 2.5(b):
(i) elect, as of any Business Day, in the case of new LIBOR
Rate Loans or any Reference Rate Loans, or as of the last
day of the applicable Interest Period, in the case of any
existing LIBOR Rate Loans, to make or convert any such
Loans (or any part thereof (A) in the case of a
conversion to a LIBOR Rate Loan, in an amount not less
than $1,000,000, or that is in an integral multiple of
$100,000 in excess thereof or (B) in the case of a
conversion to a Reference Rate Loan, in an amount not
less than $250,000) into Loans of any other Type; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue any Loans having Interest Periods
expiring on such day (or any part thereof in an amount
not less than $1,000,000, or that is in an integral
multiple of $100,000 in excess thereof).
(b) The Borrower shall deliver an Interest Rate Notice to be
received by the Agent not later than 10:00 p.m. (Seattle time)
at least (i) three Business Days in advance of the Interest
Rate Election Date, if the Loans are to be made, converted into
or continued as LIBOR Rate Loans; and (ii) one Business Day in
advance of the Interest Rate Election Date, if the Loans are to
be converted into Reference Rate Loans, specifying:
(A) the proposed Interest Rate Election Date;
(B) the aggregate amount of Loans to be made, converted or
renewed;
(C) the Type of Loans resulting from the proposed making,
conversion or continuation; and
(D) other than in the case of Reference Rate Loans, the
duration of the requested Interest Period.
<PAGE>
(c) If the Borrower does not specify an interest rate election in
any Notice of Borrowing, the Loans made pursuant to such Notice
of Borrowing shall constitute Reference Rate Loans.
(d) If upon the expiration of any Interest Period applicable to
LIBOR Rate Loans, the Borrower has failed to timely select a
new Interest Period to be applicable to such LIBOR Rate Loans,
or if any Default or Event of Default then exists, the Borrower
shall be deemed to have elected to convert such LIBOR Rate
Loans into Reference Rate Loans effective as of the expiration
date of such Interest Period.
(e) the Agent will promptly notify each Lender of its receipt of an
Interest Rate Notice, or, if no timely notice is provided by
the Borrower, the Agent will promptly notify each Lender of the
details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective
outstanding principal amounts of the Loans with respect to
which the notice was given held by each Lender.
(f) Unless the Required Lenders otherwise agree, during the
existence of a Default or Event of Default, the Borrower may
not elect to have a Loan made, converted into or continued as a
LIBOR Rate Loan.
(g) There may not be more than six different Interest Periods in
effect at any time.
2.6 Mandatory Prepayments of Loans
------------------------------
(a) ASSET DISPOSITIONS
If the Borrower, CHC or any Subsidiary shall at any time or
from time to time make or agree to make a Disposition then
(i) the Borrower shall promptly notify the Agent of such
proposed Disposition (including the amount of the estimated Net
Proceeds to be received by the Borrower, CHC or such Subsidiary
in respect thereof) and (ii) concurrently with receipt by the
Borrower, CHC or the Subsidiary of the Net Proceeds of such
Disposition, the Borrower shall prepay the Loans in an
aggregate amount equal to the amount of such Net Proceeds;
provided, however, that no such prepayment shall be required to
the extent, in each case, such Net Proceeds are from the
Disposition of personal property and are to be used within 90
days of receipt thereof to purchase replacement assets;
provided further, that such prepayment shall be required only
if (i) such Net Proceeds exceed $500,000 or (ii) the aggregate
of all Net Proceeds theretofore received by the Borrower during
the preceding 12 months and not reinvested or used to make a
prepayment hereunder exceeds $500,000.
<PAGE>
(b) EVENT OF LOSS
If the Borrower, CHC or any Subsidiary shall at any time or
from time to time suffer an Event of Loss, then (i) the
Borrower shall promptly notify the Agent of such Event of Loss
(including the amount of the estimated Net Proceeds to be
received by the Borrower, CHC or such Subsidiary in respect
thereof) and (ii) promptly upon, and in no event later than two
(2) Business Days after, receipt by the Borrower, CHC or the
Subsidiary of the Net Proceeds of such Event of Loss, the
Borrower shall either (i) prepay the Loans in an aggregate
amount equal to the amount of such Net Proceeds or (ii) deposit
an aggregate amount equal to the amount of such Net Proceeds
into an interest bearing blocked account maintained with the
Agent pending release for usage by the Borrower in a manner,
and during the time, specified in the proviso below; provided,
however, that no such prepayment shall be required to the
extent, in each case, such Net Proceeds are used within 90 days
of receipt thereof to repair, replace or restore the assets, if
any, relating to such Event of Loss.
(c) DEBT ISSUANCE
If the Borrower or CHC shall incur additional Indebtedness
after the date of this Agreement (other than Indebtedness
permitted under Section 8.5, the Borrower shall promptly notify
the Agent of the estimated Net Issuance Proceeds of such
issuance or incurrence to be received by the Borrower in
respect thereof. Promptly upon, and in no event later than
three days after, receipt by the Borrower of Net Issuance
Proceeds of such issuance or incurrence, the Borrower shall
prepay the Loans in an aggregate amount equal to the amount of
such Net Issuance Proceeds.
(d) GENERAL
Any prepayments pursuant to this Section 2.6 shall be applied
first to any Reference Rate Loans then outstanding and then to
LIBOR Rate Loans with the shortest Interest Periods remaining;
provided, however, that if the amount of Reference Rate Loans
then outstanding is not sufficient to satisfy the entire
prepayment requirement, the Borrower may, at its option, place
any amounts which it would otherwise be required to use to
prepay LIBOR Rate Loans on a day other than the last day of the
Interest Period therefor in an interest-bearing account pledged
to the Agent for the benefit of the Lenders until the end of
such Interest Period at which time such pledged amounts will be
applied to prepay such LIBOR Rate Loans. The Borrower shall
pay, together with each prepayment under this Section 2.6,
accrued interest on the amount prepaid and any amounts required
pursuant to Section 4.4.
(e) REDUCTION IN COMMITMENT
Concurrently with the making of each mandatory prepayment
pursuant to this Section 2.6, the amount of the Commitment
shall be automatically and permanently reduced by an amount
equal to the amount of the mandatory prepayment, and each
Lender's Commitment shall be reduced proportionately based upon
each Lender's Pro Rata Share.
<PAGE>
2.7 Repayment
---------
(a) The Borrower shall repay to the Lenders from time to time such
amounts of principal as may be necessary to ensure that at all
times the sum of the then outstanding principal balance of all
Loans and the Letter of Credit Usage is equal to or less than
the lesser of (i) the amount of the then applicable Commitment
or (ii) the Borrowing Base.
(b) The Borrower shall repay the Loans in full, together with all
accrued and unpaid interest thereon, on the Maturity Date.
2.8 Interest
--------
(a) Each Loan shall bear interest on the outstanding principal
amount thereof from the Closing Date at a rate per annum equal
to the LIBOR Rate or the Reference Rate, as the case may be
(and subject to the Borrower's right to convert to other Types
of Loans under Section 2.5), plus the Interest Margin.
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any
prepayment of Loans under Section 2.6 for the portion of the
Loans so prepaid and upon payment (including prepayment) in
full thereof and, during the existence of any Event of Default,
interest shall be paid on demand of the Agent at the request or
with the consent of the Required Lenders.
(c) Notwithstanding subsection (a) of this Section, while any Event
of Default exists or after acceleration, the Borrower shall pay
interest (after as well as before entry of judgment thereon to
the extent permitted by law) on the principal amount of all
outstanding Loans, at a rate per annum which is determined by
adding 2% per annum to the Interest Margin then in effect for
such Loans.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Borrower to any Lender hereunder shall be
subject to the limitation that payments of interest and late
charges shall not be required, for any period for which
interest is computed hereunder, to the extent (but only to the
extent) that contracting for or receiving such payment by such
Lender would be contrary to the provisions of any law
applicable to such Lender limiting the highest rate of interest
that may be lawfully contracted for, charged or received by
such Lender, and in such event the Borrower shall pay such
Lender interest at the highest rate permitted by applicable
law.
<PAGE>
2.9 Agency and Underwriting Fees
----------------------------
The Borrower shall pay agency fees and underwriting fees to the Agent
as required by the Commitment Letter.
2.10 Commitment Fees
---------------
On the last day of each fiscal quarter during the term of the Loans,
and on the date that the Loans are repaid in full and the Commitments
are terminated upon the election of the Borrower pursuant to Section
2.1(c) or as otherwise provided in this Agreement, Borrower shall pay
to the Agent for the ratable benefit of the Lenders commitment fees an
the amount equal to Commitment Fee Percentage per annum of the sum of
(i) the average unused portion of the Commitment during each period,
to be calculated based upon the amount of the Commitment during such
period, less (ii) the sum of the then outstanding principal balance of
all Loans and the Letter of Credit Usage during such period. The fee
paid pursuant to this Section 2.10 shall be deemed fully earned when
due and non-refundable when paid without regard to any voluntary or
involuntary prepayment of the Loans (or any portion thereof), the
failure to satisfy the conditions of lending or the termination of any
Commitment.
2.11 Late Charge
-----------
If any payment of principal or interest required under any of the
Loans is five days or more past due, the Borrower will be charged,
for the ratable benefit of the Lenders, a late charge of 5% of the
delinquent payment or $5, whichever is greater, for each such late
payment. The five-day period provided for herein shall not be
construed as a waiver of any Default or Event of Default resulting
from any late payment under any of the Loans.
2.12 Computation of Interest and Fees
--------------------------------
(a) All computations of interest and commitment fees shall be made
on the basis of a year of 360 days and actual days elapsed.
Interest and commitment fees shall accrue during each period
during which interest or commitment fees are computed from the
first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Borrower and the Lenders in the
absence of manifest error. The Agent will, at the request of
the Borrower or any Lender, deliver to the Borrower or the
Lender, as the case may be, a statement showing the quotations
used by the Agent in determining any interest rate and the
resulting interest rate.
<PAGE>
2.13 Payments by the Borrower
------------------------
(a) All payments to be made by the Borrower shall be made without
set-off, recoupment or counterclaim. Except as otherwise
expressly provided herein, all payments by the Borrower shall
be made to the Agent for the account of the Lenders at the
Agent's Payment Office, and shall be made in dollars and in
immediately available funds, no later than 10:00 p.m. (Seattle
time) on the date specified herein. The Agent will promptly
distribute to each Lender its Pro Rata Share (or other
applicable share so expressly provided herein) of such payment
in like funds as received. Any payment received by the Agent
later than 10:00 p.m. (Seattle time) shall be deemed to have
been received on the following Business Day and any applicable
interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day
other than a Business Day, such payment shall be made on the
following Business Day, and such extension of time shall in
such case be included in the computation of interest or fees,
as the case may be.
(c) Unless the Agent receives notice from the Borrower prior to the
date on which any payment is due to the Lenders that the
Borrower will not make such payment in full as and when
required, the Agent may assume that the Borrower has made such
payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so
required), in reliance upon such assumption, distribute to each
Lender on such due date an amount equal to the amount then due
such Lender. If and to the extent the Borrower has not made
such payment in full to the Agent, each Lender shall repay to
the Agent on demand such amount distributed to such Lender,
together with interest thereon at this Federal Funds Rate for
each day from the date such amount is distributed to such
Lender until the date repaid.
(d) Any payment made by the Borrower hereunder shall be applied
first, against any Financial Transaction Liability of the
Borrower owing to the Agent; second, against fees, expenses and
indemnities due hereunder or under any other Loan Document;
third, against interest due on matured obligations in respect
of any Letter of Credit, if any; fourth, against interest due
on amounts in default on any Loan, if any; fifth, against
interest due on any Loan; sixth, against matured obligations in
respect of any Letter of Credit, if any; seventh, against Loan
principal amounts in default; and eighth, against Loan
principal.
<PAGE>
2.14 Sharing of Payments, Etc.
-------------------------
If, other than as expressly provided elsewhere herein, any Lender
shall obtain on account of the Loans made by it any payment (whether
voluntary, involuntary, through this exercise of any right of set-off,
or otherwise) in excess of its Pro Rata Share, such Lender shall
immediately (a) notify the Agent of such fact, and (b) purchase from
the other Lenders such participations in the Loans made by them as
shall be necessary to cause such purchasing Lender to share the excess
payment pro rata with each of them; provided, however, that if all or
any portion of such excess payment is thereafter recovered from the
purchasing Lender, such purchase shall to that extent be rescinded and
each other Lender shall repay to the purchasing Lender the purchase
price paid therefor, together with an amount equal to such paying
Lender's ratable share (according to the proportion of (a) the amount
of such paying Lender's required repayment to (b) the total amount so
recovered from the purchasing Lender) of any interest or other amount
paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender may, to the fullest
extent permitted by law, exercise all its rights of payment (including
the right of set-off, but subject to Section 12.9) with respect to
such participation as fully as if such Lender were the direct creditor
of the Borrower in the amount of such participation. The Agent will
keep records (which shall be conclusive and binding in the absence of
manifest error) of participations purchased under this Section and
will in each case notify the Lenders following any such purchases or
repayments.
2.15 Security
--------
All Obligations of the Borrower, CHC and the Subsidiaries under this
Agreement, the Note and all other Loan Documents shall be secured in
accordance with the Collateral Documents.
2.16 Borrowing Base
--------------
(a) The sum of (i) the outstanding balance of principal of the
Loans, plus (ii) the Letter of Credit Usage shall at no time
exceed an amount equal to the Borrowing Base.
(b) The Borrower shall submit to U. S. Bank a calculation of the
Borrowing Base (i) within 45 days of the end of each fiscal
quarter of the Borrower as of the last day of such fiscal
quarter and (ii) with each Notice of Borrowing for Loans in
excess of $4,000,000 in the aggregate or request for the
issuance of a Letter of Credit in a face amount in excess of
$4,000,000.
(c) If at any time the sum of (i) the outstanding balance of
principal of the Loans, plus (ii) the Letter of Credit Usage
shall exceed the Borrowing Base, the Borrower shall repay such
outstanding portion of the Loans in an amount equal to such
excess within one Business Day. The Borrower's failure to do
so shall constitute an Event of Default.
<PAGE>
2.17 No Prepayment Charges
---------------------
Except as provided in Section 4.4, the Borrower may pay or prepay any
Loan without charge.
ARTICLE III. LETTERS OF CREDIT
3.1 Letters of Credit
-----------------
Upon the Borrower's request prior to the Maturity Date, the Agent
shall issue one or more standby letters of credit for the Borrower's
account in accordance with the terms and conditions of this Section 3.
3.2 Manner of Requesting Letters of Credit
--------------------------------------
(a) From time to time prior to the Maturity Date, the Borrower may
request that the Agent issue standby letters of credit for the
Borrower's account or extend or renew any existing Letters of
Credit. Each such request will be made by delivering a written
request for the issuance, extension or renewal of such a letter
of credit to the Agent not later than 12:00 noon (Seattle time)
one Business Day prior to the date a new letter of credit is to
be issued or an existing Letter of Credit is to be extended or
renewed. Each such request shall be deemed to constitute a
representation and warranty by the Borrower that as of the date
of such request, the representations and warranties set forth
in Article V are true and correct and that no Default or Event
of Default has occurred and is continuing. Each such request
shall specify the face amount of the requested letter of
credit, the proposed date of expiration for such letter of
credit, the name of the intended beneficiary thereof, and
whether such letter of credit is an extension or renewal of a
Letter of Credit.
(b) Each letter of credit requested hereunder (i) shall be in a
face amount such that after issuance of such letter of credit,
the Letter of Credit Usage does not exceed $5,000,000;
(ii) shall be in a face amount such that after issuance of such
letter of credit, the sum of the Letter of Credit Usage and the
then outstanding principal balance of the Loans does not exceed
an amount equal to the Commitment; and (iii) shall have an
expiration date not later than the Maturity Date.
(c) At the request of the Agent, the Borrower shall execute a
letter of credit application and reimbursement agreement
("Reimbursement Agreement"), in the standard form then used by
the Agent, in respect of each letter of credit requested
hereunder.
(d) Subject to the satisfaction of the conditions precedent set
forth in Section 4 and the Borrower's compliance with the terms
of this Section 3.2, the Agent shall issue and deliver the
<PAGE>
requested letter of credit to the Borrower or to the Borrower's
designated beneficiary at such address as the Borrower may
specify. New Letters of Credit and extensions or renewals of
any existing Letters of Credit shall contain terms and
conditions customarily included in the Agent's letters of
credit and shall otherwise be in a form acceptable to the
Agent.
(e) For each Letter of Credit issued by the Agent hereunder, the
Borrower shall pay on the date such Letter of Credit is issued
(i) to the Agent for the ratable benefit of the Lenders, a
letter of credit fee in a per annum amount equal to the number
of basis points of the face amount of the Letter of Credit
equal to the LIBOR Margin as of the date of the issuance of the
Letter of Credit and (ii) to the Agent for its own account an
administrative fee equal to ten basis points of the face amount
of the Letter of Credit.
(f) In the event of any conflict between the terms of any
Reimbursement Agreement and the terms of this Agreement, the
terms of this Agreement shall control.
3.3 Indemnification; Increased Costs
--------------------------------
(a) The Borrower agrees to indemnify the Agent on demand for any
and all costs, expenses, or damages incurred by the Agent,
directly or indirectly, arising out of the issuance of any
Letter of Credit, including, without limitation, any costs of
maintaining reserves in respect thereof and any premium rates
imposed by the Federal Deposit Insurance Corporation in
connection therewith. A certificate as to such costs, expenses
or damages submitted to the Borrower by the Agent shall be
final, conclusive and binding, absent manifest error.
(b) If at any time after the date hereof the introduction of or any
change in applicable law, rule, or regulation or in the
interpretation or the administration thereof by any Government
Authority charged with the interpretation or administration
thereof, or compliance by the Agent with any requests directed
by any such Government Authority (whether or not having the
force of law) shall, with respect to any Letter of Credit,
subject the Agent to any Tax or impose, modify or deem
applicable any reserve, special deposit or similar requirements
against assets of, deposits with or for the account of, credit
extended by the Agent or shall impose on the Agent any other
conditions affecting the Letters of Credit and the result of
any of the foregoing is to increase the cost to the Agent of
issuing a Letter of Credit or to reduce the amount of any sum
received or receivable by the Agent hereunder with respect to
the Letters of Credit, then, upon demand by the Agent, the
Borrower shall pay to the Agent such additional amount or
<PAGE>
amounts as will compensate the Agent for such increased cost or
reduction. A certificate submitted to the Borrower by the
Agent setting forth the basis for the determination of such
additional amount or amounts shall be final, conclusive and
binding, absent manifest error.
(c) The Borrower agrees to indemnify and hold the Agent harmless
from and against any and all (i) Taxes and other fees payable
in connection with Letters of Credit or the provisions of this
Agreement relating thereto, and (ii) any and all actions,
claims, damages, losses, liabilities, fines, penalties, costs
and expenses of every nature, including reasonable attorneys'
fees, suffered or incurred by the Agent otherwise arising out
of or relating to this Article III, or any Letter of Credit;
provided, however, said indemnification shall not apply to the
extent that any such action, claim, damage, loss, liability,
fine, penalty, cost or expense arises solely out of or is based
solely upon the Agent's willful misconduct or gross negligence.
3.4 Payment by the Borrower
-----------------------
The Borrower agrees to fully reimburse the Agent for all amounts paid
under any Letter of Credit together with interest thereon at the rate
applicable to Reference Rate Loans from the date such payment is made
until the date the Agent notifies the Borrower that such payment was
made. Such reimbursement shall be made in immediately available funds
to Agent at 1420 Fifth Avenue, Seattle, Washington 98101 not later
than 12:00 noon (Seattle time) on the date the Borrower is first
notified by the Agent that payment has been made under the Letter of
Credit; provided, that, if the Agent so elects pursuant to the terms
of Section 9.2, following the occurrence of an Event of Default, the
face amount of each Letter of Credit shall become immediately due and
payable. If the Borrower should default in its obligations to
reimburse the Agent or to make any other payment required hereunder,
(i) interest shall accrue on the unpaid amount thereof at the rate
applicable to Reference Rate Loans during the existence of an Event of
Default from the date such amount becomes due and payable until
payment in full by the Borrower; and (ii) the Agent, in its sole
discretion, may deem such default to constitute a Notice of Borrowing
for the amount of the unreimbursed obligation together with accrued
interest thereon, and, subject to the terms and conditions hereof, may
advance a Loan to the Borrower and immediately apply the proceeds
thereof in satisfaction of the Borrower's obligations under this
Section 3.4. Interest on unpaid amounts shall be calculated on the
basis of a year of 360 days and actual days elapsed.
<PAGE>
ARTICLE IV. TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes
-----
(a) Any and all payments by the Borrower to each Lender or the
Agent under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding
for any Taxes. In addition, the Borrower shall pay all Other
Taxes.
(b) The Borrower agrees to indemnify and hold harmless each Lender
and the Agent for the full amount of Taxes or Other Taxes
(including any Taxes or Other Taxes imposed by any jurisdiction
on amounts payable under this Section) paid by the Lender or
the Agent and any liability (including penalties, interest,
additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the
Lender or the Agent makes written demand therefor.
(c) If the Borrower shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings
(including deductions and withholdings applicable to
additional sums payable under this Section) such Lender
or the Agent, as the case may be, receives an amount
equal to the sum it would have received had no such
deductions or withholdings been made;
(ii) the Borrower shall make such deductions and withholdings;
(iii) the Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) the Borrower shall also pay to each Lender or the Agent
for the account of such Lender, at the time interest is
paid, all additional amounts which the respective Lender
specified as necessary to preserve the after-tax yield
the Lender would have received if such Taxes or Other
Taxes had not been imposed.
(d) Within 30 days after the date of any payment by the Borrower of
Taxes or Other Taxes, the Borrower shall furnish the Agent the
original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to the
Agent.
<PAGE>
(e) If the Borrower is required to pay additional amounts to any
Lender or the Agent pursuant to subsection (c) of this Section,
then such Lender shall use reasonable efforts (consistent with
legal and regulatory restrictions) to change the jurisdiction
of its Lending Office so as to eliminate any such additional
payment by the Borrower which may thereafter accrue, if such
change in the judgment of such Lender is not otherwise
disadvantageous to such Lender.
4.2 Illegality
----------
(a) If any Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or
in the interpretation or administration of any Requirement of
Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for
any Lender or its applicable Lending Office to make LIBOR Rate
Loans, then, on notice thereof by the Lender to the Borrower
through the Agent, any obligation of that Lender to make LIBOR
Rate Loans shall be suspended until the Lender notifies the
Agent and the Borrower that the circumstances giving rive to
such determination no longer exist.
(b) If a Lender determines that it is unlawful to maintain any
LIBOR Rate Loan, the Borrower shall, upon its receipt of notice
of such fact and demand from such Lender (with a copy to the
Agent), prepay in full such LIBOR Rate Loans of that Lender
then outstanding, together with interest accrued thereon and
amounts required under Section 4.4, either on the last day of
the Interest Period thereof, if the Lender may lawfully
continue to maintain such LIBOR Rate Loans to such day, or
immediately, if the Lender may not lawfully continue to
maintain such LIBOR Rate Loan. If the Borrower is required to
so prepay any LIBOR Rate Loan, then concurrently with such
prepayment, the Borrower shall borrow from the affected Lender,
in this amount of such repayment, a Reference Rate Loan.
(c) If the obligation of any Lender to make or maintain LIBOR Rate
Loans has been so terminated or suspended, the Borrower may
elect, by giving notice to the Lender through the Agent that
all Loans which would otherwise be made by the Lender as LIBOR
Rate Loans shall be instead Reference Rate Loans.
(d) Before giving any notice to the Agent under this Section, the
affected Lender shall designate a different Lending Office with
respect to its LIBOR Rate Loans if such designation will avoid
the need for giving such notice or making such demand and will
not, in the judgment of the Lender, be illegal or otherwise
disadvantageous to the Lender.
<PAGE>
4.3 Increased Costs and Reduction of Return
---------------------------------------
(a) If any Lender determines that, due to either (i) the
introduction of or any change in or in the interpretation of
any law or regulation or (ii) the compliance by that Lender
with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of
law), there shall be any increase in the cost to such Lender of
agreeing to make or making, funding or maintaining any LIBOR
Rate Loans, then the Borrower shall be liable for, and shall
from time to time, upon demand (with a copy of such demand to
be sent to the Agent), pay to the Agent for the account of such
Lender, additional amounts as are sufficient to compensate such
Lender for such increased costs.
(b) If any Lender shall have determined that (i) the introduction
of any Capital Adequacy Regulation, (ii) any change in any
Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or
(iv) compliance by the Lender (or its Lending Office) or any
corporation controlling the Lender with any Capital Adequacy
Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Lender or any
corporation controlling the Lender and (taking into
consideration such Lender's or such corporation's policies with
respect to capital adequacy and such Lender's desired return on
capital) determines that the amount of such capital is
increased as a consequence of its Commitment, loans, credits or
obligations under this Agreement, then, upon demand of such
Lender to the Borrower through the Agent, the Borrower shall
pay to the Lender, from time to time as specified by the
Lender, additional amounts sufficient to compensate the Lender
for such increase.
4.4 Funding Losses
--------------
The Borrower shall reimburse each Lender and hold each Lender harmless
from any loss or expense which the Lender may sustain or incur as a
consequence of:
(a) the failure of the Borrower to make on a timely basis any
payment of principal of any LIBOR Rate Loan;
(b) the failure of the Borrower to borrow the Loans as requested in
a Borrowing Notice, or to continue or convert a Loan after the
Borrower has given (or is deemed to have given) an Interest
Rate Notice;
(c) the prepayment (including pursuant to Section 2.6) or other
payment (including after acceleration thereof) of a LIBOR Rate
Loan on a day that is not the last day of the relevant Interest
Period; or
<PAGE>
(d) the automatic conversion under Section 2.5 of any LIBOR Rate
Loan to a Reference Rate Loan on a day that is not the last day
of the relevant Interest Period;
including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its LIBOR Rate Loans
or from fees payable to terminate the deposits from which such funds
were obtained. For purposes of calculating amounts payable by the
Borrower to the Lenders under this Section and under Section 4.3(a),
each LIBOR Rate Loan made by a Lender (and each related reserve,
special deposit or similar requirement) shall be conclusively deemed
to have been funded at the LIBOR used in determining the LIBOR Rate
for such LIBOR Rate Loan by a matching deposit or other borrowing in
the interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such LIBOR Rate Loan is in fact so
funded.
4.5 Inability to Determine Rates
----------------------------
If the Agent determines that for any reason adequate and reasonable
means do not exist for determining the LIBOR Rate for any requested
Interest Period with respect to a proposed LIBOR Rate Loan, or that
the LIBOR Rate applicable pursuant to Section 2.8(a) for any
requested Interest Period with respect to a proposed LIBOR Rate Loan
does not adequately and fairly reflect the cost to any Lender of
funding such Loan, the Agent will promptly so notify the Borrower and
each Lender. Thereafter, the obligation of the Lenders to make or
maintain LIBOR Rate Loans hereunder shall be suspended until the Agent
revokes such notice in writing. Upon receipt of such notice, the
Borrower may revoke any Interest Rate Notice then submitted by it. If
the Borrower does not revoke such Notice, the Lenders shall make,
convert or continue the Loans, as proposed by the Borrower, in the
amount specified in the applicable notice submitted by the Borrower,
but such Loans shall be made, converted or continued as Reference Rate
Loans instead of LIBOR Rate Loans.
4.6 Certificates of Lenders
-----------------------
Any Lender claiming reimbursement or compensation under this
Article IV shall deliver to the Borrower (with a copy to the Agent) a
certificate setting forth in reasonable detail the amount payable to
the Lender hereunder and such certificate shall be conclusive and
binding on the Borrower in the absence of manifest error.
4.7 Survival
--------
The agreements and obligations of the Borrower in this Article IV
shall survive this payment of all other Obligations.
<PAGE>
ARTICLE V. CONDITIONS PRECEDENT
5.1 Conditions of Initial Loans
---------------------------
This obligation of each Lender to make the initial advance to the
Borrower under the Loans hereunder or the obligation of the Agent to
issue the first Letter of Credit is subject to the condition that the
Agent has received on or before the Closing Date all of the following,
in form and substance satisfactory to the Agent and each Lender, and
with sufficient copies for each Lender:
(a) CREDIT AGREEMENT AND NOTE
This Agreement and the Note duly executed by each party
thereto;
(b) RESOLUTIONS; INCUMBENCY
(i) Copies of the resolutions of the board of directors or
other governing body of the Borrower, CHC and each
Subsidiary that may become party to a Loan Document
authorizing the transactions contemplated hereby,
certified as of the Closing Date by the Secretary or an
Assistant Secretary of such Person; and
(ii) A certificate of the Secretary or Assistant Secretary of
the Borrower, CHC and each Subsidiary that may become
party to a Loan Document certifying the names and true
signatures of the officers of the Borrower, CHC or such
Subsidiary authorized to execute, deliver and perform, as
applicable, this Agreement, and all other Loan Documents
to be delivered by it hereunder;
(c) ORGANIZATION DOCUMENTS; GOOD STANDING
Each of the following documents:
(i) the Organization Documents of the Borrower, CHC and each
Subsidiary party to any Loan Document as in effect on the
Closing Date, certified by the Secretary or Assistant
Secretary of the Borrower, CHC or such Subsidiary as of
the Closing Date; and
(ii) a good standing certificate for the Borrower, CHC and
each Subsidiary party to any Loan Document from the
Secretary of State (or similar, applicable Governmental
Authority) of its state of organization and each state
where the Borrower, CHC or such Subsidiary is qualified
to do business as a foreign entity as of a recent date;
<PAGE>
(d) LEGAL OPINIONS
An opinion of counsel to the Borrower and CHC and each
Subsidiary party to any Loan Document as in effect on the
Closing Date, addressed to the Agent and the Lenders,
substantially in the form of Exhibit H;
(e) PAYMENT OF FEES
Evidence of payment by the Borrower of all accrued and unpaid
fees, costs and expenses to the extent then due and payable on
the Closing Date, together with Attorney Costs of U. S. Bank to
the extent invoiced prior to or on the Closing Date; including
any such costs, fees and expenses arising under or referenced
in Sections 2.9 and 12.4;
(f) COLLATERAL DOCUMENTS
The Collateral Documents, executed by the Borrower, CHC and
each Subsidiary, in appropriate form for recording, where
necessary, together with:
(i) acknowledgment copies of all UCC-1 financing statements
filed, registered or recorded to perfect the security
interests of the Agent for the benefit of the Lenders, or
other evidence satisfactory to the Agent that there has
been filed, registered or recorded all financing
statements and other filings, registrations and
recordings necessary and advisable to perfect the Liens
of the Agent for the benefit of the Lenders in accordance
with applicable law;
(ii) written advice relating to such lien and judgment
searches as the Agent shall have requested, and such
termination statements or other documents as may be
necessary to confirm that the Collateral is subject to no
other Liens in favor of any Persons (other than Permitted
Liens);
(iii) funds sufficient to pay any filing or recording tax or
fee in connection with any and all UCC-1 financing
statements;
(iv) such consents, estoppels, subordination agreements and
other documents and instruments executed by landlords,
tenants, franchisors, licensors and other Persons party
to material contracts relating to any Collateral as to
which the Agent shall be granted a Lien for the benefit
of the Lenders, as requested by the Agent or any Lender;
<PAGE>
(v) evidence that all other actions necessary or, in the
opinion of the Agent or the Lenders, desirable, to
perfect and protect the first priority security interest
created by the Collateral Documents and to enhance the
Agent's ability to preserve and protect its interests in
and access to the Collateral, have been taken;
(g) INSURANCE POLICIES
Standard lenders' payable endorsements and insurance
certificates with respect to the insurance policies or other
instruments or documents evidencing insurance coverage on the
properties of the Borrower in accordance with Section 7.6;
(h) CERTIFICATE
A certificate signed by a Responsible Officer, dated as of the
Closing Date, stating that:
(i) the representations and warranties contained in
Article VI are true and correct on and as of such date,
as though made on and as of such date;
(ii) no Default or Event of Default exists or would result
from making the requested Loans or the issuance of the
requested Letter of Credit; and
(iii) there has occurred since December 31, 1997, no event or
circumstance that has resulted or could reasonably be
expected to result in a Material Adverse Effect;
(i) COMPLIANCE CERTIFICATE
A Compliance Certificate signed by a Responsible Officer, dated
as of the Closing Date;
(j) INITIAL PUBLIC OFFERING
Evidence acceptable to the Agent that the CHC (i) has completed
its initial public offering of common stock and (ii) has
received and transferred to the Borrower the net proceeds from
such initial public offering;
(k) NOTICE OF BORROWING; REIMBURSEMENT AGREEMENT
A Notice of Borrowing (in the case of requested Loans) or a
request for a Letter of Credit and a Reimbursement Agreement
(in the case of a requested Letter of Credit) executed by the
Borrower, and in each such case calculating the Borrowing Base;
<PAGE>
(l) GUARANTY
The Guaranty duly executed by CHC;
(m) OTHER DOCUMENTS
Such other approvals, opinions, documents or materials as the
Agent or any Lender may request;
(n) PAYMENT OF INDEBTEDNESS
(i) Except for (A) the Commitment of U. S. Bank set forth in
this Agreement and (B) any outstanding capital or
operating leases from U. S. Bank to the Borrower or CHC,
payment in full of all Indebtedness of the Borrower and
CHC to U. S. Bank and cancellation of any outstanding
commitments to advance additional Indebtedness to the
Borrower or CHC; and
(ii) Evidence that all other Indebtedness not permitted by
Section 8.5 has been paid in full; and
(o) ELIGIBLE REAL PROPERTY
All Collateral Documents for not fewer than four parcels of
Eligible Real Property.
5.2 Conditions to Subsequent Loans
------------------------------
The obligation of each Lender to make Loans to the Borrower, the Agent
to issue a Letter of Credit, or the Lenders to continue or convert any
Loan under Section 2.5 after the initial Loans have been advanced or
the initial issuance of a Letter of Credit hereunder is subject to the
satisfaction of the following conditions precedent on the applicable
date:
(a) INTEREST RATE NOTICE
In the case of a conversion of a Loan into another Type of Loan
or the continuation of an interest rate election as of the end
of an Interest Period, the Agent shall have received an
Interest Rate Notice executed by the Borrower;
(b) NOTICE OF BORROWING; REIMBURSEMENT AGREEMENT
The Agent shall have received, duly executed by the Borrower, a
Notice of Borrowing (in the case of requested Loans) or a
request for a Letter of Credit and a Reimbursement Agreement
(in the case of a requested Letter of Credit), in each such
case calculating the Borrowing Base;
<PAGE>
(c) CONTINUATION OF REPRESENTATIONS AND WARRANTIES
The representation and warranties in Article VI shall be true
and correct on and as of each such Interest Rate Election Date,
date of Notice of Borrowing or request for a Letter of Credit
with the same effect as if made on and as of such date (except
to the extent such representations and warranties solely and
expressly refer to an earlier date, in which case they shall be
true and correct as of such earlier date);
(d) NO EXISTING DEFAULT
No Default or Event of Default shall exist or shall result from
such continuation, conversion, making of Loans or issuance of a
Letter of Credit;
(e) SATISFACTION OF PREVIOUS CONDITIONS
The conditions set forth in Section 5.1 shall have been
previously satisfied or waived by the Agent in writing;
(f) FURTHER ASSURANCES
To the extent not previously delivered, all other documents,
agreements and instruments from or with respect to the Borrower
or any other Person that may be called for hereunder shall be
duly executed and delivered to the Agent, including but not
limited to all documents, agreements and instruments deemed
necessary by the Agent to perfect a security interest for the
benefit of the Lenders in collateral acquired after the date of
this Agreement that is intended to be encumbered pursuant to
the Collateral Documents. For the purposes of this Agreement,
the waiver of delivery of any document, agreement, or
instrument from or with respect to the Borrower or any other
Person does not constitute a continuing waiver with respect to
the obligation to fulfill the conditions precedent set forth in
this Section 5.2 except as otherwise specifically provided.
Each Interest Rate Notice, Notice of Borrowing or request for a
Letter of Credit (as the case may be) submitted by the Borrower
hereunder shall constitute a representation and warranty by the
Borrower hereunder, as of the date of each such notice and as
of each Interest Rate Election Date, as applicable, that the
conditions in this Section 5.2 are satisfied.
5.3 Conditions to Become Eligible Real Property
-------------------------------------------
The Borrower may elect that a parcel of real property owned by the
Borrower or a Subsidiary shall become Eligible Real Property subject
to (a) making a written request of the Agent therefor, (b) meeting the
conditions set forth in the definition of "Eligible Real Property,"
and (c) the condition that the Agent has received all of the following
<PAGE>
with respect to such parcel of real property, in form and substance
satisfactory to the Agent and each Lender, and with sufficient copies
for each Lender:
(i) a Deed of Trust encumbering the parcel of real property,
duly executed by the Borrower or Subsidiary that owns the
parcel of real property;
(ii) acknowledgment copies of all UCC-1 financing statements
filed, registered or recorded to perfect the security
interests of the Agent for the benefit of the Lenders, or
other evidence satisfactory to the Agent that there has
been filed, registered or recorded all financing
statements and other filings, registrations and
recordings necessary and advisable to perfect the Liens
of the Agent for the benefit of the Lenders in accordance
with applicable law;
(iii) written advice relating to such lien and judgment
searches as the Agent shall have requested, and such
termination statements or other documents as may be
necessary to confirm that the Collateral is subject to no
other Liens in favor of any Persons (other than Permitted
Liens);
(iv) funds from the Borrower sufficient to pay or reimburse
the Agent for all out-of-pocket costs and expenses
connected with the parcel of real property becoming
Eligible Real Property, including, without limitation,
appraisal fees, inspection fees, fees for environmental
and other third party inspections and reports, fees for
the Title Insurance Policy to issue with respect to such
parcel of real property, escrow fees (if any), any filing
or recording tax or fee in connection with the Deed of
Trust and all UCC-1 financing statements;
(v) such consents, estoppels, subordination agreements and
other documents and instruments executed by landlords,
tenants, franchisors, licensors and other Persons party
to material contracts relating to the parcel of real
property as to which the Agent shall be granted a Lien
for the benefit of the Lenders, as requested by the Agent
or any Lender;
(vi) evidence that all other actions necessary or, in the
opinion of the Agent or the Lenders, desirable, to
perfect and protect the first priority security interest
created by the Collateral Documents in the parcel of real
property and to enhance the Agent's ability to preserve
and protect its interests in and access to such
Collateral, have been taken;
(vii) a Title Insurance Policy insuring the Deed of Trust;
<PAGE>
(viii)a flood hazard determination in a form approved by the
Agent for the parcel of real property encumbered by a
Deed of Trust;
(ix) (A) if requested by the Agent, an environmental checklist
in a form designated by the Agent and approved by the
Agent in writing after completion by the Borrower or
Subsidiary (as the case may be), (B) an environmental
site assessment approved by the Agent in writing
performed by an engineer approved by the Agent, (E) if
requested by the Agent, an American with Disabilities Act
questionnaire, (D) an Indemnification Agreement duly
executed by the Borrower and Subsidiary (if the parcel of
real property is owned by a Subsidiary), and (E) if the
parcel of real property is being acquired with the
proceeds of Loans, a designation agreement executed by
the Borrower in a form approved by the Agent;
(x) lenders' payable endorsements and insurance certificates
with respect to the insurance policies related to such
parcel of real property or other instruments or documents
evidencing insurance coverage on the properties of the
Borrower in accordance with Section 7.6 and the Deed of
Trust;
(xi) to the extent not previously delivered, copies of the
resolutions of the board of directors of the Borrower or
Subsidiary (as the case may be) authorizing the execution
and delivery to the Agent of the Collateral Documents
with respect to such parcel real property;
(xii) to the extent not previously delivered, a certificate of
the Secretary or Assistant Secretary of the Borrower or
Subsidiary (as the case may be) certifying the names and
true signatures of the officers of the Borrower or
Subsidiary authorized to execute, deliver and perform, as
applicable, the Collateral Documents with respect to such
real property;
(xiii)to the extent not previously delivered, the Organization
Documents of the Borrower or Subsidiary (as the case may
be), certified by the Secretary or Assistant Secretary of
the Borrower or Subsidiary (as the case may be);
(xiv) to the extent not previously delivered, a good standing
certificate of the Borrower or Subsidiary (as the case
may be) from the Secretary of State (or similar,
applicable Governmental Authority) of its state of
organization and each state where the Borrower or
Subsidiary (as the case may be) is qualified to do
business as a foreign entity as of a recent date; and
<PAGE>
(xv) to the extent not previously delivered with respect to
the Collateral Documents in question and such other
matters as the Agent may reasonably request, an opinion
of counsel to the Borrower or Subsidiary (as the case may
be) and addressed to the Agent and the Lenders, in a form
acceptable to the Agent.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and each Lender
that:
6.1 Existence and Power
-------------------
The Borrower, CHC and each of its Subsidiaries:
(a) is a limited partnership or corporation, duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its organization;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry
on its business and to execute, deliver and perform its
obligation under the Loan Documents;
(c) is duly qualified as a foreign entity and is licensed 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 or license; and
(d) is in compliance with all Requirements of Law; except, in each
case referred to in clause (c) or clause (d), to the extent
that the failure to do so could not reasonably be expected to
have a Material Adverse Effect.
6.2 Authorization; No Contravention
-------------------------------
The execution, delivery and performance by the Borrower, CHC and its
Subsidiaries of this Agreement and each other Loan Document to which
such Person is party, have been duly authorized by all necessary
action, and do not and will not:
(a) contravene the terms of any of that Person's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or
the creation of any Lien under, any document evidencing any
Contractual Obligation to which such Person is a party or any
order, injunction, writ or decree of any Governmental Authority
to which such Person or its property is subject; or
(c) violate any Requirement of Law.
<PAGE>
6.3 Governmental Authorization
--------------------------
No approval, consent, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority (except for
recordings or filings in connection with the Liens granted to the
Agent under the Collateral Documents) is necessary or required in
connection with the execution, delivery or performance by, or
enforcement against, the Borrower, CHC or any of its Subsidiaries of
the Agreement or any other Loan Document.
6.4 Binding Effect
--------------
This Agreement and each other Loan Document to which the Borrower, CHC
or any of their Subsidiaries is a party constitute the legal, valid
and binding obligations of the Borrower, CHC and any of their
Subsidiaries to the extent it is a party thereto, enforceable against
such Person in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally
or by equitable principles relating to enforceability.
6.5 Litigation
----------
Except as specifically disclosed in Schedule 6.5, there are no
actions, suits proceedings, claims or disputes pending, or to the best
knowledge of the Borrower, threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, against
the Borrower, CHC or its Subsidiaries or any of their respective
properties which:
(a) purport to affect or pertain to this Agreement or any other
Loan Document, or any of the transactions contemplated hereby
or thereby; or
(b) if determined adversely to the Borrower, CHC or its
Subsidiaries, would reasonably be expected to have a Material
Adverse Effect.
No injunction, writ, temporary restraining order or any order of any
nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or
performance of this Agreement or any other Loan Document, or directing
that the transactions provided for herein or therein not be
consummated as herein or therein provided.
6.6 No Default
----------
No Default or Event of Default exists or would result from the
incurring of any Obligation by the Borrower, CHC or any Subsidiary or
from the grant or perfection of the Liens of the Agent and the Lenders
on the Collateral. As of the Closing Date, neither the Borrower, CHC
nor any Subsidiary is in default under or with respect to any
<PAGE>
Contractual Obligation in any respect which, individually or together
with all such defaults, could reasonably be expected to have a
Material Adverse Effect, or that would, if such default had occurred
after the Closing Date, create an Event of Default under
Section 9.1(e).
6.7 ERISA Compliance
----------------
Except as specifically disclosed in Schedule 6.7:
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or
state law. Each Plan which is intended to qualify under
Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the best knowledge of
the Borrower, nothing has occurred which would cause the loss
of such qualification. The Borrower, CHC and each ERISA
Affiliate have made all required contributions to any Plan
subject to Section 412 of the Code, and no application for a
funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect
to any Plan.
(b) There are no pending or, to the best knowledge of the Borrower,
threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has
resulted or could reasonably be expected to result in a
Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules
with respect to any Plan which has resulted or could reasonably
be expected to result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither the Borrower, CHC nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under
Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA);
(iv) neither the Borrower, CHC nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability (and no
event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither the Borrower nor any ERISA Affiliate has
engaged in a transaction that could be subject to Section 4069
or 4212(c) of ERISA.
6.8 Use of Proceeds; Margin Regulations
-----------------------------------
The proceeds of the Loans are to be used solely for the purposes set
forth in and permitted by Section 7.12 and Section 8.7. Neither the
Borrower, CHC nor any Subsidiary is generally engaged in the business
of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
<PAGE>
6.9 Title to Properties
-------------------
The Borrower, CHC and each Subsidiary have good record and marketable
title in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not,
individually or in the aggregate, have a Material Adverse Effect. As
of this Closing Date, the property of the Borrower, CHC and its
Subsidiaries is subject to no Liens, other than Permitted Liens.
6.10 Taxes
-----
The Borrower, CHC and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have
paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties,
income or assets otherwise due and payable, except those which are
being contested in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with GAAP. There
is no proposed tax assessment against the Borrower, CHC or any
Subsidiary that would, if made, have a Material Adverse Effect.
6.11 Financial Condition
-------------------
(a) The audited consolidated financial statements of CHC and its
Subsidiaries dated December 31, 1997, and the related
consolidated statements of income or operations, shareholders'
equity and cash flows for the fiscal quarter ended on that
date:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as
otherwise expressly noted therein, subject to ordinary,
good faith year end audit adjustments;
(ii) fairly present the financial condition of the CHC and its
Subsidiaries as of the date thereof and results of
operations for the period covered thereby; and
(iii) except as specifically disclosed in Schedule 6.11, show
all material indebtedness and other liabilities, direct
or contingent, of the Borrower, CHC and their
consolidated Subsidiaries as of the date thereof,
including liabilities for taxes, material commitments and
Contingent Obligations.
(b) Since December 31, 1997, there has been no Material Adverse
Effect.
<PAGE>
6.12 Environmental Matters
---------------------
(a) Except as specifically disclosed in Schedule 6.12, the on-going
operations of the Borrower, CHC and each of its Subsidiaries
comply in all respects with all Environmental Laws, except such
noncompliance which would not (if enforced in accordance with
applicable law) result in liability in excess of $500,000 in
the aggregate.
(b) Except as specifically disclosed in Schedule 6.12, the
Borrower, CHC and each of their Subsidiaries have obtained all
licenses, permits, authorizations and registrations required
under any Environmental Law ("Environmental Permits") and
necessary for their respective ordinary course operations, all
such Environmental Permits are in good standing, and the
Borrower, CHC and each of their Subsidiaries are in compliance
with all material terms and conditions of such Environmental
Permits.
(c) Except as specifically disclosed in Schedule 6.12, none of the
Borrower, CHC any of their Subsidiaries or any of their
respective present property or operations, is subject to any
outstanding written order from or agreement with any
Governmental Authority, nor subject to any judicial or docketed
administrative proceeding, respecting any Environmental Law,
Environmental Claim or Hazardous Material.
(d) Except as specifically disclosed in Schedule 6.12, there are no
Hazardous Materials or other conditions or circumstances
existing with respect to any property of the Borrower, CHC or
any Subsidiary, or arising from operations prior to the Closing
Date, of the Borrower, CHC or any of their Subsidiaries that
would reasonably be expected to give rive to Environmental
Claims with a potential liability of the Borrower, CHC and
their Subsidiaries in excess of $500,000 in the aggregate for
any such condition, circumstance or property. In addition,
(i) neither the Borrower, CHC nor any Subsidiary has any
underground storage tanks (x) that are not properly registered
or permitted under applicable Environmental Laws, or (y) that
are leaking or disposing of Hazardous Materials off-site, and
(ii) the Borrower, CHC and their Subsidiaries have notified all
of their employees of the existence, if any, of any health
hazard arising from the conditions of their employment and have
met all notification requirements under Title III of CERCLA and
all other Environmental Laws.
6.13 Collateral Documents
--------------------
(a) The provisions of each of the Collateral Documents are
effective to create in favor of the Agent for the benefit of
the Lenders, a legal, valid and enforceable security interest
in all right, title and interest of the Borrower, CHC and their
<PAGE>
Subsidiaries in the collateral described therein; and Deeds of
Trust have been delivered to the Agent for recording in the
real estate records of the county in which the real property to
be encumbered thereby is located; and financing statements have
been delivered to the Agent for filing in the offices in all of
the jurisdictions listed in the schedule to the Security
Agreements and executed Patent Assignments, Trademarks
Assignments and Copyright Assignments have been delivered to
the Agent for filing in the U.S. Patent and Trademark Office
and the U.S. Copyright Office and upon the filing of such
assignments and such financing statements in such offices, the
Agent, for the benefit of the Lenders, will have a perfected
first priority security interest in the Collateral.
(b) All representations and warranties of the Borrower, CHC and any
of their Subsidiaries party thereto contained in the Collateral
Documents are true and correct.
6.14 Regulated Entities
------------------
None of the Borrower, CHC, any Person controlling the Borrower or CHC,
or any Subsidiary, is an "Investment Company" within the meaning of
the Investment Company Act of 1940. The Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, any state public
utilities code, or any other Federal or state statute or regulation
limiting its ability to incur Indebtedness.
6.15 No Burdensome Restrictions
--------------------------
Neither the Borrower, CHC nor any Subsidiary is a party to or bound by
any Contractual Obligation, or subject to any restriction in any
Organization Document, or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect.
6.16 Copyrights, Patents, Trademarks and Licenses, Etc.
--------------------------------------------------
The Borrower, CHC and their Subsidiaries own or are licensed or
otherwise have the right to use all of the patents, trademarks,
service marks, trade names, copyrights, contractual franchises,
authorizations and other rights that are reasonably necessary for the
operation of their respective businesses, without conflict with the
rights of any other Person. To the best knowledge of the Borrower, no
slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to
be employed, by the Borrower, CHC or any Subsidiary infringes upon any
rights held by any other Person. Except as specifically disclosed in
Schedule 6.5, no claim or litigation regarding any of the foregoing is
pending or threatened, and no patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or code is
pending or, to the knowledge of the Borrower, proposed, which, in
either case, could reasonably be expected to have a Material Adverse
Effect.
<PAGE>
6.17 Subsidiaries
------------
The Borrower and CHC have no Subsidiaries other than those
specifically disclosed in part (a) of Schedule 6.17 hereto and have no
equity investments in any other corporation or entity other than those
specifically disclosed in part (b) of Schedule 6.17.
6.18 Insurance
---------
Except as specifically disclosed in Schedule 6.18, the properties of
the Borrower, CHC and their Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the
Borrower, in such amounts, with such deductibles and covering such
risks as are customarily carried by companies engaged in similar
businesses, including business interruption insurance for a period of
not less than 12 months, and owning similar properties in localities
where the Borrower, CHC or such Subsidiary operates.
6.19 Solvency
--------
The Borrower, CHC and each of their Subsidiaries are Solvent.
6.20 Full Disclosure
---------------
None of the representations or warranties made by the Borrower, CHC or
any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of
the statements contained in any exhibit, report, statement or
certificate furnished by or on behalf of the Borrower, CHC or any
Subsidiary in connection with the Loan Documents (including the
offering and disclosure materials delivered by or on behalf of the
Borrower to the Lenders prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made, not
misleading as of the time when made or delivered.
ARTICLE VII. AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment to make Loans or issue
Letters of Credit hereunder, or any Loan, Letter of Credit or other
Obligation shall remain unpaid or unsatisfied, unless the Required
Lenders waive compliance in writing:
7.1 Financial Statements
--------------------
The Borrower shall deliver to the Agent, in form and detail
satisfactory to the Agent and the Required Lenders, with sufficient
copies for each Lender:
<PAGE>
(a) as soon as available, but not later than 90 days after the end
of each fiscal year, a copy of the audited consolidated balance
sheet of the Borrower, CHC and their Subsidiaries as at the end
of such year and the related consolidated statements of income
or operations, shareholders' equity and cash flows for such
year, setting forth in each case in comparative form the
figures for the previous fiscal year, and accompanied by the
opinion of Coopers & Lybrand L.L.P. or another nationally
recognized independent public accounting firm ("Independent
Auditor") which report shall state that such consolidated
financial statements present fairly the financial position for
the periods indicated in conformity with GAAP applied on a
basis consistent with prior years. Such opinion shall not be
qualified or limited because of a restricted or limited
examination by the Independent Auditor of any material portion
of the Borrower's, CHC's or any Subsidiary's records;
(b) as soon as available, but not later than 45 days after the end
of each of the first three fiscal quarters of each fiscal year
a copy of the unaudited consolidated balance sheet of the
Borrower, CHC and their Subsidiaries as of the end of such
quarter and the related consolidated statements of income,
shareholders' equity and cash flows for the period commencing
on the first day and ending on the last day of such quarter,
and certified by a Responsible Officer as fairly presenting, in
accordance with GAAP (subject to ordinary, good faith year-end
audit adjustments), the financial position and the results of
operations of the Borrower, CHC and the Subsidiaries;
(c) as soon as available, but not later than 45 days after the end
of each fiscal quarter of each fiscal year, a copy of the
unaudited consolidating balance sheets of the Borrower, CHC and
their Subsidiaries, and the related consolidating statements of
income, shareholders' equity and cash flows for such quarter,
all certified by a Responsible Officer as having been developed
and used in connection with the preparation of the financial
statement referred to in Section 7.1(b);
(d) as soon as available, but not later than 45 days after the end
of each fiscal quarter of each fiscal year, a copy of the
unaudited operating statements for each parcel of Eligible Real
Property as of the end of such quarter for such quarter and for
the four quarters then ended, in such form and detail as
reasonably designated by the Agent, and certified by a
Responsible Officer as fairly presenting, in accordance with
GAAP (subject to ordinary, good faith year-end audit
adjustments), the financial results of operations for each such
parcel of real property.
<PAGE>
7.2 Certificates; Other Information
-------------------------------
The Borrower shall furnish to the Agent, with sufficient copies for
each Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 7.1(a), a certificate of the Independent
Auditor stating that in making the examination necessary
therefor no knowledge was obtained of any Default or Event of
Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 7.1(a) and (b), a Compliance
Certificate executed by a Responsible Officer;
(c) promptly, copies of all financial statements and reports that
the Borrower or CHC sends to its shareholders, and copies of
all financial statements and regular, periodical or special
reports (including Forms 10-K, 10-Q and 8-K) that the Borrower,
CHC or any Subsidiary may make to, or file with, the SEC; and
(d) promptly, such additional information regarding the business,
financial, partnership or corporate affairs of the Borrower,
CHC or any Subsidiary as the Agent, at the request of any
Lender, may from time to time reasonably request.
7.3 Notices
-------
The Borrower shall promptly notify the Agent and each Lender:
(a) of the occurrence of any Default or Event of Default, and of
the occurrence or existence of any event or circumstance that
foreseeably will become a Default or Event of Default;
(b) of (i) any breach or nonperformance of, or any default under,
any Contractual Obligation of the Borrower, CHC or any of their
Subsidiaries which could result in a Material Adverse Effect;
and (ii) any dispute, litigation, investigation, proceeding or
suspension which may exist at any time between the Borrower,
CHC or any of their Subsidiaries and any Governmental Authority
and which, if adversely determined, could result in a Material
Adverse Effect;
(c) of the commencement of, or any material development in, any
litigation or proceeding affecting the Borrower, CHC or any
Subsidiary (i) in which the amount of damages claimed is
$2,000,000 (or its equivalent in another currency or
currencies) or more if any potential loss is not fully covered
by insurance, (ii) in which the amount of damages claimed is
$10,000,000 (or its equivalent in another currency or
currencies) or more if any potential loss is fully covered by
<PAGE>
insurance, (iii) in which injunctive or similar relief is
sought and which, if adversely determined, would reasonably be
expected to have a Material Adverse Effect, or (iv) in which
the relief sought is an injunction or other stay of the
performance of this Agreement or any Loan Document;
(d) upon, but in no event later than ten days after, becoming aware
of (i) any and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or
threatened against the Borrower, CHC or any Subsidiary or any
of their respective properties pursuant to any applicable
Environmental Laws, (ii) all other Environmental Claims, and
(iii) any environmental or similar condition on any real
property adjoining or in the vicinity of the property of the
Borrower, CHC or any Subsidiary that could reasonably be
anticipated to cause such property or any part thereof to be
subject to any restrictions on the ownership, occupancy,
transferability or use of such property under any Environmental
Laws;
(e) of any other litigation or proceeding affecting the Borrower,
CHC or any of their Subsidiaries which the Borrower would be
required to report to the SEC pursuant to the Exchange Act,
within four days after reporting the same to the SEC;
(f) of any of the following events affecting the Borrower or CHC,
together with a copy of any notice with respect to such event
that may be required to be filed with a Governmental Authority
and any notice delivered by a Governmental Authority to the
Borrower with respect to such event:
(i) an ERISA Event;
(ii) if any of the representations and warranties in
Section 6.7 ceases to be true and correct;
(iii) the adoption of any new Pension Plan or other Plan
subject to Section 412 of the Code;
(iv) the adoption of any amendment to a Pension Plan or other
Plan subject to Section 412 of the Code, if such
amendment results in a material increase in contributions
or Unfunded Pension Liability; or
(v) the commencement of contributions to any Pension Plan or
other Plan subject to Section 412 of the Code; and
(g) of any material change in accounting policies or financial
reporting practices by the Borrower, CHC or any of its
consolidated Subsidiaries.
<PAGE>
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the Borrower,
CHC or any affected Subsidiary proposes to take with respect thereto
and at what time. Each notice under Section 7.3(a) shall describe
with particularity any and all clauses or provisions of this Agreement
or other Loan Document that have been (or foreseeably will be)
breached or violated.
7.4 Preservation of Existence, Etc.
-------------------------------
The Borrower shall, and shall cause CHC and each of their Subsidiaries
to:
(a) preserve and maintain in full force and effect its legal
existence and good standing under the laws of its state or
jurisdiction of organization;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its
business except in connection with transactions permitted by
Section 8.3 and sales of assets permitted by Section 8.2;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the nonpreservation of which
could reasonably be expected to have a Material Adverse Effect.
7.5 Maintenance of Property
-----------------------
The Borrower shall maintain, and shall cause CHC and each of their
Subsidiaries to maintain, and preserve all their property which is
used or useful in its business in good working order and condition,
ordinary wear and tear excepted and make all necessary repairs thereto
and renewals and replacements thereof except where the failure to do
so could not reasonably be expected to have a Material Adverse Effect,
except as permitted by Section 8.2.
7.6 Insurance
---------
In addition to insurance requirements set forth in the Collateral
Documents, the Borrower shall maintain, and shall cause CHC and each
of their Subsidiaries to maintain, with financially sound and
reputable independent insurers, insurance with respect to its
properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar
business, of such types and in such amounts as are customarily carried
under similar circumstances by such other Persons including workers'
<PAGE>
compensation insurance, public liability and property and casualty
insurance which amount shall not be reduced by the Borrower in the
absence of 30 days' prior notice to the Agent. All such insurance
shall name the Agent as loss payee/mortgagee and as additional
insured, for the benefit of the Lenders, as their interests may
appear. Upon request of the Agent or any Lender, the Borrower shall
furnish the Agent, with sufficient copies for each Lender, at
reasonable intervals (but not more than once per calendar year) a
certificate of a Responsible Officer of the Borrower (and, if
requested by the Agent, any insurance broker of the Borrower) setting
forth the nature and extent of all insurance maintained by the
Borrower, CHC and their Subsidiaries in accordance with this Section
or any Collateral Documents (and which, in the case of a certificate
of a broker, were placed through such broker).
7.7 Payment of Obligations
----------------------
The Borrower shall, and shall cause CHC and each of their Subsidiaries
to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and
adequate reserves in accordance with GAAP are being maintained
by the Borrower, CHC or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien
upon its property; and
(c) all Indebtedness, as and when due and payable, but subject to
any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness.
7.8 Compliance With Laws
--------------------
The Borrower shall comply, and shall cause CHC and each of their
Subsidiaries to comply, in all material respects with all Requirements
of Law of any Governmental Authority having jurisdiction over it or
its business (including the Federal Fair Labor Standards Act), except
such as may be contested in good faith or as to which a bona fide
dispute may exist.
7.9 Compliance With ERISA
----------------------
The Borrower shall, and shall cause CHC and each of their ERISA
Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under
Section 401(a) of the Code to maintain such qualification; and
(c) make all required contributions to any Plan subject to Section 412
of the Code.
<PAGE>
7.10 Inspection of Property and Books and Records
--------------------------------------------
The Borrower shall maintain and shall cause CHC and each of their
Subsidiaries to maintain proper books of record and account, in which
full, true and correct entries in conformity with GAAP consistently
applied shall be made of all financial transactions and matters
involving the assets and business of the Borrower, CHC and such
Subsidiary. The Borrower shall permit, and shall cause CHC and each
Subsidiary to permit, representatives and independent contractors of
the Agent to visit and inspect any of their respective properties, to
examine their respective limited partnership or corporate, financial
and operating records, and make copies thereof or abstracts therefrom,
and to discuss their respective affairs, finances and accounts with
their respective directors, officers, and independent public
accountants, all at the expense of the Borrower and at such reasonable
times during normal business hours, upon reasonable advance notice to
the Borrower; provided, however, when an Event of Default exists the
Agent or any Lender may do any of the foregoing at the expense of the
Borrower at any time during normal business hours and without advance
notice.
7.11 Environmental Laws
------------------
(a) The Borrower shall, and shall cause CHC and each of their
Subsidiaries to, conduct their operations and keep and maintain
its property in compliance with all Environmental Laws.
(b) Upon the written request of the Agent or any Lender, the
Borrower shall submit and cause CHC and each of their
Subsidiaries to submit, to the Agent with sufficient copies for
each Lender, at the Borrower's sole cost and expense, at
reasonable intervals, a report providing an update of the
status of any environmental, health or safety compliance,
hazard or liability issue identified in any notice or report
required pursuant to Section 7.3(d), that could, individually
or in the aggregate, result in liability in excess of $500,000.
7.12 Use of Proceeds
---------------
The Borrower shall use the proceeds of the Loans for working capital,
Acquisitions permitted hereunder, funding operations, and other
general partnership purposes not in contravention of any Requirement
of Law or of any Loan Document.
7.13 Appraisals
----------
(a) Prior to a parcel of real property becoming Eligible Real
Property, there shall be established for such parcel of real
property the Approved Appraisal Value based upon an appraisal
thereof performed at the Borrower's sole cost.
<PAGE>
(b) In the event that a parcel of real property has constituted
Eligible Real Property for in excess of 18 months, the Agent
may, in its discretion or at the request of the Required
Lenders, have such parcel of real property reappraised, and
upon the Agent's written approval of such reappraisal, the
reappraised value shall constitute the Approved Appraised Value
for such parcel of real property. Except as provided in
Section 7.13(c), the cost of any such reappraisal shall be
borne by the Lenders based upon each Lender's Pro Rata Share.
(c) Upon the occurrence and during the continuation of any Event of
Default, the Agent may, in its discretion or at the request of
the Required Lenders, have any one or more parcels of Eligible
Real Property reappraised, and upon the Agent's written
approval of any such reappraisal, the reappraised value shall
constitute the Approved Appraised Value for any such parcel of
Eligible Real Property. The Borrower shall reimburse the Agent
for the cost of any such reappraisal performed pursuant to this
subsection upon demand.
(d) The Borrower shall cooperate with the Agent and its designated
appraisers in connection with all appraisals and reappraisals
of real property performed pursuant to this Agreement.
7.14 Further Assurances
------------------
(a) The Borrower shall ensure that all written information,
exhibits and reports furnished to the Agent or the Lenders do
not and will not contain any untrue statement of a material
fact and do not and will not omit to state any material fact or
any fact necessary to make the statements contained therein not
misleading in light of the circumstances in which made, and
will promptly disclose to the Agent and the Lenders and correct
any defect or error that may be discovered therein or in any
Loan Document or in the execution, acknowledgment or
recordation thereof.
(b) Promptly upon request by the Agent or the Required Lenders, the
Borrower shall (and shall cause CHC and any of their
Subsidiaries to) do, execute, acknowledge, deliver, record, re-
record, file, re-file, register and re-register, any and all
such further acts, deeds, conveyances, security agreements,
mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements,
notices of assignment, transfers, certificates, assurances and
other instruments the Agent or such Lenders, as the case may
be, may reasonably require from time to time in order (i) to
carry out more effectively the purposes of this Agreement or
any other Loan Document, (ii) to subject to the Liens created
by any of the Collateral Documents any of the properties,
rights or interests covered by any of the Collateral Documents,
<PAGE>
(iii) to perfect and maintain the validity, effectiveness and
priority of any of the Collateral Documents and the Liens
intended to be created thereby, and (iv) to better assure,
convey, grant, assign, transfer, preserve, protect and confirm
to the Agent and Lenders the rights granted or now or hereafter
intended to be granted to the Lenders under any Loan Document
or under any other document executed in connection therewith.
(c) Within 20 days of the Closing Date, the Borrower shall deliver
to the Agent, lien search results evidencing the filing of
Financing Statements (as defined in the Security Agreements) in
the jurisdictions listed in Schedule 7.14 hereto, naming the
Borrower and CHC as "debtor" and the Agent as "secured party"
and confirming that no other financing statements have been
filed with respect to the Collateral in such jurisdictions
(other than Permitted Liens).
(d) Promptly upon any Person becoming after the date hereof a
Subsidiary of the Borrower, the Borrower:
(i) shall cause such Subsidiary to execute and deliver to the
Agent a guaranty of all of the Obligations in form and
substance reasonably acceptable to the Required Lenders
and the Agent;
(ii) shall cause such Subsidiary to execute and deliver to the
Agent a security agreement granting a security interest
in all of such Subsidiary's assets in favor of the Agent
for the benefit of the Lenders as security for the
Obligations (including the obligations of such Subsidiary
under the guaranty referred to in clause (i) above), in
form and substance reasonably acceptable to the Required
Lenders and the Agent and shall cause to be delivered to
the Agent with respect to such Subsidiary the documents
referred to in Section 5.1, mutatis mutandis, together
with such opinions in form and substance and from counsel
reasonably satisfactory to the Agent, as the Agent may
require; and
(iii) shall cause such Person that is the Borrower or an
Affiliate of the Borrower that is the direct owner of any
shares of capital stock (or other evidence of beneficial
ownership) of such Subsidiary to execute and deliver to
the Agent a pledge agreement pledging in favor of the
Agent for the benefit of the Lenders as security for the
Obligations, all of such capital stock, in form and
substance reasonably acceptable to the Required Lenders
and the Agent, and shall cause to be delivered to the
Agent certificates evidencing all of the issued and
outstanding shares of capital stock (or other evidence of
beneficial ownership) of such Subsidiary, together with
<PAGE>
undated stock powers (or similar instruments of transfer)
owned by such Persons duly executed in blank and
appropriately completed Uniform Commercial Code financing
statements, if applicable, with respect thereto (or, if
any such shares of capital stock (or other evidence of
beneficial ownership) are not represented by
certificates, confirmation and evidence satisfactory to
the Agent that the security interest in such shares (or
other such evidence) has been transferred and/or
registered in accordance with the laws of the applicable
jurisdictions so as to create a valid first-priority
perfected security interest therein for the benefit of
the Agent and the Lenders) and together with such
opinions in form and substance and from counsel
reasonably satisfactory to the Agent, as the Agent may
reasonably require;
provided, that in the case of an Acquisition where the Borrower, CHC
and their Affiliates acquire less than 100% of the common shares or
other common voting equity interests of a Person, the Borrower shall
be required to provide the security agreement and guaranty provided
for in clauses (i) and (ii) above only if consented to by a majority
of the holders (other than the Borrower, CHC and their Affiliates) of
the common shares or other common voting equity interests of such
Person; provided, further, that the Borrower shall be required to make
a diligent and good faith request for such consent from such holders;
provided, further, if all of the common shares or other common voting
equity interests of such Person are subsequently acquired by the
Borrower, CHC and their Affiliates, such Person shall promptly comply
with clauses (i) and (ii) above.
7.15 Minimum Number of Parcels
-------------------------
At all times that there are any Loans outstanding or there exists any
outstanding Letter of Credit, there shall be not fewer than four
parcels of Eligible Real Property.
ARTICLE VIII. NEGATIVE COVENANTS
So long as any Lender shall have any Commitment to make Loans or issue
Letters of Credit hereunder, or any Loan, Letter of Credit or other
Obligation shall remain unpaid or unsatisfied, unless the Required
Lenders waive compliance in writing:
8.1 Limitation on Liens
-------------------
The Borrower shall not, and shall not suffer or permit CHC or any
Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its
property (including, without limitation, the partnership units of the
Borrower owned by CHC), whether now owned or hereafter acquired, other
than the following ("Permitted Liens"):
<PAGE>
(a) any Lien (other than a Lien on the Collateral) existing on
property of the Borrower, CHC or any Subsidiary on the Closing
Date and set forth in Schedule 8.1 securing Indebtedness
outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without
penalty, or to the extent that nonpayment thereof is permitted
by Section 7.7, provided that no notice of lien has been filed
or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in
the ordinary course of business which are not delinquent or
remain payable without penalty or which are being contested in
good faith and by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the
property subject thereto;
(e) Liens (other than any Lien imposed by ERISA and other than on
the Collateral) consisting of pledges or deposits required in
the ordinary course of business in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(f) Liens (other than Liens on the Collateral) on the property of
the Borrower, CHC or their Subsidiary securing (i) the
nondelinquent performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations,
(ii) contingent obligations of a like nature; in each case,
incurred in the ordinary course of business, provided all such
Liens in the aggregate would not (even if enforced) cause a
Material Adverse Effect;
(g) Liens (other than Liens on the Collateral) consisting of
judgment or judicial attachment liens, provided that the
enforcement of such Liens is effectively stayed and all such
liens in the aggregate at any time outstanding for the
Borrower, CHC and their Subsidiaries do not exceed $1,000,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which,
in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the
property subject thereto or interfere with the ordinary conduct
of the businesses of the Borrower, CHC and their Subsidiaries;
provided that any such easements, rights-of-way, restrictions
and other similar encumbrances related to Eligible Real
Property shall be subject to the Agent's prior written
approval;
<PAGE>
(i) Liens on assets of Persons that become Subsidiaries after the
date of this Agreement, provided, however, that such Liens
existed at the time the respective Persons became Subsidiaries
and were not created in anticipation thereof;
(j) purchase money security interests in equipment acquired or held
by the Borrower, CHC or their Subsidiaries in the ordinary
course of business, securing Indebtedness incurred or assumed
for the purpose of financing all or any part of the cost of
acquiring such equipment; provided that (i) any such Lien
attaches to such property concurrently with or within 20 days
after the acquisition thereof and (ii) such Lien attaches
solely to the property so acquired in such transaction;
(k) Liens securing obligations in respect of capital leases on
assets subject to such leases, provided that such capital
leases are otherwise permitted hereunder;
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or
similar rights and remedies as to deposit accounts or other
funds maintained with a creditor depository institution;
provided that (i) such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against
access by the Borrower in excess of those set forth by
regulations promulgated by the FRB, and (ii) such deposit
account is not intended by the Borrower, CHC or any Subsidiary
to provide collateral to the depository institution; and
(m) Liens on real property used primarily in the hospitality
business and acquired by the Borrower, CHC or any Subsidiary
after the Closing Date that is not encumbered by any Deed of
Trust; provided that (i) any such Lien attaches to such real
property concurrently with or within 20 days after the
acquisition thereof or such Lien is to secure Indebtedness the
proceeds of which are used to refinance acquisition
Indebtedness with respect to such real property, and (ii) such
Lien attaches solely to such real property and personal
property located on such real property, as well as proceeds
thereof.
(n) Liens on real property that (i) was acquired by the Borrower,
CHC or any Subsidiary before the Closing Date, (ii) was not
encumbered by any mortgage, deed of trust or similar instrument
as of the Closing Date or the date such Lien attaches, or with
respect to which any such encumbrance that existed on the
Closing Date is removed or satisfied through the use of
proceeds of the Loans or the initial public offering of the
common stock of CHC, and (iii) is not encumbered by any Deed of
Trust; provided that (iv) any such Lien is approved by the
Required Lenders, (v) such Lien attaches solely to such real
<PAGE>
property and personal property located on such real property, as well
as proceeds thereof, and (vi) the Net Issuance Proceeds from the
Indebtedness incurred in connection with any such Liens are applied to
the Loans in accordance with Section 2.6.
8.2 Disposition of Assets
---------------------
(a) The Borrower shall not, and shall not suffer or permit CHC or
any Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of any property
(including accounts and notes receivable, with or without
recourse) or enter into any agreement to do any of the
foregoing, except that so long as there exists no Default or
Event of Default and so long as the proposed disposition would
not cause the occurrence of a Default or an Event of Default
there shall be permitted:
(i) dispositions of inventory or used, worn-out or surplus
equipment all in the ordinary course of business;
(ii) the sale of equipment to the extent that such equipment
is exchanged for credit against the purchase price of
similar replacement equipment, or the proceeds of such
sale are reasonably promptly applied, consistent with
Section 2.6, to the purchase price of such replacement
equipment;
(iii) the sale of assets (whether in one or a series of related
transactions) for cash at a price equal to or greater
than the fair market value of such assets, provided that
the aggregate purchase price does not exceed $8,000,000
during any 12-month period;
(iv) the sale of assets (whether in one or a series of related
transactions) for cash at a price equal to or greater
than the fair market value of such assets and in excess
of $8,000,000 during any 12-month period, provided that
prior to the completion of any such sale (A) the Borrower
shall have delivered to the Agent evidence deemed
sufficient by the Required Lenders reflecting that had
such assets, together with all EBITDA generated by such
assets and Indebtedness that is to be repaid in
connection with such sale, been excluded from the
financial statements of CHC for the four fiscal quarters
immediately preceding the scheduled closing date of the
proposed sale, there would have been compliance with each
of the financial covenants set forth in Section 8.14, and
(B) the Required Lenders shall have reviewed and approved
such evidence and the Agent shall have so advised the
Borrower in writing;
<PAGE>
(v) the sale of assets (whether in one or a series of related
transactions) for cash at a price equal to or greater
than the fair market value of such assets and in excess
of $8,000,000 during any 12-month with respect to which
the requirements set forth in Section 8.2(a)(iv) are not
satisfied, provided that (A) prior to or concurrently
with the completion of any such sale, the Borrower shall
repay the Loans and permanently reduce the Commitment by
an amount that would result in the pro forma compliance
with each of the financial covenants set forth in Section
8.14 as recalculated in accordance with the provisions of
Section 8.2(a)(iv) for the four fiscal quarters
immediately preceding the scheduled closing date of the
proposed sale, (B) prior to the completion of any such
sale, the Borrower shall have delivered to the Agent
evidence deemed sufficient by the Required Lenders
reflecting such pro forma compliance, and (C) prior to
the completion of any such sale, the Required Lenders
shall have reviewed and approved such evidence and the
Agent shall have so advised the Borrower in writing; and
(vi) dispositions not otherwise permitted hereunder which are
made for fair market value; provided, that (A) the
aggregate sales price from such disposition shall be paid
in cash, and (B) Net Proceeds thereof are applied as set
forth in Section 2.6 hereof.
(b) Notwithstanding the provisions of Section 8.2(a) to the
contrary, the Borrower shall not, and shall not suffer or
permit CHC or any Subsidiary to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of
(whether in one or a series of related transactions) any
property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the
foregoing for an aggregate purchase price in excess of
$35,000,000 during any 12-month period.
8.3 Consolidations and Mergers
--------------------------
The Borrower shall not, and shall not suffer or permit CHC or any
Subsidiary to, merge, consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets
(whether now owned or hereafter acquired) to or in favor of any
Person, except:
(a) any Subsidiary may merge with the Borrower or CHC, provided
that the Borrower or CHC (as the case may be) shall be the
continuing or surviving entity, or with any one or more
Subsidiaries, provided that if any transaction shall be between
a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned
Subsidiary shall be the continuing or surviving entity; and
<PAGE>
(b) any Subsidiary may sell all or substantially all of its assets
(upon voluntary liquidation or otherwise) to the Borrower or
another Wholly-Owned Subsidiary.
8.4 Loans and Investments
---------------------
The Borrower shall not purchase or acquire, or suffer or permit CHC or
any Subsidiary to purchase or acquire, or make any commitment
therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit
to make any Acquisitions, or make or commit to make any advance, loan,
extension of credit or capital contribution to or any other investment
in, any Person including any Affiliate of the Borrower, except for:
(a) investments in Cash Equivalents;
(b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or
services in the ordinary course of business;
(c) extensions of credit by the Borrower to any of its Wholly-Owned
Subsidiaries or by any of its Wholly-Owned Subsidiaries to
another of its Wholly-Owned Subsidiaries;
(d) investments made in connection with and constituting part of
the consideration paid for Acquisitions to the extent the same
are not prohibited under Section 8.7, provided that no
Acquisition shall be consummated by the Borrower, CHC or any
Subsidiary unless the Borrower has demonstrated to the
reasonable satisfaction of the Required Lenders with pro forma
financial statements prepared to reflect such Acquisition that
the Borrower will be in compliance with the Financial
Covenants.
8.5 Limitation on Indebtedness
--------------------------
The Borrower shall not, and shall not suffer or permit CHC or any
Subsidiary to, create, incur, assume, suffer to exist, or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.8;
(c) Indebtedness existing on the Closing Date and set forth in
Schedule 8.5 and any refinance of such Indebtedness in an
amount not to exceed the outstanding principal balance thereof
as of the Closing Date; provided that if any such Indebtedness
is Nonrecourse Indebtedness that is secured by assets not used
primarily in the hospitality business, then any Indebtedness to
refinance such Indebtedness shall be Nonrecourse Indebtedness;
<PAGE>
(d) Indebtedness consisting of Subordinated Debt incurred after the
Closing Date;
(e) Nonrecourse Indebtedness incurred after the Closing Date;
(f) Indebtedness secured by a Lien permitted under Section 8.1(j)
or (m); and
(g) Indebtedness incurred in connection with leases permitted
pursuant to Section 8.9(a).
8.6 Transactions With Affiliates
----------------------------
The Borrower shall not, and shall not suffer or permit CHC or any
Subsidiary to, enter into any transaction with any Affiliate of the
Borrower, except upon fair and reasonable terms no less favorable to
the Borrower, CHC or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the
Borrower, CHC or such Subsidiary.
8.7 Use of Proceeds
---------------
The Borrower shall not, and shall not suffer or permit CHC or any
Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (a) to purchase or carry Margin Stock, (b) to purchase or
redeem any stock, partnership units or other equity interest of the
Borrower or CHC, (c) to repay or otherwise refinance indebtedness of
the Borrower or others incurred to purchase or carry Margin Stock,
(d) to extend credit for the purchase of purchasing or carrying any
Margin Stock, (e) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act, (f) to finance or
refinance any Acquisition in an amount in excess of $25,000,000, (g)
to finance or refinance Acquisitions in an aggregate amount in excess
of $50,000,000 in any 12-month period except as otherwise approved in
writing by Lenders holding 51% or more of the then aggregate unpaid
principal amount of the Loans, or, if no such principal amount is then
outstanding, Lenders then having Pro Rata Shares equal to or greater
than 51% of the Commitments, or (h) to finance or refinance the
acquisition of any interest in real property that is not used
primarily in the hospitality business or the acquisition of any Person
whose primary business is not the hospitality business except as
otherwise approved by the Required Lenders and confirmed in writing by
the Agent.
8.8 Contingent Obligations
----------------------
The Borrower shall not, and shall not suffer or permit CHC or any
Subsidiary to, create, incur, assume or suffer to exist any Contingent
Obligations except:
(a) endorsements for collection or deposit in the ordinary course
of business;
<PAGE>
(b) Swap Contracts entered into in the ordinary course of business
as bona fide hedging transactions; and
(c) Contingent Obligations of the Borrower, CHC and their
Subsidiaries existing as of the Closing Date and listed in
Schedule 8.8.
8.9 Lease Obligations
-----------------
The Borrower shall not, and shall not suffer or permit CHC or any
Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease,
except for:
(a) capital leases of the Borrower, CHC and of the Subsidiaries to
finance the acquisition of equipment; and
(b) operating leases entered into by the Borrower, CHC or any
Subsidiary in the ordinary course of business.
8.10 Restricted Payments
-------------------
The Borrower shall not, and shall not suffer or permit CHC or any
Subsidiary to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of its capital stock
or partnership units (as the case may be), or purchase, redeem or
otherwise acquire for value any shares of its capital stock or
partnership units (as the case may be) or any warrants, rights or
options to acquire such shares or partnership units, now or hereafter
outstanding; except that (a) CHC or the Borrower may declare and make
dividend payments or other distributions payable solely in its common
stock or partnership units (as the case may be), (b) the Borrower may
make distributions to its partners in an amount necessary to allow CHC
to pay income and gross receipts taxes on the taxable income of the
Borrower that is recognized by its partners for tax purposes, provided
that (i) at the time of making the distribution there exists no Event
of Default and (ii) after giving effect to any proposed distribution,
there would not exist any Event of Default, (c) CHC and the Borrower
may pay dividends and distributions to their shareholders or partners
(as the case may be) or purchase or redeem shares of capital stock or
partnership units (as the case may be), provided that (i) at the time
of making the dividend, distribution, purchase or redemption payment
there exists no Event of Default, (ii) after giving effect to the
proposed payment, there would not exist an Event of Default, (iii) as
of the end of the fiscal quarter of CHC immediately prior to the date
of the proposed payment for the four fiscal quarters then ended, the
Funded Debt Ratio was less than 3.50:1.00, and (iv) after giving
effect to the proposed payment, the Capitalization Ratio would not
exceed 0.50:1.00, and (d) CHC may issue stock to partners of the
Borrower in exchange for partnership units of the Borrower.
<PAGE>
8.11 ERISA
-----
The Borrower shall not, and shall not suffer or permit any ERISA
Affiliate of the Borrower or CHC to: (a) engage in a prohibited
transaction or violation of the fiduciary responsibility rules with
respect to any Plan which has resulted or could reasonably be expected
to result in liability of the Borrower in an aggregate amount in
excess of $500,000; or (b) engage in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.
8.12 Change in Business
------------------
The Borrower shall not, and shall not suffer or permit CHC or any
Subsidiary to, engage in any material line of business substantially
different from those lines of business carried on by the Borrower, CHC
and their Subsidiaries on the date hereof.
8.13 Accounting Changes
------------------
The Borrower shall not, and shall not suffer or permit CHC or any
Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal
year of the Borrower, CHC or of any Subsidiary.
8.14 Financial Covenants
-------------------
(a) FUNDED DEBT RATIO
As of the end of each fiscal quarter for the four fiscal
quarters then ended, the Funded Debt Ratio shall not exceed (i)
4.50:1.00 for each fiscal quarter ending after the date of this
Agreement through March 31, 2000, (ii) 4.25:1.00 for each
fiscal quarter ending on June 30, 2000 through March 31, 2001,
and (iii) 4.00:1.00 for each fiscal quarter ending thereafter.
(b) INTEREST COVERAGE RATIO
As of the end of each fiscal quarter for the four fiscal
quarters then ended, the Interest Coverage Ratio shall not be
less than (i) 2.00:1.00 for each fiscal quarter ending after
the date this Agreement through December 31, 1998, and (ii)
2.25:1.00 for each fiscal quarter ending thereafter.
(c) FIXED CHARGE COVERAGE RATIO
As of the end of each fiscal quarter for the four fiscal
quarters then ended, the Fixed Charge Coverage Ratio shall not
be less than 1.75:1.00.
(d) CAPITALIZATION RATIO
As of the end of each fiscal quarter, the Capitalization Ratio
shall not exceed 0.50:1.00.
<PAGE>
(e) TOTAL ASSETS
As of the end of each fiscal quarter, the aggregate amount of
gross assets reflected on the CHC's balance sheet attributable
to Persons other than the Borrower shall not exceed 10% of the
aggregate amount of gross assets reflected on the CHC's balance
sheet.
8.15 SUBORDINATED DEBT
Not, and not permit CHC or any of their Subsidiaries to make
any payment (whether of principal, interest or otherwise) on
any Subordinated Debt on any day other than the stated,
scheduled date for such payment set forth in the documents and
instruments evidencing such Subordinated Debt or in
contravention or violation of the subordination provisions
thereof.
ARTICLE IX. EVENTS OF DEFAULT
9.1 Event of Default
----------------
Any of the following shall constitute an "Event of Default":
(a) NONPAYMENT
The Borrower fails to pay, (i) when and as required to be paid
herein, any amount of principal of any Loan, or (ii) within
five days after the same becomes due, any interest, fee or any
other amount payable hereunder or under any other Loan
Document; or
(b) REPRESENTATION OR WARRANTY
Any representation or warranty by the Borrower, CHC or any
Subsidiary made or deemed made herein, in any other Loan
Document, or which is contained in any certificate, document or
financial or other statement by the Borrower, CHC or any
Subsidiary, or any Responsible Officer, furnished at any time
under this Agreement, or in or under any other Loan Document,
is incorrect in any material respect on or as of the date made
or deemed made; or
(c) SPECIFIC DEFAULTS
The Borrower fails to perform or observe any term, covenant or
agreement contained in any of Section 7.3, 7.6 or 7.9 or in
Article VIII other than Sections 8.6 and 8.13, or the Borrower
fails to perform or observe any term, covenant or agreement
contained in Section 7.1 or 7.2 within five days after written
notice is given to the Borrower by the Agent or any Lender; or
<PAGE>
(d) OTHER DEFAULTS
The Borrower, CHC or any Subsidiary party thereto fails to
perform or observe any other term or covenant contained in this
Agreement or any other Loan Document, and such default shall
continue unremedied for a period of 30 days after the
occurrence of such default; or
(e) CROSS-DEFAULT
The Borrower, CHC or any Subsidiary (i) fails to make any
payment in respect of any Indebtedness or Contingent Obligation
having an aggregate principal amount (including undrawn,
committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit
arrangement) of more than $1,000,000 when due (whether by
scheduled maturity, required prepayment, acceleration, demand
or otherwise) and such failure continues after the applicable
grace or notice period, if any, specified in the relevant
document on the date of such failure; or (ii) fails to perform
or observe any other condition or covenant, or any other event
shall occur or condition exist, under any agreement or
instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable
grace or notice period, if any, specified in the relevant
document on the date of such failure, if the effect of such
failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or
beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in
respect thereof to be demanded; or
(f) INSOLVENCY; VOLUNTARY PROCEEDINGS
The Borrower, CHC or any Subsidiary (i) ceases or fails to be
solvent, or generally fails to pay, or admits in writing its
inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or
otherwise; (ii) voluntarily ceases to conduct its business in
the ordinary course; (iii) commences any Insolvency Proceeding
with respect to itself; or (iv) takes any action to effectuate
or authorize any of the foregoing; or
(g) INVOLUNTARY PROCEEDINGS
(i) Any involuntary Insolvency Proceeding is commenced or filed
against the Borrower, CHC or any Subsidiary, or any writ,
judgment, warrant of attachment, execution or similar process,
<PAGE>
is issued or levied against a substantial part of the
Borrower's, CHC's or any Subsidiary's properties, and any such
proceeding or petition shall not be dismissed, or such writ,
judgment, warrant of attachment, execution or similar process
shall not be released, vacated or fully bonded within 60 days
after commencement, filing or levy; (ii) the Borrower, CHC or
any Subsidiary admits the material allegations of a petition
against it in any Insolvency Proceeding, or an order for relief
(or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or (iii) the Borrower, CHC or any
Subsidiary acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in
possession (or agent therefor), or other similar Person for
itself or a substantial portion of its property or business; or
(h) ERISA
(i) An ERISA Event shall occur with respect to a Pension Plan
or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Borrower under Title IV
of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in
an aggregate amount in excess of $500,000; or (ii) the
aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $500,000; or (iii) the
Borrower, CHC or any ERISA Affiliate shall fail to pay when
due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an
aggregate amount in excess of $500,000; or
(i) MONETARY JUDGMENTS
One or more noninterlocutory judgments, noninterlocutory
orders, decrees or arbitration awards is entered against the
Borrower, CHC or any Subsidiary involving in the aggregate a
liability (i) (to the extent not covered by independent third-
party insurance as to which the insurer does not dispute
coverage) as to any single or related series of transactions,
incidents or conditions, of $2,000,000 or more, or (ii) as to
any single or related series of transactions, incidents or
conditions, of $10,000,000 or more (whether or not covered by
third-party insurance as to which the insurer does not dispute
coverage), and the same shall remain unpaid or unvacated and
unstayed pending appeal for a period of ten days after the
entry thereof; or
(j) NONMONETARY JUDGMENTS
Any nonmonetary judgment, order or decree is entered against
the Borrower, CHC or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and
<PAGE>
there shall be any period of ten consecutive days during which
a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(k) VIOLATION OF LOCK-UP AGREEMENT
There occurs any breach by the Borrower under that certain
Lock-up Agreement dated April 2, 1998, and executed by CHC; or
(l) ADVERSE CHANGE
There occurs a Material Adverse Effect; or
(m) INVALIDITY OF SUBORDINATION PROVISIONS
The subordination provisions of any agreement or instrument
governing any Subordinated Debt is for any reason revoked or
invalidated, or otherwise cease to be in full force and effect,
any Person contests in any manner the validity or
enforceability thereof or denies that it has any further
liability or obligation thereunder, or the Indebtedness
hereunder is for any reason subordinated or does not have the
priority contemplated by this Agreement or such subordination
provisions; or
(n) COLLATERAL
(i) Any provision of any Collateral Document shall for any
reason cease to be valid and binding on or enforceable
against the Borrower, CHC or any Subsidiary party thereto
or the Borrower, CHC or any Subsidiary shall so state in
writing or bring an action to limit its obligations or
liabilities thereunder; or and
(ii) any Collateral Document shall for any reason (other than
pursuant to the terms thereof) cease to create a valid
security interest in the Collateral purported to be
covered thereby or such security interest shall for any
reason cease to be a perfected and first priority
security interest subject only to Permitted Liens.
9.2 Remedies
--------
If any Event of Default occurs, the Agent shall, at the request of, or
may, with the consent of, the Required Lenders,
(a) declare the commitment of each Lender to make Loans to be
terminated, whereupon such commitments shall be terminated;
<PAGE>
(b) declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts
owing or payable hereunder or under any other Loan Document to
be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived by the Borrower;
(c) if any Letter of Credit is outstanding, declare an amount equal
to the Letter of Credit Usage immediately due and payable
whereupon the same shall become immediately due and payable,
without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Borrower;
and
(d) exercise on behalf of itself and the Lenders all rights and
remedies available to it and the Lenders under the Loan
Documents or applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 9.1 (in the case of clause (i) of
subsection (g) upon the expiration of the 60-day period mentioned
therein), the obligation of each Lender to make Loans and the
obligation of the Agent and each Lender to issue Letters of Credit
shall automatically terminate and the unpaid principal amount of all
outstanding Loans and an amount equal to the Letter of Credit Usage,
together with all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Agent
or any Lender. Amounts paid or received hereunder in respect of
issued and outstanding Letters of Credit which exceed amounts paid by
Agent under such Letters of Credit shall be held (and applied) as cash
collateral to secure the performance of all obligations of the
Borrower owing to the Agent in respect of Letters of Credits.
9.3 Rights Not Exclusive
--------------------
The rights provided for in this Agreement and the other Loan Documents
are cumulative and are not exclusive of any other rights, powers,
privileges or remedies provided by law or in equity, or under any
other instrument, document or agreement now existing or hereafter
arising.
9.4 Certain Financial Covenant Defaults
-----------------------------------
In the event that, after taking into account any extraordinary charge
to earnings taken or to be taken as of the end of any fiscal period of
CHC (a "Charge"), and if solely by virtue of such Charge, there would
exist an Event of Default due to the breach of any provision of
Section 8.14 as of such fiscal period end date, such Event of Default
shall be deemed to arise upon the earlier of (a) the date after such
fiscal period and date on which CHC announces publicly that it will
take, is taking or has taken such Charge (including an announcement in
<PAGE>
the form of a statement in a report filed with the SEC) or, if such
announcement is made prior to such fiscal period end date, the date
that is such fiscal period end date, and (b) the date the Borrower or
CHC delivers to the Agent its audited annual or unaudited quarterly
financial statements in respect of such fiscal period reflecting such
Charge as taken.
ARTICLE X. THE AGENT
10.1 Appointment and Authorization
-----------------------------
Each Lender hereby irrevocably (subject to Section 10.9) appoints,
designates and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document
and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly
set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise
exist against the Agent.
10.2 Delegation of Duties
--------------------
The Agent may execute any of its duties under this Agreement or any
other Loan Document by or through agents, employees 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 agent or attorney-in-fact that it
selects with reasonable care.
10.3 Liability of Agent
------------------
None of the Agent-Related Persons shall (i) be liable for any action
taken or omitted to be taken by any of them under or in connection
with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the
Lenders for any recital, statement, representation or warranty made by
the Borrower, CHC or any Subsidiary or Affiliate of the Borrower, or
any officer thereof, contained in this Agreement or in any other Loan
Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or for the
value of or title to any Collateral, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any
other Loan Document, or for any failure of the Borrower or any other
<PAGE>
party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to
any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of,
this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrower, CHC or any of the
Borrower's Subsidiaries or Affiliates.
10.4 Reliance by Agent
-----------------
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile,
telex or telephone message, statement 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
counsel to the Borrower), independent accountants and other
experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as
it deems appropriate and, if it so requests, 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, under this Agreement or any other Loan
Document in accordance with a request or consent of the
Required Lenders and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of
the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 5.1, each Lender that has executed this
Agreement shall be deemed to have consented to, approved or
accepted or to be satisfied with, each document or other matter
either sent by the Agent to such Lender for consent, approval,
acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to
the Lender.
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, except with respect to
defaults in the payment of principal, interest and fees required to be
paid to the Agent for the account of the Lenders, unless the Agent
shall have received written notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." The
<PAGE>
Agent will notify the Lenders of its receipt of any such notice. The
Agent shall take such action with respect to such Default or Event of
Default as may be requested by the Required Lenders in accordance with
Article IX; provided, however, that unless and until the Agent has
received any such request, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable or in
the best interest of the Lenders.
10.6 Credit Decision
---------------
Each Lender acknowledges that none of the Agent-Related Persons has
made any representation or warranty to it, and that no act by the
Agent hereinafter taken, including any review of the affairs of the
Borrower, CHC and their Subsidiaries, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any
Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon any Agent-Related Person and
based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower, CHC and their Subsidiaries, the
value of and title to any Collateral, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and
made its own decision to enter into this Agreement and to extend
credit to the Borrower hereunder. Each Lender also represents that it
will, independently and without reliance upon any Agent-Related Person
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
Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other
condition and creditworthiness of the Borrower, CHC and their
Subsidiaries. Except for notices, reports and other documents
expressly herein required to be furnished to the Lenders by the Agent,
the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Borrower, CHC or their Subsidiaries which may
come into the possession of any of the Agent-Related Persons.
10.7 Indemnification of Agent
------------------------
Whether or not the transactions contemplated hereby are consummated,
the Lenders shall indemnify upon demand the Agent-Related Persons (to
the extent not reimbursed by or on behalf of the Borrower and without
limiting the obligation of the Borrower to do so), in proportion to
each Lender's Pro Rata Share, from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall be liable for the
payment to the Agent-Related Persons of any portion of such
<PAGE>
Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse the Agent upon demand for its
ratable share of any costs or out-of-pocket expenses (including
Attorney Costs) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that
the Agent is not reimbursed for such expenses by or on behalf of the
Borrower. The undertaking in this Section shall survive the payment
of all Obligations hereunder and the resignation or replacement of the
Agent.
10.8 Agent in Individual Capacity
----------------------------
U. S. Bank and its Affiliates may make loans to, issue letters of
credit for the account of, accept deposits from, acquire equity
interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Borrower,
CHC and their Subsidiaries and Affiliates as though U. S. Bank were
not the Agent hereunder and without notice to or consent of the
Lenders. The Lenders acknowledge that, pursuant to such activities,
U. S. Bank or its Affiliates may receive information regarding the
Borrower or its Affiliates (including information that may be subject
to confidentiality obligations in favor of the Borrower, CHC or such
Subsidiary) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to its
Loans, U. S. Bank shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it
were not the Agent, and the terms "Lender" and "Lenders" include U. S.
Bank in its individual capacity.
10.9 Successor Agent
---------------
The Agent may, and at the request of the Required Lenders shall,
resign as Agent upon 30 days' notice to the Lenders. If the Agent
resigns under this Agreement, the Required Lenders shall appoint from
among the Lenders a successor agent for the Lenders which successor
agent shall, if no Default or Event of Default then exists, be
approved by the Borrower. If no successor agent is appointed prior to
the effective date of the resignation of the Agent, the Agent may
appoint, after consulting with the Lenders and the Borrower, a
successor agent from among the Lenders. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall
succeed to all the rights, powers and duties of the retiring Agent and
the term "Agent" shall mean such successor agent and the retiring
Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article X and Sections 12.4 and 12.5 shall inure to
<PAGE>
its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is 30 days following a retiring
Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform
all of the duties of the Agent hereunder until such time, if any, as
the Required Lenders appoint a successor agent as provided for above.
10.10 Withholding Tax
---------------
(a) If any Lender is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Lender claims exemption
from, or a reduction of, U.S. withholding tax under
Sections 1441 or 1442 of the Code, such Lender agrees with and
in favor of the Agent, to deliver to the Agent:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty,
properly completed IRS Forms 1001 and W-8 before the
payment of any interest in the first calendar year and
before the payment of any interest in each third
succeeding calendar year during which interest may be
paid under this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax
because it is effectively connected with a United States
trade or business of such Lender, two properly completed
and executed copies of IRS Form 4224 before the payment
of any interest is due in the first taxable year of such
Lender and in each succeeding taxable year of such Lender
during which interest may be paid under this Agreement,
and IRS Form W-9; and
(iii) such other form or forms as may be required under the
Code or other laws of the United States as a condition to
exemption from, or reduction of, United States
withholding tax.
Such Lender agrees to promptly notify the Agent of any change
in circumstances which would modify or render invalid any
claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing
IRS Form 1001 and such Lender sells, assigns, grants a
participation in, or otherwise transfers all or part of the
Obligations of the Borrower to such Lender, such Lender agrees
to notify the Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Borrower to
such Lender. To the extent of such percentage amount, the
Agent will treat such Lender's IRS Form 1001 as no longer
valid.
<PAGE>
(c) If any Lender claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Agent sells, assigns, grants
a participation in, or otherwise transfers all or part of the
Obligations of the Borrower to such a Lender, such Lender agrees
to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of
the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment
to such Lender an amount equivalent to the applicable withholding
tax after taking into account such reduction. If the forms or
other documentation required by subsection (a) of this Section
are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Lender not providing such forms or
other documentation an amount equivalent to the applicable
withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did
not properly withhold tax from amounts paid to or for the
account of any Lender (because the appropriate form was not
delivered, was not properly executed, or because such Lender
failed to notify the Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason) such Lender shall
indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including
penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Agent under this
Section, together with all costs and expenses (including
Attorney Costs). The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the
resignation or replacement to the Agent.
10.11 Collateral Matters
------------------
(a) The Agent is authorized on behalf of all the Lenders, without
the necessity of any notice to or further consent from the
Lenders, from time to time to take any action with respect to
any Collateral or the Collateral Documents which may be
necessary to perfect and maintain perfected the security
interest in and Liens upon the Collateral granted pursuant to
the Collateral Documents.
(b) The Lenders irrevocably authorize the Agent, at its option and
in its discretion, to release any Lien granted to or held by
the Agent upon any Collateral (i) upon termination of the
Commitments and payment in full of all Loans and all other
Obligations known to the Agent and payable under this Agreement
or any other Loan Document; (ii) constituting property sold or
<PAGE>
to be sold or disposed of as part of or in connection with any
disposition not prohibited hereunder; (iii) constituting
property in which the Borrower, CHC or any Subsidiary owned no
interest at the time the Lien was granted or at any time
thereafter; (iv) constituting property leased to the Borrower,
CHC or any Subsidiary under a lease which has expired or been
terminated in a transaction not prohibited under this Agreement
or is about to expire and which has not been, and is not
intended by the Borrower, CHC or such Subsidiary to be, renewed
or extended; (v) consisting of an instrument evidencing
Indebtedness or other debt instrument, if the indebtedness
evidenced thereby has been paid in full; or (vi) if approved,
authorized or ratified in writing by the Required Lenders or
all the Lenders, as the case may be, as provided in Section
12.1(f). Upon request by the Agent at any time, the Lenders
will confirm in writing the Agent's authority to release
particular types or items of Collateral pursuant to this
Section 10.11(b).
ARTICLE XI. LETTER OF CREDIT RISK PARTICIPATIONS
11.1 Sale of Risk Participations
---------------------------
The Agent agrees to sell to the Lenders, and upon issuance of any
Letter of Credit hereunder each Lender shall be deemed to have
unconditionally and irrevocably purchased from the Agent, an undivided
risk participation in such Letter of Credit in proportion to such
Lender's Pro Rata Share.
11.2 Procedure for Purchases
-----------------------
Via telephone or facsimile, the Agent will promptly advise each Lender
of each Letter of Credit issued hereunder. The Agent shall not have
any duty to ascertain or to inquire as to the accuracy of the
information furnished by the Borrower, or accuracy of the
representations and warranties made by the Borrower in any request for
the issuance of such Letter of Credit nor shall the Agent have any
duty to confirm that all conditions precedent to the issuance of such
Letter of Credit have been fully satisfied.
11.3 Payment Obligations
-------------------
(a) In the event Borrower fails to pay any amount due under
Section 3.4 by 12:00 noon (Seattle time) on the date the Agent
shall make demand for payment thereof, the Lenders shall each,
upon receipt of notice from Agent of such failure, pay to the
Agent their Pro Rata Share of such amount; provided, however,
if the Borrower pays a portion but less than all of the amount
due under Section 3.4, the Lenders shall each pay Agent only
their respective Pro Rata Shares of the difference between the
amount due under Section 3.4 and the amount paid by Borrower on
<PAGE>
account thereof. Each and every payment to be made by the
Lenders to the Agent under this Section 11.3(a) shall be made
by federal wire transfer in immediately available funds. If
any Lender receives notice from Agent by 1:30 p.m. (Seattle
time) on any Business Day of its obligation to make payments
under this subsection, then such Lender shall make such payment
no later than 2:00 p.m. (Seattle time) on the day such notice
is received. If any Lender receives such notice after 1:30
p.m. (Seattle time) on any Business Day, then such Lender shall
make such payment by no later than 1:00 p.m. (Seattle time) on
the next succeeding Business Day. If any Lender fails to make
such payment by the date and time required, its obligation
shall bear interest from and including the date when such
payment was due until paid at the per annum rate equal to the
Federal Funds Rate.
(b) The Agent shall promptly remit to the Lenders, via federal wire
transfer of funds, the Lenders' respective Pro Rata Share of
any amounts (other than fees and expense reimbursements)
received from or for the account of the Borrower in respect of
any Letter of Credit; provided, however, the Agent shall not
remit to any Lender any amounts received from or for the
account of the Borrower in respect of a Letter of Credit
unless, prior to Agent's receipt of such funds, such Lender has
paid its Pro Rata Share of such amounts pursuant to
Section 11.3(a). In the event Agent is required to refund any
amount which is paid to it or received by it from or for the
account of the Borrower, then Lenders, to the extent they shall
have previously received their share of such amount, agree to
repay to Agent their respective Pro Rata Share of such amount.
(c) Reimbursements to Lenders
-------------------------
Borrower agrees to reimburse any Lender for amounts paid by
such Lender to Agent pursuant to Section 11.3(a). Any amounts
received from or for the account of Borrower by any Lender in
respect of the aforesaid reimbursement obligation shall reduce
Borrower's payment obligation to Agent under Section 3.4. Any
amounts received from or for the account of Borrower by Agent
in satisfaction of its obligations under Section 3.4 shall
reduce pro tanto Borrower's reimbursement obligation to Lenders
under this Section 11.3(c).
ARTICLE XII. MISCELLANEOUS
12.1 Amendments and Waivers
----------------------
No amendment or waiver of any provision of this Agreement or any other
Loan Document, and no consent with respect to any departure by the
Borrower, CHC or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the
<PAGE>
Required Lenders (or by the Agent at the written request of the
Required Lenders) and the Borrower and acknowledged by the Agent, and
then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given;
provided, however, that no such waiver, amendment, or consent shall,
unless in writing and signed by all the Lenders and the Borrower and
acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Lender (or reinstate
any Commitment terminated pursuant to Section 9.2), unless such
Lender has consented thereto in writing;
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment (including without limit
mandatory prepayments) of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under
any other Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (ii) below) any fees
or other amounts payable hereunder or under any other Loan
Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the
Lenders or any of them to take any action hereunder; or
(e) amend the definition of "Required Lenders," this Section, or
Section 2.14, or any provision herein providing for consent or
other action by all Lenders; or
(f) release any material portion of the Collateral except as
otherwise may be provided herein or in the Collateral Documents
or except where the consent of the Required Lenders only is
specifically provided for;
and, provided further, that (i) no amendment, waiver or consent shall,
unless in writing and signed by the Agent in addition to the Required
Lenders or all the Lenders, as the case may be, affect the rights or
duties of the Agent under this Agreement or any other Loan Document,
and (ii) the Commitment Letter may be amended, or rights or privileges
thereunder waived, in a writing executed by the parties thereto.
12.2 Notices
-------
(a) All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise
provides, by facsimile transmission, provided that any matter
transmitted by the Borrower by facsimile (i) shall be
immediately confirmed by a telephone call to the recipient at
the number specified on Schedule 12.2, and (ii) shall be
<PAGE>
followed promptly by delivery of a hard copy original thereof)
and mailed, faxed or delivered, to the address or facsimile
number specified for notices on Schedule 12.2; or, as directed
to the Borrower or the Agent, to such other address as shall be
designated by such party in a written notice to the other
parties, and as directed to any other party, at such other
address as shall be designated by such party in a written
notice to the Borrower and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when
delivered by overnight (next-day) delivery, or transmitted in
legible form by facsimile machine, respectively, or if mailed,
upon the third Business Day after the date deposited into the
U.S. mail, or if delivered, upon delivery; except that notices
pursuant to Article II or X shall not be effective until
actually received by the Agent.
(c) Any agreement of the Agent and the Lenders herein to receive
certain notices by telephone or facsimile is solely for the
convenience and at the request of the Borrower. The Agent and
the Lenders shall be entitled to rely on the authority of any
Person purporting to be a Person authorized by the Borrower to
give such notice and the Agent and the Lenders shall not have
any liability to the Borrower or other Person on account of any
action taken or not taken by the Agent or the Lenders in
reliance upon such telephonic or facsimile notice. The
obligation of the Borrower to repay the Loans shall not be
affected in any way or to any extent by any failure by the
Agent and the Lenders to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Agent and
the Lenders of a confirmation which is at variance with the
terms understood by the Agent and the Lenders to be contained
in the telephonic or facsimile notice.
12.3 No Waiver; Cumulative Remedies
------------------------------
No failure to exercise and no delay in exercising, on the part of the
Agent or any Lender, any right, remedy, power or privilege hereunder,
shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
12.4 Costs and Expenses
------------------
The Borrower shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse U. S. Bank (including in its
capacity as Agent) within five Business days after demand
(subject to Section 5.1(e)) for all costs and expenses incurred
<PAGE>
by U. S. Bank (including in its capacity as Agent) in
connection with the development, preparation, delivery,
administration and execution of, and any amendment, supplement,
waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other
documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and
thereby, and the grant of Liens on any Collateral after the
date of this Agreement, including reasonable Attorneys Cost
incurred by U. S. Bank (including in its capacity as Agent)
with respect to the foregoing; provided that the Borrower shall
not be required to reimburse U. S. Bank for such costs and
expenses (including Attorneys Costs, but excluding the costs
and expenses described in Section 12.4(b)) incurred through the
date of this Agreement in excess of $55,000; and
(b) whether or not the transactions contemplated hereby are
consummated, and whether incurred or demand for payment is made
prior to, concurrently with or after the date of this
Agreement, pay or reimburse U. S. Bank (including in its
capacity as Agent) within five Business days after demand
(subject to Section 5.1(e)) for all costs and expenses incurred
by U. S. Bank (including in its capacity as Agent) in
connection with any Collateral or proposed Collateral,
including, without limitation, appraisal fees (including the
allocated cost of internal appraisal services), inspection
fees, fees for environmental and other third party inspections
and reports, fees for the Title Insurance Policies, escrow
fees, any filing or recording tax or fee, lien search fees, and
(c) pay or reimburse the Agent and each Lender within five Business
Days after demand (subject to Section 5.1(e)) for all costs and
expenses (including Attorney Costs) incurred by them in
connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement or
any other Loan Document during the existence of an Event of
Default or after acceleration of the Loans (including in
connection with any "workout" or restructuring regarding the
Loans, and including in any Insolvency Proceeding or appellate
proceeding).
12.5 Borrower Indemnification
------------------------
(a) Whether or not the transactions contemplated hereby are
consummated, the Borrower shall indemnify, defend and hold the
Agent-Related Persons, and each Lender and each of its
respective officers, directors, employees, counsel, agents and
attorneys-in-fact (each, an "Indemnified Person") harmless from
and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges,
expenses and disbursements (including Attorney Costs) of any
<PAGE>
kind or nature whatsoever which may at any time (including at
any time following repayment of the Loans and the termination,
resignation or replacement of the Agent or replacement of any
Lender) be imposed on, incurred by or asserted against any such
Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or
omitted by any such Person under or in connection with any of
the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding
or appellate proceeding) related to or arising out of this
Agreement or the Loans or the use of the proceeds thereof,
whether or not any Indemnified Person is a party thereto (all
the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Borrower shall have no obligation hereunder
to any Indemnified Person with respect to Indemnified
Liabilities resulting solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements
and obligations set forth in this Section shall survive payment
of all other Obligations.
(b) At the election of any Indemnified Person, the Borrower shall
defend such Indemnified Person using legal counsel satisfactory
to such Indemnified Person in such Person's sole discretion, at
the sole cost and expense of the Borrower. All amounts owing
under this Section shall be paid within 30 days after demand.
12.6 Marshalling; Payments Set Aside
-------------------------------
Neither the Agent nor the Lenders shall be under any obligation to
marshall any assets in favor of the Borrower or any other Person or
against or in payment of any or all of the Obligations. To the extent
that the Borrower makes a payment to the Agent or the Lenders, or the
Agent or the Lenders exercise their right of set-off, and such payment
or the proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or
required (including pursuant to any settlement entered into by the
Agent or such Lender in its discretion) to be repaid to a trustee,
receiver or any other party, in connection with any Insolvency
Proceeding or otherwise, then (a) to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall
be revived and continued in full force and effect as if such payment
had not been made or such set-off had not occurred, and (b) each
Lender severally agrees to pay to the Agent upon demand its Pro Rata
Share of any amount so recovered from or repaid by the Agent.
12.7 Successors and Assigns
----------------------
The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or transfer any of
its rights or obligations under this Agreement without the prior
written consent of the Agent and each Lender.
<PAGE>
12.8 Assignments, Participations, Etc.
---------------------------------
(a) Any Lender may, with the written consent of the Agent and the
Borrower which shall not be unreasonably withheld, conditioned
or delayed, at any time assign and delegate to one or more
Eligible Assignees (provided that no written consent of the
Agent shall be required in connection with any assignment and
delegation by a Lender to an Eligible Assignee that is an
Affiliate of such Lender) (each an "Assignee") all, or any
ratable part of all, of the Loans, the Commitments and the
other rights and obligations of such Lender hereunder, in a
minimum amount of the lesser of $5,000,000 or the entire amount
of the Commitment of such Lender; provided, however, that the
Borrower and the Agent may continue to deal solely and directly
with such Lender in connection with the interest so assigned to
an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given
to the Borrower and the Agent by such Lender and the Assignee;
(ii) such Lender and its Assignee shall have delivered to the
Borrower and the Agent an Assignment and Acceptance in the form
of Exhibit I ("Assignment and Acceptance"); and (iii) the
assignor Lender or Assignee has paid to the Agent a processing
fee in the amount of $3,500.
(b) Subject to the conditions set forth in Section 12.8(a), from
and after the date that the Agent notifies the assignor Lender
that it has received (and provided its consent with respect to)
an executed Assignment and Acceptance, (i) the Assignee
thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the
rights and obligations of a Lender under the Loan Documents,
and (ii) the assignor Lender shall, to the extent that rights
and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents.
(c) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance, this Agreement
shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and
the resulting adjustment of the Commitments arising therefrom.
The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
(d) Any Lender may at any time sell to one or more commercial banks
or other Persons not Affiliates of the Borrower (a
"Participant") participating interests in any Loans, the
Commitment of that Lender and the other interests of that
<PAGE>
Lender (the "originating Lender") hereunder and under the other
Loan Documents; provided, however, that (i) the originating
Lender's obligations under this Agreement shall remain
unchanged, (ii) the originating Lender shall remain solely
responsible for the performance of such obligations, (iii) the
Borrower and the Agent shall continue to deal solely and
directly with the originating Lender in connection with the
originating Lender's rights and obligations under this
Agreement and the other Loan Documents, and (iv) no Lender
shall transfer or grant any participating interest under which
the Participant has rights to approve any amendment to, or any
consent or waiver with respect to, this Agreement or any other
Loan Document, except to the extent such amendment, consent or
waiver would require unanimous consent of the Lenders as
described in the first proviso to Section 12.1. In the case of
any such participation, the Participant shall be entitled to
the benefit of Sections 4.1, 4.3 and 12.5 as though it were
also a Lender hereunder, and if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or
shall have become due and payable upon the occurrence of an
Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it
as a Lender under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or
pledge, all or any portion of its rights under and interest in
this Agreement held by it in favor of any Federal Reserve Bank
in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 C.F.R. Section 203.14, and such Federal Reserve
Bank may enforce such pledge or security interest in any manner
permitted under applicable law.
(f) The Borrower agrees to actively assist and cooperate with
U. S. Bank in the initial syndication of the Loans, including
assistance in the preparation and review of information and
participation in one or more meetings with prospective lenders.
12.9 Set-off
-------
In addition to any rights and remedies of the Lenders provided by law,
if an Event of Default exists or the Loans have been accelerated, each
Lender is authorized at any time and from time to time, without prior
notice to the Borrower, any such notice being waived by the Borrower
to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or
final) at any time held by, and other indebtedness at any time owing
by, such Lender to or for the credit or the account of the Borrower
against any and all Obligations owing to such Lender, now or hereafter
<PAGE>
existing, irrespective of whether or not the Agent or such Lender
shall have made demand under this Agreement or any Loan Document and
although such Obligations may be contingent or unmatured. Each Lender
agrees promptly to notify the Borrower and the Agent after any such
set-off and application made by such Lender; provided, however, that
the failure to give such notice shall not affect the validity of such
set-off and application.
12.10 Automatic Debits of Fees
------------------------
With respect to any agency fee, underwriting fee or other fee, or any
other cost or expense (including Attorney Costs) due and payable to
the Agent under the Loan Documents, the Borrower hereby irrevocably
authorizes U. S. Bank to debit any deposit account of the Borrower
with U. S. Bank in an amount such that the aggregate amount debited
from all such deposit accounts does not exceed such fee or other cost
or expense. If there are insufficient funds in such deposit accounts
to cover the amount of the fee or other cost or expense then due, such
debits will be reversed (in whole or in part, in U. S. Bank's sole
discretion) and such amount not debited shall be deemed to be unpaid.
No such debit under this Section shall be deemed a set-off.
12.11 Notification of Addresses, Lending Offices, Etc.
------------------------------------------------
Each Lender shall notify the Agent in writing of any changes in the
address to which notices to the Lender should be directed, of
addresses of any Lending Office, of payment instructions in respect of
all payments to be made to it hereunder and of such other
administrative information as the Agent shall reasonably request.
12.12 Counterparts
------------
This Agreement may be executed in any number of separate counterparts,
each of which, when so executed, shall be deemed an original, and all
of said counterparts taken together shall be deemed to constitute but
one and the same instrument.
12.13 Severability
------------
The illegality or unenforceability of any provision of this Agreement
or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required
hereunder.
12.14 No Third Parties Benefited
--------------------------
This Agreement is made and entered into for the sole protection and
legal benefit of the Borrower, the Lenders, the Agent and the Agent-
Related Persons, and their permitted successors and assigns, and no
other Person shall be direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with,
this Agreement or any of the other Loan Documents.
<PAGE>
12.15 Conditions Not Fulfilled
------------------------
If any requested loan is not borrowed, or any requested letter of
credit is not issued owing to nonfulfillment of any condition
precedent specified in Article V or, in the case of letters of credit,
any additional conditions specified in Article III, no party hereto
shall be responsible to any other party for any damage or loss by
reason thereof, except that the Borrower shall in any event be liable
to pay the fees, Taxes, and expenses for which it is obligated
hereunder. If for any other reason the Commitment of any Lender is
not borrowed or any requested letter of credit is not issued, neither
the Agent nor any Lender (other than the Lender failing to make its
Loan as required hereunder) shall be responsible to the Borrower for
any damage or loss by reason thereof, nor shall any other Lender or
the Borrower be excused from their performance hereunder.
12.16 Governing Law and Jurisdiction
------------------------------
(a) THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF WASHINGTON;
PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW. DEEDS OF TRUST SHALL BE GOVERNED BY
THE LAW OF THE STATE IN WHICH THE REAL PROPERTY ENCUMBERED
THEREBY IS LOCATED.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF WASHINGTON OR OF THE UNITED STATES FOR THE WESTERN
DISTRICT OF WASHINGTON, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE BORROWER, THE AGENT AND THE LENDERS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
BORROWER, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING
IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY
DOCUMENT RELATED HERETO. THE BORROWER, THE AGENT AND THE
LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT
OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY WASHINGTON LAW.
12.17 Waiver of Jury Trial
--------------------
THE BORROWER, THE LENDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF
THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON,
PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
<PAGE>
CLAIMS, OR OTHERWISE. THE BORROWER, THE LENDERS AND THE AGENT EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY
OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
12.18 Entire Agreement
----------------
This Agreement, together with the other Loan Documents, embodies the
entire agreement and understanding among the Borrower, the Lenders and
the Agent, and supersedes all prior to contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the
subject matter hereof and thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
CAVANAUGHS HOSPITALITY LIMITED PARTNERSHIP
By: Cavanaughs Hospitality Corporation,
General Partner
By: _________________________________________
Title: ______________________________________
U. S. BANK NATIONAL ASSOCIATION, as Agent
By: _________________________________________
Title: ______________________________________
U. S. BANK NATIONAL ASSOCIATION, as a Lender
By: _________________________________________
Title: ______________________________________
<PAGE>
