SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) July 9, 1996
(January 23, 1996)
National Lodging Corp.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-24794 22-3326054
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification
incorporation) No.)
605 Third Avenue, New York, New York 10158
(Address of Principal Executive Offices) (Zip Code)
(212) 692-1400
(Registrant's Telephone Number, Including Area Code)
National Gaming Corp.
339 Jefferson Road, Parsippany, New Jersey 07054-0278
(Former Name or Former Address, If Changed Since Last Report.)
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ITEM 2. Acquisition or Disposition of Assets.
The information called for by this Item 2 is hereby amended and
supplemented by adding the following:
Management's Discussion and Analysis of Financial Condition and Results of
Operations
General. The following discussion and analysis presents management's
assessment of material developments affecting the acquired Travelodge and
Thriftlodge business (the "Company") results of operations, liquidity and
capital resources for the two years ended January 31, 1995 and the period from
February 1, 1995 to January 23, 1996. This discussion should be read in
conjunction with the Company's Financial Statements and the accompanying notes.
Liquidity and Capital Resources. At January 23, 1996 the Company had
$2.7 million of cash compared to $3.2 million at January 31, 1995. Trade
accounts receivable increased from $1.7 million at January 31, 1995 to $2.8
million at January 23, 1996. This increase was the result of increases in hotel
revenue during fiscal 1996. Over the next several years, the Company expects to
increase its level of capital expenditure and renovation in its hotels. The
Company anticipates that cash flow from operating activities will provide
adequate capital for hotel renovation and refurbishment and principal payments
on notes payable. Capital expenditures were $3.8 million, $5.2 million and $5.7
million during fiscal 1996, 1995 and 1994, respectively. During fiscal 1995, the
Company exercised its option to purchase certain assets which had previously
been accounted for as capitalized lease property. As a result, the carrying
value of these assets were reclassified to property and equipment. During fiscal
1993, the Company purchased the management contracts of 23 properties in Canada
for $7.3 million. The purchase contract required additional payments in each of
the initial four years if income from the contracts exceeded certain levels. In
fiscal 1996, these additional payments totaled $1.9 million. The contracts are
stated at cost and amortized over their initial 20 year terms. Long term debt of
$2.7 million consists primarily of renovation loans with maturities of less than
five years.
Results of Operations: Fiscal 1996 compared to Fiscal 1995. Revenue
increased 4.0% from $66.5 million in the year ended January 1, 1995 to $69.1
million in the period ended January 23, 1996. This revenue increase includes an
increase in management fees and other income of $0.5 million due to an increase
in the number of management contracts. Hotel revenue increased $2.2 million on
increased occupancy and average daily rates. Occupancy increased from 63% to 65%
and the average daily rate increased $1.42 from $51.96 to $53.38. Revenue per
available room increased $1.80 to $34.43. Operating income was $1.4 million in
fiscal 1996 compared to $1.6 million for fiscal 1995. General and administrative
expenses increased to $13.0 million from $12.3 million, including $0.2 million
additional vacation expenses and $0.4 million of additional reserves for notes
receivable. Equity in earnings of joint ventures increased $0.4 million to $5.3
million for fiscal 1996 due to increases in both occupancy and average daily
rates.
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Results of Operations: Fiscal 1995 compared to Fiscal 1994. Revenue
increased 5% from $63.6 million in the year ended January 31, 1994 to $66.5
million in fiscal 1995. This revenue growth was primarily due to increases in
average daily rates per room sold combined with increased levels of room
occupancy. Occupancy increased from 61% to 63% and average daily rates increased
from $51.58 to $51.96. Revenue per available room increased $1.22 to $32.63. The
Company reported operating income of $1.6 million for fiscal 1995 compared to
$0.9 million for fiscal 1994, excluding the impact of unusual items. The unusual
items in fiscal 1994 were $10.0 million of charges recorded to write down the
carrying value of certain hotel properties to their fair market value. General
and administrative expenses decreased $0.5 million during fiscal 1995 as the
result of management restructuring and cost saving efforts. The Company's equity
in earnings of joint ventures was $4.9 million for fiscal 1995 compared to $4.2
million in fiscal 1994. This increase was due to increased occupancy and average
daily rates combined with more aggressive cost control initiatives.
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
INDEX TO FINANCIAL STATEMENTS
Travelodge/Thriftlodge
Consolidated Financial Statements as of January 23, 1996 and January
31, 1995, and for the Period February 1, 1995 to January 23, 1996 and
the Two Years in the Period Ended January 31, 1995, and Independent
Auditors Report....................................................6
Independent Auditors' Report of Deloitte & Touche LLP.......7
Report of Independent Accountants of Price Waterhouse LLP...8
Consolidated Statements of Assets and Liabilities...........9
Consolidated Statements of Operations......................10
Consolidated Statements of Changes in Seller's Investment..11
Consolidated Statements of Cash Flow.......................12
Notes to Consolidated Financial Statements.................13
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Capital Properties Limited Partnership
Audited Financial Statements as of September 30, 1995 and 1994 and for
each of the Three Years in the Period Ended September 30, 1995, and
Independent Auditors
Report............................................................22
Independent Auditors' Report of Deloitte & Touche, Canada..23
Comments by Auditor for U.S. Readers on Canada-U.S.
Reporting Conflict................................24
Statements of Operations...................................25
Balance Sheets.............................................26
Statements of Cash Flows...................................27
Notes to the Financial Statements..........................28
Unaudited Financial Statements for the Six Months
Ended March 31, 1996..............................................42
Statement of Operations....................................42
Balance Sheet..............................................43
Statement of Cash Flow.....................................44
Supplemental Information...................................45
(b) Pro Forma Financial Information.
INDEX TO PRO FORMA FINANCIAL STATEMENTS
National Lodging Corp. & Subsidiaries
Pro Forma Condensed Consolidated Financial Statements (Unaudited).48
Pro Forma Condensed Consolidated Balance Sheet
as of March 31, 1996..............................50
Pro Forma Condensed Consolidated Statement of Operations
for the Year Ended December 31, 1995..............51
Pro Forma Condensed Consolidated Statement of Operations
for the Three Months Ended March 31, 1995.........52
Notes to the Pro Forma Condensed Consolidated
Financial Statements..............................53
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(c) Exhibits.
2.1* Stock Purchase Agreement, dated as of December 19, 1995, between Forte
USA and the Registrant.
2.2* Amendment No. 1 to Stock Purchase Agreement, dated as of January 1996,
between Forte USA and the Registrant.
10.1+ Agreement Among Purchasers, dated as of January 22, 1996, among HFS
Incorporated, Motels of America, Inc. and the Registrant.
10.2+ Credit Agreement, dated as of January 23, 1996, among Chemical Bank,
Bankers Trust Company, the other banks named therein and the
Registrant.
10.3+ Pledge Agreement, dated as of January 23, 1996, among the Registrant,
Forte Hotels, Inc. and the other parties named therein, as Pledgors,
and Bankers Trust Company, as Pledgee and Collateral Agent. (Filed as
Exhibit F to Exhibit 10.2 to this Current Report on Form 8-K/A.)
99.1* Press release of the Registrant, dated January 24, 1996.
99.2** Press release of the Registrant, dated March 12, 1996.
- -------
+ Filed herewith.
* Filed as an exhibit to the Registrant's Current Report on Form 8-K
(File No. 0-24794) filed with the Commission on February 7, 1996.
** Filed as an exhibit to the Registrant's Current Report on Form 8-K/A
(File No. 0-24794) filed with the Commission on April 2, 1996.
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TRAVELODGE/THRIFTLODGE
(Business Acquired by National Lodging Corporation)
Consolidated Financial Statements as of
January 23, 1996 and January 31, 1995, and
for the Period February 1, 1995 to January 23, 1996 and
the Two Years in the Period Ended January 31, 1995, and
Independent Auditors' Report
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Shareholders of National Lodging Corporation
We have audited the accompanying consolidated statement of assets and
liabilities of the Acquired Business (or "Company" as defined in Note 1 to the
accompanying financial statements) at January 23, 1996 and the related
consolidated statements of operations, changes in seller's investments, and cash
flows for the period from February 1, 1995 to January 23, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of January 23, 1996
and the results of their operations and their cash flows for the period from
February 1, 1995 to January 23, 1996 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
New York, New York
April 19, 1996
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Report of Independent Accountants
To the Board of Directors and Shareholders
of National Lodging Corporation
In our opinion, the accompanying consolidated statement of assets and
liabilities and the related consolidated statements of operations, of changes in
seller's investment and of cash flows present fairly, in all material respects,
the financial position of the Acquired Business (or the "Company," as defined in
Note 1 to the accompanying financial statements) at January 31, 1995, and the
results of its operations and its cash flows for each of the two years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
San Diego, California
February 20, 1996
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<TABLE>
TRAVELODGE/THRIFTLODGE
(Business Acquired by National Lodging Corporation)
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
January 23, January 31,
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash (including time deposits of $0 and $200, respectively) $ 2,724 $ 3,221
Trade accounts receivable (less allowance for doubtful
accounts of $1,421 and $1,161, respectively) 2,768 1,653
Receivables from joint ventures 2,331 1,821
Prepaid expenses and other current assets 1,070 2,175
----- -----
Total current assets 8,893 8,870
NOTES RECEIVABLE FROM JOINT VENTURES 6,424 8,354
INVESTMENT IN JOINT VENTURES 7,208 7,581
PROPERTY AND EQUIPMENT 55,217 59,223
CAPITALIZED LEASE PROPERTY 1,007 1,153
MANAGEMENT CONTRACTS AND OTHER ASSETS 9,246 7,551
------ ------
$87,995 $92,732
====== ======
LIABILITIES AND SELLER'S NET INVESTMENT
CURRENT LIABILITIES:
Trade accounts payable $ 3,857 $ 2,212
Accrued expenses and other current liabilities 4,853 7,006
Current portion of long-term debt 884 891
Current portion of capitalized lease obligations 166 157
------ ------
Total current liabilities 9,760 10,266
LONG-TERM DEBT - Less current portion 1,791 2,252
CAPITALIZED LEASE OBLIGATION - Less current portion 4,096 4,263
DEFERRED INCOME 106 247
------ ------
Total liabilities 15,753 17,028
MINORITY INTEREST 3,565 3,465
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 7 and 9)
SELLER'S NET INVESTMENT 68,677 72,239
------ ------
$87,995 $92,732
====== ======
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
TRAVELODGE/THRIFTLODGE
(Business Acquired by National Lodging Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Period
February 1,
1995 to Year Ended
January 23, January 31,
1996 1995 1994
<S> <C> <C> <C>
REVENUES:
Hotels and motels $ 65,790 $ 63,636 $ 61,070
Management fees 3,351 2,822 2,553
------- ------- -------
69,141 66,458 63,623
------- ------- -------
OPERATING COSTS AND EXPENSES:
Hotels and Motels 28,904 27,844 26,019
Administrative and general 13,059 12,272 12,757
Depreciation and amortization 8,385 7,982 7,913
Write-down of property and notes receivables - - 9,960
Rent 4,700 5,074 4,715
Sales and marketing 4,459 4,202 4,069
Maintenance 3,673 3,453 3,333
Property taxes 1,864 2,110 2,101
Other 2,693 1,909 1,826
------- ------- -------
67,737 64,846 72,693
------- ------- -------
OPERATING INCOME (LOSS) 1,404 1,612 (9,070)
------- ------- -------
OTHER INCOME (EXPENSE):
Interest income 838 757 850
Interest expense (785) (1,662) (1,481)
Equity in earnings of joint ventures 5,338 4,878 4,169
------- ------- -------
5,391 3,973 3,538
------- ------- -------
MINORITY INTEREST (1,073) (960) (1,161)
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAX PROVISION 5,722 4,625 (6,693)
INCOME TAX (PROVISION) BENEFIT (2,288) (1,850) 2,677
------- ------- -------
NET INCOME (LOSS) $ 3,434 $ 2,775 $ (4,016)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
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TRAVELODGE/THRIFTLODGE
(Business Acquired by National Lodging Corporation)
CONSOLIDATED STATEMENTS OF CHANGES IN SELLER'S INVESTMENT
(Thousands of Dollars)
- -------------------------------------------------------------------------------
BALANCE, FEBRUARY 1, 1993 $86,704
Net loss (4,016)
Seller's net investment activity (11,020)
BALANCE, JANUARY 31, 1994 71,668
Net income 2,775
Seller's net investment activity (2,204)
BALANCE, JANUARY 31, 1995 72,239
Net income 3,434
Seller's net investment activity (6,996)
BALANCE, JANUARY 23, 1996 $68,677
=======
See notes to consolidated financial statements.
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<TABLE>
TRAVELODGE/THRIFTLODGE
(Business Acquired by National Lodging Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOW
(Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Period
February 1,
1995 to Year Ended
January 23, January 31,
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,434 $ 2,775 $ (4,016)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 8,385 7,982 7,913
Minority interest 1,073 960 1,161
Equity in earnings of joint ventures (5,338) (4,878) (4,169)
Write-down of property and notes receivable - - 9,110
Increase (decrease) of cash resulting from changes in:
Trade accounts receivable (1,115) 738 1,748
Receivables from joint ventures and franchisees (510) 1,484 1,104
Prepaid expenses and other current assets 1,105 (220) 2,084
Other assets (155) 7 (1,658)
Trade accounts payable 1,645 (218) (419)
Accrued expenses and other current activities (2,294) 36 (32)
------- ------ ------
Net cash provided by operating activities 6,230 8,666 12,826
------- ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Issuance of notes receivable (398) (887) (1,380)
Principal payments received on notes receivable 2,328 534 605
Capital expenditures (3,841) (5,201) (5,678)
Purchase of management contracts (1,932) - -
Capital contributed to joint ventures (201) (820) (17)
Capital distributions from joint ventures 6,040 4,898 6,116
Capital distributions to joint venture minority interest (973) (738) (543)
------ ------- ------
Net cash provided by (used in) investing activities 1,023 (2,214) (897)
------ ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) on borrowings (468) 50 (828)
Principal payments under capital lease obligations (158) (5,356) (338)
Net transactions with Seller (7,124) (1,993) (10,562)
------ ------- -------
Net cash used in financing activities (7,750) (7,299) (11,728)
------ ------- -------
NET (DECREASE) INCREASE IN CASH (497) (847) 201
CASH, BEGINNING OF PERIOD 3,221 4,068 3,867
------- ------- -------
CASH, END OF PERIOD $ 2,724 $ 3,221 $ 4,068
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
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TRAVELODGE/THRIFTLODGE
(Business Acquired by National Lodging Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 23, 1996 AND JANUARY 31, 1995 AND FOR THE
PERIOD FEBRUARY 1, 1995 TO JANUARY 23, 1996 AND
THE TWO YEARS IN THE PERIOD ENDED JANUARY 31, 1995
(Thousands of Dollars)
- -------------------------------------------------------------------------------
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
Forte Hotels, Inc. ("FHI") is a subsidiary of Forte USA Inc. ("FUSA" or
the "Seller"), whose ultimate parent is Forte Plc of London ("FPL").
FHI is primarily an owner, manager, and franchisor of hotels and motels
in the United States, Canada, Mexico and South America. FHI operates
hotels and motels under the Travelodge Hotel, Travelodge Motel and
Thriftlodge names. In addition, FHI has an ownership interest in
certain non-Travelodge related hotels, residential apartments, and
other hospitality-related business ("Exclusive Properties and other
business").
On January 23, 1996, two separate groups of FHI assets were purchased
by two independent companies. One company purchased 19 motel
properties, while the other purchased the Travelodge franchise system
in North America, including the Travelodge and Thriftlodge service
marks, franchise agreements and the assets comprising the reservation
system in North America. Additionally, a special distribution was made
by FHI to FUSA of the Exclusive Properties and other business. The
stock of FHI was then purchased by National Lodging Corporation "NLC"
(formerly known as National Gaming Corporation). Through such stock
purchase, NLC acquired 15 wholly-owned properties and interest in 97
"joint venture" properties, certain management contracts, and retail
space ("Acquired Business" or the "Company"). The accompanying
financial statements include only those assets, liabilities, revenues
and expenses arising from the operations of the Acquired Business. In
connection with the anticipated sale of FHI, 23 management contracts
for Canadian franchise properties were assigned to FHI from an
affiliate of FPL. While the assets, amortization expenses and
management fees related to these contracts were not included in the
historical financial statements of FHI, such amounts have been included
in the accompanying financial statements of the Acquired Business from
the time of the affiliate's acquisition of such contracts in June 1992.
The balances reflected in the financial statements include allocations
from FHI, which were based on the number of properties acquired,
percentage of acquired share of total account balance, or other
appropriate bases. These allocations reflect the share of corporate
overhead, results from operations, and assets and liabilities that
pertain to the Acquired Business. Management believes the foregoing
allocations were made on a reasonable basis and reflect the costs which
would have been incurred on a stand-alone basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported
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amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The financial
information included herein may not necessarily reflect the financial
position and results of operations of the Acquired Business in the
future, what the financial position, results of operations, and cash
flows of the Acquired Business would have been had it been a separate
stand-alone company.
Cash - Cash includes cash on hand, cash in banks and time deposits with
original maturities of 90 days or less.
Accounting for Investments in Joint Ventures - The Company accounts for
its investments in joint ventures in which it does not have a
controlling financial interest using the equity method of accounting
(Note 3).
Property and Equipment - Property and equipment is stated at cost.
Expenditures for replacements and major improvements are capitalized
and depreciated. Depreciation is recognized using the straight line
method over the estimated useful lives of the assets; buildings - 40
years, furniture and equipment - three to ten years. Leasehold
improvements are amortized over the shorter of their estimated useful
lives (ten to fifteen years) or the lease term. Expenditures for normal
maintenance, repairs and minor renewal are charged to expense as
incurred. Upon the sale or retirement of property or equipment, the
asset cost and related accumulated depreciation are removed from the
respective accounts and any gain or loss is included in the results of
operations.
The Company periodically assesses the recoverability of the carrying
value of property and equipment based on estimated nondiscounted cash
flows on an individual property basis. If the estimated nondiscounted
cash flows are less than the carrying value, an impairment loss is
charged to operations based on the difference between the carrying
value and the estimated discounted cash flows.
Although adoption is not required until its fiscal year 1997, the
Company has assessed the impact of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". Based on current
conditions, the Company does not believe that adoption will have an
adverse impact on its financial position or results of operations.
The Company considers interest expense on funds borrowed for the
development and construction of new hotels and motels to be a cost of
the property and capitalizes such costs until the construction is
completed. The amount capitalized is amortized over the life of the
property once it becomes operational. The Company did not capitalize
any interest during the period February 1, 1995 through January 23,
1996 or the years ended January 31, 1995 and 1994, respectively.
Other Assets - Included in other assets is $8,661,000 and $7,120,000 at
January 23, 1996 and January 31, 1995, respectively, related to
management contracts for Canadian properties. The management contracts
are stated at cost and are being amortized over the 20-year term of
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the contracts. The Company periodically assesses the recoverability of
the carrying value of its management contracts based on the estimated
nondiscounted cash flows to be generated from the contracts. If the
estimated nondiscounted cash flows are less than the carrying value, an
impairment loss would be charged to operations based on the difference
between the carrying value and the estimated discounted cash flows.
Fair Value of Financial Instruments - Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial
Instruments" ("SFAS 107") requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance
sheet for which it is practicable to estimate that value. Fair values
are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future
cash flows. Therefore, fair value estimates may not represent the
actual value of the financial instruments as of January 23, 1996, or
that may be realized in the future. SFAS 107 excludes certain financial
instruments and all nonfinancial instruments from the disclosure
requirements. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company. For current
assets, current liabilities and receivables from joint ventures and
franchisees, the carrying amount recorded on the consolidated
statements of assets and liabilities is a reasonable estimate of fair
value.
Income Taxes- The Acquired Business was included in the consolidated
income tax returns of Forte Holdings, Inc. and its predecessor. Income
tax expense for the Acquired Business has been computed on a
stand-alone basis based on the operating results of the Acquired
Business.
Pursuant to the terms of the acquisition and its income tax structure,
a new income tax basis in the acquired assets and liabilities will be
established by NLC. No historical income tax attributes will transfer
to NLC.
2. NOTES RECEIVABLE FROM JOINT VENTURES AND FRANCHISEES
Notes receivable are summarized as follows (in thousands of dollars):
January 23 January 31
1996 1995
Notes receivable $7,492 $9,089
Less allowance for uncollectible notes 1,068 735
------ ------
$6,424 $8,354
====== ======
Notes receivable bear interest at rates ranging from 3% to 12% with
maturities to 2021. Certain of these notes aggregating $5.3 and $6.0
million were collateralized by real property at January 23, 1996 and
January 31, 1995.
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3. INVESTMENT IN JOINT VENTURES
The Company is a partner in joint ventures that own and operate motels
and hotels. The Company has a fifty percent interest in many of its
joint ventures. The Company consolidates the joint ventures in which it
has a majority ownership interest. It records its interest under the
equity method for those joint ventures in which the Company does not
have a majority ownership interest.
Assets, liabilities and the results of operations of joint ventures
accounted for under the equity method are reflected in the following
balance sheets and statements of operations (in thousands of dollars):
<TABLE>
<CAPTION>
January 23, January 31,
1996 1995
<S> <C> <C>
Joint Venture Balance Sheets
Joint venture assets:
Current assets $ 5,198 $ 5,630
Long-term assets 32,850 37,294
Less joint venture liabilities:
Current liabilities 3,503 3,853
Long-term liabilities 8,003 9,902
------------------ ------------------
Joint venture equity 26,542 29,169
Less equity of other investors 19,334 21,588
------------------ ------------------
Investment in joint ventures, end of year $ 7,208 $ 7,581
================== ==================
</TABLE>
<TABLE>
<CAPTION>
Period
February 1, 1995
to Year Ended January 31,
January 23, 1996 1995 1994
Joint Venture Statements of Operations
<S> <C> <C> <C>
Revenue $ 49,006 $ 45,006 $ 43,616
Operating Costs (35,738) (32,923) (32,859)
Interest expense (915) (1,258) (1,632)
--------------------- ------------------ ------------------
$ 12,353 $ 10,825 $ 9,125
===================== ================== ==================
</TABLE>
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4. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows (in thousands of
dollars):
January 23, January 31,
1996 1995
Land $ 5,144 $ 6,041
Buildings and improvements 76,628 78,098
Furniture and equipment 60,964 60,688
Construction in progress 82 1,769
------------- -----------
142,818 146,596
Less accumulated depreciation (87,601) (87,373)
------------- ------------
$ 55,217 $ 59,223
============= ============
The Company recorded impairment losses of $9,110,000 related to its
properties during 1994 due to the estimated impact on future cash flows
brought on by changes in the industry as well as by former management's
plan to dispose of certain properties. Properties designated as held
for sale at such time were written down to their estimated net
realizable values.
5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are summarized as
follows (in thousands of dollars):
January 23, January 31,
1996 1995
Payroll and payroll benefits $ 1,681 $ 1,853
Deferred compensation -- 784
Taxes 503 644
Accrued rent payable 346 595
Accrued interest payable 68 107
Other 2,255 3,023
------------ -------------
$ 4,853 $ 7,006
============ =============
C/M: 11752.0003 368638.6
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<PAGE>
6. LONG-TERM DEBT
Long-term debt is summarized as follows (in thousands of dollars):
January 23, January 31,
1996 1995
Notes and contracts payable to banks and
others --interest rates ranging from
6.0% to 12.0% with maturities to 2001 $ 2,529 $ 2,904
Mortgage Debt-- interest rates ranging
from 8.0% to 10.0% with maturities to
2002 146 239
----------- -----------
2,675 3,143
Less current portion 884 891
------------ ----------
Long-term debt $ 1,791 $ 2,252
============ ===========
Future principal payments required on the Company's debt are as follows
(in thousands of dollars):
Year Ending
January 31,
1997 $ 884
1998 744
1999 594
2000 321
2001 101
Thereafter 31
------------
$ 2,675
============
Interest paid approximated interest expense of $785,000, $1,662,000 and
$1,481,000 during fiscal 1996, 1995 and 1994, respectively.
7. LEASES
Capital Leases - Certain of the Company's leases qualify as capital
leases. The present value of the future minimum lease payments under
these capital leases is based upon the estimated incremental borrowing
rate of the Company in effect at the time of entering into the lease,
which ranges from 8.0% to 10.0%. The present value of the future
minimum lease payments as of January 23, 1996 is as follows (in
thousands of dollars):
C/M: 11752.0003 368638.6
18
<PAGE>
Minimum
Year Ending Lease
January 31, Payments
1997 $ 577
1998 577
1999 577
2000 577
2001 577
Thereafter 4,786
----------
Total minimum lease payments 7,671
Less amounts representing interest 3,409
----------
Present value of minimum lease payments 4,262
Less current portion 166
----------
Long-term capitalized lease obligations $ 4,096
==========
Capitalized lease property is comprised of the following (in thousands
of dollars):
January 23, January 31,
1996 1995
Buildings and improvements $ 4,120 $ 4,120
----------- -----------
4,120 4,120
Less accumulated depreciation
and amortization (3,113) (2,967)
----------- -----------
$ 1,007 $ 1,153
=========== ===========
Operating Leases - The Company operates many of its hotels and motels
under long-term leases expiring at various dates through 2035.
Substantially all leases have renewal options exercisable after a
specified number of years and require the payment of real estate taxes
and insurance. Contingent rentals, based on sales volume, are also
required by most leases.
The Company is obligated to pay future minimum rentals under
noncancelable operating leases as follows (in thousands of dollars):
Year Ending January 31,
1997 $ 2,471
1998 2,471
1999 2,471
2000 2,471
2001 2,471
Thereafter $ 27,822
-------------
$ 40,177
============
C/M: 11752.0003 368638.6
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<PAGE>
<TABLE>
Rental expense on operating leases is summarized as follows (in
thousands of dollars):
<CAPTION>
Period
February 1, 1995
to Year Ended January 31,
January 23, 1996 1995 1994
<S> <C> <C> <C>
Minimum rentals $ 2,087 $ 1,969 $ 1,885
Contingent rentals 2,613 3,105 2,830
---------------- --------------- ---------------
$ 4,700 $ 5,074 $ 4,715
================ =============== ===============
</TABLE>
8. FAIR VALUES OF FINANCIAL INSTRUMENTS
The book values and fair values of financial instruments are summarized
as follows (in thousands of dollars) at January 23, 1996:
January 23,
1996
Book Fair
Value Value
Notes Receivable $ 6,424 $ 6,045
The fair value of notes receivable is estimated by discounting future
cash flows using current interest rates and estimates of borrower
credit risk. The primary difference between fair value and book value
is due to certain notes having stated interest rates below the market
interest rates at January 23, 1996.
The fair value of the Company's long-term debt is estimated using
discounted cash flow analysis based on the Company's current
incremental borrowing rate for similar types of borrowing arrangements.
The book value of long-term debt approximated its estimated fair value
at January 23, 1996.
9. COMMITMENTS AND CONTINGENT LIABILITIES
Joint Ventures - The Company is directly liable for all indebtedness of
the joint ventures in the event of default in payment of rent,
mortgages or other obligations. The joint ventures had borrowings of
$11.0 million, and $10.2 million at January 23, 1996 and January 31,
1995, respectively.
Contingencies - Various claims and legal proceedings arising in the
ordinary course of business seeking monetary damages and other relief
are pending against the Company. The amount of liability, if any, from
claims and actions cannot be determined with certainty; however,
management does not believe that an adverse outcome of these matters
would have a material adverse effect on the Company's financial
condition, results of operations, or cash flows.
C/M: 11752.0003 368638.6
20
<PAGE>
10. EMPLOYEE BENEFIT PLANS
Defined Benefit Plan - The employees of the Acquired Business
participated in the Seller's retirement plan (the "Plan"). The Plan is
a noncontributory, defined benefit plan. The normal retirement benefit
provided for by the Plan is determined based upon a covered employee's
earnings and length of service at the time of retirement. The pension
costs were funded by the Seller as they accrued in accordance with the
provisions of the Plan. In connection with the acquisition, the Plan
was frozen, participants became fully vested in their accrued benefits
and no further service benefit will accrue. The Plan obligations were
retained by the Seller.
Pension expense of $540,000, $574,000 and $543,000 was charged to the
Acquired Business during the fiscal period February 1, 1995 to January
23, 1996 and the years ended January 31, 1995 and 1994, respectively.
The weighted average discount rate used in determining the actuarial
present value of projected benefit obligations was 7.0%, 8.5% and 7.0%
in 1996, 1995 and 1994, respectively. The assumed rate of increase in
future compensation levels was 5.0%. The expected long-term rate of
return on assets was 9.0%.
11. OTHER RELATED PARTY BALANCES AND TRANSACTIONS
The Seller provided certain services to the Acquired Business including
management, legal, accounting, income tax, treasury, employee benefits
and human resource administration services. Costs related to these
services as well as other overhead costs of the Seller have been
allocated to the Acquired Business using allocation methods considered
reasonable by management. The allocated costs were approximately
$6,670,000, $6,858,000 and $6,935,000 during the period February 1,
1995 to January 23, 1996 and the years ended January 31, 1995 and 1994,
respectively.
An affiliate of the Seller provided certain marketing and promotional
services to the Acquired Business. Additionally, the Seller maintained
and operated a reservation system network and provided such service to
the Acquired Business. These services were charged to the properties
under a cost reimbursement program and did not contain a profit margin.
Amounts charged for these services were $1,912,000, $1,908,000 and
$1,832,000 during the period February 1, 1995 to January 23, 1996 and
the years ended January 31, 1995 and 1994, respectively, for the
wholly-owned properties and consolidated joint ventures. Additionally,
nonconsolidated joint ventures were charged $1,732,000, $1,604,000 and
$1,563,000 during the period February 1, 1995 to January 23, 1996 and
the years ended January 31, 1995 and 1994, respectively.
The Seller also provided administrative and financial services to the
joint ventures. The Company charged the joint ventures $432,000,
$436,000 and $411,000 for these services in the period February 1, 1995
to January 23, 1996 and the years ended January 31, 1995 and 1994,
respectively. Per agreement, charges for these services are primarily
calculated at the rate of $8 per room per month.
******
C/M: 11752.0003 368638.6
21
<PAGE>
Financial Statements of
CAPITAL PROPERTIES LIMITED PARTNERSHIP
September 30, 1995, 1994 and 1993
C/M: 11752.0003 368638.6
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
To Syndicated Capital Properties Inc., the General Partner
of Capital Properties Limited Partnership
We have audited the balance sheets of Capital Properties Limited Partnership as
at September 30, 1995 and 1994, and the statements of operations and cash flows
for each of the three years in the period ended September 30, 1995. These
financial statements are the responsibility of the General Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Partnership as at September 30, 1995 and
1994 and the results of its operations and the changes in its financial position
for each of the three years in the period ended September 30, 1995 in accordance
with accounting principles generally accepted in Canada, which differ in certain
material respects with accounting principles generally accepted in the United
States (see Note 11).
DELOITTE & TOUCHE
Chartered Accountants
Calgary, Alberta, Canada
December 18, 1995 (except as to Note 10 for which the date is February 6, 1996)
C/M: 11752.0003 368638.6
23
<PAGE>
Comments by Auditor for U.S. Readers
on Canada-U.S. Reporting Conflict
In the United States, reporting standards for auditors require the
addition of an explanatory paragraph (following the opinion paragraph)
when the financial statements are affected by significant uncertainties
such as that described in Note 1 of the financial statements as at
September 30, 1994 and 1995. Our report to the General Partner dated
December 18, 1995 (except as to Note 10 for which the date is February
6, 1996) is expressed in accordance with Canadian reporting standards
which do not permit a reference to such uncertainty in the auditors'
report when the uncertainty is adequately disclosed in the financial
statements.
DELOITTE & TOUCHE
Chartered Accountants
Calgary, Alberta, Canada
December 18, 1995
C/M: 11752.0003 368638.6
24
<PAGE>
<TABLE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Statements of Operations
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
$ $ $
---------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Rooms 43,529 38,930 36,036
Other 5,166 5,116 5,103
- -----------------------------------------------------------------------------------------------------------------------------------
48,695 44,046 41,139
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Wages and benefits 11,611 10,686 9,951
Direct costs 5,186 4,905 4,056
Administration 3,974 3,413 3,503
Marketing 3,080 2,555 2,503
Maintenance and energy 3,816 3,758 3,649
Taxes and insurance 5,641 5,266 5,072
Management, royalty and franchise fees 2,676 2,423 2,263
Depreciation and amortization 3,628 3,553 2,694
Interest expense 11,359 11,085 10,709
- -----------------------------------------------------------------------------------------------------------------------------------
50,971 47,644 44,400
- -----------------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE THE UNDERNOTED 2,276 3,598 3,261
- -----------------------------------------------------------------------------------------------------------------------------------
WRITE DOWN OF ASSETS (NOTE 10) 708 - -
MINORITY INTEREST 21 5 (8)
- -----------------------------------------------------------------------------------------------------------------------------------
729 5 (8)
- -----------------------------------------------------------------------------------------------------------------------------------
NET LOSS 3,005 3,603 3,253
===================================================================================================================================
</TABLE>
C/M: 11752.0003 368638.6
25
<PAGE>
<TABLE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Balance Sheets
September 30, 1995 and 1994
Tabular Amounts in Thousands of Canadian Dollars
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994
$ $
--------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash and term deposits 527 959
Accounts receivable 2,435 2,208
Linen supplies 671 642
Other supplies 259 257
Prepaid property tax 1,149 1,014
Other prepaids 245 406
- ----------------------------------------------------------------------------------------------------------------------------------
5,286 5,486
Property and equipment (Note 4) 162,568 166,591
- ----------------------------------------------------------------------------------------------------------------------------------
167,854 172,077
==================================================================================================================================
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 3,853 4,169
Accrued interest on long-term debt 2,065 921
Property taxes payable 1,564 3,010
Current portion of long-term debt (Note 6) 122,665 3,448
- ----------------------------------------------------------------------------------------------------------------------------------
130,147 11,548
Long-term debt (Note 6) 9,779 129,567
- ----------------------------------------------------------------------------------------------------------------------------------
139,926 141,115
Minority interest 405 464
Contingency (Note 1)
Partners' equity (Note 7) 27,523 30,498
- ----------------------------------------------------------------------------------------------------------------------------------
167,854 172,077
==================================================================================================================================
</TABLE>
Approved on behalf of the Capital Properties Limited Partnership by its general
partner, Syndicated Capital Properties Inc.
- ---------------------------------------- ---------------------------------
PETER P. SIKORA, Director RANDY B. ROYER, Director
C/M: 11752.0003 368638.6
26
<PAGE>
<TABLE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Statements of Cash Flows
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
$ $ $
----------------------------------------------------------
<S> <C> <C> <C>
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES
OPERATING
Net loss (3,005) (3,603) (3,253)
Items not affecting cash
Minority interest 21 5 (8)
Depreciation and amortization 3,628 3,553 2,694
Write down of assets 708 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
1,352 (45) (567)
Changes in non-cash operating working capital items:
Accounts receivable (227) (322) (527)
Linen and other supplies (31) (87) (50)
Prepaid property tax (135) 73 (138)
Other prepaids 161 63 (16)
Accounts payable (316) 382 (58)
Due to affiliated company -- -- (541)
Accrued interest on long-term debt 1,144 333 458
Property taxes payable (1,446) 1,262 (1,619)
--------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
502 1,659 (3,058)
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCING
Debt issued -- 1,906 5,005
Repayment of debt (571) (1,111) (1,887)
Partnership units issued (canceled) 30 6 (686)
Minority interest (80) -- (100)
Reorganization and refinancing costs -- -- (237)
- -----------------------------------------------------------------------------------------------------------------------------------
(621) 801 2,095
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTING
Additions to furnishings and equipment (313) (2,535) (3,734)
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW (432) (75) (4,697)
CASH POSITION, BEGINNING OF YEAR 959 1,034 5,731
- -----------------------------------------------------------------------------------------------------------------------------------
CASH POSITION, END OF YEAR 527 959 1,034
===================================================================================================================================
</TABLE>
C/M: 11752.0003 368638.6
27
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- ------------------------------------------------------------------------------
1. FINANCIAL STATUS OF THE PARTNERSHIP
The Partnership has incurred significant losses over the past four
years, is in violation of financial covenants relating to its bank
credit facilities, has not met its principal repayment schedule and is
in arrears on property tax payments. The operations of the Partnership
have always provided positive cash flow before debt service and
property taxes; however, management believes that a reduction in the
present debt level is necessary for the long-term viability of the
Partnership. Management is pursing the possibility of raising equity
capital and has had discussions with its bankers about debt
restructuring. Under the loan agreements, the banks have the right to
demand payment of the debt owing and could take action to realize their
security. No such demand has been made by any of the banks.
These financial statements have been prepared on the basis of
accounting principles applicable to a going concern that contemplates
the realization of assets and the payment of liabilities in the
ordinary course of business. If the going concern assumption was not
appropriate for these financial statements, then adjustments would be
necessary to the carrying values of assets and liabilities, the
reported loss and the balance sheet classifications used.
2. ORGANIZATION AND OPERATION OF THE PARTNERSHIP
a. Business of Capital Properties Limited Partnership
Capital Properties Limited Partnership ("Capital Properties" or "the
Partnership") was established in 1991 as a limited partnership in the
province of Ontario, Canada. Capital Properties initially was
established to provide a means whereby different owners of hotels
operated under a common name could combine the assets, debt and
operations of these hotels into one entity. It was established for the
purpose of purchasing, developing, selling, renovating, managing and
owning equity interests in hotel properties and other real estate
investments located or to be located throughout Canada.
At special meetings held prior to September 30, 1992, twelve limited
partnerships owning fourteen hotels voted in favour of conveying their
respective hotels into Capital Properties effective September 30, 1992.
Capital Properties also purchased four hotels from four condominium
syndicates (subject to certain minority interest) as well as three
wholly owned and one 50% owned hotel from Relax Development Corporation
Ltd. ("RDCL"). As at September 30, 1992, Capital Properties owned a
100% interest in twenty-one hotels (subject to minority interest) and a
50% interest in one hotel. Ownership of these properties continues to
the present day.
C/M: 11752.0003 368638.6
28
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- ------------------------------------------------------------------------------
2. ORGANIZATION AND OPERATION OF THE PARTNERSHIP (Continued)
a) Business of Capital Properties Limited Partnership (Continued)
One of the major aspects of this restructuring related to the existing
mortgage debt on the hotels. Through negotiations between Capital
Properties and the various lender groups, agreement was reached to
refinance a major portion of the hotel mortgage debt. The transfer of
the respective hotels to Capital Properties was conditional on
finalization of the loan and mortgage assignment agreements between
various lender groups and Capital Properties.
For purposes of the reorganization, the value of the hotels included in
Capital Properties was based on independent third party appraisals.
Capital Properties also acquired the net working capital deficiency,
assumed certain first mortgages and restructured the remaining hotel
debt as referred to above. The fair market value of the hotels and
related working capital (deficiency) less mortgages, using a January 1,
1992 adjustment date, was settled by the issuance of Capital Properties
Limited Partnership units at $1 per unit.
The purchase of the hotels and related assets from limited partnerships
and condominiums syndicates was done on a tax deferred basis under the
Income Tax Act of Canada. Of the twelve limited partnerships who agreed
to transfer their respective hotels to Capital Properties, ten were
dissolved on December 31, 1992. The Capital Properties partnership
units received by the respective limited partnerships are now owned by
the individual investors of these dissolved partnerships. The holders
of condominium syndicate interests have transferred interests in their
respective hotels to Capital Properties in exchange for partnership
units.
Syndicated Capital Properties Inc. (Syndicated GP) is the sole general
partner of Capital Properties.
b. Management License and Marketing Agreements
Capital Properties has entered into management license agreements with
Forte Hotels, Inc. and Forte Hotels Management, Inc. (collectively the
"Manager", represented by Royco Hotels & Resorts Ltd. in Canada)
whereby the Manager will manage each of the hotels owned by Capital
Properties.
C/M: 11752.0003 368638.6
29
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------
2. ORGANIZATION AND OPERATION OF THE PARTNERSHIP (Continued)
(b) Management License and Marketing Agreements (Continued)
The agreements are for terms of 20 years with three renewal terms of
ten years each. The Manager is entitled to the following fees:
% of
"Gross Revenue"
as defined
Management fee 3.5
Royalty fee (for use of trademarks
and management system) 2.0
After 1995, the royalty fee will be increased by an additional 1%.
During the year, Capital Properties incurred management fees of
$1,810,000 ($1,639,000 in 1994 and $1,542,000 in 1993) and royalty fees
of $867,000 ($776,000 in 1994 and $721,000 in 1993).
The agreements also provide for the manager to receive a management
incentive fee which will be non-cumulative. The annual management
incentive fee will be calculated by multiplying the "MIF percentage"
(defined below) by the net operating income before debt service ("NOI")
but payable out of net operating income after debt service (the "Cash
Available for Distribution") on the basis of one dollar of management
incentive fee to be paid to the Manager for every three dollars of Cash
Available for Distribution. The MIF percentage shall be equal to 3%
based on a ten million dollar NOI. The MIF percentage will be increased
or decreased proportionately based on increases or decreases in the
NOI, on the basis that a one million dollar increase or decrease in the
NOI results in a one-half of one percent increase or decrease in the
MIF percentage, provided that the MIF percentage shall not increase for
increases in NOI beyond twenty-six million dollars. No management
incentive fees have been incurred from inception to September 30, 1995.
Capital Properties also has an agreement with Travelodge International
Marketing Agency ("TIMA") whereby each hotel will contribute 4% of room
revenue to a separate fund out of which the cost of the central
reservation system and national advertising and promotion will be paid.
During 1995, fees under this agreement were $1,741,000 ($1,577,000 in
1994 and $1,546,000 in 1993).
C/M: 11752.0003 368638.6
30
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------
2. ORGANIZATION AND OPERATION OF THE PARTNERSHIP (Continued)
b) Management License and Marketing Agreements (Continued)
Each hotel is responsible for its pro rata cost of accounting
services and its local advertising and promotion expenses.
With respect to the acquisition of third party supplies and
services, the Manager may charge an administrative and
handling fee, provided the price and terms of such supplies
and services including such fees are competitive with
non-affiliated sources of supply. Fees in 1995 amounted to
$667,000 ($626,000 in 1994 and nil in 1993).
c) Asset Management Fee
Capital Properties has entered into an agreement with its
general partners, Syndicated GP, to manage the assets and
provide investor services provided Syndicated GP remains as
general partner. Syndicated GP will be entitled to be
reimbursed for its actual operating costs and out of pocket
expenses and will earn an annual management incentive fee,
calculated and payable based on 3/16 of the amount earned
annually by the Manager as a management incentive fee.
Syndicated GP will receive a fee in connection with the
acquisition, sale or financing of the assets of Capital
Properties and a fee based on equity raised. No fees under
this agreement were incurred from inception to September 30,
1995.
3. SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with
accounting policies generally accepted in Canada. Significant
accounting policies are outlined below:
a) Basis of Presentation
These financial statements reflect only the assets,
liabilities, revenues and expenses of the Partnership,
including its 50% proportionate interest in the Edmonton South
Hotel, and do not include any other assets, liabilities,
revenues and expenses of the partners or the liability of the
partners for taxes on income, if any, earned by the
Partnership. The statement of operations does not include a
charge for interest on invested capital.
C/M: 11752.0003 368638.6
31
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
b) Property and Equipment
Property and equipment are stated at cost and are depreciated
over their estimated useful lives. Hotel properties were
valued on September 30, 1992, the date of formation of the
Partnership, at amounts based on independent third party
appraisals. Depreciation on the hotel buildings is provided by
the sinking fund method over forty years in amounts that
increase annually at 5%. Depreciation on renovations is
provided using the straight-line method at the rate of 15% per
annum. Depreciation on furnishings and equipment is provided
using the straight-line method at rates ranging from 8% to 33%
per annum.
c) Minority Interest
Certain owners of individual interests related to condominium
hotels in London, Sudbury and Kitchener did not accept Capital
Properties' offer to purchase their respective units at
September 30, 1992. The interests of these unit holders are
treated as a minority interest in these financial statements.
d) Reorganization and Refinancing Costs
Costs related to the acquisition and transfer of hotels to
Capital Properties and the costs related to the
reorganization, restructuring and transfer of debt to Capital
Properties on September 30, 1992 were deducted from partners'
equity.
4. PROPERTY AND EQUIPMENT
--------------------------------------
1995 1994
$ $
--------------------------------------
Land 35,957 35,957
Building 115,165 115,165
Furnishings and equipment 14,535 14,298
Renovations 7,461 7,385
----------------------------------------------------------------------
173,118 172,805
Less accumulated depreciation 10,550 6,214
-----------------------------------------------------------------------
162,568 166,591
=======================================================================
C/M: 11752.0003 368638.6
32
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------
<TABLE>
5. JOINT VENTURE
The following amounts are included in these financial statements and
represent Capital Properties' proportionate share of assets,
liabilities, revenues, and expenses of an unincorporated joint venture
related to the Edmonton South Hotel.
<CAPTION>
-----------------------------------------
1995 1994
$ $
-----------------------------------------
<S> <C> <C>
Assets 4,999 5,061
Liabilities 1,067 1,126
Revenues 962 878
Expenses 964 896
6. LONG-TERM DEBT
-----------------------------------------
1995 1994
$ $
-----------------------------------------
a) Major Lenders
8.5% loan from Scotia Mortgage Corporation, secured
by five hotels 29,563 29,835
8.5% loan from Canadian Imperial Bank of Commerce
("CIBC"), secured by five hotels 33,405 33,405
8.5% loan from the province of Alberta Treasury
Branch, secured by three and one-half hotels (subject to
existing mortgages) 20,717 20,713
8.5% loan from Bank of Montreal, secured by six hotels 28,353 28,393
----------------------------------------------------------------------------------------------------------------------
Total Major Lenders 112,038 112,346
</TABLE>
C/M: 11752.0003 368638.6
33
<PAGE>
<TABLE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------------------------------------------
6. LONG-TERM DEBT (Continued)
<CAPTION>
-----------------------------------------
1995 1994
$ $
-----------------------------------------
The above loans from major lenders are all due on September 30, 1997
and are secured by separate first fixed and floating charge demand
debentures related to their specific hotels. Blended monthly interest
and principal payments on the above loans are $906,000. In addition
Capital Properties has granted the major lenders a blanket demand
debenture on all but two hotels. This debenture ranks after the
renovation loan security and other first mortgages and the first charge
debentures referred to below. During the year, Capital Properties was
in violation of certain debt covenants related to debt owned to the
major lenders. During 1994, the major lenders agreed to monthly
payments of interest only beginning November 1, 1993 under their
respective loan agreements. As well, the major lenders waived
compliance with certain covenants on the loan agreements to April 30,
1994. No further waivers were received beyond that date.
<S> <C> <C>
b) 13% mortgage from Hong Kong Trust, 858 912
secured by a hotel property and related
assets located at Edmonton South, with
blended monthly interest and principal
payments of $13,892. At year end, this
mortgage was due and payable and is
secured with assets having a book value of
$4,999,000. Capital Properties, dealing
with the owners of the other 50% interest
in Edmonton South Hotel, has refinanced
the mortgage with Hong Kong Trust at
10.05% effective November 1, 1995, due
November 1, 2000, with blended interest
and principal payments of $11,489.
</TABLE>
C/M: 11752.0003 368638.6
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<PAGE>
<TABLE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------------------------------------------
6. LONG-TERM DEBT (Continued)
<CAPTION>
-----------------------------------------
1995 1994
$ $
-----------------------------------------
<S> <C> <C>
c) Bank prime plus 1/2% mortgage from Adelaide Capital Corporation due April 1,
2000, secured by a hotel property and related assets located at Regina,
Saskatchewan, with monthly principal
payments of $10,000 plus interest. 2,239 2,342
d) 8.5% mortgage from Canadian Western
Bank, due September 30, 1997, secured by
a hotel property and related assets located
at TorontoWoodbine, Ontario, with
blended monthly interest and principal
payments of $39,560. During the year,
Capital Properties was in violation of
certain debt covenants related to debt owed
to the lender. 4,842 4,854
e) 9% mortgage from Hong Kong Trust
(formerly Metropolitan Trust), due July 1,
1997, secured by a hotel property and
related assets located at Calgary, Alberta,
with blended interest and principal
payments of $60,095. 6,967 7,061
f) Bank prime plus 2% renovation loan from
the province of Alberta Treasury Branches
with maturity date not yet established,
secured by a second fixed charge with
respect to all hotels (excluding properties
pledged under the CIBC loan) and a third
fixed charge with respect to the properties
pledged under the CIBC loan. During the
year, Capital Properties was in violation of
certain debt covenants related to debt owed
to the lender 5,500 5,500
- ---------------------------------------------------------------------------------------------------------------------
132,444 133,015
Less principal amounts due within one year 285 3,448
Less principal amounts due within one year
due to violation of financial covenants 122,380 --
- ---------------------------------------------------------------------------------------------------------------------
9,779 129,567
=====================================================================================================================
</TABLE>
C/M: 11752.0003 368638.6
35
<PAGE>
<TABLE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------------------------------------------
6. LONG-TERM DEBT (Continued)
- --------------------------------------------------------------------------------------------------------------------
If Capital Properties can achieve continued support from the major lenders, the
principal payments due within the next five years are approximately:
<CAPTION>
---------------------
$
(000s)
---------------------
<S> <C> <C>
1996 2,757
1997 122,754
1998 1,084
1999 1,183
2000 2,931
Subsequent to 2000 1,735
- ------------------------------------------------------------------------------------------------------
132,444
======================================================================================================
</TABLE>
7. PARTNERS' EQUITY
a) Partnership Units Authorized
Authorized Units - The General Partner (Syndicated GP) is
authorized to issue the following classes of units:
An unlimited number of Class A units An unlimited number of
Class B units An unlimited number of Class C units
The following are the attributes of the Class A, Class B and Class C
partnership units.
Class A Units
Fully voting, participating, redeemable units. Each Class A unit will
initially represent a contribution to capital of $1.00. Subject to any
preferred return payable on any other class of unit. Class A units are
entitled to an initial 7%, non-cumulative, annual return and will
thereafter participate equally with all other participating units.
Class B Units
Class B units are fully voting, participating, redeemable units and
initially represent a contribution to capital of $1.00 per Class B
unit. Class B units are entitled to a 7%, non-cumulative, preferred
annual return from the 1st day of the month following the month of
issuance until the fifth anniversary of such date or such earlier or
later date as may be determined by the general partner at the time of
issuance. Thereafter, the Class B units participate equally with all
other participating units, after payment of any preferred annual return
on any other Class or Classes of units and the 7% annual return on the
Class A units. A Class B unit will be deemed to be a Class A unit on
January 1st of the year following expiry of its preferred return.
C/M: 11752.0003 368638.6
36
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------
7. PARTNERS' EQUITY (Continued)
Class C Units
Class C units are fully voting, participating, redeemable units and initially
represent a contribution to capital of $1.00 per Class C unit. Class C units are
entitled to a 9% non-cumulative, preferred annual return in priority to any
preferred return on the Class B units, from the 1st day of the month following
the month of issuance until the fifth anniversary of such date, or such earlier
or later date as may be determined by the general partner at the time of
issuance. Thereafter, the Class C units participate equally with all other
participating units after payment of any preferred return on any other Class or
Classes of units and the 7% annual return on the Class A units. A Class C unit
will be deemed to be a Class A unit on January 1st of the year following the
expiry of its preferred return.
The annual return of unit holders is based on distributable cash (as defined in
the partnership agreement). No distributions have been payable for the years
ended 1993, 1994 or 1995.
b) Units
A breakdown by class of units issued is as follows:
--------------------------------------
1995 1994
$ $
--------------------------------------
Class A units 31,892,150 31,861,262
Class B units 12,580,527 12,580,527
Class C units -- --
- -------------------------------------------------------------------------------
44,472,677 44,441,789
===============================================================================
c) Equity
--------------------------------------
1995 1994
$ $
--------------------------------------
Opening equity 30,498 34,095
Partnership units issued 30 6
Net loss (3,005) (3,603)
- -------------------------------------------------------------------------------
27,523 30,498
===============================================================================
C/M: 11752.0003 368638.6
37
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------
8. LEASE COMMITMENTS
Capital Properties is committed to the following lease payments over
the next five years for certain of its operating equipment and one land
lease expiring in 2023.
--------------------
$
--------------------
1996 398
1997 164
1998 74
1999 12
2000 1
9. COMPARATIVE FIGURES
Certain of the prior year's figures have been reclassified to conform
with the current year's presentation.
10. SUBSEQUENT EVENT
On February 6, 1996, Capital Properties entered into an agreement to
sell the Travelodge Hotel Toronto Airport for $4,976,000, which is
approximately equal to the existing first mortgage. The carrying value
of the assets at September 30, 1995 was $5,500,000. The closing of the
transaction was scheduled for March 28, 1996; however the offer was
withdrawn prior to that date and the property was written down to the
amount of the existing first mortgage, resulting in a write down of
$708,000.
On March 11, 1996 a letter of intent was signed to sell the assets of
Capital Properties to National Lodging Corp. of Delaware subject to
investor approval. The letter of intent contemplates the sale of 20.5
properties to National Lodging Corp. with Capital Properties retaining
its interest in the Travelodge Hotel Toronto Airport referred to above.
National Lodging Corp. is to provide debt/equity financing sufficient
to retire Capital Properties' existing bank debt.
The major lenders have entered into an agreement in principle with
National Lodging Corp. to accept principle payments on the outstanding
debt in the amount of $87,630,000. National Lodging Corp. has also
agreed to assume approximately $10,000,000 in debt of the non-major
lenders. Capital Properties has in turn agreed to sell to National
Lodging Corp. its net assets for $97,630,000 in settlement of the
outstanding debt. Capital Properties will recognize a $34,814,000 gain
on settlement of debt and a $64,938,000 loss from the disposition of
assets.
11. SUPPLEMENTAL INFORMATION
The following supplemental information is provided in accordance with
the Securities Exchange Act of 1934 as required for entities included
in an 8K filing for material transactions.
C/M: 11752.0003 368638.6
38
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------
11. SUPPLEMENTAL INFORMATION (Continued)
(Tabular Amounts are in Thousands of Canadian Dollars)
Reconciliation With United States Generally Accepted Accounting
Principles
Capital Properties Limited Partnership follows Canadian generally
accepted accounting principles ("GAAP") which are different in some
respects from those applicable in the United States and from practices
prescribed by the United States Securities and Exchange Commission
("SEC").
<TABLE>
Statement of Operations
The application of United States accounting principles would have
affected net loss as follows:
<CAPTION>
Year Ended September 30
-----------------------------------------------------------
1995 1994 1993
$ $ $
-----------------------------------------------------------
<S> <C> <C> <C>
Net loss based on Canadian GAAP 3,005 3,603 3,253
Depreciation and amortization expense (i) 1,371 1,419 1,454
Consolidation of investment and recognition of minority - - -
interest (ii)
Reorganization and refinancing costs (iv) - - 237
-----------------------------------------------------------
Net loss based on United States GAAP 4,376 5,022 4,944
===========================================================
</TABLE>
<TABLE>
Balance Sheet
The cumulative effect of the application of United States accounting
principles would have resulted in a decrease to the following balance
sheet accounts:
<CAPTION>
Year Ended September 30
------------------------------------------
1995 1994
$ $
------------------------------------------
<S> <C> <C>
Property and Equipment (iii) (29,525) (29,525)
Accumulated depreciation (i) (20,853) (19,482)
------------------------------------------
Net Property and Equipment (50,378) (49,007)
==========================================
Consolidation of investment and recognition of minority - -
interest (ii)
==========================================
Partners' Equity (50,378) (49,007)
==========================================
</TABLE>
C/M: 11752.0003 368638.6
39
<PAGE>
<TABLE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------------------------------------------
11. SUPPLEMENTAL INFORMATION (Continued)
(Tabular Amounts are in Thousands of Canadian Dollars)
The cumulative effect on Partners' Equity is comprised of the following
items:
<CAPTION>
Year Ended September 30
------------------------------------------
1995 1994
$ $
------------------------------------------
<S> <C> <C>
Partners' Equity based on Canadian GAAP 27,523 30,498
------------------------------------------
Depreciation and amortization expense (i) (20,853) (19,482)
Property and Equipment (iii) (29,525) (29,525)
Reorganization and refinancing costs (iv) 2,747 2,747
Retained deficit (2,747) (2,747)
------------------------------------------
Cumulative change (50,378) (49,007)
------------------------------------------
Partners' Equity based on United States GAAP (22,855) (18,509)
==========================================
</TABLE>
<TABLE>
Statement of Cash Flow
<CAPTION>
Year Ended September 30
-----------------------------------------------------------
1995 1994 1993
$ $ $
-----------------------------------------------------------
<S> <C> <C> <C>
OPERATING
Net loss (1,371) (1,419) (1,691)
===========================================================
Depreciation and amortization expense 1,371 1,419 1,454
===========================================================
</TABLE>
Summary of differences between Canadian Generally Accepted Accounting Principles
used by Capital Properties Limited Partnership and United States Generally
Accepted Accounting Principles
(i) Depreciation Expense:
Capital Properties calculates depreciation expense on its buildings
using the sinking fund method. Under United States accounting
principles, this method is specifically disallowed and another
systematic method must be chosen. The straight line method was chosen
using a period of 40 years representing the estimated useful life of
the buildings. The adjustment booked was a cumulative increase in
depreciation expense and accumulated depreciation of $19,482,000 in
1994 and $20,853,000 in 1995.
C/M: 11752.0003 368638.6
40
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
Notes to the Financial Statements
Years Ended September 30, 1995, 1994 and 1993
Tabular Amounts in Thousands of Canadian Dollars
- -------------------------------------------------------------------------------
11. SUPPLEMENTAL INFORMATION (Continued)
(Tabular Amounts are in Thousands of Canadian Dollars)
(ii) Investment:
Capital Properties has recorded a 50% investment in a hotel property
under the proportionate consolidation method for Canadian GAAP. United
States accounting principles would require full consolidation with
minority interest disclosure. Such consolidation would not have a
material effect on the individual account balances in these financial
statements and has not been reflected in the supplemental information.
(iii) Property and Equipment:
Under Canadian GAAP, a reorganization can result in the comprehensive
revaluation of the assets brought into a new entity. Effective
September 30, 1992, several limited partnerships rolled into Capital
Properties whereby the assets were revalued, resulting in an increase
to the carrying value of the properties.
Under United States Emerging Issues Task Force 87-21, a new basis of
accounting is not appropriate on the roll-in of limited partnership
assets into a Master Limited Partnership, which Capital Properties is
deemed to be. Historical costs of the assets should be carried forward.
The adjustment upon adoption of EITF 87-21 in 1992 was a decrease to
property and equipment and Partners' equity of $29,525,000 which is
reflected in the 1994 Balance Sheet and Partners' Equity
reconciliation.
(iv) Reorganization and Refinancing Costs:
Certain costs associated with effecting the roll-up of various limited
partnerships to form Capital Properties were charged under Canadian
GAAP to Partners' Equity. Under United States accounting principles
these costs would be accounted for as direct period costs. The
adjustment of $2,747,000 has been reflected as a reclassification of
reorganization costs to retained deficit.
C/M: 11752.0003 368638.6
41
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
(unaudited)
For the Six Months Ended March 31, 1996
(Amounts in Thousands of Canadian Dollars)
YEAR TO DATE
1996 1995
---------------- -----------------
$ $
---------------- -----------------
REVENUES
Rooms 18,547 18,094
Other 2,305 2,299
---------------- -----------------
20,852 20,393
---------------- -----------------
OPERATING EXPENSES
Wages and benefits 5,625 5,280
Direct costs 2,281 2,312
Administration 1,956 1,575
Marketing 1,452 1,385
Maintenance and energy 1,993 1,885
Taxes and insurance 2,890 2,718
Management, royalty and franchise fees 1,239 1,122
Depreciation and amortization 1,752 1,802
Interest expense 5,605 5,603
---------------- -----------------
24,793 23,682
---------------- -----------------
LOSS BEFORE THE UNDERNOTED (3,941) (3,289)
WRITEDOWN OF ASSETS (655) -
---------------- -----------------
NET LOSS (4,596 (3,289)
================ =================
C/M: 11752.0003 368638.6
42
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
BALANCE SHEET
(unaudited)
For the Six Months Ended March 31, 1996
(Amounts in Thousands of Canadian Dollars)
YEAR TO DATE
1996 1995
------------- -----------------
$ $
------------- -----------------
ASSETS
Current Assets
Cash and term deposits 862 1,053
Accounts receivable 1,979 1,670
Linen supplies 635 619
Supplies and prepaids 648 544
------------- -----------------
4,124 3,886
------------- -----------------
Property and Equipment 160,394 164,898
------------- -----------------
164,518 168,794
============= =================
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities 4,065 3,459
Accrued interest on long-term debt 2,589 2,040
Property taxes payable 2,467 2,796
Current Portion of Long Term Debt 122,498 123,661
------------- -----------------
131,619 131,956
Long-term debt 9,602 9,171
------------- -----------------
141,221 141,127
Minority Interest 405 448
PARTNERS' EQUITY 22,892 27,209
------------- -----------------
TOTAL LIABILITIES AND EQUITY 164,518 168,784
============= =================
C/M: 11752.0003 368638.6
43
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
STATEMENT OF CASH FLOW
(unaudited)
For the Six Months Ended March 31, 1996
(Amounts in Thousands of Canadian Dollars)
YEAR TO DATE
1996 1995
------------- ------------
$ $
------------- ------------
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE
FOLLOWING ACTIVITIES:
OPERATING
Net loss (4,596) (3,289)
Non-cash items
Depreciation and amortization 1,752 1,802
Write down of assets 655
------------- ---------------
(2,189) (1,487)
Changes in non-cash working capital:
Accounts receivable 456 538
Linen and other supplies 51 42
Prepaid property tax 1,149 1,014
Other prepaids (159) 100
Accounts payable 212 (710)
Accrued interest on long-term debt 524 1,119
Property taxes payable 903 (214)
------------- ---------------
947 402
FINANCING
Repayment of debt (344) 183
Reorganization costs (35) 0
Minority interest 0 (16)
(379) (199)
INVESTING
Additions to furnishings and equipment (233) (109)
------------- ---------------
(233) (109)
NET CASH INFLOW 335 94
CASH, BEGINNING OF PERIOD 527 959
------------- ---------------
CASH, END OF PERIOD 862 1,053
============= ===============
C/M: 11752.0003 368638.6
44
<PAGE>
SUPPLEMENTAL INFORMATION
(Tabular Amounts are in Thousands of Canadian Dollars)
The following supplemental information is provided in accordance with the
Securities Exchange Act of 1934 as required for entities included in an 8K
filing for material transactions.
Reconciliation With United States Generally Accepted Accounting Principles
Capital Properties Limited Partnership follows Canadian generally accepted
accounting principles ("GAAP") which are different in some respects from those
applicable in the United States and from practices prescribed by the United
States Securities and Exchange Commission ("SEC").
Statement of Operations
The application of United States accounting principles would have affected net
loss as follows:
Period Ended March 31
1996 1995
---- ----
$ $
- -
Net loss based on Canadian GAAP 4,596 3,289
Depreciation expense (i) 654 685
Consolidation of investment and recognition of minority - -
----- -----
interest (ii)
Net loss based on United States GAAP 5,250 3,974
----- -----
Balance Sheet
The cumulative effect of the application of United States accounting principles
would have resulted in a decrease to the following balance sheet accounts:
Period Ended March 31
1996 1995
---- ----
$ $
- -
Property and Equipment (iii) (29,525) (29,525)
Accumulated depreciation (I) (21,506) (20,167)
-------- --------
Net Property and Equipment (51,031) (49,692)
======== ========
Consolidation of investment and recognition of minority - -
interest (ii)
Partners' Equity (51,031) (49,692)
======== ========
C/M: 11752.0003 368638.6
45
<PAGE>
SUPPLEMENTAL INFORMATION (CONTINUED)
(Tabular Amounts are in Thousands of Canadian Dollars)
<TABLE>
The cumulative effect on Partners' Equity is comprised of the following items:
<CAPTION>
-----------------------------------------
Period Ended March 31
-----------------------------------------
1996 1995
---- ----
$ $
- -
<S> <C> <C>
Partners' Equity based on Canadian GAAP 22,892 27,209
------ ------
Depreciation and amortization expense (I) (21,506) (20,167)
Property and Equipment (iii) (29,525) (29,525)
Reorganization and refinancing costs (iv) 2,747 2,747
Retained deficit (iv) (2,747) (2,747)
------- -------
Cumulative change (51,031) (49,692)
-------- --------
Partners' Equity based on United States accounting principles (28,139) (22,483)
-------- --------
Statement of Cash Flow
-----------------------------------------
Period Ended March 31
-----------------------------------------
1996 1995
---- ----
$ $
- -
OPERATING
Net loss (654) (685)
----- -----
Depreciation and amortization expense (654) (685)
----- -----
</TABLE>
Summary of differences between Canadian Generally Accepted Accounting Principles
used by Capital Properties) Limited Partnership and United States Generally
Accepted Accounting Principles
(i) Depreciation Expense:
Capital Properties calculates depreciation expense on its buildings using the
sinking fund method. Under United States accounting principles, this method is
specifically disallowed and another systematic method must be chosen. The
straight line method was chosen using a period of 40 years representing the
estimated useful life of the buildings. The adjustment booked was a cumulative
increase in depreciation expense and accumulated depreciation of $20,167,000 in
1995 and $21,506,000 in 1996.
(ii) Investment:
Capital Properties has recorded a 50% investment in a hotel property under the
proportionate consolidation method for Canadian GAAP. United States accounting
principles would require full consolidation with minority interest disclosure.
Such consolidation would not have a material effect on the individual account
balances in these financial statements and has not been reflected in the
supplemental information,
(iii) Property and Equipment:
Under Canadian GAAP, a reorganization can result in the comprehensive
revaluation of the assets brought into a new entity. Effective September 30,
1992, several limited partnerships rolled into Capital Properties whereby the
assets were revalued resulting in an increase to the carrying value of the
properties. Under United States Emerging Issues Task Force 87-2 1, a new basis
of accounting is
C/M: 11752.0003 368638.6
46
<PAGE>
SUPPLEMENTAL INFORMATION (CONTINUED)
(Tabular Amounts are in Thousands of Canadian Dollars)
not appropriate on the roll-in of Limited partnership assets into a Master
Limited Partnership, which Capital Properties is deemed to be. Historical costs
of the assets should be carried forward. The adjustment upon adoption of EITF
87-21 in 1992 was a decrease to property and equipment and Partners' equity of
$29,525,000 which is reflected in the 1995 Balance Sheet and Partners' Equity
reconciliation.
(iv) Reorganization and Refinancing Costs:
Certain costs associated with effecting the roll-up of various limited
partnerships to form Capital Properties were charged under Canadian GAAP to
Partners' Equity. Under United States accounting principles these costs would be
accounted for as direct period costs. The adjustment of $2,747,000 has been
reflected as a reclassification of reorganization costs to retained deficit.
C/M: 11752.0003 368638.6
47
<PAGE>
NATIONAL LODGING CORP. &
SUBSIDIARIES
Pro Forma Condensed
Consolidated Financial Statements
C/M: 11752.0003 368638.6
48
<PAGE>
NATIONAL LODGING CORP. & SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following Pro Forma Condensed Consolidated Balance Sheet as of March
31, 1996 is presented as if the proposed sale of 4 million shares of newly
issued common stock to Chartwell Leisure Associates L.P. II ("Chartwell") and
FSNL LLC ("FSNL") and the pending acquisition of a majority interest in Capital
Properties Limited Partnership ("CPLP") (the "CPLP Acquisition"), which owns 20
hotels and a one-half interest in an additional hotel, occurred at March 31,
1996. The closing of such acquisition will not occur until after the approval
and closing of the proposed stock sale. The Pro Forma Condensed Consolidated
Statements of Operations for the year ended December 31, 1995 and the three
months ended March 31, 1996 are presented as if the acquisition of the stock of
Forte Hotels, Inc. ("FHI"), which comprised 15 wholly-owned properties and
interest in 97 "joint venture" properties ("Travelodge/Thriftlodge"), the
pending CPLP Acquisition, and the proposed sale of 4 million shares to
partially finance the CPLP Acquisition had occurred on January 1, 1995. The
acquisitions have been accounted for using the purchase method of accounting.
Accordingly, assets acquired and liabilities assumed will be recorded at their
estimated fair values which are subject to further refinement. Management does
not expect that the final allocation of the purchase prices for the above
acquisitions will differ materially from the preliminary allocations.
The Pro Forma Condensed Consolidated Financial Statements should be read in
conjunction with the historical audited financial statements and related notes
thereto of National Lodging Corp. ("NLC"), Travelodge/Thriftlodge and CPLP.
These Pro Forma Condensed Consolidated Financial Statements are not necessarily
indicative of the results that would actually have occurred had the transactions
been consummated at the dates indicated, nor are they necessarily indicative of
future operating results or financial position of NLC.
The Pro Forma Condensed Consolidated Statements of Operations do not reflect the
effect of certain cost savings and revenue enhancements that management believes
may be realized following the acquisitions of FHI and CPLP. These savings are
expected to be realized primarily through the cessation of pursuing gaming
development ventures, elimination of duplicative corporate overhead and
restructuring of NLC, FHI and CPLP's corporate structures.
C/M: 11752.0003 368638.6
49
<PAGE>
<TABLE>
NATIONAL LODGING CORP. & SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996 (UNAUDITED)
(Dollars in Thousands)
<CAPTION>
Historical Historical Pro Forma Pro Forma
ASSETS NLC CPLP Adjustments Consolidated
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 19,212 $ 634 $ (64,454) (2) $ 11,246
57,000 (1)
(1,140) (12)
(6) (10)
Receivables 17,953 1,456 5 (10) 19,414
Other assets 2,346 944 (14) (10) 3,276
-------- --------- ---------- --------
Total current assets 39,511 3,034 (8,609) 33,936
Investments 16,301 16,301
Joint venture interests 15,705 15,705
Long-term receivables 13,074 13,074
Property and equipment 77,911 80,468 (2,160) (10) 156,219
Other assets 11,902 11,902
-------- -------- ---------- ----------
TOTAL ASSETS $174,404 $ 83,502 $(10,769) $247,137
======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 9,872 $ 2,991 $ 3,500 (2) $ 15,562
(801) (10)
Current portion of long-term debt 1,017 90,132 (86,357) (2) 1,232
(3,560) (10)
Other current liabilities 3,720 3,720
------- -------- ---------- --------
Total current liabilities 10,889 96,843 (87,218) 20,514
-------- -------- --------- --------
LONG-TERM LIABILITIES 75,635 7,065 (1,264) (2) 82,035
599 (10)
-------- ----------- ----------
MINORITY INTEREST 3,348 298 550 (10) 4,196
--------- --------- ---------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock $1.00 par value -
10,000,000 authorized; none issued and
outstanding
Common stock; $.01 par value - 55 40 (1) 95
100,000,000 authorized
Paid-in capital 106,617 56,960 (1) 162,437
(1,140) (12)
Accumulated deficit (22,210) (22,210)
Foreign currency translation adjustment 70 70
CPLP net deficit (20,704) 19,667 (2)
1,037 (10)
Total stockholders' equity 84,532 (20,704) 76,564 140,392
-------- --------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $174,404 $ 83,502 $ (10,769) $ 247,137
======== ======== ========= =========
</TABLE>
See notes to pro forma condensed consolidated financial statements.
C/M: 11752.0003 368638.6
50
<PAGE>
<TABLE>
NATIONAL LODGING CORP. & SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Adjustments
Thriftlodge/ Completed Historical Pending
NLC Travelodge Transaction Subtotal CPLP Transactions
REVENUE:
<S> <C> <C> <C> <C> <C> <C> <C>
Owned hotels and motels $ $65,790 $ $ 65,790 $31,715 $ (981) (10)
- -
Management fees, franchise fees and other __________ 3,351 __________ 3,351 3,764 (126) (10)
- - ------- -------- ------ -------
Total revenue __________ 69,141 __________ 69,141 35,479 (1,107)
------- ------- ------- -------
EXPENSES:
Owned hotels and motels 28,904 28,904 15,019 (979) (10)
Royalty fee expense 1,550 (4) 1,550 1,950 377 (10)
Development 15,482 15,482 516 (516) (10)
General and administrative 6,003 13,059 19,062 2,895
Rent, sales and marketing 9,159 9,159 2,244 (149) (10)
Depreciation and amortization 8,385 1,255 (5) 9,838 3,642 (46) (10)
198 (3)
Other 8,230 8,230 4,110 (351) (10)
------- ---------- ------- ------- -------
Total expenses 21,485 67,737 3,003 92,225 30,376 (1,664)
------- ------- ------- ------- ------- -------
OPERATING (LOSS) INCOME (21,485) 1,404 (3,003) (23,084) 5,103 557
OTHER INCOME (EXPENSE):
Interest expense (785) (3,390) (7) (4,175) (8,276) 7,584 (11)
212 (10)
Interest income 4,012 838 (2,170) (6) 2,680 (449) (6)
Equity in earnings of unconsolidated joint
ventures 5,338 5,338
Minority interest in consolidated joint ventures (1,073) (1,073) (15)
----- -------- ---------- --------- ---------- ----------
Net (loss) income before income taxes (17,473) 5,722 (8,563) (20,314) (3,188) 7,904
INCOME TAX PROVISION (8) 709 709
--------- ------- -------- ------- ---------- -------
NET INCOME (LOSS) $(18,182) $ 5,722 $(8,563) $(21,023) $(3,188) $ 7,904
======== ======= ======== ========= ======== =======
PER SHARE INFORMATION:
Net loss $ (3.57) $ (4.12)
========= =========
Weighted average common shares outstanding 5,099 5,099 4,000
========= ======== =======
Pro Forma
Consolidated
REVENUE:
<S> <C>
Owned hotels and motels $ 96,524
- -
Management fees, franchise fees and other 6,989
- - --------
Total revenue 103,513
--------
EXPENSES:
Owned hotels and motels
Royalty fee expense 42,944
Development 3,877
General and administrative 15,482
Rent, sales and marketing 21,957
Depreciation and amortization 11,254
13,434
Other
11,989
--------
Total expenses
120,937
--------
OPERATING (LOSS) INCOME
(17,424)
OTHER INCOME (EXPENSE):
Interest expense
(4,655)
Interest income
Equity in earnings of unconsolidated joint 2,231
ventures
Minority interest in consolidated joint ventures 5,338
(1,088)
--------
Net (loss) income before income taxes
(15,598)
INCOME TAX PROVISION (8)
709
--------
NET INCOME (LOSS)
$(16,307)
=========
PER SHARE INFORMATION:
Net loss
$ (1.79)
=========
Weighted average common shares outstanding
9,099
========
</TABLE>
See notes to pro forma condensed consolidated financial statements.
C/M: 11752.0003 368638.6
51
<PAGE>
<TABLE>
NATIONAL LODGING CORP. & SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
<CAPTION>
Pro Forma Pro Forma
Adjustments Adjustments
Historical Completed Historical Pending
NLC Transaction (9) Subtotal CPLP Transactions
REVENUE:
<S> <C> <C> <C> <C> <C> <C>
Owned hotels and motels $12,468 $ 3,679 $16,147 $ 6,764 $ (219) (10)
Management fees, franchise fees and other 583 134 717 844 (30) (10)
------- ------- -------- ------- --------
Total revenue 13,051 3,813 16,864 7,608 (249)
------- ------- ------- ------- -------
EXPENSES:
Owned hotels and motels 5,391 1,934 7,325 3,610 (355) (10)
Royalty fee expense 486 (11) (10)
Development 378 378 479 (378) (10)
General and administrative 3,383 768 4,151 732
Rent, sales and marketing 2,289 691 2,980 525
Depreciation and amortization 1,783 516 2,299 871 (15) (10)
Other 1,762 579 2,341 1,026
------- ------- ------- ------- -------
Total expenses 14,986 4,488 19,474 7,729 (759)
------- ------- ------- ------- -------
OPERATING (LOSS) INCOME (1,935) (675) (2,610) (121) 510
OTHER INCOME (EXPENSE):
Interest expense (1,502) (413) (1,915) (2,035) 1,896 (11)
64 (10)
Interest income 788 34 822 (112) (6)
Equity in earnings of unconsolidated joint ventures 814 76 890
Minority interest in consolidated joint ventures (95) (27) (122)
-------- ------- ----- --------- ----------
Net (loss) income before income taxes (1,930) (1,005) (2,935) (2,156) 2,358
INCOME TAX PROVISION (8)
NET INCOME (LOSS) $ (1,930) $(1,005) $ (2,935) $(2,156) $ 2,358
======== ======== ========= ======== =======
PER SHARE INFORMATION:
Net income (loss) $ (0.33) $ (0.50)
======== =========
Weighted average common shares outstanding 5,868 5,868 4,000
======== ========= =======
Pro Forma
Consolidated
REVENUE:
<S> <C>
Owned hotels and motels $22,692
1,531
Management fees, franchise fees and other -------
24,223
Total revenue -------
EXPENSES: 10,580
Owned hotels and motels 475
Royalty fee expense 479
Development 4,883
General and administrative 3,505
Rent, sales and marketing 3,155
Depreciation and amortization 3,367
Other --------
26,444
Total expenses --------
(2,221)
OPERATING (LOSS) INCOME
OTHER INCOME (EXPENSE): (1,990)
Interest expense
710
Interest income 890
Equity in earnings of unconsolidated joint ventures (122)
Minority interest in consolidated joint ventures -------
(2,733)
Net (loss) income before income taxes
INCOME TAX PROVISION (8)
$( 2,733)
NET INCOME (LOSS) =========
PER SHARE INFORMATION: $ (0.28)
Net income (loss) ========
9,868
Weighted average common shares outstanding =======
</TABLE>
See notes to pro forma condensed consolidated financial statements.
C/M: 11752.0003 368638.6
52
<PAGE>
<TABLE>
NATIONAL LODGING CORP. AND SUBSIDIARIES
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in Thousands)
1. The Pro Forma Adjustment reflects the sale of 4,000,000 shares of NLC's
common stock to Chartwell for
$57,000.
2. The acquisition cost of CPLP has been allocated as follows:
<S> <C>
Total cash consideration $ 64,454
Estimated transaction fees directly identified with the transaction 3,500
----------
Acquisition cost 67,954
Short-term debt extinguished (86,357)
Long-term debt extinguished (1,264)
CPLP net deficit eliminated 19,667
----------
Excess of cost over book value of net assets acquired $ -
===========
</TABLE>
The Company may be obligated to make certain contingent payments to CPLP's
constituent partners, based on a formula which considers future earnings of
CPLP. Such payments will be recorded as additional cost of the acquisition
when the contingent payments are earned and will be allocated to properties
and amortized over the remaining useful lives of the properties. The
Company would not have been required to make any such payments on a pro
forma basis for the year ended December 31, 1995 or the three month period
ended March 31, 1996.
3. The Pro Forma Adjustment reflects the yearly amortization expense of $198
of deferred loan costs incurred by NLC under its revolving line of credit.
The deferred loan costs are being amortized over the six-year life of the
loan.
4. The Pro Forma Adjustments reflect royalty expense of $1,550 associated with
agreements executed with the owner of the Travelodge trademark in
connection with agreements related to the FHI acquisition. The expense was
determined by applying the contractual rate of 4% to gross room revenues.
5. The Pro Forma Adjustments reflects depreciation expense of $1,024 resulting
from the excess of the cost of the FHI Acquisition over the book value of
net assets acquired, which were allocated to properties and joint venture
interests. The properties are amortized on a straight-line basis over 25
years, representing the estimated useful lives of the properties.
6. The Pro Forma Adjustments reflect the elimination of interest income earned
on cash and cash equivalents utilized by NLC in the FHI and CPLP
Acquisitions.
7. The Pro Forma Adjustments reflect interest expense on the revolving line of
credit used to finance the FHI acquisitions.
C/M: 11752.0003 368638.6
53
<PAGE>
8. The Pro Forma Financial Statements assume that NLC's net operating loss
carryforward will not be utilized in the pro forma financial statements due
to NLC's history of losses, thereby concluding that it is more likely than
not that NLC will not realize deferred tax assets.
9. The Pro Forma Adjustments reflect the addition of 22 days of activity for
Travelodge. As the acquisition occurred on January 23, 1996, the historical
NLC numbers do not contain Travelodge prior to the acquisition.
10. The Pro Forma Adjustment reflects the elimination of a property included in
the historical financial statements which is not being acquired in the
acquisition and adds the operating results of a 50 percent interest in
another property being acquired.
11. The Pro Forma Adjustment reflects the elimination of interest expense on
historical CPLP debt which will be extinguished with the proceeds of the
acquisition.
12. The Pro Forma Adjustment reflects the advisory fee which will be paid to
HFS Incorporated by the Company for services provided in connection with
the sale of stock to Chartwell.
******
C/M: 11752.0003 368638.6
54
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NATIONAL LODGING CORP.
(Registrant)
Date: July 9, 1996
By /s/ Martin L. Edelman
-----------------------
Name: Martin L. Edelman
Title: President
C/M: 11752.0003 368638.6
<PAGE>
EXHIBIT INDEX
Exhibit
2.1* Stock Purchase Agreement, dated as of December 19, 1995, between Forte
USA and the Registrant.
2.2* Amendment No. 1 to Stock Purchase Agreement, dated as of January
1996, between Forte USA and the Registrant.
10.1+ Agreement Among Purchasers, dated as of January 22, 1996, among HFS
Incorporated, Motels of America, Inc. and the Registrant.
10.2+ Credit Agreement, dated as of January 23, 1996, among Chemical Bank,
Bankers Trust Company, the other banks named therein and the
Registrant.
10.3+ Pledge Agreement, dated as of January 23, 1996, among the
Registrant, Forte Hotels, Inc. and the other parties named therein,
as Pledgors, and Bankers Trust Company, as Pledgee and Collateral
Agent. (Filed as Exhibit F to Exhibit 10.2 to this Current Report on
Form 8-K/A.)
99.1.* Press release of the Registrant, dated January 24, 1996.
99.2.** Press release of the Registrant, dated March 12, 1996.
- --------
+ Filed herewith.
* Filed as an exhibit to the Registrant's Current Report on Form 8-K
(File No. 0-24794) filed with the Commission on February 7, 1996.
** Filed as an exhibit to the Registrant's Current Report on Form 8-K/A
(File No. 0-24794) filed with the Commission on April 2, 1996.
C/M: 11752.0003 368638.6
EXHIBIT 10.1
<PAGE>
AGREEMENT AMONG PURCHASERS
Among
NATIONAL LODGING CORP.,
HFS INCORPORATED
and
MOTELS OF AMERICA, INC.
Dated as of January 22, 1996
143845.6/NYL3
<PAGE>
T A B L E O F C O N T E N T S
Page
ARTICLE I
AGREEMENTS REGARDING THE ACQUISITION
SECTION 1.01. Stock Purchase Agreement and Purchase Agreements...... 2
SECTION 1.02. Formation of Acquisition Vehicle...................... 2
SECTION 1.03. Expense Reimbursement................................. 2
ARTICLE II
AGREEMENTS REGARDING WORKING CAPITAL;
CURRENT ASSETS; AND NOTES RECEIVABLE
SECTION 2.01. Working Capital Adjustment............................ 3
SECTION 2.02. Covered Current Assets................................ 4
SECTION 2.03. Long-Term Notes Receivable............................ 6
SECTION 2.04. Joint Venture Receivables............................. 6
ARTICLE III
AGREEMENTS REGARDING USE OF TRADEMARKS
SECTION 3.01. Franchise Agreements.................................. 7
SECTION 3.02. Company License....................................... 8
SECTION 3.03. JFK Franchise Agreement............................... 8
SECTION 3.04. New Joint Ventures and Additional Hotels.............. 8
ARTICLE IV
AGREEMENTS REGARDING EMPLOYEES
SECTION 4.01. Owned Properties...................................... 9
SECTION 4.02. Corporate and Reservation System Employees............ 9
SECTION 4.03. Severance Cost........................................ 9
143845.6/NYL3
<PAGE>
ii
Page
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Services Agreement.................................... 10
SECTION 5.02. Relax Properties...................................... 10
SECTION 5.03. MOA Financing......................................... 10
SECTION 5.04. Miscellaneous......................................... 10
SECTION 5.05. Further Assurances.................................... 11
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 6.01. Organization, Authority and Qualification of the Purchaser.11
SECTION 6.02. No Conflict................................................12
SECTION 6.03. Governmental Consents and Approvals........................12
SECTION 6.04. Litigation.................................................12
SECTION 6.05. Financing..................................................12
SECTION 6.06. Stock Purchase Agreement and Purchase Agreements...........12
SECTION 6.07. Brokers....................................................13
ARTICLE VII
SURVIVAL; INDEMNIFICATION; LIQUIDATED DAMAGES
SECTION 7.01. Survival of Representations and Warranties.................13
SECTION 7.02. Indemnification by the Purchasers..........................13
SECTION 7.03. Liquidated Damages.........................................15
SECTION 7.04. Indemnification by the Seller..............................15
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Expenses...................................................16
SECTION 8.02. Notices....................................................16
SECTION 8.03. Public Announcements.......................................18
SECTION 8.04. Headings...................................................18
SECTION 8.05. Severability...............................................18
SECTION 8.06. Entire Agreement...........................................18
SECTION 8.07. Assignment.................................................19
143845.6/NYL3
<PAGE>
iii
Page
SECTION 8.08. No Third Party Beneficiaries.................... 19
SECTION 8.09. Amendment and Waiver............................ 19
SECTION 8.10. Governing Law................................... 19
SECTION 8.11. Counterparts.................................... 19
SECTION 8.12. Specific Performance............................ 20
SECTION 8.13. Payments........................................ 20
EXHIBITS
Exhibit A Form of License Agreement
Exhibit B License Agreement
Exhibit C JFK Franchise Agreement
Exhibit D Relax Properties Agreement
Exhibit E Promissory Note
Exhibit F Guaranty
Exhibit G Amendment to the Pledge Agreement
SCHEDULES
Schedule 1.03 Legal Expenses
Schedule 3.01 Owned Properties to be Transferred
143845.6/NYL3
<PAGE>
AGREEMENT AMONG PURCHASERS, dated as of January 22, 1996 among
NATIONAL LODGING CORP., a Delaware corporation ("NALC"), HFS INCORPORATED, a
Delaware corporation ("HFS"), and MOTELS OF AMERICA, INC., a Delaware
corporation ("MOA"; each of NALC, HFS and MOA being sometimes referred to herein
as a "Purchaser" and collectively as "Purchasers" or the "Purchasing Group").
W I T N E S S E T H:
WHEREAS, the Purchasing Group intends to acquire (the
"Acquisition") Forte Hotels, Inc. (the "Company") from Forte USA, Inc. (the
"Seller") upon the terms and subject to the conditions set forth in (i) the
Stock Purchase Agreement dated as of December 19, 1995, between the Seller and
NALC (the "Stock Purchase Agreement"), (ii) the Purchase Agreement, dated as of
December 19, 1995, among the Company, the Seller and HFS (the "HFS Purchase
Agreement"), and (iii) the Purchase Agreement, dated as of December 19, 1995,
among the Company, the Seller and MOA (the "MOA Purchase Agreement" and,
together with the HFS Purchase Agreement, the "Purchase Agreements");
capitalized terms used but not otherwise defined in this Agreement have the
respective meanings assigned to such terms in the Stock Purchase Agreement;
WHEREAS, it is the intention of the parties that following the
Acquisition (i) HFS will own and operate the portion of the business of the
Company related to the franchising of the Travelodge, Thriftlodge and related
trademarks, including all franchise agreements and volume purchase agreements,
an exclusive license of the Travelodge, Thriftlodge and related trademarks, and
the Domestic CRO (collectively, the "Franchise Business"); (ii) MOA will own and
operate certain motels currently owned and operated by the Company
(collectively, the "MOA Owned Properties"); and (iii) NALC will own and operate
certain hotels and motels currently owned and operated by the Company other than
the MOA Owned Properties, hold the Company's ownership interest in the Joint
Ventures and continue to own and operate all aspects of the Company's business
other than the Franchise Business, the MOA Owned Properties and certain assets
of the Company being transferred to the Seller prior to the Acquisition pursuant
to the Special Distribution; and
WHEREAS, the Purchasing Group wishes to set forth the terms of
their respective rights and obligations among themselves relative to the
Acquisition and the terms and conditions of certain agreements that would govern
the ownership and management of the Company's businesses following the
Acquisition;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth herein, the parties hereto hereby agree as follows:
143845.6/NYL3
<PAGE>
2
ARTICLE I
AGREEMENTS REGARDING THE ACQUISITION
SECTION 1.01. Stock Purchase Agreement and Purchase
Agreements. Each Purchaser shall comply with its obligations under the Stock
Purchase Agreement and the Purchase Agreements, as the case may be (including
all obligations related to closing, collection of Covered Current Assets and
collection of Notes Receivable).
SECTION 1.02. Formation of Acquisition Vehicle. (a) Prior to
the Closing, each of MOA and HFS shall form a corporation under the Delaware
General Corporation Law (an "Acquisition Vehicle") for purposes of consummating
the transactions contemplated by the MOA Purchase Agreement in the case of MOA,
and the HFS Purchase Agreement in the case of HFS.
(b) Immediately prior to the Effective Time, each Purchaser
shall take all necessary steps to have available, either directly in the case of
NALC or in the respective Acquisition Vehicles in the case of HFS and MOA, the
funds necessary to consummate the transactions contemplated by the Stock
Purchase Agreement, the HFS Purchase Agreement or the MOA Purchase Agreement, as
the case may be.
SECTION 1.03. Expense Reimbursement. Except as otherwise
provided in Section 7.02, Section 7.03, Section 7.04 or Section 8.01, all actual
out-of-pocket costs or expenses of the Purchasers or an Acquisition Vehicle,
other than (i) payment of the purchase price under the Stock Purchase Agreement
and the respective Purchase Agreements, (ii) expenses and costs incurred by any
Purchaser in connection with obtaining financing for payment of such purchase
price, or that become payable by the Company after the Closing (including
attorney's fees not to exceed the amounts set forth on Schedule 1.03, expenses
and settlement costs in connection with claims brought by third parties and
related to the transactions contemplated by the Stock Purchase Agreement and the
Purchase Agreement, and all fees of Merrill Lynch & Co.) incurred in connection
with the transactions contemplated by the Stock Purchase Agreement or the
Purchase Agreements, shall be allocated among the Purchasers: 60% to NALC, 20%
to HFS and 20% to MOA; provided, however, that property-related debt owed to
third parties (including the Company) shall be the sole responsibility of the
relevant Purchaser of such property (for the avoidance of doubt the relevant
Purchaser of the property shall be the beneficial owner in cases where legal and
beneficial interests have been bifurcated). Any payment received, net of costs
or expenses incurred in connection with collecting such amount, from Seller
pursuant to Section 4.21 of the Stock Purchase Agreement, Section 4.8 of the HFS
Purchase Agreement or Section 4.6 of the MOA Purchase Agreement shall be
allocated as set forth in the preceding sentence.
143845.6/NYL3
<PAGE>
3
ARTICLE II
AGREEMENTS REGARDING WORKING CAPITAL;
CURRENT ASSETS; AND NOTES RECEIVABLE
SECTION 2.01. Working Capital Adjustment. Within 60 days after
Closing, in conjunction with preparing the Statement of working capital of the
Company in accordance with Section 1.6 of the Stock Purchase Agreement, and
using the same principles and methods set forth in Section 1.6 thereof, NALC
shall prepare (i) a statement setting forth the portion of the working capital
of the Company as of the Closing Date that relates to the Franchise Business and
receivables from the Joint Ventures in connection with the obligations of each
Joint Venture to pay a specified percentage of gross room revenues to a
Travelodge and Thriftlodge marketing and promotional fund (the "HFS Statement")
and (ii) a statement setting forth the portion of the working capital of the
Company as of the Closing Date that relates to the MOA Owned Properties (the
"MOA Statement") and deliver each to MOA and HFS. Each of HFS and MOA shall have
30 days from the receipt of such Statements to notify NALC that it disputes any
item contained in the HFS Statement or MOA Statement, respectively. Any such
dispute by HFS or MOA shall be governed by the dispute resolution procedures and
time lines (including the submission of any such dispute to an Independent
Accounting Firm) set forth in Section 1.6(b) and 1.6(c) of the Stock Purchase
Agreement concerning resolution of disputes between NALC and the Seller. The HFS
Statement shall become the "HFS Final Statement" and the MOA Statement shall
become the "MOA Final Statement" in accordance with provisions equivalent to
those in Section 1.6 of the Stock Purchase Agreement.
(b) In the event that the working capital set forth in the HFS
Statement or the MOA Statement exceeds $0, HFS or MOA, as the case may be, shall
pay the amount of such excess to NALC within ten business days after delivery of
the MOA Final Statement or the HFS Final Statement, as the case may be, together
with interest thereon at a rate equal to the prime rate per annum as quoted in
the Wall Street Journal from the Closing Date to the date of payment,
irrespective of whether NALC is entitled to receive a working capital adjustment
from Seller pursuant to Section 1.6 of the Stock Purchase Agreement. In the
event the working capital set forth in the HFS Final Statement or the MOA Final
Statement is less than $0, NALC shall pay to HFS or MOA, as the case may be, the
amount of such deficiency within ten business days after delivery of the HFS
Final Statement or the MOA Final Statement, as the case may be, together with
interest thereon at a rate equal to the prime rate per annum quoted in the Wall
Street Journal from the Closing Date to the date of payment; provided, however,
that in the event NALC is entitled to payment from the Seller pursuant to
Section 1.6(d) of the Stock Purchase Agreement, or from HFS or MOA pursuant to
this Section 2.01, and NALC shall not have received such payment, NALC shall not
be required to make any payment pursuant to this Section 2.01 to the extent that
it has not received such payment pursuant to Section 1.6 of the Stock Purchase
Agreement or this
143845.6/NYL3
<PAGE>
4
Section 2.01; provided further that NALC shall use its reasonable best efforts
to collect from the Seller any payment to which NALC is entitled pursuant to
Section 1.6(d) of the Stock Purchase Agreement.
SECTION 2.02. Covered Current Assets. (a) With respect to
Covered Current Assets (other than cash or prepaid expenses) of the Company
reflected on the HFS Final Statement, in the case of HFS (the "HFS Covered
Current Assets"), or on the MOA Final Statement, in the case of MOA (the "MOA
Covered Current Assets"), in the event that HFS or MOA, as the case may be, has
not Received payment in respect of such Covered Current Assets in an amount in
cash, property or other consideration equal to the amount of the HFS Covered
Current Assets, in the case of HFS, or the MOA Covered Current Assets, in the
case of MOA (net of (x) any specific reserve reflected on the Final Statement
and (y) the portion of the general reserve reflected on the Final Statement that
the HFS Covered Current Assets or the MOA Covered Current Assets, as the case
may be, represents of the Covered Current Assets; such sum of specific and
general reserves being, in respect of HFS or MOA, the Reserve), within one year
of the Closing Date, then, (i) NALC shall within ten business days after such
period has expired make payment of an amount equal to the amount not so Received
to HFS or MOA, as the case may be, and (ii) HFS or MOA, as the case may be,
shall assign to NALC (or, at NALC's request, to the Seller) all remaining HFS
Covered Current Assets or MOA Covered Current Assets, as the case may be;
provided, however, that in the event NALC is entitled to a payment from the
Seller pursuant to Section 1.7 of the Stock Purchase Agreements and such payment
has not been made, NALC shall have no obligation to make payment to MOA or HFS
pursuant to this Section 2.02 to the extent such payment is not Received from
the Seller; provided further that NALC shall use its reasonable best efforts to
collect from the Seller any payment to which NALC is entitled pursuant to
Section 1.7 of the Stock Purchase Agreement. In the event that HFS or MOA
Receives, in the aggregate, an amount in cash, property, or other consideration
in excess of the HFS Covered Current Assets or the MOA Covered Current Assets,
respectively (net of Reserve), within one year of the Closing Date, HFS or MOA,
as the case may be, shall pay such excess amount to NALC (or, at NALC's request,
to the Seller).
(b) During the one-year period referred to in paragraph (a)
above, each of HFS and MOA shall use its reasonable best efforts to collect the
HFS Covered Current Assets and MOA Covered Current Assets, respectively;
provided, however, that in connection with such collection efforts HFS shall not
be required to terminate any franchise agreement or be required to bring any
legal action against any franchisee or any affiliate thereof or suspend any
franchisee from the Domestic CRO. Each of HFS and MOA shall at all times act in
good faith with respect to the collection of the HFS Covered Current Assets and
the MOA Covered Current Assets, respectively. HFS and MOA shall allocate any
undesignated amount Received from any debtor of any current asset to the HFS
Covered Current Asset or MOA Covered Current Asset, as the case may be, of that
debtor; provided, however, that HFS or MOA shall take whatever reasonable steps
(in good faith) it deems
143845.6/NYL3
<PAGE>
5
appropriate to have the payor designate such amounts Received; provided further
that, if such debtor is the debtor with respect to multiple Covered Current
Assets as a result of having multiple independent business relationships with
HFS or MOA (for example, if one individual or entity were a party to four
franchise agreements), HFS or MOA, as the case may be, shall allocate any amount
Received pro rata among such Covered Current Assets in the proportion that the
amount of obligation with respect to each business relationship bears to the
total amount of the Covered Current Assets then owned by such debtor. Neither
MOA nor HFS shall forgive, compromise, settle or issue any credit memorandum in
respect of any Covered Current Assets without the prior consent of NALC;
provided, however, that the only basis on which such consent shall be denied is
that such forgiveness, compromise, settlement or issuance would result in NALC
not receiving payment in accordance with Section 1.7 of the Stock Purchase
Agreement. In the event that HFS or MOA has Received payment in respect of HFS
Current Covered Assets or MOA Covered Current Assets, respectively, in excess of
the Net Amount of such Covered Current Assets, HFS or MOA, as the case may be,
shall pay to NALC (or, at NALC's request, to the Seller) 50% of such excess
amount less all costs and expenses incurred by HFS or MOA, as the case may be,
in order to collect such Covered Current Assets. Net amount of HFS Covered
Current Assets or MOA Covered Current Assets, as the case may be, shall mean the
aggregate book value of such Covered Current Assets less the amount of the
Reserve with respect thereto. In the event that HFS or MOA shall extend the due
date with respect to any such obligation (without the consent of the Seller;
such consent, if obtained, being deemed to also be the consent of NALC) to a
date after the first anniversary of the Closing Date, then, for purposes of
calculating the adjustment pursuant to this Section 2.02, such Covered Current
Assets shall be deemed Received in full.
(c) Throughout the one-year period contemplated by this
Section 2.02, HFS and MOA shall prepare and deliver to NALC, reasonably promptly
following the end of the relevant quarter, a quarterly statement of any payments
Received by HFS or MOA, as the case may be, in respect of Covered Current Assets
and a copy of appropriate documentation and receipts in respect thereof. HFS or
MOA, as the case may be, shall at the time of delivery of each such quarterly
statement pay all amounts Received in respect of Covered Current Assets other
than HFS Current Covered Assets or MOA Covered Current Assets, respectively, to
NALC; all amounts Received in respect of MOA Current Assets or HFS Covered
Current Assets shall be deemed to have been paid to NALC for purposes of Section
4.5 of the HFS Purchase Agreement or Section 4.2 of the MOA Purchase Agreement,
respectively.
(d) In the event that HFS or MOA shall Receive payment for any
Covered Current Assets after such Covered Current Assets have been assigned to
NALC or the Seller, any amounts so Received by HFS or MOA, as the case may be,
shall promptly be paid over to NALC or the Seller, as the case may be.
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6
(e) Within 30 days after the expiration of the one-year period
contemplated by this Section 2.02, each of HFS or MOA shall prepare and deliver
to NALC (i) a statement setting forth the amount of the payments Received in
respect of the HFS Covered Current Assets and the MOA Covered Current Assets,
respectively, during the one-year period and (ii) a report on all HFS Covered
Current Assets or MOA Covered Current Assets, as the case may be, not Received
by HFS or MOA, respectively, in the one year period accompanied by appropriate
documentation and receipts in respect thereof. NALC shall have 30 days after
receipt of such statements during which to notify HFS or MOA, as the case may
be, of any disputes with respect to such statements. HFS or MOA and NALC shall
cooperate in good faith to resolve any such disputes as promptly as possible. In
the event of any disputes which cannot be resolved by the parties, the parties
shall apply the resolution mechanism set forth in Section 1.6(c) of the Stock
Purchase Agreement, with the Independent Accounting Firm applying the standards
and procedures set forth in this Section 2.02 in lieu of the standards and
procedures set forth in Section 1.6 of the Stock Purchase Agreement.
SECTION 2.03. Long-Term Notes Receivable. (a) In the event
NALC shall Receive any payment from debtors that is designated to payment of
Non-JV Notes Receivable, pursuant to the Stock Purchase Agreement, or any
payment pursuant to Section 1.8 of the Stock Purchase Agreement in respect of
the Non-JV Notes Receivable, NALC shall pay, following the end of each calendar
quarter, within ten days of the end of such quarter, 20% of such amount Received
during such quarter to HFS and 20% of such amount Received during such quarter
to MOA.
(b) In the event either MOA or HFS shall Receive payment from
a debtor in respect of a Note Receivable after such Note Receivable has been
assigned to the Seller, it shall promptly pay such amount to NALC (or, at the
request of NALC, to the Seller).
SECTION 2.04. Joint Venture Receivables. HFS and MOA
acknowledge and agree that all payments in respect of JV Covered Current Assets
(except for receivables from the Joint Ventures in connection with the
obligations of each Joint Venture to pay a specified percentage of gross room
revenues to a Travelodge and Thriftlodge marketing and promotional fund) and JV
Notes Receivable made by the Seller, or any debtor thereof, pursuant to Section
1.9 of the Stock Purchase Agreement shall be the property of NALC, and neither
HFS nor MOA shall have any claim in respect of any such payment.
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7
ARTICLE III
AGREEMENTS REGARDING USE OF TRADEMARKS
SECTION 3.01. Franchise Agreements. (a) As contemplated in the
HFS Purchase Agreement, immediately prior to the Closing, the Company, as
licensor, will enter into Travelodge license agreements, substantially in the
form attached as Exhibit A, with (i) NALC, as licensee, with respect to the
Owned Properties being retained by the Company and (ii) each of MOA, the MOA
Acquisition Vehicle, MOA-TL Holding Corp., Central Park Motel Corp. and York
Motel Corp., as licensees, with respect to the Owned Properties being sold to
MOA, the MOA Acquisition Vehicle, Central Park Motel Corp. and York Motel Corp.
respectively. At the Closing, NALC shall assign to the Company all of its rights
and obligations, as licensee, under such Travelodge license agreements relating
to the Owned Properties being retained by the Company, and shall cause the
Company to assume all of the obligations of NALC thereunder.
(b) MOA intends to sell the five Owned Properties listed on
Schedule 3.01 (the "Schedule 3.01 Properties"). In the event that any purchaser
of a Schedule 3.01 Property does not perform all obligations under the
Travelodge license agreement applicable to such Schedule 3.01 Property (which
Travelodge license agreement shall be assumed by MOA immediately prior to the
Closing as provided in Section 3.01(a) above) through the seventh anniversary of
the Closing (the "Seventh Anniversary"), whether by reason of the failure of
such purchaser to assume the Travelodge license agreement, the termination of
the license agreement by such purchaser prior to the Seventh Anniversary, or the
failure by such purchaser to perform all of its obligations pursuant to the
Travelodge license agreement through the Seventh Anniversary, then MOA shall be
required (in lieu of any damages, including liquidated damages, payable under
the Travelodge license agreement in respect of such Schedule 3.01 Property) to
replace royalties (i.e., 4% of gross room revenues) lost by HFS or the HFS
Acquisition Vehicle through the Seventh Anniversary (based upon the lesser of
(x) the amount of annual gross room revenues of such property set forth opposite
the name of such property on Schedule 3.01 and (y) the annual gross room
revenues of such property during the twelve-month period preceding the date of
such sale, termination or failure to perform) by reason of such failure to
assume, termination or failure to perform. HFS and MOA agree that such
replacement of revenues lost by HFS through the Seventh Anniversary may be made
by cash payment by MOA in respect of the lost revenues (either on the schedule
provided in the license agreement or in a lump sum amount based on the present
value of the revenue stream to HFS as agreed upon by HFS and MOA), or by
substitution of other hotel or motel properties owned or operated by MOA
(provided, however, that such substitute hotels or motels meet the standards
promulgated by HFS for franchisees of its trademarks and service marks and are
otherwise reasonably satisfactory to HFS). Any such substitution of other hotel
or motel properties shall be effected through execution by MOA (or an affiliate
of MOA) and HFS of a Travelodge license agreement
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8
substantially in the form of Exhibit A or of a franchise or license agreement
for another HFS-brand in such form as is reasonably acceptable to HFS. HFS and
MOA further agree that any obligation of MOA to HFS which arises pursuant to
this Section 3.01(b) shall be offset by the amount of any revenues received by
HFS through the Seventh Anniversary pursuant to any franchise or license
agreement which is entered into by MOA (or an affiliate of MOA) and HFS with
respect to an HFS-brand after the date of this Agreement (excluding the
Travelodge license agreements to be assumed pursuant to Section 3.01(a) above).
SECTION 3.02. Company License. NALC agrees to cause the
Company, as licensee, to enter into a license agreement at Closing substantially
in the form attached as Exhibit B and that such license agreement will be a
binding and enforceable obligation of the Company as of as the Closing.
SECTION 3.03. JFK Franchise Agreement. At the Closing, HFS
shall cause Ramada Franchise Systems, Inc., as franchisor, and NALC shall cause
the Company, as franchisee, to enter into a franchise agreement substantially in
the form attached as Exhibit C in respect of the Owned Property located at John
F. Kennedy International Airport in New York.
SECTION 3.04. New Joint Ventures and Additional Hotels. In the
event that NALC or the Company shall (a) enter into any joint venture agreement
that contemplates the use of any trademark or service mark which is assigned to
HFS pursuant to the Trademark Assignment Agreement other than an extension of an
existing Joint Venture on substantially the same terms as currently exist, (b)
enter into any other agreement with any third party for the ownership or
operation of a hotel or motel that desires, in its sole discretion, to use any
trademark or service mark which is assigned to HFS pursuant to the Trademark
Assignment Agreement or (c) desire, in its sole discretion, to use any such
marks with respect to a joint venture, hotel or motel owned by NALC or the
Company that is not already a party to a franchise agreement with HFS, NALC
shall, or shall cause the Company or such joint venture, as licensee, to enter
into a Travelodge license agreement substantially in the form attached as
Exhibit A with the HFS Acquisition Vehicle, as licensor; provided, however, that
(i) if the consent of any co-owner of a Joint Venture is required in connection
with the transactions contemplated by the Stock Purchase Agreement and (ii) in
order to obtain such consent the Company and such co-owner enter into a new
agreement on substantially the same terms as the existing agreement governing
the Joint Venture and such new agreement does not extend beyond the term of the
existing agreement, then NALC shall not be obligated to cause the relevant Joint
Venture to enter into a Travelodge license agreement, substantially in the form
attached as Exhibit A.
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9
ARTICLE IV
AGREEMENTS REGARDING EMPLOYEES
SECTION 4.01. Owned Properties. (a) All employees of the
Company employed at any one of the MOA Owned Properties solely for the purposes
of providing services in respect of such Owned Property shall be employed by MOA
immediately after the Closing.
(b) All employees of the Company employed at any one of the
Owned Properties other than the Excluded Properties that continues to be owned
by the Company after Closing solely for the purposes of providing services in
respect of such Owned Property shall continue to be employed by the Company
immediately after the Closing.
(c) All employees employed by the Company at the location of
any Joint Venture solely for the purposes of providing services in respect of
such Joint Venture shall continue to be employed by the Company as of the
Closing.
SECTION 4.02. Corporate and Reservation System Employees. All
employees located at the El Cajon facility and engaged solely in the provision
of services in respect of the Domestic CRO, shall become employees of HFS
immediately after the Closing. All employees of the Company located at the El
Cajon facility engaged in the provision of general corporate services other than
in connection with the Domestic CRO shall continue to be employees of the
Company immediately after the Closing. In the event that any employee of the
Company at the El Cajon facility provides both general corporate and reservation
services, HFS and the Company shall cooperate in good faith to allocate such
employee to either HFS or the Company or, in the alternative, to have such
employee continue to provide both corporate and reservation services in which
case both HFS and the Company will cooperate in good faith to determine what
portion of the liabilities in respect of such employee shall be assumed by HFS
and the Company, respectively.
SECTION 4.03. Severance Cost. All severance obligations and
other Losses incurred by the Company, MOA or HFS in respect of the dismissal or
termination of employment of any of the employees of the Company immediately
prior to the Closing listed on Schedule 4.13(e) of the Disclosure Schedule to
the Stock Purchase Agreement who are terminated by the Company, MOA or HFS, as
the case may be, within six months after Closing, including any liability to the
Seller in respect thereof, shall be allocated 60% to NALC, 20% to MOA and 20% to
HFS; provided, however, that if such Losses exceed $1,000,000, such excess shall
be allocated 75% to NALC and 25% to HFS.
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10
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Services Agreement. As promptly as practicable
following the Closing, HFS will cause the HFS Acquisition Vehicle, and NALC will
cause the Company to, enter into a services agreement pursuant to which the HFS
Acquisition Vehicle shall have the right to use the El Cajon facility in
connection with the Domestic CRO (the "Services Agreement"). Pursuant to the
Services Agreement, the Company and HFS shall cooperate, in good faith, to
allocate a portion of the actual cost of operating the El Cajon facility to the
Domestic CRO, which allocated amount shall be paid by the HFS Acquisition
Facility. Any payments from the Seller in connection with its use of the El
Cajon facility for the international reservation system in accordance with
Amendment No. 1 to the HFS Purchase Agreement shall be the sole property of HFS
and HFS, in its sole discretion, may retain such payments or transfer such
payments to the Company in which case it will receive a credit against the
portion of the operating costs of the El Cajon facility that has been allocated
to the HFS Acquisition Vehicle.
SECTION 5.02. Relax Properties. (a) Prior to the Closing, HFS
and NALC will enter into a definitive Relax Properties Agreement, substantially
in the Form attached as Exhibit D.
(b) The parties acknowledge that it is their intention that
HFS receive the benefit of all franchise arrangements in respect of the motels
and hotels in Canada managed by Royco and the franchise sales arrangements with
Royco and that NALC receive all of the benefits of the management arrangements
for such motels and hotels. In the event that the assignment of contracts
pursuant to the Relax Properties Agreement, the HFS Purchase Agreement and the
Stock Purchase Agreement does not result in HFS receiving all of the economic
benefits of the relevant franchise agreements and the arrangements whereby Royco
obtains new franchisees on a commission basis or NALC receiving all of the
economic benefits of the management contracts and the put/call agreement, HFS
and NALC will cooperate, in good faith, to ensure that each of HFS and NALC
receives the economic benefit to which it is entitled.
SECTION 5.03. MOA Financing. MOA and HFS shall, prior to the
Closing, use their reasonable best efforts to enter into, or cause the relevant
Affiliate to enter into, a (i) promissory note substantially in the form
attached as Exhibit E, (ii) a guaranty agreement substantially in the form
attached as Exhibit F and (iii) an amendment substantially in the form attached
as Exhibit G to the pledge agreement in respect of MOA stock.
SECTION 5.04. Miscellaneous. The Purchasers agree that they
shall cooperate, in good faith, with each other to ensure that each receives the
benefit of all of the
143845.6/NYL3
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11
covenants of the Seller set forth in the Stock Purchase Agreement and the
Purchase Agreements. Without limiting the generality of the foregoing, the
Purchasers shall:
(i) cooperate to ensure that each receives access to all
available information relating to the Company;
(ii) use their reasonable best efforts to cooperate with each
other and the Seller in obtaining any consent required pursuant to the
Stock Purchase Agreement or either of the Purchase Agreements from any
federal, state or local or any foreign government, governmental,
regulatory or administrative authority, agency or commission or any
court, tribunal or judicial or arbitral body (a "Governmental
Authority") or any third party; and
(iii) cooperate, in good faith, to allocate, and provide to
each other copies of, all books and records, including customer lists,
of the Company.
SECTION 5.05. Further Assurances. Each Purchaser shall from
time to time after the Closing, upon the request of another Purchaser and
without further consideration, execute, acknowledge and deliver in proper form
any further instruments, and take such further actions as such other Purchaser
may reasonably require, to carry out effectively the intent of this Agreement,
the Stock Purchase Agreement and the Purchase Agreements.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
As an inducement to the other Purchasers to enter into this
Agreement, each Purchaser hereby represents and warrants to the other Purchasers
as follows:
SECTION 6.01. Organization, Authority and Qualification of the
Purchaser. Such Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all necessary corporate power and authority to enter into this Agreement, to
carry out its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by such
Purchaser, the performance by such Purchaser of its obligations hereunder and
the consummation by such Purchaser of the transactions contemplated hereby have
been duly authorized by all requisite corporate action on the part of such
Purchaser. This Agreement has been duly executed and delivered by such
Purchaser, and (assuming due authorization, execution and delivery by the other
Purchasers) this Agreement constitutes a legal, valid and binding obligation of
such Purchaser enforceable against such Purchaser in accordance with its terms.
143845.6/NYL3
<PAGE>
12
SECTION 6.02. No Conflict. Assuming that all consents,
approvals, authorizations and other actions described in Section 6.03 have been
obtained, the execution, delivery and performance of this Agreement by such
Purchaser do not and will not (a) violate, conflict with or result in the breach
of any provision of the certificate of incorporation or by-laws (or similar
organizational documents) of such Purchaser, (b) conflict with or violate any
federal, state, local or foreign statute, law, ordinance, regulation, rule,
code, order, other requirement or rule of law (a "Law") or any order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority (a "Governmental Order") applicable to such
Purchaser or any of its assets, properties or businesses or (c) conflict with,
result in any breach of, constitute a default (or an event which with the giving
of notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any encumbrance on any of the assets or properties of such Purchaser
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to which
such Purchaser is a party or by which any of such assets or properties is bound
or affected, which, in any such case, would have a material adverse effect on
the ability of such Purchaser to consummate the transactions contemplated by
this Agreement.
SECTION 6.03. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement by such Purchaser do not
and will not require any consent, approval, authorization or other order of,
action by, filing with or notification to any Governmental Authority, except the
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
SECTION 6.04. Litigation. There are no actions by or against
such Purchaser pending before any Governmental Authority (or, to the best
knowledge of such Purchaser, threatened to be brought by or before any
Governmental Authority) which could affect the legality, validity or
enforceability of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 6.05. Financing. Such Purchaser has funds on hand, or
will have available such funds at the time of the Closing, sufficient to
consummate the transactions contemplated hereby, and such Purchaser or an
Acquisition Vehicle formed by such Purchaser will have available all of the
funds necessary (x) to satisfy its obligations under this Agreement, and (y) to
pay all the related fees and expenses in connection with the foregoing.
SECTION 6.06. Stock Purchase Agreement and Purchase
Agreements. Each of the representations and warranties made by such
Purchaser in the Stock Purchase
143845.6/NYL3
<PAGE>
13
Agreement or in a Purchase Agreement, as the case may be, is true and correct
and shall be true and correct as of the Closing, as if made as of the Closing.
SECTION 6.07. Brokers. Except for Merrill Lynch & Co., whose
fees will be paid as set forth in Section 1.03, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of such Purchaser.
ARTICLE VII
SURVIVAL; INDEMNIFICATION; LIQUIDATED DAMAGES
SECTION 7.01. Survival of Representations and Warranties. The
representations and warranties of the Purchasers contained in Article VI shall
survive the Closing for a period of one year following the Closing.
SECTION 7.02. Indemnification by the Purchasers. (a) Each
Purchaser (the "Indemnifying Party") hereby agrees to indemnify and hold
harmless on an after-tax basis each other Purchaser and its affiliates,
officers, directors, employees, agents, successors and assigns (an "Indemnified
Party") for any and all liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' and consultants' fees and expenses) actually suffered or
incurred by an Indemnified Party (including, without limitation, any action
brought or otherwise initiated by an Indemnified Party), net of any resulting
tax benefit and net of any refund or reimbursement of any portion of such amount
including, without limitation, reimbursement by way of insurance or third party
indemnification (a "Loss"), arising out of or resulting from:
(i) the breach of any representation or warranty made by the
Indemnifying Party in this Agreement or in the Stock Purchase
Agreement, in the case of NALC, in the HFS Purchase Agreement, in the
case of HFS, or in the MOA Purchase Agreement, in the case of MOA; or
(ii) the breach of any covenant or agreement by the
Indemnifying Party contained in this Agreement or in the Stock Purchase
Agreement, in the case of NALC, in the HFS Purchase Agreement, in the
case of HFS, or in the MOA Purchase Agreement, in the case of MOA
(including any breach of any obligation to close the transactions
contemplated by the relevant Agreement); provided, however, that under
no circumstance shall any payment of liquidated damages that NALC is
obligated to make pursuant to Section 4.21(b) or (c) of the Stock
Purchase Agreement, any payment of liquidated damages that HFS is
obligated to make
143845.6/NYL3
<PAGE>
14
pursuant to Section 4.8(b) or (c) of the HFS Purchase Agreement, or any
payment of liquidated damages that MOA is obligated to make pursuant to
Section 4.6(b) or 4.6(c) of the MOA Purchase Agreement, be considered a
Loss of the respective Purchaser; provided, further, that to the extent
that such payment is as a result of a failure of another Purchaser to
make its corresponding payment of liquidated damages under the
respective Purchase Agreement, in which case, the Purchaser making such
corresponding payment shall be entitled to recovery of the amount of
such corresponding payment from the Purchaser not making such
corresponding payment.
(b) Any party seeking indemnification under this Article VII
shall give each Indemnifying Party notice of any matter that such Indemnified
Party has determined has given or could give rise to a right of indemnification
under this Agreement, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and liabilities of an Indemnifying Party under this
Article IV with respect to Losses arising from claims of any third party which
are subject to the indemnification provided for in this Article VII ("Third
Party Claims") shall be governed by the following additional terms and
conditions: if an Indemnified Party shall receive notice of any Third Party
Claim, the Indemnified Party shall give the Indemnifying Party notice of such
Third Party Claim within 30 days of the receipt by the Indemnified Party of such
notice; provided, however, that the failure to provide such notice shall not
release the Indemnifying Party from any of its obligations under this Article
VII except to the extent the Indemnifying Party is materially prejudiced by such
failure and shall not relieve the Indemnifying Party from any other obligation
or liability that it may have to any Indemnified Party otherwise than under this
Article VII. If the Indemnifying Party acknowledges in writing its obligation to
indemnify the Indemnified Party hereunder against any Losses that may result
from such Third Party Claim, then the Indemnifying Party shall be entitled to
assume and control the defense of such Third Party Claim at its expense and
through counsel of its choice if it gives notice of its intention to do so to
the Indemnified Party within five days of the receipt of such notice from the
Indemnified Party; provided, however, that if there exists or is reasonably
likely to exist a conflict of interest that would make it inappropriate in the
judgment of the Indemnified Party for the same counsel to represent both the
Indemnified Party and the Indemnifying Party, then the Indemnified Party shall
be entitled to retain its own counsel, in each jurisdiction for which the
Indemnified Party determines counsel is required, at the expense of the
Indemnifying Party. In the event the Indemnifying Party exercises the right to
undertake any such defense against any such Third Party Claim as provided above,
the Indemnified Party shall cooperate with the Indemnifying Party in such
defense and make available to the Indemnifying Party, at the Indemnifying
Party's expense, all witnesses, pertinent records, materials and information in
the Indemnified Party's possession or under the Indemnified Party's control
relating thereto as is reasonably required by the Indemnifying Party. Similarly,
in the event the Indemnified Party is, directly or indirectly, conducting the
defense against any such Third Party Claim,
143845.6/NYL3
<PAGE>
15
the Indemnifying Party shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party, at the Indemnifying Party's
expense, all such witnesses, records, materials and information in the
Indemnifying Party's possession or under the Indemnifying Party's control
relating thereto as is reasonably required by the Indemnified Party. No such
Third Party Claim may be settled by the Indemnifying Party without the prior
written consent of the Indemnified Party.
SECTION 7.03. Liquidated Damages. In the event (i) HFS or MOA
is unable or unwilling to consummate the transactions contemplated by the HFS
Purchase Agreement or the MOA Purchase Agreement, as the case maybe, for any
reason and (ii) NALC exercises its option to buy the assets not purchased by HFS
or MOA pursuant to the HFS Purchase Agreement or the MOA Purchase Agreement, as
the case may be, in accordance with Section 8.06 of the Stock Purchase
Agreement, then HFS or MOA, or each, as the case may be, in addition to any
indemnification made pursuant to Section 7.02 and notwithstanding the provisions
of Section 1.03, shall pay (x) all of its expenses and costs incurred in
connection with the transactions contemplated by the Stock Purchase Agreement
and the Purchase Agreements, and its failure to consummate such transactions,
and (y) an additional sum of $1,000,000 to NALC as liquidated damages for the
failure of MOA or HFS, as the case may be, to consummate the transactions
contemplated by the relevant Purchase Agreement.
SECTION 7.04. Indemnification by the Seller. (a) In the event
HFS suffers or incurs a Loss in respect of which it believes it is entitled to
indemnification pursuant to Section 5.02 of the HFS Purchase Agreement or MOA
suffers a Loss in respect of which it believes it is entitled to indemnification
pursuant to Section 5.02 of the MOA Purchase Agreement or NALC suffers a Loss in
respect of which it believes it is entitled to indemnification pursuant to
Article VI of the Stock Purchase Agreement, such party or parties shall notify
the other two Purchasers in reasonable detail of the nature of the potential
indemnification claim against the Seller. Either of the other Purchasers shall
have ten business days after delivery of such notice to notify HFS, MOA or NALC,
as the case may be, that it in good faith believes the potential indemnification
claim does not relate solely to the Franchise Business, in the case of HFS, the
MOA Owned Properties, in the case of MOA, or the other aspects of the Company's
businesses, in the case of NALC, setting forth the reasons for such belief in
reasonable detail. If no such notification is made, HFS, MOA or NALC, as the
case may be, may bring such indemnification claim directly against the Seller in
accordance with the provisions of the Purchase Agreements and the Stock Purchase
Agreement, as the case may be, and assume all costs and expenses and be entitled
to all recovery in resect of such indemnification claim. In the event such
notification is made, NALC shall have the option to bring such indemnification
claim itself in accordance with Article VI of the Stock Purchase Agreement
regardless of whether NALC has incurred or suffered a Loss. The Purchasers shall
cooperate in good faith and consult with each other in connection with the
prosecution of such indemnification claim and shall cooperate in good
143845.6/NYL3
<PAGE>
16
faith to allocate any expenses and costs incurred in connection with such
indemnification claim and any amounts recovered as a result of such
indemnification claim among the Purchasers pro rata in accordance with the
relationship that the actual Losses of each of the Purchasers bears to the total
Losses of the Purchasing Group. If NALC does not elect to bring such
indemnification claim, HFS or MOA, as the case may be, shall be free to bring
such indemnification claim directly against the Seller but shall do so in
consultation with and in cooperation with the other Purchasers and all costs and
expenses and proceeds related to such indemnification claim shall be allocated
in accordance with the preceding sentence.
(b) The Purchasers agree to consult quarterly, or as often as
they deem appropriate, and provide each other with an estimate of the aggregate
Losses each Purchaser has suffered or incurred in order to determine whether the
aggregate Losses of the Purchasing Group exceed the Seller's Basket Amount.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Expenses. Notwithstanding the provisions of
Section 1.03, in the event the Closing shall not have occurred and the Stock
Purchase Agreement is terminated (except (i) that in all circumstances the fees
and expenses of Merrill Lynch & Co. shall be allocated 60% to NALC, 20% to HFS
and 20% to MOA and (ii) as otherwise provided in Section 7.02), all costs and
expenses, including, without limitation, fees and disbursements of counsel and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
SECTION 8.02. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by telecopy or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 8.02):
(a) if to NALC:
National Lodging Corp.
339 Jefferson Road
Parsippany, NJ 07054-0278
Telephone: (201) 952-8472
Telecopy: (201) 428-3260
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17
Attention: James Buckman
with copies to:
Battle Fowler LLP
75 East 55th Street
New York, NY 10022
Telephone: (212) 856-7100
Telecopy: (212) 856-7808
Attention: Martin Edelman
and
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telephone: (212) 848-4000
Telecopy: (212) 848-7179
Attention: Alfred Ross
(b) if to HFS:
HFS Incorporated
339 Jefferson Road
Parsippany, NJ 07054-0278
Telephone: (201) 952-8472
Telecopy: (201) 428-3260
Attention: James Buckman
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telephone: (212) 848-4000
Telecopy: (212) 848-7179
Attention: Alfred Ross
(c) if to MOA:
Motels of America, Inc.
885 Seventh Avenue, Suite 4300
143845.6/NYL3
<PAGE>
18
New York, NY 10106
Telephone: (212) 333-2120
Telecopy: (212) 262-6235
Attention: Paul Wallace
with a copy to:
Donovan, Leisure, Newton & Irvine
30 Rockefeller Plaza, 38th Floor
New York, NY 10112
Telephone: (212) 632-3000
Telecopy: (212) 632-3315
Attention: Frank Cuiffo
SECTION 8.03. Public Announcements. Except as may be required
by the federal securities laws or the rules of any listing agreement with a
national securities exchange, no party to this Agreement shall make, or cause to
be made, any press release or public announcement or make any other disclosure
in respect of this Agreement or the transactions contemplated hereby without the
prior written consent of the other parties hereto, and the parties shall
cooperate as to the timing and contents of any such press release, public
announcement or other disclosure.
SECTION 8.04. Headings. The descriptive headings contained in
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 8.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 8.06. Entire Agreement. This Agreement, the Stock
Purchase Agreements and the Purchase Agreements constitute the entire agreement
of the parties hereto with respect to the subject matter hereof and thereof and
supersede all prior agreements and undertakings, both written and oral, among
the parties hereto with respect to the subject matter hereof and thereof.
143845.6/NYL3
<PAGE>
19
SECTION 8.07. Assignment. This Agreement may not be assigned
without the express written consent of the parties hereto (which consent may be
granted or withheld in the sole discretion of the parties hereto); provided,
however, that each Purchaser shall be entitled to assign this Agreement to any
other individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity, as well as any syndicate or group
that would be deemed to be a person under Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended ("Person") that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, such Purchaser (an "Affiliate"). The term, "control" (including
the terms "controlled by" and "under common control with") as used above with
respect to the relationship between two or more Persons means the possession,
directly or indirectly or as trustee or executor, of the power to direct or
cause the direction of the affairs of management of a Person, whether through
the ownership of voting securities, as trustee or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities representing a 50% voting interest in such Person.
SECTION 8.08. No Third Party Beneficiaries. This Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their Affiliates (including the Acquisition Vehicles), and nothing herein,
express or implied, is intended to or shall confer upon any other person any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
SECTION 8.09. Amendment and Waiver. This Agreement may not be
amended or modified except by an instrument in writing signed by, or on behalf
of, the parties hereto. Any party hereto may (i) extend the time for the
performance of any obligation or other act of any other party hereto, (ii) waive
any inaccuracy in the representations and warranties of any other party
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any agreement of any other party or any condition contained
herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or each of the parties to be bound
thereby.
SECTION 8.10. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any New York state or federal court sitting in the
Borough of Manhattan in the City of New York. To the extent permitted by law,
the parties hereto expressly consent to the jurisdiction of such courts, agree
to venue in such courts and hereby waive any defense or claim of forum non
conveniens they may have with respect to any such action or proceeding brought.
SECTION 8.11. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which
143845.6/NYL3
<PAGE>
20
when executed shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 8.12. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or in equity.
SECTION 8.13. Payments. Any payment of any amount owed by a
Purchaser to any other Purchaser pursuant to this Agreement shall be made in
U.S. dollars by wire transfer in immediately available funds to an account
designated in writing by the recipient of such payment; provided, however, that
if no such account is designated, payment shall be made by delivery of a check
to the address of the recipient Purchaser set forth in Section 8.02.
143845.6/NYL3
<PAGE>
21
IN WITNESS WHEREOF, NALC, HFS and MOA have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
NATIONAL LODGING CORP.
By:
Name: Stephen P. Holmes
Title: Executive Vice President and Chief
Financial Officer
HFS INCORPORATED
By:
Name: James E. Buckman
Title: Executive Vice President and General
Counsel
MOTELS OF AMERICA, INC.
By:
Name: Kent M. Mueller
Title: President and Chief Operating Officer
143845.6/NYL3
<PAGE>
EXHIBIT A
<PAGE>
Site No.:
Property:
LICENSE AGREEMENT
FORTE HOTELS, INC.
1973 FRIENDSHIP DRIVE, EL CAJON, CALIFORNIA 92020
THIS AGREEMENT entered into at El Cajon, California, this ________ day
of January 1996, by and between FORTE HOTELS, INC., a California corporation,
hereinafter referred to as "LICENSOR," and __________________________, a
Delaware corporation, hereinafter referred to as "LICENSEE," who is the owner,
lessee, and/or operator of the specific premises described as follows:
located at
hereinafter referred to as the "property" or the "motor hotel".
WITNESSETH:
WHEREAS, LICENSOR has developed and implemented a plan for providing,
and has provided, a network of motor hotels and related services of high
quality and of distinguishing characteristics (hereinafter referred to as the
"System"), including (but not limited to) the following:
(1) The right to use the registered service marks and trademarks,
"Travelodge(R)" and "Sleepy Bear(R)," which have been registered or applied for
in the United States Patent Office and in the appropriate trademark offices in
other countries, use of both of which is solely and exclusively granted by
LICENSOR;
(2) The words, service marks or trademarks "Travelodge(R),"
"Travelodge(R) Hotel," "Travelodge(R) Motel," "Sleepy Bear(R)," and other
combinations of said words, service marks or trademarks, either alone or in
association with the color schemes, building designs, insignia, logograms,
slogans and signs, used as part of the System, in association with a nationwide
service of motor hotels all symbolizing standardized, high quality, distinctive
motor hotel service;
(3) Style, color and other distinguishing characteristics equipment,
furnishings and appliances used in and about the motor hotel or any other
distinguishing characteristics;
(4) Methods of operation, referrals and reservation procedures and
national advertising and publicity service; and
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<PAGE>
(5) Standardized, uniform motor hotels services providing lodging,
food, beverage, and other conveniences, parking for automobiles, and motor
hotel services of a distinctive nature in accordance with fair and ethical
policies and practices and with the highest standards of efficiency, courtesy,
hospitality and cleanliness; and
WHEREAS, LICENSEE wishes to be a part of the System and to be licenses
to provide motor hotel services of the same distinctive nature and high quality
as has been established and to use the same trademarks, service marks, color
patterns and schemes, signs, designs and other distinguishing characteristics
of the System as have been established and are provided by LICENSOR. It is the
intention of the parties that the motor hotel which is the subject of the
license granted under this Agreement, together with motels and motor hotels now
or hereafter operated by LICENSOR and/or joint ventures of which LICENSOR
and/or affiliates are a party, and those operated or to be operated by other
licensees, will form parts of the System. The success of both parties to this
Agreement and of other licensees is directly affected by the business conduct
of all licensees in the System. LICENSEE, therefore, recognizes that adherence
to the terms of this Agreement, including the payment of all fees, is a matter
of mutual importance and consequence to LICENSEE, to Licensor and to all other
licensees.
THE TRAVELODGE(R) System is comprised of the LICENSOR, ITS LICENSEES,
ITS CUSTOMERS, ITS POTENTIAL CUSTOMERS AND ITS VENDORS AND SUPPLIERS. It is the
role of LICENSOR to administer the License Agreement and in so doing weigh the
needs of the entire TRAVELODGE system, and all of the licensees in it. LICENSOR
has a paramount duty to protect the Travelodge trademark for the ultimate
benefit of the TRAVELODGE franchise system. Any control TRAVELODGE LICENSOR
exerts over LICENSEE pursuant to this Agreement is limited to the amount
necessary to protect LICENSOR's trademarks and service marks.
NOW, THEREFORE, IT IS MUTUALLY COVENANTED AND AGREED AS
FOLLOWS:
1. LICENSOR grants to LICENSEE, subject to the terms and conditions
hereof, a nonexclusive license to use the System and the registered trademarks
and service marks, "Travelodge(R)" and "Sleepy Bear(R)" for and in connection
with LICENSEE'S aforesaid motor hotel, the location of which is described
above. Said motor hotel shall be operated under the name Hayward (S.F. Bay),
except as otherwise required hereunder.
2. a. This Agreement and License shall be in effect for a term
commencing on the date hereof and continuing for a period (the "Term") of
twenty (20) years. NEITHER PARTY HAS RENEWAL RIGHTS OR OPTIONS.
b. Notwithstanding the foregoing, this Agreement may be terminated
during the term hereof if LICENSEE shall:
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364962.1
<PAGE>
i.) violate any covenant, condition or obligation herein
contained, or any standard in the then current
TRAVELODGE operations manual, or contained in any
other agreement between the parties hereto or their
affiliated companies, and such violation continues
after the expiration of thirty (30) days after
written notice of default from LICENSOR stating the
facts of such breach; or
ii.) make an assignment for the benefit of creditors or
become insolvent; or file a voluntary petition in
bankruptcy, or be adjudicated a bankrupt or
insolvent, or file any petition or answer seeking
any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, under any
present or future law or regulation or seek or
acquiesce in the appointment of any trustee,
receiver or liquidator for any substantial part of
the properties of LICENSEE; or if, within sixty (60)
days after the commencement of any proceeding
against LICENSEE seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or
future law or regulation, such proceeding shall not
have been dismissed; or if, within sixty (60) days
after the appointment without the consent or
acquiescence of LICENSEE of any trustee, receiver or
liquidator of any substantial part of the properties
of LICENSEE of any trustee, receiver or liquidator
of any substantial part of the properties of
LICENSEE, such appointment shall not have been
vacated; or
iii.) following substantial destruction by fire or other
cause, not rebuild and open for business to the
public within a period not exceeding twelve (12)
months, in accordance with the original plans or
such other plans and specifications as shall be
approved by LICENSOR in writing.
Then LICENSOR may, at its option, by written notice to
LICENSEE, immediately declare this Agreement and License and all rights and
privileges hereunder terminated, and LICENSEE shall pay to LICENSOR any and all
accrued amounts due to the effective date of such termination and any and all
damages suffered by LICENSOR as a result of such termination.
Both parties agree that if LICENSEE violates any covenant,
condition or obligation contained herein, LICENSOR shall be entitled to
compensation for the detriment incurred, but that it is extremely difficult and
impractical to ascertain the extent of the detriment. To avoid this problem,
the parties agree to liquidated damages as provided in Paragraph 30.
3. In consideration of the extremely valuable rights granted to
LICENSEE hereunder, Licensee shall make payments to Licensor as follows:
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364962.1
<PAGE>
a. An initial license fee (hereinafter the "initial license
fee") of Dollars ($0.00), plus any applicable taxes, which has been fully
earned and is, therefore, nonrefundable.
b. In addition, LICENSEE shall, within five (5) days after
the end of each calendar month during the term of this Agreement, commencing
with the calendar month in which operations begin at the motor hotel, pay to
LICENSOR royalty fee equal to four percent (4%) of the Gross Room Revenue. This
royalty fee is in consideration of LICENSEE's use of LICENSOR's trademarks and
service marks, and is fully earned each day such trademarks and service marks
are used by LICENSEE, and is not subject to any counterclaims or setoffs of any
nature.
c. LICENSEE agrees that a percentage of the Gross Room
Revenue (as that term is defined herein) of the motor hotel shall be paid each
month to the Licensor Marketing Fund for national advertising and promotion of
motels and motor hotels operating under Licensor's Trademarks and Service Marks
within five (5) days after the end of each calendar month. The percentage of
Gross Room Revenue to be paid hereunder, currently four percent (4.0%), shall
be set by the Board of Directors of LICENSOR, from time to time, and the
percentage so set shall be effective commencing on the first day of the month
following the month in which the Board of Directors so set the said percentage.
LICENSEE may receive bills from LICENSOR for its proportionate share of the
cost of the referral reservation and directory service, for travel agents' or
airline commissions for LICENSEE's property, and for other services provided to
the LICENSEE and LICENSEE shall timely pay the amount of such bills.
d. All past due accounts incurred pursuant to this section
shall bear an interest rate not to exceed one and one-half percent (1 1/2%) of
the unpaid balance per month, or the highest rate of interest permitted by law
in the jurisdiction where the motor hotel is located, whichever is lower, and
LICENSEE authorizes LICENSOR to deduct any sums LICENSEE is in arrears to
LICENSOR from any sums payable by TRAVELODGE LICENSOR to LICENSEE.
e. It is anticipated that the LICENSOR may enter into certain
contractual obligations on behalf of LICENSEE including, but not limited to,
agreements in connection with the sites for, erection or maintenance of one or
more billboard type advertising signs. LICENSOR may expend funds at its
discretion to best support the Travelodge system. To induce LICENSOR to enter
into such contractual arrangements, LICENSEE does hereby agree to pay all costs
and expenses, and to hold LICENSOR harmless from all costs and liability,
incurred in connection therewith. LICENSOR will only enter into such property
specific agreements with LICENSEE's approval. TRAVELODGE LICENSOR does not
guarantee any minimum number of guests from the referral reservation and
directory service.
f. The term "Gross Room Revenue" as used herein shall include
all receipts derived from the renting, use or occupancy of guest rooms and
meeting rooms in the
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364962.1
<PAGE>
motor hotel, excluding sales taxes or other taxes which may be required by law
to be collected from guests.
4. a. On, or before five (5) days after the end of each calendar
month, LICENSEE shall submit to LICENSOR a statement on special forms provided
to LICENSEE by LICENSOR showing the number of rooms rented and the Gross Room
Revenue obtained with respect to the motor hotel during such month, and each
such statement shall be certified by LICENSEE to be true and accurate and shall
be accompanied by the payment set forth in Paragraphs 3.b and 3.c above.
b. LICENSEE shall keep on the premises of the motor hotel
true and accurate books, records and accounts relating to Gross Room Revenues
for a period of at least two (2) years, and LICENSOR, its agents or
representatives, shall be allowed to examine and audit and make copies of
entries in said books, records and accounts at all reasonable times. If
LICENSOR, or its agents or representatives discover a discrepancy in LICENSEE
reporting to LICENSOR of greater than five percent (5%), then the LICENSEE
shall reimburse LICENSOR for all costs incurred in performing such audit,
including travel, meals and lodging for the auditors.
c. LICENSEE shall provide LICENSOR, within sixty (60) days
following the close of each fiscal year, a Statement of Operations, including
an unaudited Balance Sheet and Profit and Loss Statement for such fiscal year,
copies of occupancy tax forms submitted to governmental agencies and at other
times such reports as LICENSOR may require on forms to be prescribed by
LICENSOR, all to be true and correct and prepared in conformity with generally
accepted accounting principles on a basis consistent with that of the prior
year. LICENSEES with motor hotels of 100 rooms or more must also provide
LICENSOR with a revenue audit prepared by an independent certified public
accountant for each fiscal year. Such audit will be provided to LICENSOR within
sixty (60) days of the close of LICENSEE'S fiscal year.
5. a. LICENSEE acknowledges LICENSOR's exclusive right and title to
use and to license others to use the registered service marks and trademarks.
LICENSEE agrees not to use or imitate the said System or service marks and
trademarks except under written license from LICENSOR;
b. The License herein granted to use "Travelodge(R)," "Sleepy
Bear(R)," and any other service marks and trademarks subsequently adopted by
LICENSOR is nonexclusive and is applicable only to the specific motor hotel
described herein;
c. Exclusive title and rights to use and to license others to
use any other service marks and trademarks subsequently adopted by LICENSOR for
the System or any part thereof or addition thereto shall be the exclusive
property of LICENSOR;
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364962.1
<PAGE>
d. All highway or other signs depicting the words, style and
design of "Travelodge(R)" and also the likeness "Sleepy Bear(R)" which
advertise LICENSEE's motor hotel shall first be approved by LICENSOR in writing
in all respects, including size, location, copy, color and materials, which
approval shall not be unreasonably withheld;
e. In all uses of the registered marks "Travelodge(R)" and
"Sleepy Bear(R)" by LICENSEE, an "R" in a circle shall be affixed adjacent to
such marks: (R), and in Canada the following legend included at least once in
connection with such use: "Marks used under license".
f. LICENSEE shall not use the name "Travelodge(R)" nor
"Sleepy Bear(R)" as a part of its partnership, joint venture, corporate or
other business name; and
g. Upon any termination of this Agreement this instrument
forthwith constitutes an assignment to LICENSOR of all of LICENSEE's rights in
and to said service marks and trademarks, "Travelodge(R)" and "Sleepy Bear(R),"
together with the good will of the business then symbolized thereby insofar as
LICENSEE and said motor hotels are concerned, and LICENSEE will immediately
discontinue all use of said registered service marks and trademarks and shall
immediately obliterate the words "Travelodge(R)," "Sleepy Bear(R)" and the
design of "Sleepy Bear(R)" from LICENSEE's signs and from any and all places
and materials whatsoever.
If LICENSEE shall fail to obliterate any such words within
fifteen (15) days after written demand, then LICENSOR by its duly authorized
agents may enter upon the premises of LICENSEE to accomplish said results
without being guilty of trespass or any other tort, and may make or cause to be
made such changes at the expense of LICENSEE, which LICENSEE agrees to pay on
demand. LICENSOR and LICENSEE further agree that it would be impractical or
extremely difficult to fix the actual damage sustained by LICENSOR for
LICENSEE's use of the service marks and trademarks "Travelodge(R)" or "Sleepy
Bear(R)," and LICENSEE agrees therefore to pay to LICENSOR as liquidated
damages Five Hundred Dollars ($500) a day for each day's unauthorized use
thereof. LICENSEE also agrees that LICENSOR will suffer great and irreparable
injury from any use by LICENSEE, after the termination of this Agreement of the
service marks and trademarks "Travelodge(R)" and "Sleepy Bear(R)" and that
injunctive relief will be the only fair, adequate and complete remedy available
to LICENSOR. Accordingly, LICENSEE hereby consents to the entry of an
injunction in favor of LICENSOR, permanently enjoining further use of said
service marks and trademarks subsequent to any such termination of this
Agreement.
6. LICENSEE agrees:
a. To maintain a high moral standard and atmosphere at
LICENSEE's Travelodge(R);
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364962.1
<PAGE>
b. To comply with all local, State and Federal laws,
ordinances, rules and regulations pertaining thereto; to maintain its premises
and accommodations in a clean, safe and orderly manner;
c. To provide efficient, courteous and high quality
Travelodge(R) System service to the public;
d. To furnish motor hotel services and conveniences of the
same quality, type and distinguishing characteristics as are established and
maintained by LICENSOR in the System, to the end that the motor hotel operated
by LICENSEE under this Agreement shall help to create and build good will among
the public for Travelodge(R) System motels and motor hotels as a whole and so
that LICENSOR, LICENSEE, and each member of said system shall be benefitted,
and the public assured uniform, efficient, courteous, high quality service on a
standardized basis; to comply with any and all marketing manuals as are
currently used in the System, or which may hereafter be implemented for use in
the System by LICENSOR;
e. To conduct its motor hotel business and advertise the same
by use of such symbols as may be established from time to time by LICENSOR and
none other; to diligently promote and make every reasonable effort to steadily
increase said business by selling and providing accommodations and related
services at its motor hotel to all persons who inquire for them and by printed
advertisements and highway signs a reasonable distance from the location of the
motor hotel;
f. To refrain from using any items of merchandise, equipment,
stationery, supplies, furnishings or utensils bearing the service marks or
trademarks, "Travelodge(R)" or "Sleepy Bear(R)," in connection with the
operation of the motor hotel unless the same shall have been first submitted to
and approved in writing by LICENSOR, which approval shall not be unreasonably
withheld;
g. To use and distribute guidebooks and directories in
accordance with standards and requirements established by LICENSOR;
h. To repair and paint (color scheme to be approved by
LICENSOR) the exterior and interior of the motor hotel buildings and structures
at reasonable times or upon the request of LICENSOR; and at all times to
maintain the interior and exterior of the building, structures and surrounding
premises in a clean, orderly and sanitary condition satisfactory to LICENSOR.
The failure to repair and paint is to be considered a monetary default;
i. To permit inspection at all reasonable times of
accommodation and related service facilities and procedures by LICENSOR
representatives to assure full compliance with this Agreement;
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364962.1
<PAGE>
j. To comply with the standards of hosting, management, food
service and preparation, and housekeeping established by the Operations
Department of LICENSOR, and to follow the procedures set forth in the
operations manual published by LICENSOR (as revised from time to time), receipt
of a copy of which is acknowledged. No variation from these standards and
procedures is permitted without the prior written consent of LICENSOR. The
Travelodge(R) operations manual shall remain the sole property of LICENSOR and
shall be returned to LICENSOR in the event of the termination of this
Agreement;
k. To abide by the operational policy decisions determined by
the representative board of the system and by the majority decisions of the
co-owner and licensees of the System. However, in the event of any conflict
between said operational policy decisions and provisions of the Travelodge(R)
operations manual, the latter shall control. LICENSEE shall cooperate with
LICENSOR, the Licensor Marketing Fund and the owners and manager of other
Travelodge(R) motels and motor hotels with regard to common problems and
policies;
l. To obtain the approval of LICENSOR for all furniture,
furnishings, fixtures, supplies, utensils and equipment which it proposes to
use in its motor hotel; to purchase or lease from LICENSOR, or from anyone
designated by LICENSOR, all furniture, furnishings, fixtures, supplies,
utensils and equipment which it proposes to use in its motor hotel. LICENSEE
shall not be obligated to purchase or lease any of said items from LICENSOR or
its designee if LICENSEE desires to purchase or lease the same from third
persons provided, however, said items must be at least equal in quality and
strength to those specified by LICENSOR for the System in its specifications in
respect thereof;
m. To give consideration to rental rates to be charged for
motor hotel rooms to be rented to the public that LICENSOR, on the basis of its
experience in respect to relevant factors including services offered, location
and area, may from time to time recommend to the end that the public and the
System will best be served and protected, particularly against excessive
charges;
n. To cause the person or person who will be directly
responsible for the management and operation of the motor hotel business
contemplated by this Agreement to attend the LICENSOR orientation school to
become familiar with the System. The cost for attending the orientation school
shall be borne by LICENSEE;
o. To participate in all LICENSOR network promotions and
programs including, but not limited to VNA, FIT, group coupons, industry
discounts, senior citizens, airline discounts, travel agent discounts, family
plans, children's-free policy, children's programs, Break Rate programs and
Frequent Traveler Program;
p. To comply with LICENSOR standards for guest supplies;
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364962.1
<PAGE>
q. To participate in LICENSOR's international referral system
for guests, groups and meeting planners;
r. To comply with LICENSOR standards for reservation services
and equipment including, but not limited to, airline surcharges, general sales
agents fees and property terminal system;
s. To attend the annual Travelodge(R) Conference, area
meetings and special LICENSOR meetings;
t. To comply with all travel trade policies and procedures
including, but not limited to, travel agent commissions, group tour policies,
travel agent and group promotions and trade show support;
u. To participate in LICENSOR programs that recognize
individuals or companies responsible for booking guests into Travelodge(R); and
v. To comply with LICENSOR employee standards for uniform
appearance, and treatment of guests. LICENSOR shall have no authority to hire,
fire, or control LICENSEE's employees.
7. LICENSOR expressly reserves the right to reasonably revise, amend
and change from time to time the System or any part thereof. Such System, as so
changed, revised or amended, shall for all purposes be deemed to be the System
referred to in this Agreement. Any and all improvements in the System developed
by LICENSOR or by LICENSEE shall be and become the sole and absolute property
of LICENSOR and become part of the LICENSOR business knowledge, and LICENSEE
shall have no right to use such improvements or business knowledge except in
accordance with this Agreement. Information and data disclosed by LICENSEE in
respect to its motor hotel operations and business shall not be confidential.
8. During the term of this Agreement, LICENSEE will not discontinue
the operation of the motor hotel under the service mark and trademark
"Travelodge(R)," nor sell, transfer, assign, lease or sublet, nor offer to
sell, transfer, assign, lease or sublet any interest in the names
"Travelodge(R)" or "Sleepy Bear(R)," the motor hotel or any part thereof, or in
the business conducted in connection therewith, or in the buildings, equipment
or furnishings used in connection therewith, or any interest in LICENSEE
without the prior written consent of LICENSOR, which consent shall not be
unreasonably withheld. In approving of the proposed transferee, TRAVELODGE
LICENSOR shall take into consideration, among other factors, the financial
condition of the proposed transferee, the proposed transferee's previous
business experience and the general integrity and reputation of the proposed
transferee.
a. If LICENSEE, at any time during the term hereof, shall
receive a bona fide offer acceptable to LICENSEE to purchase, lease or sublease
the motor hotel,
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<PAGE>
LICENSEE shall promptly inform LICENSOR in writing, setting forth the full
terms of such offer, and LICENSOR may, within thirty (30) days after receipt of
such written notice, at its option, elect, by giving written notice to
LICENSEE, to purchase, lease or sublease the motor hotel on the same terms and
conditions contained in said offer. Until the end of said thirty (30) day
option period, LICENSEE shall not accept any third-party bona fide offer;
b. If, at the expiration of the thirty (30) day period
referred to in Subparagraph 8.a. above, LICENSOR has failed to elect to
exercise said option, LICENSEE may transfer, sell, lease or sublease the motor
hotel on terms no more favorable than those submitted to LICENSOR in writing,
subject to LICENSOR's approval of the prospective purchaser or lessee, as
hereinafter provided. LICENSOR shall have sixty (60) days from and after the
expiration of the aforementioned thirty (30) day period to approve or
disapprove of the prospective successor in writing. In the event the
prospective successor is not acceptable, LICENSOR shall notify the LICENSEE of
this fact in writing. In such event, LICENSEE shall not be permitted to
transfer its interest in this Agreement and in the License granted hereby to
any other party without first obtaining LICENSOR's approval. In the event of a
transfer without LICENSOR's prior approval, LICENSOR shall have the right to
immediately terminate this Agreement;
c. In the event the prospective successor is acceptable to
LICENSOR, such acceptance shall be conditioned upon the fact that the
prospective successor agrees to enter into the then current standard form of
License Agreement being offered by LICENSOR to prospective licensees with the
royalty provision stated in such form of agreement, but the requirement of
initial franchise fee or its equivalent shall be waived by LICENSOR; and
d. Upon any transfer of LICENSEE's interest in the motor
hotel, the successor or successors to LICENSEE, as a condition of their right
to the continued enjoyment of the benefits of this Agreement, and to reimburse
LICENSOR for its expenses in respect to reviewing the qualifications of the
prospective transferee, will be required at LICENSOR's option, to pay to
LICENSOR a nonrefundable license transfer fee of Ten Thousand Dollars
($10,000).
9. LICENSOR shall have the privilege, if LICENSEE desires to sell,
lease, sublease or otherwise transfer its rights to the motor hotel described
in this Agreement, to participate with real estate brokers in the listing of
the said property and in said transaction and to receive usual reasonable
brokerage commissions, fees and costs relating thereto, if LICENSOR procures a
buyer or lessee.
10. LICENSEE warrants that its execution of this AGREEMENT and use of
the marks "Travelodge(R)" and "Sleepy Bear(R)," as provided herein, are not a
breach of any agreement or covenant with any other person, firm or company. If
any person, firm or company shall claim that LICENSEE's execution of this
Agreement or use of the marks, "Travelodge(R)" or "Sleepy Bear(R)" is a breach
of any such agreement or covenant then LICENSEE will, at its cost and expense,
defend such against claim and pay, indemnify and
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save LICENSOR harmless from all liability and damages including costs and
attorney's fees which LICENSOR may incur or sustain in defending against any
such claims asserted by such other person, firm or company.
11. If LICENSEE is to occupy the described premises under a lease,
sublease or other written contract from the owner thereof, LICENSEE shall,
prior to the execution thereof, obtain LICENSOR's written approval of such
lease, sublease or other contract, and such instrument shall contain the
express covenant that throughout its term the premises shall be used solely and
exclusively as and for a motor hotel under all of the terms and conditions of
this Agreement, and that no assignment, transfer, change, modification or other
amendment of such instrument shall be entered into between the owner and
LICENSEE without the express consent in writing of LICENSOR, which consent
shall not be unreasonably withheld. This provision, however, shall be subject
to the right of LICENSOR to cancel this Agreement, as set forth in Subparagraph
8.b. of this Agreement. If LICENSEE occupies said premises under a lease,
sublease or other contract with the owner as aforesaid, it is agreed that
LICENSEE will cause an "Owner's Consent" to the foregoing, in a form prescribed
by LICENSOR, to be executed and acknowledged by the owner of said premises
within fifteen (15) days after the day hereof, and if such Owner's Consent
shall not be obtained, LICENSOR shall have the option to terminate this
Agreement.
12. LICENSOR agrees:
a. To make available consultation with LICENSOR's officials
and staff on matters relating hereto;
b. To make available, upon LICENSEE's request, information
that LICENSOR may have with respect to equipment, furniture, furnishings and
supplies, including prices thereof, necessary or convenient to operating
LICENSEE's motor hotel;
c. To assist LICENSEE in installing methods of motor hotel
operations found by LICENSOR to be sound and effective, and to provide
orientation in LICENSOR methods to personnel responsible for the management and
operation of the motor hotel (not to exceed three persons), selected by
LICENSEE. Such orientation shall be provided at such place as LICENSOR may
designate, and LICENSEE shall be responsible for the trainee's wages, board,
room and transportation expenses during the orientation period;
d. To encourage use by the traveling public of those motels
and motor hotels operating under licenses from LICENSOR or operated by joint
ventures in which LICENSOR or its affiliates are a party;
e. To furnish to LICENSEE lease terms or prices on signs,
entrance signs, decalcomania, forms, stationery and other items of a kind which
are then being made available to other licensees of LICENSOR. It is agreed that
LICENSEE need not lease or purchase any of the foregoing items from LICENSOR;
however LICENSOR shall have the
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right of prior approval of any such items to be leased or purchased by LICENSEE,
which approval shall not be unreasonably withheld; and
f. To make available to LICENSEE, at LICENSEE's request and
at a price to be agreed upon, any or all of the following:
i.) Formulation and implementation of an
accounting/control system;
ii.) complete motor hotel accounting service, including
preparation of balance sheets, profit and loss
statements, depreciation and other schedules and
income tax data; and
iii.) Advertising and promotional programs for use at
local level.
13. No additional construction or substantial alteration shall be made
with respect to the motor hotel, unless working drawings and specifications and
color schemes are first approved in writing by LICENSOR, which approval shall
not be unreasonably withheld. Upon completion of an addition, LICENSEE agrees
to pay to LICENSOR Three Hundred Dollars ($300) per room for Travelodge and
Three Hundred Fifty Dollars ($350) per room for Travelodge Hotel for each
additional rental room added.
14. During the term of this Agreement, LICENSEE shall procure, carry
and pay for windstorm, fire and extended coverage insurance. The proceeds of
any such insurance, in the event of damage or destruction, shall be used to
repair or restore the buildings as nearly as possible to their original
condition and value.
15. LICENSEE agrees to indemnify and hold harmless LICENSOR, its
officers, agents and employees from loss, cost, damage, expense and liability,
including attorney's fees and court costs, by reason of damage or loss,
including personal injury, of whatsoever nature or kind, arising in connection
with the business of the motor hotel or out of, or as a result of, any
negligent or intentional act or failure to act on the part of LICENSEE, its
agents, employees, tenants or sub-tenants. LICENSEE agrees to place with an
insurance company rated A - or higher by Best's Key Rating Guide and reasonably
approved by LICENSOR and keep in effect during this Agreement, insurance for
the benefit of LICENSOR (as well as for LICENSEE) covering public liability, on
a broad form basis with limits not less than Five Million Dollars ($5,000,000)
combined single limits for bodily injury and property damage and include
personal injury, products, liquor legal liability and non-owned automobile
coverage. LICENSOR is to be named as an additional insured and in case of
modification or cancellation of the contract, LICENSOR is to be given 30 days
notice. Insurance provisions are to be approved by LICENSOR. In addition,
LICENSEE agrees to provide proper Worker's Compensation insurance covering all
of its employees. LICENSEE further agrees to deliver to LICENSOR the
certificates naming LICENSOR as an additional insured and to promptly pay all
premiums on said policies as and when the same become due.
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16. This Agreement contains the entire agreement of the parties, and
no representation, inducement, promise or agreement, oral or otherwise, not
embodied herein, shall be of any force or effect. No failure of LICENSOR to
exercise any power hereunder, or insist upon strict compliance by LICENSEE and
any obligation hereunder, and no custom or practice at variance with the terms
hereof shall constitute a waiver of LICENSOR's right to demand exact compliance
with the terms hereof. Waiver by LICENSOR of any default by LICENSEE shall not
affect or impair LICENSOR's rights in respect to any subsequent default of the
same or a different kind, or any delay or omission of LICENSOR to exercise any
right arising from any default shall affect or impair LICENSOR's right to the
same or any future default. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing.
17. LICENSEE is an independent contractor, and LICENSOR and LICENSEE
are not and shall not be considered as joint venturers, partners, employees or
agents of each other, and neither shall have the power to bind or obligate the
other, except as set forth in this Agreement. LICENSEE shall hold itself out to
the public, and all those with whom it does business, as being independently
owned and operated, and to prominently display notice of its independent status
on all printed material associated with the subject property. LICENSOR and
LICENSEE have entered into this agreement for the pursuit of profit and
professional fulfillment. Each represents that it has substantial experience in
its prospective business and will not rely upon the expertise of the other in
the operation of its respective businesses.
18. LICENSEE hereby acknowledges that the License granted by this
Agreement is nonexclusive and that LICENSOR may own or operate, alone or in
conjunction with others through a joint venture or otherwise, motels or motor
hotels; and further may license others, on the same or different terms as the
within Agreement, to operate TRAVELODGE(R) and/or other motels or motor hotels
within the near vicinity of the subject motor hotel.
19. LICENSOR shall not be liable to any person or company for any
debts incurred with respect to the motor hotel and business or related business
thereof unless LICENSOR specifically agrees in writing to pay such debts.
LICENSEE agrees to indemnify and hold LICENSOR harmless from such debts,
including reasonable attorney's fees and court costs.
20. In any suit or action brought under the terms of this Agreement, a
reasonable attorney's fee of the prevailing party shall be fixed by the court
and shall be taxed as a part of the costs in favor of the prevailing party in
such suit or action.
21. Any action to enforce this Agreement shall be filed in, and shall
be governed by and construed in accordance with the laws of, the State of
California. The parties waive and will waive all right to jury trial of any
dispute either arising from the LICENSOR/LICENSEE relationship, or with respect
to this Agreement. The parties waive and will
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waive all right to seek punitive and/or exemplary damages in any action that
arises from the LICENSOR/LICENSEE relationship with respect to this Agreement.
The place of performance for this Contract shall be in San
Diego County, California. LICENSEE shall make the payments required by
Paragraph 3 of this Agreement and submit the statements required by Paragraph 4
of this Agreement to LICENSOR at its principal place of business in El Cajon,
California.
22. All terms and words used in this Agreement, regardless of the
number and gender in which they are used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context or sense of this Agreement or any paragraph
or clause herein may require, as if such words had been fully and properly
written in the appropriate number and gender.
23. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original, but such
counterparts together shall constitute but one and the same instrument.
24. Should any part of this Agreement, for any reason, be declared or
held invalid, such invalidity shall not affect the validity of any remaining
portion, which remaining portion shall remain in force and effect as if this
Agreement had been executed with the invalid portion thereof eliminated; and it
is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part, parts or portion which may, for any reason, be hereafter declared
invalid.
25. All notices pertaining to this Agreement by one party to the other
shall be sent by registered or certified mail: If to LICENSOR, addressed to it
at 1973 Friendship Drive, El Cajon, California 92020, and if to LICENSEE
addressed to it at 339 Jefferson Road, Parsippany, New Jersey 07054 or at such
other address as either of the parties shall designate by written notice to the
other from time to time. Service of any notice made by mail, or reliable
overnight delivery service in the manner herein provided shall be conclusively
deemed complete on the day of actual delivery as shown by the addressee's
registry or certification receipt, or at the expiration of the second day after
the date of mailing, whichever is earlier in time.
26. All rights under this Agreement shall inure to the benefit of the
successors and assigns of LICENSOR. This Agreement is not intended to benefit
any other person or entity except the named parties hereto and no other person
or entity shall be entitled to any rights hereunder by virtue of so-called
'third party beneficiary rights' or otherwise.
27. In the event LICENSEE or any successor of LICENSEE herein is a
corporation, partnership, joint venture or other entity other than named
individuals doing business under their own names, it agrees as follows:
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a. To furnish LICENSOR at the time of execution of this
Agreement, or if a successor, as a condition of obtaining LICENSOR's approval
of such transfer, a stockholders' agreement executed by all of its stockholders
stating that no such stockholder will sell, assign or transfer any of his stock
to any person or company other than his immediate family or persons who also
are stockholders, without the written consent of LICENSOR, which consent will
not be unreasonably withheld;
b. That no unissued stock will be issued to any person or
company other than its stockholders without the written consent of LICENSOR,
which consent will not be unreasonably withheld, and that it will furnish
LICENSOR, at the time of execution of this Agreement, or, if a successor, as a
condition of obtaining LICENSOR's approval of such transfer, a resolution of
its Board of Directors which has been ratified by the stockholders to such
effect;
c. To furnish to LICENSOR, at the time of execution of this
Agreement, the name of a designated individual to act as representative of
LICENSEE in connection with all matters pertaining to this Agreement, which
designated individual will be conclusively presumed to have full authority to
act for LICENSEE in all matters, and in no event shall LICENSOR be responsible
for any action taken by such individual on behalf of LICENSEE; provided,
however, that the designated individual may be changed from time to time by
notice in writing to LICENSOR and, in the event of such notice, the previously
designated individual shall be deemed to have been replaced by the individual
named in such notice as of the date of receipt of such notice by LICENSOR; and
d. That in the event of a violation of the provisions of
Subparagraphs a., b. or c. above, or in the event stock is sold, assigned,
transferred or issued in violation of said stockholder's agreement or
resolution, LICENSOR shall have the option and right, after giving LICENSEE
thirty (30) days written notice in which to cure said violations, to forthwith
cancel and terminate this Agreement, and thereupon the rights and obligations
hereunder shall cease, but such termination shall not affect the obligations
hereunder of LICENSEE to take action or abstain from taking action after the
termination hereof as provided elsewhere in this Agreement, nor shall it affect
the responsibility of LICENSEE for damages or sums due as provided in Paragraph
2.a. above.
28. LICENSOR may accept any check or payment in any amount without
prejudice to LICENSOR's right to recover the balance of the amount due or to
pursue any other right or remedy. No endorsement or statement on any check or
payment or in any letter accompanying any check or payment or elsewhere shall
constitute or be construed as an accord or satisfaction.
29. The expiration or termination of this Agreement shall be without
prejudice to any rights of LICENSOR against LICENSEE and such expiration or
termination shall not relieve LICENSEE of any of its obligations to LICENSOR
existing at the time of expiration or termination or terminate those
obligations of LICENSEE which, by their nature, survive
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<PAGE>
the expiration or termination of this Agreement. LICENSEE is obligated to
return, at no expense to the LICENSOR, any and all copies of the operations
manual, other manuals and any other communications media and material provided
for LICENSEE's use without additional charge in connection with the operation
of the Franchised Business.
30. Notwithstanding anything contained herein to the contrary, the
following special stipulations shall be controlling:
a. Paragraph 2.b.(i) hereof is modified by inserting the word
"material" between the words "any" and "covenant" and between the words "any"
and "standard" in the first line thereof.
b. Paragraph 2.b.(iii) hereof is modified by adding at the
end thereof the words "which approval shall not be unreasonably withheld or
delayed".
c. The percentage of Gross Room Revenue to be paid to the
Licensor Marketing Fund pursuant to Paragraph 3.c. shall be four percent (4%)
which percent may be changed by the Board of Directors of LICENSOR in its
discretion, provided that any increases therein shall be limited to increases
reasonably required to cover the cost of providing the services funded by the
Licensor Marketing Fund.
d. In calculating Gross Room Revenue under Paragraph 3.f.
hereof, there shall also be excluded from the receipts described therein
separate charges to guests for food and beverage, room service, telephone
charges, key forfeitures and entertainment, and vending machine receipts.
e. Paragraphs 8.a., 8.b., 8.c. and 8.d. are deleted.
f. Paragraph 9 is deleted.
g. Paragraph 10 is modified by deleting the second sentence
thereof and inserting in lieu thereof the following:
Licensor will indemnify, defend and hold harmless
LICENSEE, to the fullest extent permitted by law,
from and against all losses, liability and expenses
(including reasonable attorney's fees) incurred by
LICENSEE in any action or claim arising from
LICENSEE's proper use of the System and the marks
licensed hereunder alleging that LICENSEE's use of
the System and such marks is an infringement of a
third party's rights to any trade secret, patent,
copyright, trademark, servicemark or trade name.
LICENSEE shall promptly notify LICENSOR in writing
when any such infringement claim or action is
commenced or threatened and LICENSEE shall cooperate
in the defense and resolution of such action or
claim. Any such claim or action may be resolved by
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<PAGE>
LICENSOR requiring that LICENSEE modify its use of
the infringing or allegedly infringing property to
avoid said infringement, so long as such
modification does not materially adversely affect
LICENSEE's operation of the motor hotel which is
licensed hereunder.
h. Paragraph 11 hereof is deleted.
i. Paragraph 27 is deleted. LICENSEE agrees that the transfer
of more than 20% of the currently outstanding equity of LICENSEE, or the
issuance of more than 20% of additional equity in, LICENSEE in either case
without the written consent of LICENSOR, shall be a breach of this Agreement by
LICENSEE permitting the LICENSOR to terminate this Agreement for cause.
j. Paragraph 12.e. hereof is modified by deleting the word
"decalcomania" therefrom.
k. The parties establish the following schedule of liquidated
damages payable by LICENSEE to LICENSOR within 15 days after termination of
this Agreement prior to expiration of the Term by LICENSOR with cause or by
LICENSEE without cause, insofar as actual damages are difficult to predict and
this formula is a reasonable pre-estimate of the actual damages to be suffered
by LICENSOR as a result of premature termination of this Agreement. LICENSEE
shall pay to LICENSOR the product of the aggregate payments due from LICENSEE
pursuant to Paragraph 3.b. (whether or not paid by LICENSEE) during the last
twelve (12) months the LICENSEE was part of the TRAVELODGE System under this
Agreement, multiplied by the "Factor." If the LICENSEE has not been a part of
the TRAVELODGE System under this Agreement for at least twelve (12) months, the
parties agree that liquidated damages shall be calculated by taking the average
of monthly payments due from LICENSEE pursuant to Paragraph 3.b. (whether or
not paid by LICENSEE) under this Agreement times twelve (12), then multiplying
by the Factor. If the termination occurs before the end of the fourth year of
the Term, then the Factor will be five (5). If the termination occurs during
the fifth year of the Term, the Factor will be four (4). If the termination
occurs during the sixth year of the Term, the Factor will be three (3). If the
termination occurs after the sixth year of the Term, the Factor will be two
(2).
l. LICENSEE and any assignee or successor of the original
LICENSEE may assign this Agreement to, the lessee or transferee of fee simple
title to the motor hotel upon thirty (30) days prior written notice to LICENSOR
at any time during the Term when LICENSEE is not in default under this
Agreement without payment of an application, initial or transfer fee by
LICENSEE or the assignee provided that (1) the assignee completes and returns
to LICENSOR at least fifteen (15) days before the transfer of possession or
title, whichever comes first, LICENSOR's standard license applications, (2) the
assignee is reasonably acceptable to LICENSOR, (3) for a period ending on the
seventh anniversary of the date of execution of this Agreement, LICENSEE
remains primarily liable for the timely and full payment of the Licensee's
obligations under this Agreement for the payment of
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liquidated damages in accordance with Paragraph 30.k., and (4) the assignee
assumes this Agreement by writing acceptable to and directly enforceable by
LICENSOR. From and after said seventh anniversary, LICENSEE shall have no
further liability under this subparagraph 1.
m. LICENSEE may terminate this Agreement at any time without
incurring the damages provided in Paragraph 30.k., provided that LICENSEE shall
have entered into a license or franchise agreement with another subsidiary of
HFS Incorporated ("HFS") providing for the operation of the Property as part of
the franchise system owned by said subsidiary, which agreement shall be in the
then current standard form of license or franchise agreement being offered to
prospective licensees or franchisees by said subsidiary in its then current
Uniform Franchise Offering Circular for the state in which the Property is
located. Such agreement shall be modified to include liquidated damages and
assignment provisions substantially the same as Paragraphs 30.k. and 30.1.
hereof, after giving effect to the expiration of the period prior to such
termination of this Agreement, and a term at least equal to the unexpired
portion of the original term of this Agreement. LICENSEE acknowledges that
neither HFS nor any subsidiary of HFS shall be obligated to enter into any
license or franchise agreement with LICENSEE with respect to the Property.
{SIGNATURE PAGE TO FOLLOW}
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IN WITNESS WHEREOF, the undersigned have set their hands and seals as
of the day and year first above written.
FORTE HOTELS, INC.
a California corporation a Delaware corporation
by__________________________ _____________________________
by__________________________ _____________________________
"LICENSOR" "LICENSEE"
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EXHIBIT B
<PAGE>
- -------------------------------------------------------------------------------
---------------------------------------
LICENSE AGREEMENT
---------------------------------------
Between
BEAR ACQUISITION CORP.
and
FORTE HOTELS, INC.
Dated as of January [ ], 1996
- -------------------------------------------------------------------------------
365002.1
<PAGE>
TABLE OF CONTENTS
Page No.
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms....................................... 1
ARTICLE II
LICENSE GRANTED
SECTION 2.1. Grant....................................................... 2
SECTION 2.2. License Fees................................................ 3
SECTION 2.3. Compliance with Obligations................................. 3
SECTION 2.4. Documents................................................... 3
SECTION 2.5. Reservations and Promotion.................................. 3
SECTION 2.6. Third Party Infringement; Protection........................ 4
SECTION 2.7. Usage....................................................... 4
SECTION 2.8. No Use upon Termination..................................... 4
ARTICLE III
TERMINATION
SECTION 3.1. Term........................................................ 5
SECTION 3.2. Other Termination........................................... 5
SECTION 3.3. Effect of Termination....................................... 5
ARTICLE IV
OTHER MATTERS
SECTION 4.1. Rights Reserved, etc........................................ 6
SECTION 4.2. Limited Representations by Licensor......................... 6
SECTION 4.3. Indemnification............................................. 6
SECTION 4.4. Confidential Information.................................... 8
SECTION 4.5. Liquidated Damages.......................................... 8
SECTION 4.6. Continued Use of Trademarks................................. 9
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Expenses.................................................... 9
SECTION 5.2. Notices..................................................... 9
SECTION 5.3. Public Announcements........................................ 10
SECTION 5.4. Headings.................................................... 11
SECTION 5.5. Severability................................................ 11
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SECTION 5.6. No Third Party Beneficiaries................................ 11
SECTION 5.7. Amendment and Waiver........................................ 11
SECTION 5.8. Governing Law............................................... 11
SECTION 5.9. Counterparts................................................ 12
SECTION 5.10. No Transfer, etc............................................ 12
SECTION 5.11. No Agency/Partnership....................................... 12
SCHEDULES
Schedule 1.01(q) The Trademarks
Schedule 2.01 Joint Ventures
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LICENSE AGREEMENT (this "Agreement"), dated as of January
[ ], 1996, between FORTE HOTELS, INC., a Delaware corporation, as Licensee
("Licensee") and BEAR ACQUISITION CORP., a Delaware corporation, as Licensor
("Licensor").
WITNESSETH:
WHEREAS, pursuant to the Agreement Among Purchasers, dated as of
January [ ], 1996, among National Lodging Corp. ("NALC"), Motels of America,
Inc. and Licensor (the "Agreement Among Purchasers"), NALC has agreed to cause
Licensee to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein and other good and valuable consideration, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used in this
Agreement, the following terms shall have the respective meanings set forth
below. Unless the context otherwise requires, other terms used but not
otherwise defined shall have the meanings ascribed to them in the Agreement
Among Purchasers.
(a) "Agreement" has the meaning provided in the preamble to
this Agreement.
(b) "Agreement Among Purchasers" has the meaning provided
in the recitals to this Agreement.
(c) "Co-owner" has the meaning provided in Section 3.02.
(d) "Factor" has the meaning provided in Section 4.05.
(e) "Forte SPV Agreement" has the meaning provided in
Section 2.03:
(f) "Gross Room Revenues" means all receipts derived from the renting,
use or occupancy of guest rooms and meeting rooms in the hotel or motel,
excluding sales taxes or other taxes which may be required by law, to be
collected from guests.
(g) "HFS" has the meaning provided in Section 4.05.
(h) "Indemnified Party" has the meaning provided in
Section 4.03.
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(i) "Joint Venture" has the meaning provided in
Section 2.01.
(j) "Joint Venture Properties" has the meaning provided in
Section 2.01.
(k) "Licensee" has the meaning provided in the preamble to
this Agreement.
(l) "Licensor" has the meaning provided in the preamble to
this Agreement.
(m) "Loss" has the meaning provided in Section 4.03.
(n) "NALC" has the meaning provided in the recitals to this
Agreement.
(o) "Territory" means Canada, Mexico, the Commonwealth of
Puerto Rico and the United States of America.
(p) "Third Party Claims" has the meaning provided in
Section 4.03.
(q) "Trademarks" means the trademarks, service marks and logos listed
in Schedule 1.01(q), attached hereto and made a part hereof, including, without
limitation, the registrations and applications for registration listed in
Schedule 1.01(q).
(r) "Travelodge License Agreement" has the meaning provided
in Section 2.05.
ARTICLE II
LICENSE GRANTED
SECTION 2.1. Grant. (a) Subject to the terms and conditions
hereof, Licensor hereby grants to Licensee a non-exclusive, non-transferable
right and license to continue to use the Trademarks within the Territory in
connection with hotel and motel services and related goods and services for the
hotels and motels listed on Schedule 2.01 (the "Joint Venture Properties"),
each individually a "Joint Venture Property", and the hotel or motel business
operated at each such Joint Venture Property being a "Joint Venture"), to the
extent of Licensor's rights in the Trademarks, subject always to compliance
with the terms of this Agreement.
(b) Licensor further grants to Licensee a
non-exclusive, non-transferable right and license to continue to
use the Trademarks outside the Territory, to the extent of
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<PAGE>
Licensor's rights in the Trademarks, solely to advertise, promote and make
reservations for the Joint Venture Properties.
(c) The right and license to use the Trademarks granted in
this Section 2.01 shall apply only to the Joint Venture Properties and for the
current term, or as extended pursuant to Section 3.04(a) of the Agreement Among
Purchasers, of the Joint Venture agreement in respect of such property. There
shall be no expansion or revision of the list of Joint Venture Properties
contained in Schedule 2.01 except that hotels and motels may be deleted from
the list upon termination of this Agreement with respect to such Joint Venture
Property.
SECTION 2.2. License Fees. (a) For each Joint Venture,
Licensee shall, within five (5) days after the end of each calendar month
during the term of this Agreement, pay to Licensor a royalty fee equal to four
percent (4%) of Licensee's percentage ownership interest in the Joint Venture
Property multiplied by the Gross Room Revenues of the Joint Venture. This
royalty fee is in consideration of Licensee's use of the Trademarks and is
fully earned each day such Trademarks are used by Licensee, and is not subject
to any counter-claims or setoffs of any nature.
(b) In addition, in consideration of the use and benefit of
the marketing and reservation system owned and operated by Licensor, Licensee
shall pay, or cause each Joint Venture to pay, to Licensor a fee equal to the
lesser of (i) the percentage of Gross Room Revenues currently being paid by
such Joint Venture to Licensee for such services, subject to the right of
Licensor to increase such fee under the same circumstances as Licensee may
currently raise such fee pursuant to the respective joint venture agreement and
(ii) four and one half percent (4.5%) of Gross Room Revenues of such Joint
Venture, within five (5) days after the end of each calendar month.
SECTION 2.3. Compliance with Obligations. Licensee hereby
agrees to abide by all obligations of Licensor in the Territory pursuant to the
trademark assignment agreement dated the date hereof between Licensor and Forte
USA, Inc., a Delaware corporation, relating to the Trademarks and all
attachments thereto.
SECTION 2.4. Documents. The parties agree to cooperate in
recording the licenses granted herein where appropriate and will enter into
such further agreements and execute such documents as either of them may
reasonably request as necessary for the purposes of recordation and enforcement
of the rights granted herein.
SECTION 2.5. Reservations and Promotion. The parties shall
cooperate in advertising and promoting their hotels and
-3-
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<PAGE>
motels, and in taking reservations for each other's hotels and motels, on terms
substantially similar to those contained in the form of Travelodge License
Agreement ("Travelodge License Agreement"), a copy of which has been supplied
to Licensee, or on such other terms as may be mutually agreed from time to
time.
SECTION 2.6. Third Party Infringement; Protection. Licensee
shall immediately notify Licensor of any possible infringement of any of the
Trademarks which may come to Licensee's attention and Licensee agrees to
cooperate fully with Licensor at its own expense in the prosecution of any
infringers. Licensee further agrees to do any and all things (including, but
not limited to, executing any relevant documents or instruments) which are
deemed necessary or appropriate by Licensor in order to secure, protect and/or
preserve Licensor's rights to the Trademarks. Without limiting the generality
of the foregoing, Licensee agrees to take any actions required to be taken by
the franchisee under the terms of the Travelodge License Agreement.
SECTION 2.7. Usage. Licensee shall not, in any manner,
represent that it has any ownership in the Trademarks or in any registrations
thereof, but may, during the term hereof, represent that it is a "licensee" or
"official licensee" hereunder. Licensee shall not register or attempt to
register any of the Trademarks in its own name or that of any other person or
entity unless specifically authorized in writing by Licensor to do so. Licensee
shall not use, and shall use its best efforts to keep others from using, the
Trademarks in any manner likely to cause confusion or doubt in the mind of the
public. Any and all uses of the Trademarks by Licensee shall inure to the
benefit of Licensor, which shall be entitled to and own all rights, interests
and benefits created by such uses, including, but not limited to, Trademark
goodwill. Licensee shall use the Trademarks in compliance with the standards
and rules for franchisees contained in the Travelodge License Agreement or as
otherwise promulgated from time to time by Licensor in respect of Travelodge or
Thriftlodge properties.
SECTION 2.8. No Use upon Termination. Upon expiration or
termination of this Agreement for any reason, none of Licensee, any Joint
Venture or any co-owner of any Joint Venture shall use at any time, on any
products or otherwise, any word or term, or any symbol or any label having any
resemblance to the Trademarks.
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<PAGE>
ARTICLE III
TERMINATION
SECTION 3.1. Term. With respect to any and all Trademarks,
this Agreement shall continue in force until the earliest of:
(a) its expiration or earlier termination pursuant to the terms
hereof, including, but not limited to, breach of this Agreement,
including, with respect to any Joint Venture, any breach of the
standards and rules for franchisees contained in the Travelodge
License Agreement or as otherwise promulgated from time to time by
Licensor in respect of Travelodge or Thriftlodge properties;
(b) twenty (20) years from the date of this Agreement; or
(c) in respect of any Joint Venture, upon the later of (i) ten
business days following (A) delivery of written notice by Licensee to
Licensor of termination in respect of such Joint Venture or (B) the
dissolution of such Joint Venture and (ii) payment by Licensee to
Licensor of liquidated damages in accordance with Section 4.05(a) in
respect of such Joint Venture.
SECTION 3.2. Other Termination. Notwithstanding anything to
the contrary herein, Licensor may terminate this Agreement forthwith, or at any
time thereafter, by notice to Licensee in the event that (i) Licensee shall go
into liquidation, (ii) a receiver or trustee shall be appointed for all or a
portion of the property or estate of Licensee, (iii) Licensee shall be adjudged
bankrupt or insolvent, (iv) Licensor shall file a voluntary petition in
bankruptcy or insolvency, (v) a petition in bankruptcy or insolvency shall be
filed against Licensee and not dismissed within ninety (90) days, or (vi)
Licensee makes an assignment for the benefit of its creditors (and whether any
of the aforesaid events be the outcome of the voluntary act of Licensee or
otherwise). Licensee shall give Licensor prompt written notice of the
occurrence of any of the event(s) described in the preceding sentence.
SECTION 3.3. Effect of Termination. (a) Upon any termination
of this Agreement in respect of any Joint Venture Property, this instrument
forthwith constitutes an assignment to Licensor of all of Licensee's rights in
and to the Trademarks, together with the goodwill of the business then
symbolized thereby insofar as Licensee and said Joint Venture Property or Joint
Venture Properties are concerned, and Licensee will, and will cause the Joint
Venture to, immediately discontinue all use of the Trademarks and shall
immediately obliterate the words "Travelodge", "Thriftlodge", "Sleepy Bear" and
the design of
-5-
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<PAGE>
"Sleepy Bear" from Licensee's signs and from any and all places
and materials whatsoever.
(b) If Licensee or the Joint Venture shall fail to obliterate
any such words within fifteen (15) days after written demand, then Licensor by
its duly authorized agents may enter upon the premises of Licensee to
accomplish said results without being guilty of trespass or any other tort, and
may make or cause to be made such changes at the expense of Licensee, which
Licensee agrees to pay on demand. Licensor and Licensee further agree that it
would be impractical or extremely difficult to fix the actual damage sustained
by Licensor for Licensee's use of the Trademarks, and Licensee agrees,
therefore, to pay to Licensor as liquidated damages Five Hundred Dollars ($500)
a day for each day's unauthorized use thereof. Licensee also agrees that
Licensor will suffer great and irreparable injury from any use by Licensee
after the termination of this Agreement of the Trademarks and that injunctive
relief will be the only fair, adequate and complete remedy available to
Licensor. Accordingly, Licensee hereby consents to the entry of an injunction
in favor of Licensor, permanently enjoining further use of the Trademarks
subsequent to any such termination of this Agreement.
ARTICLE IV
OTHER MATTERS
SECTION 4.1. Rights Reserved, etc. All rights in the
Trademarks other than those specifically granted herein are reserved by
Licensor for its own use and benefit. Upon expiration or termination of this
Agreement or upon expiration or termination of this Agreement in respect of a
Joint Venture Property for any reason whatsoever, all rights in the Trademarks
licensed hereunder shall automatically revert to Licensor. Licensor shall, at
any time or from time to time (whether during or after the term of this
Agreement), execute any documents reasonably required by Licensor in such
connection.
SECTION 4.2. Limited Representations by Licensor. Licensor
makes no representations or warranties to Licensor with regard to the
Trademarks (or any matter related thereto) other than as specifically expressed
herein.
SECTION 4.3. Indemnification. (a) Licensee hereby agrees to
indemnity and hold harmless on an after-tax basis Licensor and its affiliates,
officers, directors, employees, agents, successors and assigns (an "Indemnified
Party") for any and all liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' and consultants' fees and expenses) actually suffered or
incurred by an Indemnified Party (including,
-6-
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<PAGE>
without limitation, any action brought or otherwise initiated by an Indemnified
Party), net of any resulting tax benefit and net of any refund or reimbursement
of any portion of such amount including, without limitation, reimbursement by
way of insurance or third party indemnification (a "Loss"), arising out of or
resulting from:
(i) Licensee's use of the Trademarks;
(ii) the breach of any covenant or agreement by
Licensee contained in this Agreement; or
(iii) the ownership or operation of any Joint Venture or
Joint Venture Property.
(b) An Indemnified Party seeking indemnification under this
Section 4.03 shall give Licensee notice of any matter that such Indemnified
Party has determined has given or could give rise to a right of indemnification
under this Agreement, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and liabilities of Licensee under this Section 4.03
with respect to Losses arising from claims of any third party which are subject
to the indemnification provided for in this Section 4.03 ("Third Party Claims")
shall be governed by the following additional terms and conditions: if an
Indemnified Party shall receive notice of any Third Party Claim, the
Indemnified Party shall give Licensee notice of such Third Party Claim within
30 days of the receipt by the Indemnified Party of such notice; provided,
however, that the failure to provide such notice shall not release Licensee
from any of its obligations under this Section 4.03 except to the extent
Licensee is materially prejudiced by such failure and shall not relieve
Licensee from any other obligation or liability that it may have to any
Indemnified Party otherwise than under this Section 4.03. If Licensee
acknowledges in writing its obligation to indemnify the Indemnified Party
hereunder against any Losses that may result from such Third Party Claim, then
Licensee shall be entitled to assume and control the defense of such Third
Party Claim at its expense and through counsel of its choice if it gives notice
of its intention to do so to the Indemnified Party within five days of the
receipt of such notice from the Indemnified Party; provided, however, that if
there exists or is reasonably likely to exist a conflict of interest that would
make it inappropriate in the judgment of the Indemnified Party for the same
counsel to represent both the Indemnified Party and Licensee, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of Licensee. In the event Licensee exercises the right to undertake
any such defense against any such Third Party
-7-
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<PAGE>
Claim as provided above, the Indemnified Party shall cooperate with Licensee in
such defense and make available to Licensee, at Licensee's expense, all
witnesses, pertinent records, materials and information in the Indemnified
Party's possession or under the Indemnified Party's control relating thereto as
is reasonably required by Licensee. Similarly, in the event the Indemnified
Party is, directly or indirectly, conducting the defense against any such Third
Party Claim, Licensee shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party, at the Licensee's expense,
all such witnesses, records, materials and information in the Licensee's
possession or under the Licensee's control relating thereto as is reasonably
required by the Indemnified Party. No such Third Party Claim may be settled by
Licensee without the prior written consent of the Indemnified Party.
SECTION 4.4. Confidential Information. Any information
disclosed to Licensee under this Agreement shall be held as confidential by
Licensee and shall be used only as allowed under this Agreement, except for
information which is or becomes publicly known through no fault of Licensee or
becomes published in a patent or other written publication.
SECTION 4.5. Liquidated Damages. (a) The parties establish
the following schedule of liquidated damages payable by Licensee to Licensor
within fifteen (15) days after termination of this Agreement in respect of any
Joint Venture Property prior to the end of the twentieth year following the
date of this Agreement with or without cause by either party, insofar as actual
damages are difficult to predict and this formula is a reasonable pre-estimate
of the actual damages to be suffered by Licensor as a result of premature
termination of this Agreement. Licensee shall pay to Licensor the product of
the aggregate payments due from Licensee pursuant to Section 2.02(a) (whether
or not paid by Licensee) during the last twelve (12) months multiplied by the
Factor (as hereinafter defined). If this Agreement has not been in effect for
at least twelve (12) months, the parties agree that liquidated damages shall be
calculated by taking the average of monthly payments due from Licensee pursuant
to Section 2.02(a) (whether or not paid by Licensee) under this Agreement times
twelve (12), then multiplying by the Factor. If the termination occurs before
the end of the fourth year following the date of this Agreement, then the
Factor will be five (5). If the termination occurs during the fifth year
following the date of this Agreement, the Factor will be four (4). If the
termination occurs during the sixth year following the date of this Agreement,
the Factor will be three (3). If the termination occurs after the sixth year
following the date of this Agreement, but before the end of the twentieth year
following the date of this Agreement, the Factor will be two (2).
-8-
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<PAGE>
(b) Licensee may terminate this Agreement at any time in
respect of any Joint Venture without incurring the damages provided in
paragraph (a), provided, however, that Licensee shall have entered into a
license or franchise agreement with another subsidiary of HFS Incorporated
("HFS") providing for the operation of the relevant Joint Venture Property as
part of the franchise system owned by said subsidiary, which agreement shall be
in the then current standard form of license or franchise agreement being
offered to prospective licensees or franchisees by said subsidiary in its then
current Uniform Franchise Offering Circular for the state in which the relevant
Joint Venture Property is located. Such agreement shall be modified to include
liquidated damages and assignment provisions substantially the same as
paragraph (a) hereof, after giving effect to the expiration of the period prior
to such termination of this Agreement in respect of such Joint Venture, and a
term at least equal to the unexpired portion of the original term of this
Agreement in respect of such Joint Venture. Licensee acknowledges that neither
HFS nor any subsidiary of HFS shall be obligated to enter into any license or
franchise agreement with Licensee with respect to the relevant Joint Venture
Property.
SECTION 4.6. Continued Use of Trademarks. During the term of
this Agreement, Licensee will not discontinue the operation of any Joint
Venture Property under the Trademarks, without the prior written consent of
Licensor, unless such Joint Venture Property has dissolved or terminated its
joint venture agreement.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Expenses. Except as otherwise provided in
Section 4.03, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses.
SECTION 5.2. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by telecopy or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 6.02):
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<PAGE>
(a) if to Licensee:
Forte Hotels, Inc.
c/o National Lodging Corp.
339 Jefferson Road
Parsippany, NJ 07054-0278
Telephone: (201) 952-8472
Telecopy: (201) 428-3260
Attention: James Buckman
with copies to:
Battle Fowler LLP
75 East 55th Street
New York, NY 10022
Telephone: (212) 856-7100
Telecopy: (212) 856-7808
Attention: Martin Edelman
and
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telephone: (212) 848-4000
Telecopy: (212) 948-7179
Attention: Alfred Ross
(b) if to Licensor:
Bear Acquisition Corp.
c/o HFS Incorporated
339 Jefferson Road
Parsippany, NJ 07054-0278
Telephone: (201) 952-8472
Telecopy: (201) 428-3260
Attention: James Buckman
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telephone: (212) 848-4000
Telecopy: (212) 848-7179
Attention: Alfred Ross
SECTION 5.3. Public Announcements. Except as may be required
by the federal securities laws or the rules of any listing agreement with a
national securities exchange, no party to this Agreement shall make, or cause
to be made, any press release or public announcement or make any other
disclosure in
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<PAGE>
respect of this Agreement or the transactions contemplated hereby without the
prior written consent of the other parties hereto, and the parties shall
cooperate as to the timing and contents of any such press release, public
announcement or other disclosure.
SECTION 5.4. Headings. The descriptive headings contained in
this Agreement are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 5.5. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 5.6. No Third Party Beneficiaries. This Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their Affiliates, and nothing herein, express or implied, is intended to or
shall confer upon any other person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 5.7. Amendment and Waiver. This Agreement may not be
amended or modified except by an instrument in writing signed by, or on behalf
of, the parties hereto. Any party hereto may (i) extend the time for the
performance of any obligation or other act of any other party hereto, (ii)
waive any inaccuracy in the representations and warranties of any other party
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any agreement of any other party or any condition contained
herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or each of the parties to be bound
thereby.
SECTION 5.8. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any New York state or federal court sitting in the
Borough of Manhattan in the City of New York. To the extent permitted by law,
the parties hereto expressly consent to the jurisdiction of such courts, agree
to venue in such courts and hereby waive any
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<PAGE>
defense or claim of forum non conveniens they may have with respect to any such
action or proceeding brought.
SECTION 5.9. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 5.10. No Transfer, etc. This Agreement and the rights
hereunder shall not be assignable or transferable in whole or in part by
Licensee, either voluntarily or by operation of law or otherwise, without the
prior written consent of Licensor, and Licensee shall not attempt to assign,
transfer, sub-license, pledge or otherwise dispose of this Agreement or of any
of its rights or obligations hereunder without the prior written consent of
Licensor. Any attempt by License to make any such disposition without the prior
written consent of Licensor shall be void and may be treated by Licensor as
grounds for termination of this Agreement. In the event of assignment of this
Agreement by Licensee, Licensee will remain liable for all obligations of the
assignee until the seventh anniversary of the Closing.
SECTION 5.11. No Agency/Partnership. Nothing in this
Agreement shall be construed so as to constitute either Party hereto the agent
or partner of the other. On no account may a Party hereto create (or hold
itself out to third parties as being able to create) any binding obligation on
behalf of the other without the prior written consent of the other.
IN WITNESS WHEREOF, Licensor and Licensee have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
BEAR ACQUISITION CORP.,
as Licensor
By: __________________________
Name:
Title:
FORTE HOTELS, INC.,
as Licensee
By: __________________________
Name:
Title:
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<PAGE>
SCHEDULE 1.01(q): TRADEMARKS
<TABLE>
TRADEMARK "SLEEPY BEAR"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Reg.
Trademark Reg. No. Date Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------
In Canada
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SLEEPY 270,706 07/02/82 Pens, pencils, postcards, placemats,
drinking glasses made of glass or plastic, ashtrays, shower
caps, ice buckets, shoe cloths and match books. Hotel and
motel services, namely services rendered in providing room
and meals by hotels and motels, accommodation services;
restaurant services; consulting services in connection
with the operation of hotels and motels of others; charge
account services, namely extending credit to customers;
and services in training personnel.
BEAR 270,705 07/02/82 Pens, pencils, postcards, placemats,
SILHOUETTE drinking glasses made of glass or
Design plastic, ashtrays, shower caps, ice buckets, shoe clothes
and match books. Hotel and motel services, namely services
rendered in providing room and meals by hotels and motels;
accommodation services; restaurant services; consulting
services in connection with the operation of hotels and
motels of others; charge account services, namely
extending credit to customers; and services in training
personnel.
</TABLE>
NYL3/145199.1
<PAGE>
2
<TABLE>
TRADEMARK "SLEEPY BEAR"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Reg.
Trademark Reg. No. Date Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
In Mexico
- -----------------------------------------------------------------------------------------------------------------------------
SLEEPY BEAR 357,297 12/23/88 Lodging, inns and food through hotels,
inns and tourist camps, tourist homes,
inn-farms (farming houses for tourists),
and rest and convalescence houses.
Restaurants, self-service restaurants,
canteens, night clubs and bars.
- -----------------------------------------------------------------------------------------------------------------------------
BEAR Application Filing Date Hotel, motel, resort hotel, restaurant,
SILHOUETTE 180,065 10/07/93 bar, catering and hotel/motel
Design reservation services.
- -----------------------------------------------------------------------------------------------------------------------------
BEAR Application Filing Date Hotel directories, maps, brochures,
SILHOUETTE 180,066 10/07/93 posters, newsletters, magazines,
Design newspapers, note pads, message pads,
door hangers, pens, pencils, drinking glass covers,
and toilet bowl covers.
- -----------------------------------------------------------------------------------------------------------------------------
In United States
- -----------------------------------------------------------------------------------------------------------------------------
SLEEPY with 848,208 04/30/68 Motor hotel directories, motor hotel
SLEEPY BEAR services and performing a charge
Design account service, namely extending
credit to customers of applicant.
- -----------------------------------------------------------------------------------------------------------------------------
SLEEPY BEAR 1,868,761 12/20/94 Hotel and Motel services.
- -----------------------------------------------------------------------------------------------------------------------------
SLEEPY BEAR 1,895,437 05/23/95 Providing a children's club in
CLUB connection with hotel and motel
services.
- -----------------------------------------------------------------------------------------------------------------------------
BEAR 1,001,682 01/14/75 Hotel, motel and restaurant services.
SILHOUETTE
- -----------------------------------------------------------------------------------------------------------------------------
BEAR 1,006,905 03/18/75 Paper products, namely stationery,
SILHOUETTE postcards, placemats, and advertising
Design brochures and leaflets.
</TABLE>
NYL3/145199.1
<PAGE>
3
<TABLE>
TRADEMARK "SLEEPY BEAR"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Reg.
Trademark Reg. No. Date Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
BEAR Application Filing Date Men's, women's and children's
SILHOUETTE 74/439,019 09/23/93 clothing, namely bandanas, head
bands, neck bands, sweat bands, wrist bands, blazers,
blouses, bottoms, boxer shorts, cloth diapers for infants,
raincoats, coveralls, dresses, footwear, golf shirts,
nightgowns, halloween costumes, hats, head wear, infant
wear, wind resistant jackets, knit shirts, loungewear,
mittens, mufflers, neckerchiefs, neckties, night shirts,
pajamas, sweat pants, polo shirts, robes, scarves, sport
shirts, undershirts, bermuda shorts, boxer shorts, gym
shorts, sweat shirts, sweat shorts, shower caps,
sleepwear, slippers, sneakers, socks, bathing suits, gym
suits, jogging suits, play suits, sweat suits, bathing
trunks, swim trunks, uniforms, athletic uniforms, sun
visors and warm-up suits.
</TABLE>
NYL3/145199.1
<PAGE>
4
<TABLE>
TRADEMARK "SLEEPY BEAR"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Reg.
Trademark Reg. No. Date Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
"KEEP ON Application Application Soaps and cosmetics, including
TRUCKING" 74-647,856 Dt. 03/17/95 shampoos, lotions and creams; clocks
POSE BEAR and watches, watch straps, jewelry,
Design pins, key-chains; paper goods and
(SLEEPY BEAR printed matter, including stationery;
Character Design) accommodation and services
directories, advertising brochures and leaflets, paper and
plastic bags, paper bands for toilet seats, pens, pencils,
drinking mugs, drinking glasses, ice buckets, fabrics,
including bed linen and bed covers, table linens, wall
hangings made of fabric, towels, clothing, headwear, and
footwear for infants, children and adults, including
bandanas, headbands, neckbands, sweatbands, wristbands,
blazers, blouses, bottoms, boxer shorts, cloth diapers,
raincoats and rainwear, coveralls, dresses, footwear, golf
shirts, nightgowns, pajamas, halloween costumes, hats,
headwear, infantwear, jackets (wind resistant), knit
shirts, loungewear, mittens, mufflers, neckerchiefs,
neckties, sweatpants, robes, scarves, knitshirts,
nightshirts, poloshirts, sweatshirts, undershirts, bermuda
shorts, gym shorts, sweat shorts, shower caps, sleepwear,
sleepers, slippers, sneakers, socks, bathing suits, gym
suits, jogging suits, play suits, sweatsuits, warm-up
suits, bathing trunks, swimtrunks, uniforms, athletic
uniforms, visors and sun visors; posters and wall hangings
made of paper materials; games, playthings and sporting
articles, including toys, dolls, inflatable dolls and golf
balls; ashtrays and matches; hotel and motel
</TABLE>
NYL3/145199.1
<PAGE>
5
<TABLE>
TRADEMARK "SLEEPY BEAR"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Reg.
Trademark Reg. No. Date Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
management services, convention services, business
consultation services, business management services, and
travel and convention organizing services.
=======================================
</TABLE>
NYL3/145199.1
<PAGE>
6
<TABLE>
TRADEMARK "TRAVELODGE"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Reg.
Trademark Reg. No. Date Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
In Canada
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 117,776 04/29/60 Lodging services.
Logo
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 352,092 02/24/89 Hotel, motel, lodging, restaurant,
catering services, and related
management services.
- -----------------------------------------------------------------------------------------------------------------------------
VISCOUNT 291,703 06/8/84 Hotel, motel and restaurant services.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 166/42384- 03/17/95 Lodging supplies, namely towels,
206543 blankets and soap.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 294,589 08/31/84 Hotel, motel and restaurant services.
VISCOUNT
- -----------------------------------------------------------------------------------------------------------------------------
In Mexico
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 405,526 02/11/92 Beer, mineral and aerated waters and
other non-alcoholic drinks, fruit drinks
and fruit juices, syrups and other
preparations for making beverages.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 405,717 02/12/92 Paper, cardboard and goods made from
these materials not included in other
classes; printed matter; book binding
material; photographs; stationery;
adhesives for stationery or household
purposes; artists' materials; paint
brushes; typewriters and office
requisites (except furniture);
instructional and teaching material
(except apparatus); plastic materials for
packaging (not included in other
classes); playing cards; printers' type;
and printing blocks.
</TABLE>
NYL3/145199.1
<PAGE>
7
<TABLE>
TRADEMARK "TRAVELODGE"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Reg.
Trademark Reg. No. Date Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 405,167 02/07/92 Coffee, tea, cocoa, sugar, rice,
tapioca, sago, artificial coffee, flour
and preparations made from cereals,
bread, pastry and confectionery, ices,
honey, treacle, yeast, baking powder,
salt, mustard, vinegar, sauces (except
salad dressings), spices and ice.
- -----------------------------------------------------------------------------------------------------------------------------
In United States
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 1,474,602 01/26/88 Motor hotel services.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 1,869,185 12/27/94 Hotel, motel, resort hotel, restaurant,
catering and hotel/motel reservation
services. Toilet soap, hair shampoo,
hand lotion, and hair conditioner.
Pens, stationery, envelopes, bags for
the disposal of feminine hygiene
products, paper drinking-glass caps,
note pads, paper placemats, hotel
directories, comment cards,
guestbooks, stationery portfolios,
printed paper signs hung from
doorknobs, tent cards, paper name
tags, brochures regarding personal
security, business cards, paper toilet-
seat bands, and trash bags. Drinking
glasses, ashtrays not of precious metal,
and matches.
</TABLE>
NYL3/145199.1
<PAGE>
8
<TABLE>
TRADEMARK "TRAVELODGE"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Reg.
Trademark Reg. No. Date Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 1,879,457 02/21/95 Toilet soap, hair shampoo, hand lotion
and Design and hair conditioner. Pens, stationery, envelopes, bags
for the disposal of feminine hygiene products, paper
drinking-glass caps, note pads, paper placemats, hotel
directories, comment cards, guestbooks, stationery
portfolios, printed paper signs hung from doorknobs, tent
cards, paper name tags, brochures regarding personal
security, business cards, paper toilet-seat bands, and
trash bags. Drinking glasses, ashtrays not of precious
metal, and matches.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 1,868,724 12/20/94 Hotel, motel, resort hotel
restaurant, and Design catering and hotel/motel
reservation services.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 1,210,114 09/21/82 Hotel and motel services.
BARGAIN BREAK WEEKEND
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE 1,213,615 10/19/82 Hotel and motel services featuring
PREFERRED special rates and benefits
TRAVELLER
=============================================================================================================================
</TABLE>
NYL3/145199.1
<PAGE>
9
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
TRADEMARK "THRIFTLODGE"
- -----------------------------------------------------------------------------------------------------------------------------
Trademark Reg. No. Reg. Date Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------
In Mexico
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
THRIFTLODGE 363,997 02/27/89 Hotel, motel and restaurant services.
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
In United States
- -----------------------------------------------------------------------------------------------------------------------------
THRIFTLODGE 1,539,812 05/16/89 Motel services.
- -----------------------------------------------------------------------------------------------------------------------------
=============================================================================================================================
</TABLE>
NYL3/145199.1
<PAGE>
SCHEDULE 2.01: JOINT VENTURES
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Date Joint Venture Partner Property
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. 1/24/86 Charlotte L. Mattinson Trustee, Mattinson San Antonio Alamo
Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
2. 3/14/83 Leroy G. Clark Atlanta Central
- ------------------------------------------------------------------------------------------------------------------------------
3. 6/12/90 Antoni Trzaska; Teresa Trzaska; Harry Ashtabula
Krieger; Lillian F. Epstein; Judith A.
Epstein Brown; Norman D. Epstein; and
Burnett and Bertha Hendryx, Co-Trustees,
the Hendryx Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
4. 8/2/66 Bertil Hanson; Gregory Lawrence Johnson, Chicago O'Hare
Trustee of the Gregory Lawrence Johnson
Trust and The John William Johnson Trust;
and Gary L. Laughton and Evelyn M.
Laughton, as Trustees for The Laughton
Family Revocable Living Trust dated
6/29/90
- ------------------------------------------------------------------------------------------------------------------------------
5. 10/30/67 RST, Inc. Lancaster
- ------------------------------------------------------------------------------------------------------------------------------
6. 12/19/90 S. Ahluwalia Athens, Alabama Thriftlodge
- ------------------------------------------------------------------------------------------------------------------------------
7. 2/6/63 HAD Inc. Natick
- ------------------------------------------------------------------------------------------------------------------------------
8. 4/15/80 Grow Mountain Corp. Ocala
- ------------------------------------------------------------------------------------------------------------------------------
9. 11/1/82 The Maximuke Co.; William Howard and Cincinnati
Diane L. Waite; and Virginia N. Webb
- ------------------------------------------------------------------------------------------------------------------------------
10. 7/24/84 Mark Pitre; Harold P. Chastnat and Evelyn Lafayette Center
Chastnat
- ------------------------------------------------------------------------------------------------------------------------------
11. 1/28/72 Marco, a Pennsylvania general partnership Chambersburg
- ------------------------------------------------------------------------------------------------------------------------------
12. 1/30/91 Harrisburg, Inc. Lake Park
- ------------------------------------------------------------------------------------------------------------------------------
13. 7/27/72 Lortola, Inc. Quincy
- ------------------------------------------------------------------------------------------------------------------------------
14. 6/11/70 Alfred J. LeCocq and Sandra S. LeCocq; Zanesville Thriftlodge
Frederick J. Grant III, as Trustee under
Declaration of Trust by Ethel Weller
Curphey; John M. Curphey; and William
M. Curphey, Jr.
- ------------------------------------------------------------------------------------------------------------------------------
15. 2/5/75 Evelyn Ringquist Alexandria
</TABLE>
NYL3/145204.1
<PAGE>
2
<TABLE>
<CAPTION>
Date Joint Venture Partner Property
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
16. 6/16/94 Roger A. Davis; Virginia Davis Mason City Thriftlodge
- ------------------------------------------------------------------------------------------------------------------------------
17. 3/27/62 Montgomery Motel, Inc. Louisville
- ------------------------------------------------------------------------------------------------------------------------------
18. 10/1/93 Nancy S. Juneby Lawrence*
- ------------------------------------------------------------------------------------------------------------------------------
19. 7/18/77 Richard E. Pruehs South Sioux City
- ------------------------------------------------------------------------------------------------------------------------------
20. 6/29/93 Harshad Patel Bedford
- ------------------------------------------------------------------------------------------------------------------------------
21. 12/15/78 Arthur T. Bach; Cecilia B. Bach; Gainesville (Gainesville
Willoughby Cox, Jr. and Barbara D. Cox; Lodge)
Kathleen Gale McBroom; Betty Jane Orton
- ------------------------------------------------------------------------------------------------------------------------------
22. 12/19/83 Ronald J. Grace; Artex Development Co. Sarasota Thriftlodge
- ------------------------------------------------------------------------------------------------------------------------------
23. 3/16/87 Sara-Myers, Inc. Fort Myers
- ------------------------------------------------------------------------------------------------------------------------------
24. 12/15/69 Angeline Kapelak; Gundlach's Florida Clearwater
Properties, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
25. 12/23/84 Lucille M. Bonewitz; V. Michael Bonewitz; Terre Haute Thriftlodge
Josette M. Bonewitz
- ------------------------------------------------------------------------------------------------------------------------------
26. 1/12/68 William R. Webb; Virginia E. Webb; The Utica
Stille & Duhlmeier Company
- ------------------------------------------------------------------------------------------------------------------------------
27. 12/13/77 Margaret M. Hurley Trust Seattle Downtown
- ------------------------------------------------------------------------------------------------------------------------------
28. 9/10/57 Sandra A. Brown, Trustee of the Brown Las Vegas Strip
Family Living Trust; Deborah D. Brown;
Jeanette Z. Foushee; James Zurcher, Jr.;
LaFond Family Trust; Robert E. LaFond;
Laura Belle Kelch, Trustee of the Kelch
Family Trust; Marilyn Gubler, Trustee of
the Marilyn Gubler Trust; Robert M. Kelch
- --------
* The joint venture agreement was not executed by the parties. The parties are currently acting
in accordance with the terms thereof.
</TABLE>
NYL3/145204.1
<PAGE>
3
<TABLE>
<CAPTION>
Date Joint Venture Partner Property
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
29. 10/23/93 David and Thelma Schiller Living Trust; San Francisco Central
Estate of Frances M. Rose; Estate of
Marguerite A. Loyton, Margene A. Lorton,
Executor; Kenneth Gordon Rose; Lesley
Rubinstein; Gregory Rubinstein; George S.
& Barbara A. Ritzau, Co-Trustees of the
Ritzau Family Trust; Kenneth Gordon
Rose, Trustee of the June Rubinstein Trust;
Joan L. Van de Sande, Trustee of Joan L.
Van de Sande Trust; Brett William Van de
Sande; Carole M. Phillips; Kurt Steven Van
de Sande; Benjamin Byung-Sik Yuh &
Barbara B. Yuh
- ------------------------------------------------------------------------------------------------------------------------------
30. 6/28/83 Edward A. Tudor; Rachel S. Knopp Trust, Space Needle
under Declaration of Trust dated 9/4/87,
Henry Straub, Jr., Trustee; Jeanette Z.
Foushee; Rosalie M. Tudor; Safter, Inc.;
James E. Zurcher, Jr.; La Fond Family
Trust, Eugene La Fond, Trustee; Robert E.
La Fond
- ------------------------------------------------------------------------------------------------------------------------------
31. 9/1/61 Nancy Bowker; Elizabeth M. Smith, as Monterey
Sole Trustee of the Elizabeth Moies Smith
Trust dated 9/11/87; Craig Smith
- ------------------------------------------------------------------------------------------------------------------------------
32. 4/9/87 Benjamin Byung-Sik Yuh and Barbara B. San Francisco Downtown
Yuh; Borel Bank and Trust Company,
Successor Trustee of the Frances G. Rose
Trust; Kenneth Gordon Rose; Estate of
Marguerite A. Lorton, Margene A. Lorton,
Executor; Barbara Lorton; June Rubinstein
Trust, Kenneth Rose, Trustee; Lesley
Rubinstein; Gregory Rubinstein; Joan L.
Van de Sande, Trustee of Joan L. Van de
Sande Trust; Brett W. Van de Sande;
Carole Phillips; Kurt S. Van de Sande;
George S. and Barbara A. Ritzau, Co-
Trustees of the Ritzau Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
33. 9/2/77 Carl J. Pendleton; Majorie E. Pendleton; Tahoe City
Nellys F. Webber
</TABLE>
NYL3/145204.1
<PAGE>
4
<TABLE>
<CAPTION>
Date Joint Venture Partner Property
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
34. 5/4/61 Pearson Radco, Inc. Salt Lake City Center
(formerly Salt Lake-
Downtown)
- ------------------------------------------------------------------------------------------------------------------------------
35. 11/9/89 Harold Edwin Ross Nesbitt, Jr., Trustee La Jolla Beach
under declaration of trust dated 10/12/89;
Cecil A. Smith and Caroline Smith,
Trustees of the Caroline and Cecil A. Smith
Family Trust dated 5/15/87
- ------------------------------------------------------------------------------------------------------------------------------
36. 1/2/62 Harold Edwin Ross Nesbitt, Jr.; Ronald La Jolla Cove
Fearing; Gladys Fearing; Mary McDonnell
- ------------------------------------------------------------------------------------------------------------------------------
37. 5/25/88 Frances G. Rose Trust, Wells Fargo Bank, San Francisco Ghiradelli
Successor Trustee; Kenneth Gordon Rose; Square
Estate of June Rubinstein; Lesley
Rubinstein; Gregory Rubinstein
- ------------------------------------------------------------------------------------------------------------------------------
38. 5/26/71 Barry W. Ongerth; Daniel P. Hagmaier and San Francisco Airport South
Elsie G. Hagmaier, as Trustees of the
Revocable Trust of Daniel P. Hagmaier and
Elsie G. Hagmaier, dated 8/1/91; Dale
Wallace Bennett and Grant B. Johnson;
Fred Bennett, Jr.
- ------------------------------------------------------------------------------------------------------------------------------
39. 10/15/84 Madene Beddo, Co-Trustee of the M&M Santa Fe
Family Trust dated 3/27/95; Jeanette Z.
Foushee; James E. Zurcher, Jr.; Robert E.
La Fond; La Fond Family Trust, Eugene
La Fond, Trustee
- ------------------------------------------------------------------------------------------------------------------------------
40. 4/3/62 Trustee of the Eli E. Dorsey Credit Trust University (Seattle)
- ------------------------------------------------------------------------------------------------------------------------------
41. 3/10/75 Rellim, Inc. Durango
- ------------------------------------------------------------------------------------------------------------------------------
42. 12/19/89 Russell C. Christensen; Romaine J. Salt Lake City
Christensen; Highway Realty Co.
- ------------------------------------------------------------------------------------------------------------------------------
43. 1/10/79 Atlantic Partnership; TL Grove, Inc.; Helen Long Beach Downtown
P. Anderson; Robert O. Anderson
- ------------------------------------------------------------------------------------------------------------------------------
44. 11/14/86 Bentitou Partnership Berkeley
- ------------------------------------------------------------------------------------------------------------------------------
45. 10/18/79 Kam-Rink Holdings Ltd. Kamloops
</TABLE>
NYL3/145204.1
<PAGE>
5
<TABLE>
<CAPTION>
Date Joint Venture Partner Property
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
46. 4/4/72 Frederic J. Bentitou; Kyla L. Bentitou; Presidio
Hella R. Fluss, Trustee of the Fluss Family
Trust
- ------------------------------------------------------------------------------------------------------------------------------
47. 3/1/66 W.G. Enterprises; Jeanne Gage Ahlgren Santa Monica
and Myron Ahlgren, Trustees of the
Ahlgren Family Trust Agreement
- ------------------------------------------------------------------------------------------------------------------------------
48. 3/17/72 KML Corporation South Tahoe
- ------------------------------------------------------------------------------------------------------------------------------
49. 7/1/74 The Estate of George Karasek; Helga Santa Cruz
Karasek; Nancy L. Bowker and Irving A.
Bowker; Carolyn Bowker; Marilyn
Dorman; Keith Bowker; June Cornell
- ------------------------------------------------------------------------------------------------------------------------------
50. 5/16/77 Bruce E. Depew Missoula
- ------------------------------------------------------------------------------------------------------------------------------
51. 8/19/86 Robert Lee Delaney Enterprises, Inc.; Mission Valley
Wulfing Land Investment Co.; Mission
Four Inc.; Tey-Delaney Investments, Inc.;
Ticoulat Family Trust, B. Odette Ticoulat,
Trustee; Anita A. Tey, M.D.
- ------------------------------------------------------------------------------------------------------------------------------
52. 9/21/73 10-E, Inc.; Estate of Theresa G. Bellevue
McNamara, M. Hudzikiewicz, Executrix
- ------------------------------------------------------------------------------------------------------------------------------
53. 12/7/90 Wilbur C. Huffstutler and Shirley J. Milpitas
Huffstutler; Donald Dilsaver and Beverly
Dilsaver
- ------------------------------------------------------------------------------------------------------------------------------
54. 6/23/94 Rajendra & Anita Shastri Mesa
- ------------------------------------------------------------------------------------------------------------------------------
55. 1/20/82 Shan J. Karia Portland Thriftlodge
- ------------------------------------------------------------------------------------------------------------------------------
56. 10/21/76 Govind R. Vaghashia Burbank
- ------------------------------------------------------------------------------------------------------------------------------
57. 4/12/76 Sallie Sebree Gregg; Vijay Desai Williams
- ------------------------------------------------------------------------------------------------------------------------------
58. 7/16/79 Barney J. Huseby; Catherine J. Huseby; Mercer Island
Elizabeth C. Ratcliff; Beverly B. Goucher
- ------------------------------------------------------------------------------------------------------------------------------
59. 6/22/93 Benjamin Byung-Sik Yuh; Barbara Bok- Golden Gate
Soon Yuh; Linda Benamati Bower, Trustee
of the Linda Benamati Bower Revocable
Trust dated 6/8/89; Vivian Irwin; Betsy H.
Keller, Trustee
- ------------------------------------------------------------------------------------------------------------------------------
60. 11/29/92 Edward A. Tudor; Rosalie M. Tudor Moses Lake
</TABLE>
NYL3/145204.1
<PAGE>
6
<TABLE>
<CAPTION>
Date Joint Venture Partner Property
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
61. 10/19/82 Mar-Te, Inc. Boise
- ------------------------------------------------------------------------------------------------------------------------------
62. 6/23/75 Wayne Thompson; Sara D. Thompson; San Luis Obispo
Lawrence Eastman, Trustee
- ------------------------------------------------------------------------------------------------------------------------------
63. 4/1/63 Robert E. La Fond; Irja S. Sturm; Jeanette Las Vegas Downtown
Z. Foushee; James E. Zurcher, Jr.; La
Fond Family Trust, Eugene La Fond,
Trustee
- ------------------------------------------------------------------------------------------------------------------------------
64. 10/22/87 Gary L. Hines, Maxine L. Hines Paso Robles
- ------------------------------------------------------------------------------------------------------------------------------
65. 3/6/63 Moberly Holdings, Ltd. Revelstoke Lodge (Canada)
- ------------------------------------------------------------------------------------------------------------------------------
66. 8/28/69 Janet M. Perry Flagstaff
- ------------------------------------------------------------------------------------------------------------------------------
67. 12/13/83 Brewer Family Trust - Descendants' Trust, Palm Springs
Frederick Brewer, Trustee; Brewer Family
Trust - Marital Trust, Frederick Brewer,
Trustee; Glenn A. Davis & Marguerite L.
Davis; Erich H. & Elizabeth Langmann
- ------------------------------------------------------------------------------------------------------------------------------
68. 5/18/94 Alpha 100, Tae H. Chon Ogden
- ------------------------------------------------------------------------------------------------------------------------------
69. 3/30/81 Visalia Lodging Associates Visalia Thriftlodge
- ------------------------------------------------------------------------------------------------------------------------------
70. 5/28/80 Diane H. Lundstrom & The Estate of Kim Walla Walla
Lundstrom; Jeanne Gage Ahlgren and
Myron Ahlgren, Trustees of the Ahlgren
Family Trust, under agreement dated
6/15/89
- ------------------------------------------------------------------------------------------------------------------------------
71. 4/30/92 Jayendra D. Bhakta; Parimala J. Bhakta Palo Alto
- ------------------------------------------------------------------------------------------------------------------------------
72. 2/12/92 WMT Inc.; Grimes Corp.; Denzell May Roseburg
Gage; Jeanne Gage Ahlgren & Myron
Ahlgren, Trustees Ahlgren Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
73. 5/25/76 Georgia Sherwood; Yutaka Gofuku; Keiko Santa Barbara City Center
Gofuku; Yoshiyasu Nakanishi
- ------------------------------------------------------------------------------------------------------------------------------
74. 1/20/88 Erich H. Langmann; Elizabeth Langmann Yuma
- ------------------------------------------------------------------------------------------------------------------------------
75. 6/7/54 Gene Grief Hollywood (Travel Inn)
- ------------------------------------------------------------------------------------------------------------------------------
76. 7/27/92 Alfred W. Van de Vanter and Lorayne B. Ephrata
Van de Vanter; Cathy Vaughn
- ------------------------------------------------------------------------------------------------------------------------------
77. 3/7/85 Shah and Patel, a Partnership Oceanside
</TABLE>
NYL3/145204.1
<PAGE>
7
<TABLE>
<CAPTION>
Date Joint Venture Partner Property
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
78. 9/21/94 Dalip Sharma; Willis H. Miller, Trustee Yakima
under the Willis H. Miller Revocable Inter
Vivos Trust dated 4/26/84
- ------------------------------------------------------------------------------------------------------------------------------
79. 5/1/91 Robert A. Mathison; Nanci B. Mathison; Eureka
Ann Norwood; Myron Ahlgren and Jeanne
Gage Ahlgren, Co-Trustees of the Ahlgren
Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
80. 7/25/77 Lawrence A. Raffo and Victoria Raffo, as Reno
Co-Trustees of the Albert J. Raffo Family
Trust; Gloria Mary Raffo; Richard H. &
Geraldine Owens; Angelina Raggi; Nathan
Scardigli; Anthony L. & Sylvia B. Flores;
Dominic & Lorraine Giusti; Victoria Raffo
- ------------------------------------------------------------------------------------------------------------------------------
81. 2/9/81 Williard E. Hempel, Trustee, Williard E. San Diego Airport
Hempel Trust; Aubrey & Virginia Potter,
Co-Trustees
- ------------------------------------------------------------------------------------------------------------------------------
82. 9/16/85 Jean Belleau Santa Rosa Downtown
- ------------------------------------------------------------------------------------------------------------------------------
83. 11/14/88 D.J. Schock, Inc. Billings
- ------------------------------------------------------------------------------------------------------------------------------
84. 6/15/82 April Blossom, Inc.; Arnold Schwartz and Rancho Bernardo
June Schwartz; Lester & Marion Schwartz;
M. Louis Norman, Successor Trustee
Herteen Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
85. 3/14/94 Jean Belleau and Marianne Belleau Santa Rosa
- ------------------------------------------------------------------------------------------------------------------------------
86. 5/24/73 San-Ern, Inc. Embarcadero-Harbor
- ------------------------------------------------------------------------------------------------------------------------------
87. 4/12/90 Alex Palermo and Jimmie Jane Palermo; San Diego Airport/Pt. Loma
William A. Lake and Kleo M. Lake; Estate
of Bettye Lutes, Eugene A. Horton, Esq.,
Executor; Alfrieda Anderson; Nancy Jo
Splitstoser; Molly C. Abreu; Madelyn
McDonald; James P. McDonald
- ------------------------------------------------------------------------------------------------------------------------------
88. 6/22/89 Barob Group, Ltd.; Genevieve Simons Bayview Thriftlodge
Family Trust, N. Joseph and G. Simons,
Co-Trustees; Sadie Moss; Edward Moss;
Elaine Levenson; Laurence Gerson; Estate
of Rita Moss; Helen Moss
</TABLE>
NYL3/145204.1
<PAGE>
8
<TABLE>
<CAPTION>
Date Joint Venture Partner Property
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
89. 5/10/83 Michael M. Murata; June O. Murata; Bellingham
Glenna M. Enquist
- ------------------------------------------------------------------------------------------------------------------------------
90. 2/12/81 Man-Kyung Hong; Myung-Joo Hung; Mary Cabrillo Central
Jane Guerin
- ------------------------------------------------------------------------------------------------------------------------------
91. 5/31/83 Estate of Bettye Lutes, Eugene A. Horton, Balboa Park
Esq., Executor; Mary Jane Guerin; Helen
McCormick Thomson; Leonard and Denise
Marien
- ------------------------------------------------------------------------------------------------------------------------------
92. 9/2/64 Estate of Thelma Olson, Nancy Underlee, Eagle Rock (Eagle Rock
Executor; Michael Bonaparte, Executor of Inn)*
the Estate of Joseph Graham
- ------------------------------------------------------------------------------------------------------------------------------
93. 4/27/78 Arthur R. Boag Ontario
- ------------------------------------------------------------------------------------------------------------------------------
94. 11/27/72 Twin Pines Apartments Santa Barbara Beach
- ------------------------------------------------------------------------------------------------------------------------------
95. 7/19/90 James C. Rector and Yvonne A. Rector; San Diego Uptown Welcome
Shrikant and Sunita Sawant Inn
- ------------------------------------------------------------------------------------------------------------------------------
96. 12/5/77 Estate of Bettye Lutes; Jessie I. Pruett; San Diego Downtown
Mary Jane Guerin
- ------------------------------------------------------------------------------------------------------------------------------
97. 1/2/80 Emmett D. White El Paso
- ------------------------------------------------------------------------------------------------------------------------------
98. 5/2/82 The Elizabeth Moies Smith Trust Monterey Fairgrounds
- ------------------------------------------------------------------------------------------------------------------------------
99. 7/23/62 Co-owners of the Company Travelodge at Fisherman's
Wharf
- ------------------------------------------------------------------------------------------------------------------------------
- --------
* The joint venture agreement was not executed by the parties. The parties are currently acting
in accordance with the terms thereof.
</TABLE>
NYL3/145204.1
<PAGE>
EXHIBIT C
<PAGE>
Location: Jamaica, New York
Entity No.
Unit No.:
RAMADA FRANCHISE SYSTEMS, INC.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement"), dated _______________, 19___, is
between RAMADA FRANCHISE SYSTEMS, INC., a Delaware corporation ("we", "our" or
"us"), and Forte Hotels, Inc., a Delaware corporation ("you"). The definitions
of capitalized terms are found in Appendix A. In consideration of the
following mutual promises, the parties agree as follows:
1. License. We acquired from Franchise Systems Holdings, Inc. ("FSH") pursuant
to the Master License Agreements the right to use and to sublicense certain
trade names, trademarks and service marks including the Marks and the
distinctive Ramada System for providing transient guest lodging services to
the public under the "RAMADA" name and certain services to its licensees,
including the Reservation System, advertising, marketing and training
services. We have the exclusive right to license and franchise to you the
distinctive "Ramada" System for providing transient guest lodging services. We
grant to you and you accept the License, effective and commencing on the
Opening Date and ending on the earliest to occur of the Term's expiration, a
Transfer or a Termination. You will call the Facility a "Ramada Plaza Hotel."
You may adopt additional or secondary designations for the Facility with our
prior written consent, which we may withhold, condition, or withdraw on
written notice in our sole discretion.
2. Ramada Inns National Association.
2.1 Membership. You automatically become a member of the Ramada Inns National
Association ("RINA"), an unincorporated association. Other Chain licensees are
also members of RINA. RINA may consider and discuss common issues relating to
advertising and operation of facilities in the System and, through its
Executive Committee, make recommendations to us regarding such issues and
other matters.
2.2 Annual Conference. A RINA conference is held each year. The conference
date and location will be determined by the RINA Executive Committee after
consultation with us. You will pay not less than one "Conference Registration
Fee" for each Facility you own. When you pay the Conference Registration Fee,
you may send your representative to the conference. Additional Facility
representatives may attend subject to conference policies and after payment of
an additional Conference Registration Fee for each such additional attendee.
You will pay the costs of
C/M 11752.0003
<PAGE>
transportation, lodging and meals (except those we provide as part of the
Conference) for your attendees.
3. Your Improvement and Operating Obligations. Your obligations
to improve, operate and maintain the Facility are:
3.1 Improvements. You must select and acquire the Location and acquire, equip
and supply the Facility in accordance with System Standards. You must provide
us with proof that you own or lease the Facility before or within 30 days
after the Effective Date. You must begin renovation of the Facility no later
than thirty (30) days after the Effective Date. The deadline for completing
the pre-opening phase of conversion and renovation, when the Facility must
score at least 450 points (or equivalent) under our quality assurance
inspection system and be ready to open for business under the System, is
ninety (90) days after the Effective Date. All renovations will comply with
System Standards, any Approved Plans, Schedule B and any Punch List attached
to this Agreement. Your general contractor or you must carry the insurance
required under this Agreement during renovation. You must complete the
pre-opening renovation specified on the Punch List and the Facility must pass
its pre-opening quality assurance inspection with a score of at least 450
points (or equivalent) before we consider the Facility to be ready to open
under the System. You must continue renovation and improvement of the Facility
after the Opening Date as the Punch List requires and pass a post-opening
quality assurance inspection within nine (9) months after the Opening Date. We
may, in our sole discretion, terminate this Agreement by giving written notice
to you (subject to applicable law) if (1) you do not commence or complete the
pre-opening or post-opening improvements of the Facility by the dates
specified in this Section, or (2) you prematurely identify the Facility as a
Chain Facility or begin operation under the System name described in Schedule
B in violation of Section 3.3 and you fail to either complete the pre-opening
Improvement Obligation or cease operating and/or identifying the Facility
under the Marks and System within five days after we send you written notice
of default. Time is of the essence for the Improvement Obligation. We may,
however, in our sole discretion, grant one or more extensions of time to
perform any phase of the Improvement Obligation. You will pay us a
non-refundable extension fee of $2.00 per room for each day of any extension
of the deadline for completing pre-opening improvements. This fee will be
payable to us after each 30 days of the extension. You will pay us the balance
of the extension fee outstanding when the Facility opens under the System 10
days after the Opening Date. The grant of an extension will not waive any
other default existing at the time the extension is granted.
3.2 Improvement Plans. You will create plans and specifications
for the work described in Section 3.1 (based upon the System
-2-
C/M 11752.0003 3650
<PAGE>
Standards and this Agreement) if we so request and submit them for our
approval before starting improvement of the Location. We will not unreasonably
withhold or delay our approval, which is intended only to test compliance with
System Standards, and not to detect errors or omissions in the work of your
architects, engineers, contractors or the like. Our review does not cover
technical, architectural or engineering factors, or compliance with federal,
state or local laws, regulations or code requirements. We will not be liable
to your lenders, contractors, employees, guests, others or you on account of
our review or approval of your plans, drawings or specifications, or our
inspection of the Facility before, during or after renovation or construction.
Any material variation from the Approved Plans requires our prior written
approval. You will promptly provide us with copies of permits, job progress
reports, and other information as we may reasonably request. We may inspect
the work while in progress without prior notice.
3.3 Pre-Opening. You may identify the Facility as a Chain Facility prior to
the Opening Date, or commence operation of the Facility under a Mark and using
the System, only after first obtaining our approval or as permitted under and
strictly in accordance with the System Standards Manual. If you identify the
Facility as a Chain Facility or operate the Facility under a Mark before the
Opening Date without our express written consent, then in addition to our
remedies under Sections 3.1 and 11.2, you will begin paying the Royalty to us,
as specified in Section 7.1, from the date you identify or operate the
Facility using the Mark. We may delay the Opening Date until you pay the
Royalty accruing under this Section.
3.4 Operation. You will operate and maintain the Facility continuously after
the Opening Date on a year-round basis as required by System Standards and
offer transient guest lodging and other related services of the Facility
(including those specified on Schedule B) to the public in compliance with the
law and System Standards. You will keep the Facility in a clean, neat, and
sanitary condition. You will clean, repair, replace, renovate, refurbish,
paint, and redecorate the Facility and its FF&E as and when needed to comply
with System Standards. The Facility will be managed by either a management
company or an individual manager with significant training and experience in
general management of similar lodging facilities. The Facility will accept
payment from guests by all credit and debit cards we designate in the System
Standards Manual. You may add to or discontinue the amenities, services and
facilities described in Schedule B, or lease or subcontract any service or
portion of the Facility, only with our prior written consent which we will not
unreasonably withhold or delay. Your front desk operation, telephone system,
parking lot, swimming pool and other guest service facilities may not be
shared with or used by guests of another lodging or housing facility.
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3.5 Training. You (or a person with executive authority if you are an entity)
and the Facility's general manager will attend the training programs described
in Section 4.1 we designate as mandatory for licensees or general managers,
respectively. You will train or cause the training of all Facility personnel
as and when required by System Standards and this Agreement. You will pay for
all travel, lodging, meals and compensation expenses of the people you send
for training programs, the cost of training materials and other reasonable
charges we may impose for training under Section 4.1, and all travel, lodging,
meal and facility and equipment rental expenses of our representatives if
training is provided at the Facility.
3.6 Marketing. You will participate in System marketing programs, including
the Directory and the Reservation System. You will obtain and maintain the
computer and communications service and equipment we specify to participate in
the Reservation System. You will comply with our rules and standards for
participation, and will honor reservations and commitments to guests and
travel industry participants. You may implement, at your option and expense,
your own local advertising. Your advertising materials must use the Marks
correctly, and must comply with System Standards or be approved in writing by
us prior to publication. You will stop using any non-conforming, out-dated or
misleading advertising materials if we so request.
3.6.1 You will participate in any regional marketing, training or management
alliance or cooperative of Chain licensees formed to serve the Chain
Facilities in your area. We may assist the cooperative collect contributions.
You may be excluded from cooperative programs and benefits if you don't
participate in all cooperative programs according to their terms, including
making payments and contributions when due.
3.7 Governmental Matters. You will obtain as and when needed all governmental
permits, licenses and consents required by law to construct, acquire,
renovate, operate and maintain the Facility and to offer all services you
advertise or promote. You will pay when due or properly contest all federal,
state and local payroll, withholding, unemployment, beverage, permit, license,
property, ad valorem and other taxes, assessments, fees, charges, penalties
and interest, and will file when due all governmental returns, notices and
other filings.
3.8 Inspections and Audits. You will permit our representatives to perform
quality assurance inspections of the Facility and audit your financial and
operating books and records (including tax returns) relating to the Facility
and any related business, with or without prior notice of the inspection or
audit. The inspections and audits will commence during normal business hours,
although we may observe Facility operation and accounting
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activity at any time. You, the Facility staff and your other agents and
employees will cooperate with our inspectors and auditors in the performance
of their duties. You will pay us any underpayment of, and we will pay you or
credit your Recurring Fee account for any overpayment of, Recurring Fees
discovered by an audit. You will pay the reasonable travel, lodging and meal
expenses of our reinspection or audit and any reinspection fee we may impose
if the Facility does not pass an inspection, you refuse to cooperate with our
auditors or inspectors, or the audit reveals that you paid us less than 97% of
the correct amount of Recurring Fees. We may publish or disclose the results
of quality assurance inspections.
3.9 Reports and Accounting. You will prepare and submit timely monthly reports
containing the information we require about the Facility's performance during
the preceding month. You will prepare and submit other reports and information
about the Facility as we may reasonably request from time to time or in the
System Standards Manual. You will maintain accounting books and records in
accordance with generally accepted accounting principles and the American
Hotel & Motel Association Uniform System of Accounts for Hotels, as amended,
subject to this Agreement and other reasonable accounting standards we may
specify from time to time. You will prepare and submit to us if we so request
your annual and semiannual financial statements. We do not require that your
financial statements be independently audited, but you will send us a copy of
your audited statements if you have them audited and we ask for them.
3.10 Insurance. You will obtain and maintain during the Term of this Agreement
the insurance coverage required under the System Standards Manual from
insurers meeting the standards established in the Manual. Unless we instruct
you otherwise, your liability insurance policies will name Ramada Franchise
Systems, Inc. and HFS Incorporated as additional insureds.
3.11 Conferences. You or your representative will attend each annual RINA
conference and pay the Conference Registration Fee described in Section 2.2.
Mandatory recurrent training for licensees and general managers described in
Section 4.1.3 may be held at a RINA conference. The Fee will be the same for
all Chain Facilities that we license in the United States. You will receive
reasonable notice of a Chain conference.
3.12 Purchasing. You will purchase or obtain certain items we designate as
proprietary or that bear Marks from suppliers we approve. You may purchase any
other items for the Facility from any competent source you select, so long as
the items meet or exceed System Standards.
3.13 Good Will. You will use reasonable efforts to protect,
maintain and promote the name "Ramada" and its distinguishing
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characteristics, and the other Marks. You will not permit or allow your
officers, directors, principals, employees, representatives, or guests of the
Facility to engage in conduct which is unlawful or damaging to the good will
or public image of the Chain or System. You will participate in Chain-wide
guest service and satisfaction guaranty programs we require in good faith for
all Chain Facilities. You will follow System Standards for identification of
the Facility and for you to avoid confusion on the part of guests, creditors,
lenders, investors and the public as to your ownership and operation of the
Facility, and the identity of your owners.
3.14 Facility Modifications. You may materially modify, diminish or expand the
Facility (or change its interior design, layout, FF&E, or facilities) only
after you receive our prior written consent, which we will not unreasonably
withhold or delay. You will pay our Rooms Addition Fee then in effect for each
guest room you add to the Facility. If we so request, you will obtain our
prior written approval of the plans and specifications for any material
modification, which we will not unreasonably withhold or delay. You will not
open to the public any material modification until we inspect it for
compliance with the Approved Plans and System Standards.
3.15 Courtesy Lodging. You will provide lodging at the "Employee Rate"
established in the System Standards Manual from time to time (but only to the
extent that adequate room vacancies exist) to our representatives traveling on
business, but not more than three standard guest rooms at the same time.
3.16 Minor Renovations. Beginning three years after the Opening Date, we may
issue a "Minor Renovation Notice" to you that will specify reasonable Facility
upgrading and renovation requirements (a "Minor Renovation") to be commenced
no sooner than 60 days after the notice is issued, having an aggregate cost
for labor, FF&E and materials estimated by us to be not more than the Minor
Renovation Ceiling Amount. You will perform the Minor Renovations as and when
the Minor Renovation Notice requires. We will not issue a Minor Renovation
Notice within three years after the date of a prior Minor Renovation Notice,
or if the three most recent quality assurance inspection scores of the
Facility averaged at least 450 points or equivalent and the most recent
quality assurance inspection score for the Facility was at least 425 points or
equivalent when the Facility is otherwise eligible for a Minor Renovation.
4. Our Operating and Service Obligations. We will provide you
with the following services and assistance:
4.1 Training. We will offer general manager training, property opening,
recurrent training and supplemental training.
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4.1.1 Management Training. Between 60 days before and six months after the
projected Opening Date, we will offer at a location in the United States we
designate, and the Facility general manager must complete a training program
to our satisfaction. The training program will not exceed two weeks in
duration and will cover such topics as System Standards, services available
from us, and operating a Chain Facility. We may charge you a reasonable fee
for materials for each manager trainee. Each manager's training program may
vary depending on his or her prior training and experience. Any replacement
general manager of the Facility must complete the training program within the
time specified in the System Standards Manual. No tuition will be charged for
your first participation in this training but you must pay for your
representative's travel, lodging, meals, incidental expenses, compensation and
benefits. We may charge you reasonable tuition for training for replacement
managers.
4.1.2 Property Opening Training. We will provide at the Facility or another
agreed location, a "Property Training Program" (at our discretion as to length
and scheduling) to assist you in opening the Facility. There is no charge for
the Property Training Program other than for the reasonable expenses for
travel, room, board and other out-of-pocket costs of our representatives.
4.1.3 Recurrent Training. We will provide training for you and the Facility's
managers if we determine that additional training for licensees and managers
is necessary from time to time. Training will be held in our U.S. training
center or other locations, or in conjunction with regional workshops or
conferences. You will pay for your representative's travel, lodging, meals,
incidental expenses, compensation and benefits for this training. We may
charge reasonable tuition for refresher courses and regional workshops. This
training may be held in conjunction with a Chain conference.
4.1.4 Supplemental Training. We may offer optional training programs without
charge or for tuition. We may offer or sell to you video tapes, computer discs
or other on-site training aids and materials, or require you to buy them at
reasonable prices.
4.1.5 We may charge you a reasonable cancellation fee if you cancel your
training program commitments or reservations within 30 days (or such shorter
period as we may specify) before the start of any training program at which
you or your representative has a reservation. We may charge you tuition for
your representatives to attend mandatory sessions other than those people we
require to attend the training and fees for instructional materials.
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4.2 Reservation System. We will operate and maintain (directly or by
subcontracting with an affiliate or one or more third parties), with funds
allocated from the collections of the RINA Services Assessment Fee, a
computerized Reservation System or such technological substitute(s) as we
determine, in our discretion. We will use the allocated RINA Services
Assessment Fees for the acquisition, development, support, equipping,
maintenance, improvement and operation of the Reservation System. We will
provide software maintenance for the software we license to you to connect to
the Reservation System if your Recurring Fee payments are up to date. The
Facility will participate in the Reservation System, commencing with the
Opening Date for the balance of the Term. We have the right to provide
reservation services to lodging facilities other than Chain Facilities or to
other parties. We will not offer callers to our general consumer toll free
reservation telephone number in the United States the opportunity to make
reservations for other lodging chains.
4.3 Marketing.
4.3.1 We will promote public awareness and usage of Chain Facilities with
funds allocated from collections of the RINA Services Assessment Fees by
implementing advertising, promotion, publicity, market research and other
marketing programs, training programs and related activities, and the
production and distribution of Chain publications and directories of hotels.
We will determine in our discretion: (i) The nature and type of media
placement; (ii) The allocation (if any) among international, national,
regional and local markets; and (iii) The nature and type of advertising copy,
other materials and programs. We or an affiliate may be reimbursed for the
reasonable direct and indirect costs, overhead or other expenses of providing
marketing services. We are not obligated to supplement or advance funds
available from collections of the RINA Services Assessment Fees to pay for
marketing activities. We do not promise that the Facility or you will benefit
directly or proportionately from marketing activities.
4.3.2 We may, at our discretion, implement special international, national,
regional or local promotional programs (which may or may not include the
Facility) and may make available to you (to use at your option) media
advertising copy and other marketing materials for prices which reasonably
cover the materials' direct and indirect costs.
4.3.3 We will publish the Chain Directory. We will include the Facility in the
Chain Directory after it opens if you submit the information we request on
time, and you are not in default under this Agreement at the time we must
arrange for publication. We will supply Directories to you for display at
locations specified in the System Standards Manual or policy statements. We
may assess you a reasonable charge for the direct and indirect
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expenses (including overhead) of producing and delivering the
Directories.
4.4 Purchasing. We may offer optional assistance to you with purchasing items
used at or in the Facility. Our affiliates may offer this service on our
behalf. We may restrict the vendors authorized to sell proprietary or
Mark-bearing items in order to control quality, provide for consistent service
or obtain volume discounts. We will maintain and provide to you lists of
suppliers approved to furnish Mark-bearing items, or whose products conform to
System Standards.
4.5 The System. We will control and establish requirements for all aspects of
the System. We may, in our discretion, change, delete from or add to the
System, including any of the Marks or System Standards, in response to
changing market conditions. We may, in our discretion, permit deviations from
System Standards, based on local conditions and our assessment of the
circumstances.
4.6 Consultations and Standards Compliance. We will assist you to understand
your obligations under System Standards by telephone, mail, during quality
assurance inspections, through the System Standards Manual, at training
sessions and during conferences and meetings we conduct. We will provide
telephone and mail consultation on Facility operation and marketing through
our representatives.
4.7 System Standards Manual and Other Publications. We will specify System
Standards in the System Standards Manual, policy statements or other
publications. We will lend you one copy of the System Standards Manual
promptly after we sign this Agreement. We will send you any System Standards
Manual revisions and/or supplements as and when issued. We will send you all
other publications for Chain licensees and all separate policy statements in
effect from time to time.
4.8 Inspections and Audits. We have the unlimited right to conduct unannounced
quality assurance inspections of the Facility and its operations, records and
Mark usage to test the Facility's compliance with System Standards and this
Agreement, and the audits described in Section 3.8. We have the unlimited
right to reinspect if the Facility does not achieve the score required on an
inspection. We may impose a reinspection fee and will charge you for our
reasonable costs of travel, lodging and meals for any reinspection, or for an
audit if you pay less than 97% of the correct amount of Recurring Fees. Our
inspections are solely for the purposes of checking compliance with System
Standards.
5. Term. The Term begins on the Effective Date and expires on
the day prior to the fifteenth anniversary of the Opening Date.
Some of your duties and obligations will survive termination or
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expiration of this Agreement. You will execute and deliver to us with this
Agreement a notarized Declaration of License Agreement in recordable form. We
will countersign and return one copy of the Declaration to you. We may, at our
option, record the Declaration in the real property records of the county
where the Facility is located. The Declaration will be released at your
request and expense when this Agreement terminates or expires and you perform
your post-termination obligations. NEITHER PARTY HAS RENEWAL RIGHTS OR
OPTIONS.
6. Application and Initial Fees. The application fee and
initial fee shall be waived.
7. Recurring Fees, Taxes and Interest.
7.1 You will pay us certain "Recurring Fees" in U.S. dollars (or such other
currency as we may direct if the Facility is outside the United States)
fifteen days after the month in which they accrue, without billing or demand.
Recurring Fees include the following:
7.1.1 A "Royalty" equal to four percent (4.0%) of Gross Room Revenues of the
Facility accruing during the calendar month, accrues from the earlier of the
Opening Date or the date you identify the Facility as a Chain Facility or
operate it under a Mark until the end of the Term.
7.1.2 A "RINA Services Assessment Fee" as set forth in Schedule C for
advertising, marketing, training, the Reservation System and other related
services and programs, accrues from the Opening Date until the end of the
Term. On behalf of RINA, we collect and deposit the Fees from licensees, then
disburse and administer the funds collected by means of a separate account or
accounts. The RINA Services Assessment Fee is subject to change for all Chain
Facilities, and new fees and charges may be assessed for new services, by
substituting a new Schedule C or otherwise, but only upon the recommendation
of the RINA Executive Committee and after our approval. You will also pay or
reimburse us for travel agent commissions paid for reservations at the
Facility and other fees levied to pay for reservations for the Facility
originated or processed through other reservation systems and networks. We may
charge a reasonable service fee for this service. We may charge Facilities
using the Reservation System outside the United States for reservation service
using a different formula. We may use the RINA Services Assessment Fees we
collect, in whole or in part, to reimburse our reasonable direct and indirect
costs, overhead or other expenses of providing marketing, training and
reservation services.
7.2 You will pay to us "Taxes" equal to any federal, state or local sales,
gross receipts, use, value added, excise or similar taxes assessed against us
on the Recurring Fees by the
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jurisdictions where the Facility is located, but not including any income tax,
franchise or other tax for the privilege of doing business by us in your
State. You will pay Taxes to us when due.
7.3 "Interest" is payable when you receive our invoice on any past due amount
payable to us under this Agreement at the rate of 1.5% per month or the
maximum rate permitted by applicable law, whichever is less, accruing from the
due date until the amount is paid.
7.4 If a transfer occurs, your transferee or you will pay us our then current
Application Fee and a "Relicense Fee" equal to the Initial Fee we would then
charge a new licensee for the Facility.
8. Indemnifications.
8.1 Independent of your obligation to procure and maintain insurance, you will
indemnify, defend and hold the Indemnitees harmless, to the fullest extent
permitted by law, from and against all Losses and Expenses, incurred by any
Indemnitee for any investigation, claim, action, suit, demand, administrative
or alternative dispute resolution proceeding, relating to or arising out of
any transaction, occurrence or service at, or involving the operation of the
Facility, any breach or violation of any contract or any law, regulation or
ruling by, or any act, error or omission (active or passive) of, you, any
party associated or affiliated with you or any of the owners, officers,
directors, employees, agents or contractors of you or your affiliates,
including when the active or passive negligence of any Indemnitee is alleged
or proven. You have no obligation to indemnify an Indemnitee for damages to
compensate for property damage or personal injury if a court of competent
jurisdiction makes a final decision not subject to further appeal that the
Indemnitee engaged in wilful misconduct or intentionally caused such property
damage or bodily injury. This exclusion from the obligation to indemnify shall
not, however, apply if the property damage or bodily injury resulted from the
use of reasonable force by the Indemnitee to protect persons or property.
8.2 You will respond promptly to any matter described in the preceding
paragraph, and defend the Indemnitee. You will reimburse the Indemnitee for
all costs of defending the matter, including attorneys' fees, incurred by the
Indemnitee if your insurer or you do not assume defense of the Indemnitee
promptly when requested. We must approve any resolution or course of action in
a matter that could directly or indirectly have any adverse effect on us or
the Chain, or could serve as a precedent for other matters.
8.3 We will indemnify, defend and hold you harmless, to the fullest extent
permitted by law, from and against all Losses and Expenses incurred by you in
any action or claim arising from your
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proper use of the System alleging that your use of the System and any property
we license to you is an infringement of a third party's rights to any trade
secret, patent, copyright, trademark, service mark or trade name. You will
promptly notify us in writing when you become aware of any alleged
infringement or an action is filed against you. You will cooperate with our
defense and resolution of the claim. We may resolve the matter by obtaining a
license of the property for you at our expense, or by requiring that you
discontinue using the infringing property or modify your use to avoid
infringing the rights of others.
9. Your Assignments, Transfers and Conveyances.
9.1 Transfer of the Facility. This Agreement is personal to you (and your
owners if you are an entity). We are relying on your experience, skill and
financial resources (and that of your owners and the guarantors, if any) to
sign this Agreement with you. You may finance the Facility and grant a lien,
security interest or encumbrance on it without notice to us or our consent. If
a Transfer is to occur, the transferee or you must comply with Section 9.3.
Your License terminates when the Transfer occurs. If the transferee does not
sign a replacement license agreement with us before you give the transferee
ownership or possession of the Facility, then the License terminates when you
transfer ownership or possession of the Facility. The transferee may not
operate the Facility under the System, and you are responsible for performing
the post-termination obligations in Section 13. You and your owners may, only
with our prior written consent and after you comply with Sections 9.3 and 9.6,
assign, pledge, transfer, delegate or grant a security interest in all or any
of your rights, benefits and obligations under this Agreement, as security or
otherwise. Transactions involving Equity Interests that are not Equity
Transfers do not require our consent and are not Transfers.
9.2 Public Offerings and Registered Securities. You may engage the first
registered public offering of your Equity Interests only after you pay us a
public offering fee equal to $15,000. Your Equity Interests (or those of a
person, parent, subsidiary, sibling or affiliate entity, directly or
indirectly effectively controlling you), are freely transferable without the
application of this Section if they are, on the Effective Date, or after the
public offering fee is paid, they become, registered under the federal
Securities Act of 1933, as amended, or a class of securities registered under
the Securities Exchange Act of 1934, as amended, or listed for trading on a
national securities exchange or the automated quotation system of the National
Association of Securities Dealers, Inc. (or any successor system), provided
that any tender offer for at least a majority of your Equity Interests will be
an Equity Transfer subject to Section 9.1.
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9.3 Conditions. We may, to the extent permitted by applicable law, condition
and withhold our consent to a Transfer when required under this Section 9
until the transferee and you meet certain conditions. If a Transfer is to
occur, the transferee (or you, if an Equity Transfer is involved) must first
complete and submit our Application, qualify to be a licensee in our sole
discretion, given the circumstances of the proposed Transfer, provide the same
supporting documents as a new license applicant, pay the Application and
Relicense Fees then in effect, sign the form of License Agreement we then
offer in conversion transactions and agree to renovate the Facility as if it
were an existing facility of similar age and condition converting to the
System, as we reasonably determine. We will provide a Punch List of
improvements we will require after the transferee's Application is submitted
to us. We must also receive general releases from you and each of your owners,
and payment of all amounts then owed to us and our affiliates by you, your
owners, your affiliates, the transferee, its owners and affiliates, under this
Agreement or otherwise. Our consent to the transaction will not be effective
until these conditions are satisfied.
9.4 Permitted Transferee Transactions. You may transfer an Equity Interest or
effect an Equity Transfer to a Permitted Transferee without obtaining our
consent, renovating the Facility or paying a Relicense Fee or Application Fee.
No Transfer will be deemed to occur. You also must not be in default and you
must comply with the application and notice procedures specified in Sections
9.3 and 9.6. Each Permitted Transferee must first agree in writing to be bound
by this Agreement, or at our option, execute the License Agreement form then
offered prospective licensees. No transfer to a Permitted Transferee shall
release a living transferor from liability under this Agreement or any
guarantor under any Guaranty of this Agreement. You must comply with this
Section if you transfer the Facility to a Permitted Transferee. A transfer
resulting from a death may occur even if you are in default under this
Agreement.
9.5 Attempted Transfers. Any transaction requiring our consent under this
Section 9 in which our consent is not first obtained shall be void, as between
you and us. You will continue to be liable for payment and performance of your
obligations under this Agreement until we terminate this Agreement, all your
financial obligations to us are paid and all System identification is removed
from the Facility.
9.6 Notice of Transfers. You will give us at least 30 days
prior written notice of any proposed Transfer or Permitted
Transferee transaction. You will notify us when you sign a
contract to Transfer the Facility and 10 days before you intend
to close on the transfer of the Facility. We will respond to all
requests for our consent and notices of Permitted Transferee
transactions within a reasonable time not to exceed 30 days. You
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will notify us in writing within 30 days after a change in ownership of 25% or
more of your Equity Interests that are not publicly held or that is not an
Equity Transfer, or a change in the ownership of the Facility if you are not
its owner. You will provide us with lists of the names, addresses, and
ownership percentages of your owner(s) at our request.
10. Our Assignments. We may assign, delegate or subcontract all or any part of
our rights and duties under this Agreement, including by operation of law,
without notice and without your consent. We will have no obligations to you
after you are notified that our transferee has assumed our obligations under
this Agreement except those that arose before we assign this Agreement.
11. Default and Termination.
11.1 Default. In addition to the matters identified in Section 3.1, you will
be in default under this Agreement if (a) you do not pay us when a payment is
due, (b) you do not perform any of your other obligations when this Agreement
and the System Standards Manual require, or (c) if you otherwise breach this
Agreement. If your default is not cured within ten days after you receive
written notice from us that you have not filed your monthly report, paid us
any amount that is due or breached your obligations regarding Confidential
Information, or within 30 days after you receive written notice from us of any
other default (except as noted below), then we may terminate this Agreement by
written notice by you, under Section 11.2. We will not exercise our right to
terminate if you have completely cured your default, or until any waiting
period required by law has elapsed. In the case of quality assurance default,
if you have acted diligently to cure the default but cannot do so and have
entered into a written improvement agreement with us within 30 days after the
failing inspection, you may cure the default within 90 days after the failing
inspection. We may terminate the License if you do not perform that
improvement agreement.
11.2 Termination. We may terminate the License, or this Agreement if the
Opening Date has not occurred, effective when we send written notice to you or
such later date as required by law or as stated in the default notice, when
(1) you do not cure a default as provided in Section 11.1 or we are authorized
to terminate under Section 3.1. (2) you discontinue operating the Facility as
a "Ramada", (3) a guarantor on whom we are relying to enter into this
Agreement dies or becomes incapacitated, (4) you lose possession or the right
to possession of the Facility, (5) you (or any guarantor) suffer the
termination of another license or franchise agreement with us or one of our
affiliates, (6) you intentionally maintain false books and records or submit a
materially false report to us, (7) you (or any guarantor) generally fail to
pay debts as they come due in the ordinary
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course of business, (8) you, any guarantor or any of your owners or agents
misstated to us or omitted to tell us a material fact to obtain or maintain
this Agreement with us, (9) you receive two or more notices of default from us
in any one year period (whether or not you cure the defaults), (10) a
violation of Section 9 occurs, or a Transfer occurs before the relicensing
process is completed, (11) you contest in court the ownership or right to
franchise or license all or any part of the System or the validity of any of
the Marks, (12) you, any guarantor or the Facility is subject to any voluntary
or involuntary bankruptcy, liquidation, dissolution, receivership, assignment,
reorganization, moratorium, composition or a similar action or proceeding that
is not dismissed within 60 days after its filing, or (13) you maintain or
operate the Facility in a manner that endangers the health or safety of the
Facility's guests.
11.3 Casualty and Condemnation.
11.3.1 You will notify us promptly after the Facility suffers a Casualty that
prevents you from operating in the normal course of business, with less than
75% of guest rooms available. You will give us information on the availability
of guest rooms and the Facility's ability to honor advance reservations. You
will tell us in writing within 60 days after the Casualty whether or not you
will restore, rebuild and refurbish the Facility to conform to System
Standards and its condition prior to the Casualty. This restoration will be
completed within 180 days after the Casualty. You may decide within the 60
days after the Casualty, and if we do not hear from you, we will assume that
you have decided, to terminate this Agreement, effective as of the date of
your notice or 60 days after the Casualty, whichever comes first. If this
Agreement so terminates, you will pay all amounts accrued prior to termination
and follow the post-termination requirements in Section 13. You will not be
obligated to pay Liquidated Damages if the Facility will no longer be used as
an extended stay or transient lodging facility after the Casualty.
11.3.2 You will notify us in writing within 10 days after you receive notice
of any proposed Condemnation of the Facility, and within 10 days after
receiving notice of the Condemnation date. This Agreement will terminate on
the date the Facility or a substantial portion is conveyed to or taken over by
the condemning authority.
11.4 Our Other Remedies. We may suspend the Facility from the Reservation
System for any default or failure to pay or perform under this Agreement,
discontinue Reservation System referrals to the Facility for the duration of
such suspension, and may divert previously made reservations to other Chain
Facilities after giving notice of non-performance, non-payment or default. We
may deduct points under our quality assurance inspection program for your
failure to comply with this Agreement or System Standards.
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Reservation service will be restored after you have fully cured any and all
defaults and failures to pay and perform. We may omit the Facility from the
Directory if you are in default on the date we must determine which Chain
Facilities are included in the Directory. You recognize that any use of the
System not in accord with this Agreement will cause us irreparable harm for
which there is no adequate remedy at law, entitling us to injunctive and other
relief. We may litigate to collect amounts due under this Agreement without
first issuing a default or termination notice. Our consent or approval may be
withheld if needed while you are in default under this Agreement or may be
conditioned on the cure of all your defaults.
11.5 Your Remedies. If we fail to issue our approval or consent as and when
required under this Agreement within a reasonable time of not less than 30
days after we receive all of the information we request, and you believe our
refusal to approve or consent is wrongful, you may bring a legal action
against us to compel us to issue our approval or consent to the obligation. To
the extent permitted by applicable law, this action shall be your exclusive
remedy. We shall not be responsible for direct, indirect, special,
consequential or exemplary damages, including, but not limited to, lost
profits or revenues.
12. Liquidated Damages.
12.1 Generally. If we terminate the License under Section 11.2, or you
terminate this Agreement (except under Section 11.3 or as a result of our
default which we do not cure within a reasonable time after written notice),
you will pay us within 30 days following the date of termination, as
Liquidated Damages, an amount equal to the sum of accrued Royalties and RINA
Services Assessment Fees during the immediately preceding 24 full calendar
months (or the number of months remaining in the unexpired Term at the date of
termination, whichever is less). If the Facility has been open for less than
24 months, then the amount shall be the average monthly Royalties and RINA
Services Assessment Fees since the Opening Date multiplied by 24. You will
also pay any applicable Taxes assessed on such payment. Liquidated Damages
will not be less than the product of $2,000.00 multiplied by the number of
guest rooms in the Facility. If we terminate this Agreement under Section 3
before the Opening Date, you will pay us within 10 days after you receive our
notice of termination Liquidated Damages equal to one-half the amount payable
for termination under Section 11.2. Liquidated Damages are paid in place of
our claims for lost future Recurring Fees under this Agreement. Our right to
receive other amounts due under this Agreement is not affected.
12.2 Condemnation Payments. In the event a Condemnation is to
occur, you will pay us the fees set forth in Section 7 for a
period of one year after we receive the initial notice of
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condemnation described in Section 11.3.2, or until the Condemnation occurs,
whichever is longer. You will pay us Liquidated Damages equal to the average
daily Royalties and RINA Services Assessment Fees for the one year period
preceding the date of your condemnation notice to us multiplied by the number
of days remaining in the one year notice period if the Condemnation is
completed before the one year notice period expires. This payment will be made
within 30 days after Condemnation is completed (when you close the Facility or
you deliver it to the condemning authority). You will pay no Liquidated
Damages if the Condemnation is completed after the one year notice period
expires, but the fees set forth in Section 7 must be paid when due until
Condemnation is completed.
13. Your Duties At and After Termination. When the License or
this Agreement terminates for any reason whatsoever:
13.1 System Usage Ceases. You will immediately stop using the System to
operate and identify the Facility. You will remove all signage and other items
bearing any Marks and follow the other steps detailed in the System Standards
Manual for changing the identification of the Facility. You will promptly
paint over or remove the Facility's distinctive System trade dress, color
schemes and architectural features.
13.2 Other Duties. You will pay all amounts owed to us under this Agreement
within 10 days after termination. You will owe us Recurring Fees on Gross Room
Revenues accruing while the Facility is identified as a "Ramada", including
the RINA Services Assessment Fees for so long as the Facility receives service
from the Reservation System. We may immediately remove the Facility from the
Reservation System and divert reservations as authorized in Section 11.4. We
may also, to the extent permitted by applicable law, and without prior notice
enter the Facility and any other parcels, remove software (including archive
and back-up copies) for accessing the Reservation System, all copies of the
System Standards Manual, Confidential Information, equipment and all other
personal property of ours, and paint over or remove and purchase for $10.00,
all or part of any interior or exterior Mark-bearing signage (or signage face
plates), including billboards, whether or not located at the Facility, that
you have not removed or obliterated within five days after termination. You
will promptly pay or reimburse us for our cost of removing such items, net of
the $10.00 purchase price for signage. We will exercise reasonable care in
removing or painting over signage. We will have no obligation or liability to
restore the Facility to its condition prior to removing the signage. We shall
have the right, but not the obligation, to purchase some or all of the
Facility's Mark-bearing FF&E and supplies at the lower of their cost or net
book value, with the right to set off their aggregate purchase price against
any sums then owed us by you.
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13.3 Advance Reservations. The Facility will honor any advance reservations,
including group bookings, made for the Facility prior to termination at the
rates and on the terms established when the reservations are made and pay when
due all related travel agent commissions.
13.4 Survival of Certain Provisions. Sections 3.8, 3.9, 3.13, 7, 8, 11.4, 12,
13, 15, 16 and 17 survive termination of the License and this Agreement,
whether termination is initiated by you or us, even if termination is
wrongful.
14. Your Representations and Warranties. You expressly
represent and warrant to us as follows:
14.1 Quiet Enjoyment and Financing. You own, or will own prior to commencing
improvement, or lease, the Location and the Facility. You will be entitled to
possession of the Location and the Facility during the entire Term without
restrictions that would interfere with your performance under this Agreement,
subject to the reasonable requirements of any financing secured by the
Facility. You have, when you sign this Agreement, and will maintain during the
Term, adequate financial liquidity and financial resources to perform your
obligations under this Agreement.
14.2 This Transaction. You have received, at least 10 business days prior to
execution of this Agreement and making any payment to us, our current Uniform
Franchise Offering Circular for prospective licensees. Neither we nor any
person acting on our behalf has made any oral or written representation or
promise to you that is not written in this Agreement on which you are relying
to enter into this Agreement. You release any claim against us or our agents
based on any oral or written representation or promise not stated in this
Agreement. You and the persons signing this Agreement for you have full power
and authority and have been duly authorized, to enter into and perform or
cause performance of your obligations under this Agreement. You have obtained
all necessary approvals of your owners, Board of Directors and lenders. Your
execution, delivery and performance of this Agreement will not violate, create
a default under or breach of any charter, bylaws, agreement or other contract,
license, permit, indebtedness, certificate, order, decree or security
instrument to which you or any of your principal owners is a party or is
subject or to which the Facility is subject. Neither you nor the Facility is
the subject of any current or pending merger, sale, dissolution, receivership,
bankruptcy, foreclosure, reorganization, insolvency, or similar action or
proceeding on the date you execute this Agreement and was not within the three
years preceding such date, except as disclosed in the Application. You will
submit to us the documents about the Facility, you, your owners and your
finances that we request in the License
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Application (or after our review of your initial submissions) before or within
30 days after you sign this Agreement.
14.3 No Misrepresentations or Implied Covenants. All written information you
submit to us about the Facility, you, your owners, any guarantor, or the
finances of any such person or entity, was or will be at the time delivered
and when you sign this Agreement, true, accurate and complete, and such
information contains no misrepresentation of a material fact, and does not
omit any material fact necessary to make the information disclosed not
misleading under the circumstances. There are no express or implied covenants
or warranties, oral or written, between we and you except as expressly stated
in this Agreement.
15. Proprietary Rights.
15.1 Marks and System. You will not acquire any interest in or right to use
the System or Marks except under this Agreement. You will not apply for
governmental registration of the Marks, or use the Marks or our corporate name
in your legal name, but you may use a Mark for an assumed business or trade
name filing.
15.2 Inurements. All present and future distinguishing characteristics,
improvements and additions to or associated with the System by us, you or
others, and all present and future service marks, trademarks, copyrights,
service mark and trademark registrations used and to be used as part of the
System, and the associated good will, shall be our property and will inure to
our benefit. No good will shall attach to any secondary designator that you
use.
15.3 Other Locations and Systems. We and our affiliates each reserve the right
to own, in whole or in part, and manage, operate, use, lease, finance,
sublease, franchise, license (as licensor or licensee), provide services to or
joint venture (i) distinctive separate lodging or food and beverage marks and
other intellectual property which are not part of the System, and to enter
into separate agreements with you or others (for separate charges) for use of
any such other marks or proprietary rights, (ii) other lodging, food and
beverage facilities, or businesses, under the System utilizing modified System
Standards, and (iii) a Chain Facility at or for any location other than the
Location. There are no territorial rights or agreements between the parties.
You acknowledge that we are affiliated with or in the future may become
affiliated with other lodging providers or franchise systems that operate
under names or marks other than the Marks. We and our affiliates may use or
benefit from common hardware, software, communications equipment and services
and administrative systems for reservations, franchise application procedures
or committees, marketing and advertising programs, personnel, central
purchasing, approved supplier lists, franchise
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sales personnel (or independent franchise sales representatives),
etc.
15.4 Confidential Information. You will take all appropriate actions to
preserve the confidentiality of all Confidential Information. Access to
Confidential Information should be limited to persons who need the
Confidential Information to perform their jobs and are subject to your general
policy on maintaining confidentiality as a condition of employment or who have
first signed a confidentiality agreement. You will not permit copying of
Confidential Information (including, as to computer software, any translation,
decompiling, decoding, modification or other alteration of the source code of
such software). You will use Confidential Information only for the Facility
and to perform under this Agreement. Upon termination (or earlier, as we may
request), you shall return to us all originals and copies of the System
Standards Manual, policy statements and Confidential Information "fixed in any
tangible medium of expression," within the meaning of the U.S. Copyright Act,
as amended. Your obligations under this subsection commence when you sign this
Agreement and continue for trade secrets (including computer software we
license to you) as long as they remain secret and for other Confidential
Information, for as long as we continue to use the information in confidence,
even if edited or revised, plus three years. We will respond promptly and in
good faith to your inquiry about continued protection of any Confidential
Information.
15.5 Litigation. You will promptly notify us of (i) any adverse or infringing
uses of the Marks (or names or symbols confusingly similar), Confidential
Information or other System intellectual property, and (ii) or any threatened
or pending litigation related to the System against (or naming as a party) you
or us of which you become aware. We alone handle disputes with third parties
concerning use of all or any part of the System. You will cooperate with our
efforts to resolve these disputes. We need not initiate suit against imitators
or infringers who do not have a material adverse impact on the Facility, or
any other suit or proceeding to enforce or protect the System in a matter we
do not believe to be material.
16. Relationship of Parties.
16.1 Independence. You are an independent contractor. You are not our legal
representative or agent, and you have no power to obligate us for any purpose
whatsoever. We and you have a business relationship based entirely on and
circumscribed by this Agreement. No partnership, joint venture, agency,
fiduciary or employment relationship is intended or created by reason of this
Agreement. You will exercise full and complete control over and have full
responsibility for your contracts, daily operations, labor relations,
employment practices and policies, including,
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but not limited to, the recruitment, selection, hiring, disciplining, firing,
compensation, work rules and schedules of your employees.
16.2 Joint Status. If you comprise two or more persons or entities
(notwithstanding any agreement, arrangement or understanding between or among
such persons or entities) the rights, privileges and benefits of this
Agreement may only be exercised and enjoyed jointly. The liabilities and
responsibilities under this Agreement will be the joint and several
obligations of all such persons or entities.
16.3 FSH Rights. In the event our rights to (i) any of the Marks or the Ramada
System shall be terminated pursuant to the Master License Agreements (other
than as a result of a purchase option we exercise as set forth therein), or
(ii) we liquidate, dissolve or otherwise cease to do business, then FSH or its
assignee shall have the right to succeed to all of our rights in, to and under
this Agreement and any other agreements between you and us entered into
pursuant to this Agreement, and in such event FSH or its assignee shall be
obligated to perform our duties and assume all of our obligations under any
such agreements.
17. Legal Matters.
17.1 Partial Invalidity. If all or any part of a provision of this Agreement
violates the law of your state (if it applies), such provision or part will
not be given effect. If all or any part of a provision of this Agreement is
declared invalid or unenforceable, for any reason, or is not given effect by
reason of the prior sentence, the remainder of the Agreement shall not be
affected. However, if in our judgment the invalidity or ineffectiveness of
such provision or part substantially impairs the value of this Agreement to
us, then we may at any time terminate this Agreement by written notice to you
without penalty or compensation owed by either party.
17.2 Waivers, Modifications and Approvals. If we allow you to deviate from
this Agreement, we may insist on strict compliance at any time after written
notice. Our silence or inaction will not be or establish a waiver, consent,
course of dealing, implied modification or estoppel. All modifications,
waivers, approvals and consents of or under this Agreement by us must be in
writing and signed by our authorized representative to be effective.
17.3 Notices. Notices will be effective if in writing and delivered by
facsimile transmission with confirmation original sent by first class mail,
postage prepaid, by delivery service, with proof of delivery, or by first
class, prepaid certified or registered mail, return receipt requested, to the
appropriate party at its address stated below or as may be otherwise
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designated by notice. Notices shall be deemed given on the date
delivered or date of attempted delivery, if refused.
Ramada Franchise Systems, Inc.:
Our address: 339 Jefferson Road, P.O. Box 278,
Parsippany, New Jersey 07054-0278,
Attention: Vice President-Franchise Compliance:
Fax No. (201) 428-9579
Forty Hotels, Inc.:
Your address: 339 Jefferson Road,
Parsippany, New Jersey 07054,
Attention:
Your fax No.:
17.4 Remedies. Remedies specified in this Agreement are cumulative and do not
exclude any remedies available at law or in equity. The non-prevailing party
will pay all costs and expenses, including reasonable attorneys' fees,
incurred by the prevailing party to enforce this Agreement or collect amounts
owed under this Agreement. You consent and waive your objection to the
non-exclusive personal jurisdiction of and venue in the New Jersey state
courts situated in Morris County, New Jersey and the United States District
Court for the District of New Jersey for all cases and controversies under
this Agreement or between we and you.
17.5 Miscellaneous. The Agreement will be governed by and construed under the
laws of the State of New Jersey. The New Jersey Franchise Practices Act will
not apply to any Facility located outside the State of New Jersey. This
Agreement is exclusively for the benefit of the parties. There are no third
party beneficiaries. No agreement between us and anyone else is for your
benefit. The section headings in this Agreement are for convenience of
reference only. We may unilaterally revise Schedule C under this Agreement.
This Agreement, together with the exhibits and schedules attached, is the
entire agreement (superseding all prior representations, agreements and
understandings, oral or written) of the parties about the Facility.
17.6 Waiver of Jury Trial. The parties waive the right to a jury trial in any
action related to this Agreement or the relationship between the licensor, the
licensee, any guarantor, and their respective successors and assigns.
18. Special Stipulations. The following special stipulations
apply to this Agreement and supersede any inconsistent or
conflicting provisions. These are personal to you and are not
transferable or assignable except to a Permitted Transferee.
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18.1 Liquidated Damages. Your Liquidated Damages payable within 15 days after
termination of the License prior to expiration of the Term by Us with cause or
by You without cause by either party shall be the product of the aggregate
Royalties and RINA Services Assessment Fees accruing under Section 7.1
(whether or not paid and excluding travel agent commissions and GDS Fees)
during the last twelve (12) months before termination, multiplied by the
"Factor." If termination occurs during the first License Year, Liquidated
Damages shall be calculated by taking the average of monthly payments of
Royalties and RINA Services Assessment Fees, (whether or not paid and
excluding travel agent commissions and GDS Fees) under this Agreement times
twelve (12), then multiplying by the Factor. If the termination occurs before
the end of the fourth License Year, then the Factor will be five (5). If the
termination occurs during the fifth License Year, the Factor will be four (4).
If the termination occurs during the sixth License Year, the Factor will be
three (3). If the termination occurs after the sixth License Year, the Factor
will be two (2).
18.2 Additional Transfer Rights. You and any assignee or successor of the
original Licensee may assign this Agreement to, the lessee or transferee of
fee simple title to the Facility upon thirty (30) days prior written notice to
us at any time during the Term when you are not in default under this
Agreement without payment of an application, initial or transfer fee by either
you or the assignee provided that (1) the assignee completes and returns to us
at least fifteen (15) days before the transfer of possession or title,
whichever comes first, our standard license application, (2) the assignee is
reasonably acceptable to us, (3) for a period ending on the seventh
anniversary of the date of execution of this Agreement, the original Licensee
remains primarily liable for the timely and full payment of the Licensee's
obligations under this Agreement for the payment of liquidated damages in
accordance with Section 12, and (4) the assignee assumes this Agreement by
writing acceptable to and directly enforceable by us. From and after said
seventh anniversary you shall have no further liability under this
subparagraph.
18.3 Conversion Rights. You may terminate the License at any time without
incurring Liquidated Damages or any termination fees, provided that you shall
have entered into a license or franchise agreement with another subsidiary of
HFS Incorporated ("HFS") providing for the operation of the Facility as part
of the franchise system owned by the subsidiary, which agreement shall be in
the then current standard form of license or franchise agreement being offered
to prospective licensees or franchisees by the subsidiary in its then current
Uniform Franchise Offering Circular for New York. Such agreement shall be
modified to include liquidated damages and assignment provisions substantially
the same as Sections 18.1 and 18.2
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above, after giving effect to the expiration of the period prior to such
termination of this Agreement, and a Term at least equal to the unexpired
portion of the original term of this Agreement. You acknowledge that neither
HFS nor any subsidiary of HFS shall be obligated to enter into any license or
franchise agreement with you with respect to the Facility.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first stated above.
WE:
Ramada Franchise Systems, Inc.:
By:__________________________ Attest:__________________________
Vice President Assistant Secretary
YOU, as licensee:
Forte Hotels, Inc.
By:__________________________ Attest:__________________________
(Vice) President
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APPENDIX A
DEFINITIONS
Agreement means this License Agreement.
Application Fee means the fee you pay when you submit your Application under
Section 6.
Approved Plans means your plans and specifications for constructing or
improving the Facility initially or after opening, as approved by us under
Section 3.
Casualty means destruction or significant damage to the Facility by act of God
or other event beyond your reasonable anticipation and control.
Chain means the network of Chain Facilities.
Chain Facility means a lodging facility we own, lease, manage, operate or
authorize another party to operate using the System and identified by the
Marks.
Condemnation means the taking of the Facility for public use by a government
or public agency legally authorized to do so, permanently or temporarily, or
the taking of such a substantial portion of the Facility that continued
operation in accordance with the System Standards, or with adequate parking
facilities, is commercially impractical, or if the Facility or a substantial
portion is sold to the condemning authority in lieu of condemnation.
Conference Registration Fee means the fee charged for attendance at the annual
RINA conference.
Confidential Information means any trade secrets we own or protect and other
proprietary information not generally known to the lodging industry including
confidential portions of the System Standards Manual or information we
otherwise impart to you and your representatives in confidence. Confidential
Information includes the "Standards of Operation and Design Manual" and all
other System Standards manuals and documentation, including those on the
subjects of employee relations, finance and administration, field operation,
purchasing and marketing, the Reservation System software and applications
software.
Declaration means the Declaration of License Agreement you and we sign under
Section 5.
Design Standards mean standards specified in the System Standards Manual from
time to time for design, construction, renovation, modification and
improvement of new or existing Chain Facilities,
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including all aspects of facility design, number of rooms, rooms mix and
configuration, construction materials, workmanship, finishes, electrical,
mechanical, structural, plumbing, HVAC, utilities, access, life safety,
parking, systems, landscaping, amenities, interior design and decor and the
like for a Chain Facility.
Directory means the general purpose directory we publish listing the names and
addresses of Chain Facilities, and at our discretion, other Ramada facilities
located outside the United States, Canada and Mexico.
Effective Date means the date on which we and you have executed of this
Agreement, or the date we insert in the Preamble of this Agreement.
Equity Interests shall include, without limitation, all forms of equity
ownership of you, including voting stock interests, partnership interests,
limited liability company membership or ownership interests, joint and tenancy
interests, the proprietorship interest, trust beneficiary interests and all
options, warrants, and instruments convertible into such other equity
interests.
Equity Transfer means any transaction in which your owners or you sell,
assign, transfer, convey, pledge, or suffer or permit the transfer or
assignment of, any percentage of your Equity Interests that will result in a
change in control of you to persons other than those disclosed on Schedule B,
as in effect prior to the transaction. Unless there are contractual
modifications to your owners' rights, an Equity Transfer of a corporation or
limited liability company occurs when either majority voting rights or
beneficial ownership of more than 50% of the Equity Interests changes. An
Equity Transfer of a partnership occurs when a newly admitted partner will be
the managing, sole or controlling general partner, directly or indirectly
through a change in control of the Equity Interests of an entity general
partner. An Equity Transfer of a trust occurs when either a new trustee with
sole investment power is substituted for an existing trustee, or a majority of
the beneficiaries convey their beneficial interests to persons other than the
beneficiaries existing on the Effective Date. An Equity Transfer does not
occur when the Equity Interest ownership among the owners of Equity Interests
on the Effective Date changes without the admission of new Equity Interest
owners. An Equity Transfer occurs when you merge, consolidate or issue
additional Equity Interests in a transaction which would have the effect of
diluting the voting rights or beneficial ownership of your owners' combined
Equity Interests in the surviving entity to less than a majority.
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Facility means the Location, together with all improvements, buildings, common
areas, structures, appurtenances, facilities, entry/exit rights, parking,
amenities, FF&E and related rights, privileges and properties existing at the
Location on the Effective Date or afterwards.
FF&E means furniture, fixtures and equipment.
FF&E Standards means standards specified in the System Standards Manual for
FF&E and supplies to be utilized in a Chain Facility.
Food and Beverage means any restaurant, catering, bar/lounge, entertainment,
room service, retail food or beverage operation, continental breakfast, food
or beverage concessions and similar services offered at the Facility.
Gross Room Revenues means gross revenues attributable to or payable for
rentals of guest rooms at the Facility, including all credit transactions,
whether or not collected, but excluding separate charges to guests for Food
and Beverage, room service, telephone charges, key forfeitures and
entertainment; vending machine receipts; and federal, state and local sales,
occupancy and use taxes.
Improvement Obligation means your obligation to either (i) renovate and
upgrade the Facility, or (ii) construct and complete the Facility, in
accordance with the Approved Plans and System Standards, as described in
Section 3.
Indemnitees means us, our direct and indirect parent, subsidiary and sister
corporations, and the respective officers, directors, shareholders, employees,
agents and contractors, and the successors, assigns, personal representatives,
heirs and legatees of all such persons or entities.
Initial Fee means the fee you are to pay for signing this Agreement as stated
in Section 6.
License means the non-exclusive license to operate the type of Chain Facility
described in Schedule B only at the Location, using the System and the Mark we
designate in Section 1.
License Year means the one-year period beginning on the Opening Date and each
subsequent anniversary of the Opening Date and ending on the day preceding the
next anniversary of the Opening Date.
Liquidated Damages means the amounts payable under Section 12, set by the
parties because actual damages will be difficult or impossible to ascertain on
the Effective Date and the amount is a reasonable pre-estimate of the damages
that will be incurred and is not a penalty.
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Location means the parcel of land situated at J.F.K.
International Airport, Van Wyck Expressway, Jamaica, New York, as more fully
described in Schedule A.
Losses and Expenses means all payments or obligations to make payments either
(i) to or for third party claimants by any and all Indemnitees, including
guest refunds, or (ii) incurred by any and all Indemnitees to investigate,
respond to or defend a matter, including without limitation investigation and
trial charges, costs and expenses, attorneys' fees, experts' fees, court
costs, settlement amounts, judgments and costs of collection.
Maintenance Standards means the standards specified from time to time in the
System Standards Manual for repair, refurbishment and replacement of FF&E,
finishes, decor, and other capital items and design materials in Chain
Facilities.
Marks means, collectively (i) the service marks associated with the System
published in the System Standards Manual from time to time including, but not
limited to, the name, design and logo for "Ramada" and other marks (U.S. Reg.
Nos. 849,591 and 1,191,422) and (ii) trademarks, trade names, trade dress,
logos and derivations, and associated good will and related intellectual
property interests.
Marks Standards means standards specified in the System Standards Manual for
interior and exterior Mark-bearing signage, advertising materials, china,
linens, utensils, glassware, uniforms, stationery, supplies, and other items,
and the use of such items at the Facility or elsewhere.
Minor Renovation means the repairs, refurbishing, repainting, and other
redecorating of the interior, exterior, guest rooms, public areas and grounds
of the Facility and replacements of FF&E we may require you to perform under
Section 3.16.
Minor Renovation Ceiling Amount means $3,000.00 per guest room.
Minor Renovation Notice means the written notice from us to you specifying the
Minor Renovation to be performed and the dates for commencement and completion
given under Section 3.16.
Opening Date means the date on which we authorize you to open the Facility for
business identified by the Marks and using the System.
Operations Standards means standards specified in the System Standards Manual
for cleanliness, housekeeping, general maintenance, repairs, concession types,
food and beverage service, vending machines, uniforms, staffing, employee
training,
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guest services, guest comfort and other aspects of lodging
operations.
Permitted Transferee means (i) any entity, natural person(s) or trust
receiving from the personal representative of an owner any or all of the
owner's Equity Interests upon the death of the owner, if no consideration is
paid by the transferee or (ii) the spouse or adult issue of the transferor, if
the Equity Interest transfer is accomplished without consideration or payment,
or (iii) any natural person or trust receiving an Equity Interest if the
transfer is from a guardian or conservator appointed for an incapacitated or
incompetent transferor.
Punch List means the list of upgrades and improvements attached as part of
Schedule B, which you are required to complete under Section 3.
Recurring Fees means fees paid to us on a periodic basis, including without
limitation, Royalties, RINA Services Assessment Fees, and other reservation
fees and charges as stated in Section 7.
Relicense Fee means the fee your transferee or you pay to us under Section 7
when a Transfer occurs.
Reservation System or "Central Reservation System" means the system for
offering to interested parties, booking and communicating guest room
reservations for Chain Facilities described in Section 4.2.
RINA means the Ramada Inns National Association.
RINA Services Assessment Fees means the assessments charged as set forth in
Section 7.1.2.
Rooms Addition Fee means the fee we charge you for adding guest rooms to the
Facility.
Royalty means the monthly fee you pay to us for use of the System
under Section 7(a). "Royalties" means the aggregate of all
amounts owed as a Royalty.
System means the comprehensive system for providing guest lodging facility
services under the Marks as we specify which at present includes only the
following: (a) the Marks; (b) other intellectual property, including
Confidential Information, System Standards Manual and know-how; (c) marketing,
advertising, publicity, and other promotional materials and programs; (d)
System Standards; (e) training programs and materials; (f) quality assurance
inspection and scoring programs; and (g) the Reservation System.
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<PAGE>
System Standards means the standards for the participating in the System
published in the System Standards Manual, including but not limited to Design
Standards, FF&E Standards, Marks Standards, Operations Standards, Technology
Standards and Maintenance Standards and any other standards, policies, rules
and procedures we promulgate about System operation and usage.
System Standards Manual means the Standards of Operation and Design Manual and
any other manual we publish or distribute specifying the System Standards.
Taxes means the amounts payable under Section 7.2 of this Agreement.
Technology Standards means standards specified in the System Standards Manual
for local and long distance telephone communications services, telephone,
telecopy and other communications systems, point of sale terminals and
computer hardware and software for various applications, including, but not
limited to, front desk, rooms management, records maintenance, marketing data,
accounting, budgeting and interfaces with the Reservation System to be
maintained at the Chain Facilities.
Term means the period of time during which this Agreement shall be in effect,
as stated in Section 5.
Termination means a termination of the License under Sections 11.1 or 11.2 or
your termination of the License or this Agreement.
Transfer means (1) an Equity Transfer, (2) you assign, pledge, transfer,
delegate or grant a security interest in all or any of your rights, benefits
and obligations under this Agreement, as security or otherwise without our
consent as specified in Section 9, (3) you assign (other than as collateral
security for financing the Facility) your leasehold interest in (if any),
lease or sublease all or any part of the Facility to any third party, (4) you
engage in the sale, conveyance, transfer, or donation of your right, title and
interest in and to the Facility, (5) your lender or secured party forecloses
on or takes possession of your interest in the Facility, directly or
indirectly, or (6) a receiver or trustee is appointed for the Facility or your
assets, including the Facility. A Transfer does not occur when you pledge or
encumber the Facility to finance its acquisition or improvement, you refinance
it, or you engage in a Permitted Transferee transaction.
"You" and "Your" means and refers to the party named as licensee identified in
the first paragraph of this Agreement and its Permitted Transferees.
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<PAGE>
"We", "Our" and "Us" means and refers to Ramada Franchise Systems, Inc., a
Delaware corporation, its successors and assigns.
-31-
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SCHEDULE A
(Legal Description of Facility)
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<PAGE>
SCHEDULE B
PART I: YOUR OWNERS:
Name Ownership Percentage Type of Equity Interest
PART II: THE FACILITY:
Primary designation of Facility: Ramada Plaza Hotel
Number of approved guest rooms: 475
Parking facilities (number of spaces, description): 475
Other amenities, services and facilities: gift shop, meeting
rooms, exercise room
PART III: DESCRIPTION AND SCHEDULE OF RENOVATIONS TO BE
COMPLETED AS THE IMPROVEMENT OBLIGATION:
[Punch List to be attached.]
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<PAGE>
SCHEDULE C
September 1995
The RINA Services Assessment Fee is equal to 4.5% of Gross Room
Revenues.
The airline reservation system charge described in Section 7 is $3.50
per gross reservation. The travel agent commission described in Section 7 is
10% of the Gross Room Revenues generated by each reservation originated by the
agent plus our service fee of $0.35 per reservation.
The RINA Services Assessment Fee is subject to change for all Chain
facilities, and new fees and charges may be assessed for new services, but
only upon the recommendation of the Executive Committee of RINA and Our
approval.
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<PAGE>
EXHIBIT C
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C/M 11752.0003 365014.1
<PAGE>
EXHIBIT D
<PAGE>
January [ ], 1996
National Lodging Corp.
339 Jefferson Road
Parsippany, New Jersey 07054
Relax Properties Agreement
Ladies and Gentlemen:
Reference is made to the Agreement Among Purchasers dated as
of January 22, 1996 among National Lodging Corp. ("NALC"), HFS Incorporated
("HFS") and Motels of America, Inc. ("MOA") (the "Agreement Among Purchasers"),
relating to the rights and obligations of the Purchasers among themselves
relative to the acquisition of Forte Hotels, Inc. ("FHI") from Forte USA, Inc.
(the "Seller"), upon the terms and subject to the conditions set forth in (i)
the Stock Purchase Agreement dated as of December 19, 1995, between the Seller
and NALC, (ii) the Purchase Agreement, dated as of December 19, 1995, among FHI,
the Seller and HFS (the "HFS Purchase Agreement") and (iii) the Purchase
Agreement, dated as of December 19, 1995, among FHI, the Seller and MOA. Terms
defined in the Agreement Among Purchasers or the HFS Purchase Agreement and not
otherwise defined herein are used herein as therein defined.
In order to clarify the respective rights of NALC and Bear
Acquisition Corp. ("BAC") in and to the properties listed on Appendix A hereto
(the "Current Relax Franchises") and any franchises subsequently established
pursuant to the Management Services and Development Agreement, dated September
30, 1992, originally by and between Forte Hotels Management Inc. and Royco
Hotels and Resorts Ltd. ("Royco") (the "Management Services and Franchise
Development Agreement") (collectively with the Current Relax Franchises, the
"Relax Franchises"), NALC and BAC hereby agree as follows:
1. (a) BAC will allow NALC to act as the sub-franchisor of the
Relax Franchises solely for purposes of the Management Services and
Franchise Development Agreement. NALC will not amend, modify or waive
any provision of the Management Services and Franchise Development
Agreement, or terminate or consent to the termination of the Management
Services and Franchise Development Agreement, without the prior written
consent of BAC.
145039_2/NYL3
<PAGE>
2
(b) NALC will promptly forward to BAC all payments
and other economic benefits that arise under the Management Services
and Franchise Development Agreement and relate to the promotion,
marketing or soliciting of franchise opportunities, including but not
limited to payments and economic benefits arising under Articles 2 and
4 and Schedule 2 of the Management Services and Franchise Development
Agreement that relate to the promotion, marketing or soliciting of
franchise opportunities. In the event that NALC receives any payment of
a royalty, marketing or other fee from any of the Relax Franchises
pursuant to a franchise agreement, NALC shall promptly forward such
payment to BAC.
(c) BAC will promptly forward to NALC all payments
due to Royco pursuant to the Management Services and Franchise
Development Agreement that relate to the promotion, marketing or
soliciting of franchise opportunities, including but not limited to
payments due under Articles 2 and 4 of the Management Services and
Franchise Development Agreement that relate to the promotion, marketing
or soliciting of franchise opportunities.
(d) NALC will promptly forward to BAC all notices,
materials or other information it receives or distributes pursuant to
the Management Services and Franchise Development Agreement that relate
to any of the Relax Franchises, including, but not limited to notices,
materials or other information received pursuant to Articles 2, 3, 6 or
7 thereof.
(e) NALC will promptly notify BAC of all
opportunities presented to it by Royco to enter into Additional Forte
Hotels Franchise and License Agreements (as defined in the Management
Services and Franchise Development Agreement), and will not take any
action with regard to such opportunities except as directed by BAC
unless and until BAC rejects such opportunity in writing. Any
Additional Forte Hotels Franchise and License Agreements shall be
negotiated and executed by BAC, or by Royco on behalf of BAC, at the
sole discretion of BAC. NALC will take all other actions that relate to
the development of any of the Relax Franchises pursuant to the
Management Services and Franchise Development Agreement as and when
reasonably directed to do so by BAC.
2. (a) NALC will not amend, modify or waive any material
provision of, or terminate any of the non-disturbance agreements listed
in Appendix B hereto (the "Franchise Non-Disturbance Agreements"), with
the exception of the amendment, modification or waiver of Section 4 of
the Franchise Non-Disturbance Agreements, or any agreement that affects
any of the Franchise Non-Disturbance Agreements, nor will NALC agree,
whether in writing or otherwise, to any such amendment, modification,
waiver or termination, without the prior written consent of BAC.
145039_2/NYL3
<PAGE>
3
(b) NALC will promptly forward to BAC all payments
and other economic benefits that arise under the Franchise
Non-Disturbance Agreements and relate to the Franchise and License
Agreement (as defined in the Franchise Non-Disturbance Agreements),
including, but not limited to, payments and economic benefits arising
under Sections 3, 6, 7 and 8 of the Franchise Non-Disturbance
Agreements that relate to the Franchise and License Agreement.
(c) NALC will promptly forward to BAC all notices,
materials or other information it receives or distributes pursuant to
the Franchise Non-Disturbance Agreements that relate to any of the
Relax Franchises, including, but not limited to, notices, materials or
other information received pursuant to Sections 3, 6, 7, 8, 10, 11, 12
or 13 thereof.
3. NALC will not amend, modify or waive any material provision
of, or terminate any agreement that affects any of the Relax
Franchises, nor will NALC agree, whether in writing or otherwise, to
any such amendment, modification, waiver or termination, without the
prior written consent of BAC.
4. The parties agree, as promptly as practicable after the
Closing, to use all commercially reasonable efforts to enter into a new
master management agreement between NALC and Royco, which will relate
to management services to be provided to the Relax Franchises and will
be based upon the relevant sections of the Management Services and
Franchise Development Agreement, and a new master franchise development
agreement between BAC and Royco, which will relate to franchise
development and will be based upon the relevant sections of the
Management Services and Franchise Development Agreement.
5. The parties agree, as promptly as practicable after the
Closing, to use all commercially reasonable efforts to enter into new
non-disturbance agreements between NALC and each of the lenders listed
in Appendix C hereto, which shall relate to the non-disturbance of the
Management Agreement (as defined in the Franchise Non-Disturbance
Agreements), and be based upon the relevant sections of the existing
agreements; and BAC and each of the lenders listed in Appendix B
hereto, which shall relate to the non-disturbance of the Franchise and
License Agreement (as defined in the Franchise Non-Disturbance
Agreements), and be based upon the relevant sections of the existing
agreements.
145039_2/NYL3
<PAGE>
4
Please acknowledge your understanding of, and agreement to,
the foregoing by executing in the space provided below and returning to me a
copy of this letter.
Very truly yours,
BEAR ACQUISITION CORP.
By
Name:
Title:
Acknowledged and Agreed, this 23rd day of January, 1996:
NATIONAL LODGING CORP.
By
Name:
Title:
145039_2/NYL3
<PAGE>
EXHIBIT E
<PAGE>
PROMISSORY NOTE
U.S.$10,000,000 Dated: January 23, 1996
FOR VALUE RECEIVED, the undersigned, MOA-TL HOLDING CORP., a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
HFS INCORPORATED (together with its successors and assigns, the "Lender") the
principal amount of $10,000,000 or, if less, the aggregate principal amount of
Advances (as hereinafter defined) made by the Lender to the Borrower outstanding
on the Termination Date (as hereinafter defined).
The Borrower promises to pay interest on the unpaid principal
amount of each Advance from the date of such Advance until such principal amount
is paid in full, payable in arrears quarterly on the last day of each March,
June, September and December and on the Termination Date, at an interest rate
per annum equal at all times to 14% per annum; provided, however, that any
overdue amount (after giving effect to any applicable grace period) of
principal, interest or other amounts payable hereunder shall, to the fullest
extent permitted by law, bear interest, payable on demand, at 16% per annum.
ARTICLE I - DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used herein, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Advance" means an advance by the Lender to the Borrower
pursuant to Article II.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City.
"Commitment" has the meaning specified in Section 2.01.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of property or services
(other than trade payables not overdue by more than 60 days incurred in
the ordinary course of such Person's business), (c) all obligations of
such Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all obligations of such Person created or arising
under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (e) all
obligations of such Person as lessee under leases that have been or
should be, in accordance with GAAP, recorded as capital leases, (f) all
obligations, contingent or otherwise, of such Person in respect of
acceptances, letters of credit or similar extensions of credit, (g) all
Debt of others referred to in clauses (a) through (f) above or clause
(h) below guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (1) to pay or purchase such Debt or to advance or
supply funds for the payment or purchase of such Debt, (2) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make
payment of such Debt or to assure the holder of such Debt against loss,
(3) to supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services irrespective
of whether such property is received or such services are rendered) or
(4) otherwise to
MOA Note
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<PAGE>
2
assure a creditor against loss, and (i) all Debt referred to in clauses
(a) through (g) above secured by (or for which the holder of such Debt
has an existing right, contingent or otherwise, to be secured by) any
Lien on property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Debt.
"Debt Coverage Ratio" means, at any time of determination, the
ratio of (i) consolidated EBITDA of the Borrower and its subsidiaries
for the four fiscal quarters of the Borrower then most recently ended
to (ii) the sum of (a) interest payable on all Debt (other than the
Debt evidenced by this Note) plus (b) the aggregate principal amount of
all Debt (other than the Debt evidenced by this Note and other than
Debt which is repaid with the proceeds of Refinancing Debt) scheduled
or otherwise required to be paid or mandatorily prepaid, in each case
by the Borrower and its subsidiaries during the four fiscal quarters of
the Borrower then most recently ended, in each case calculated in
accordance with GAAP.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"EBITDA" means, for any period, the sum, determined on a
consolidated basis for the Borrower and its Subsidiaries, of (a) net
income (or net loss), (b) interest expense, (c) income tax expense, (d)
depreciation expense and (e) amortization expense, in each case,
determined in accordance with GAAP for such period.
"Events of Default" has the meaning specified in Section 6.01.
"Excess Refinancing Proceeds" has the meaning specified in
Section 5.02(a)(iii)(C).
"GAAP" has the meaning specified in Section 1.03.
"Guarantor" means New Image Realty, Inc., a Nevada corporation.
"HFS Agreement" means any franchise agreement or license
agreement entered into from time to time by the Borrower or any of its
subsidiaries and the Lender or any of its subsidiaries, as such
agreement may be amended, supplemented or otherwise modified from time
to time.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"Loan Documents" means this Note, the Guaranty (as hereinafter
defined) and the Pledge Agreement, in each case as amended,
supplemented or otherwise modified from time to time.
"Net Cash Proceeds" means, with respect to any sale, lease,
transfer or other disposition of any asset by any Person, the aggregate
amount of cash received from time to time (whether as initial
consideration or through payment or disposition of deferred
consideration) by or on behalf of such Person in connection with such
transaction after deducting therefrom only (without duplication) (a)
reasonable and customary brokerage commissions, underwriting fees and
discounts, legal fees, finder's fees and other similar fees and
commissions, (b) reasonable and customary real estate closing
adjustments and (c) the amount of taxes payable in connection with or
as a result of such transaction, in each case to the extent, but only
to the extent, that the amounts so deducted are, at the time of receipt
MOA Note
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<PAGE>
3
of such cash, actually paid or payable to a Person that is not an
affiliate of such Person or the Borrower or any affiliate of the
Borrower and are properly attributable to such transaction or to the
asset that is the subject thereof.
"Nomura Credit Agreement" means the Note Purchase Agreement
dated as of January 23, 1996, between MOA-TL Corp. and Nomura Asset
Capital Corporation, and the Transaction Documents (as defined
therein), in each case as amended, supplemented or otherwise modified,
amended and restated, replaced or refinanced from time to time in
accordance with their terms.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) Liens for taxes, assessments and
governmental charges or levies to the extent not required to be paid
under Section 5.01 hereof; (b) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's Liens
and other similar Liens arising in the ordinary course of business
securing obligations that are not overdue for a period of more than 30
days; (c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or
statutory obligations; and (d) easements, rights of way and other
encumbrances on title to real property that do not render title to the
property encumbered thereby unmarketable or materially adversely affect
the use of such property for its present purposes.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability company or
other entity, or a government or any political subdivision or agency
thereof.
"Pledge Agreement" means the Pledge Agreement dated as of
March 31, 1995 made by the Guarantor to the Lender, as amended,
supplemented or otherwise modified from time to time.
"Termination Date" means the earlier of January 31, 2001 and
the date of termination in whole of the Commitments pursuant to Section
2.03 or 6.01.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the
happening of such a contingency.
"Wallace Group" means Paul F. Wallace and any corporation,
association or other business entity of which more than 50% of (a) the
issued and outstanding capital stock having ordinary voting power to
elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class
or classes of such corporation shall or might have voting power upon
the occurrence of any contingency) or (b) the interest in the capital
or profits of such association or other business entity is at the time
directly or indirectly owned or controlled by Paul F. Wallace.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e) ("GAAP").
MOA Note
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4
ARTICLE II - AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. The Lender agrees, on the terms
and conditions hereinafter set forth, to make Advances to the Borrower from time
to time on any Business Day during the period from the date hereof until the
Termination Date in an aggregate amount not to exceed at any time outstanding
$10,000,000 (the "Commitment"). Each Advance shall be in an aggregate amount of
$1,000,000 or an integral multiple of $250,000 in excess thereof. Within the
limit of the Commitment, the Borrower may borrow under this Section 2.01, prepay
pursuant to Section 2.05 and reborrow under this Section 2.01.
SECTION 2.02. Making the Advances. (a) Each Advance shall be
made on notice, given not later than 11:00 A.M. (New York City time) on the
third Business Day prior to the date of the proposed Advance, by the Borrower to
the Lender. Each such notice of a requested Advance shall be by telephone,
confirmed immediately in writing, or telecopier or telex, specifying therein the
requested date of such Advance and amount of such Advance. The Lender shall,
before 11:00 A.M. (New York City time) on the date of such Advance, upon
fulfillment of the applicable conditions set forth in Article III, make such
Advance available to the Borrower, in same day funds, at an account maintained
by the Borrower with a commercial bank organized under the laws of the United
States, or any State thereof, and designated by the Borrower for such purpose.
SECTION 2.03. Termination or Reduction of the Commitments. The
Borrower shall have the right, upon at least one Business Day's notice to the
Lender, to terminate in whole or reduce in part the unused portion of the
Commitment, provided that each partial reduction shall be in the aggregate
amount of $1,000,000 or an integral multiple of $250,000 in excess thereof.
SECTION 2.04. Repayment. The Borrower shall repay to the Lender on the
Termination Date the aggregate principal amount of the Advances then
outstanding.
SECTION 2.05. Prepayments. (a) Optional. The Borrower may,
upon at least one Business Day's notice to the Lender stating the proposed date
and principal amount of the prepayment, and if such notice is given the Borrower
shall, prepay the outstanding principal amount of the Advances in whole or in
part, with accrued interest to the date of such prepayment on the amount
prepaid, provided that each optional partial prepayment shall be in a principal
amount not less than $250,000.
(b) Mandatory. (i) The Borrower shall, on the date of receipt
of the Net Cash Proceeds by the Borrower or any of its subsidiaries from the
sale, lease, transfer or other disposition of any assets of the Borrower or any
of its subsidiaries (other than the sale of inventory in the ordinary course of
business), to the extent not otherwise required pursuant to the terms of the
Nomura Credit Agreement to be applied to prepay amounts outstanding thereunder,
prepay an aggregate principal amount of the Advances equal to the amount of such
Net Cash Proceeds.
(ii) The Borrower shall, on the date of receipt of Excess
Refinancing Proceeds, prepay an aggregate principal amount of the Advances equal
to the amount of such Excess Refinancing Proceeds.
SECTION 2.06. Payments and Computations. (a) The Borrower
shall make each payment hereunder not later than 11:00 A.M. (New York City time)
on the day when due in U.S. dollars to the Lender at its address referred to in
Section 7.02 or at an account maintained by the Lender with a commercial bank
organized under the laws of the United States, or any State thereof, and
designated by the Lender for such purposes, in same day funds.
MOA Note
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5
(b) All computations of interest shall be made by the Lender
on the basis of a year of 365 or 366 days, as the case may be, for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest is payable.
(c) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest.
SECTION 2.07. Use of Proceeds. The proceeds of the Advances
shall be available (and the Borrower agrees that it shall use such proceeds)
solely (i) to finance the acquisition by the Borrower of certain assets pursuant
to the Asset Purchase Agreement dated as of December 19, 1995 between Motels of
America, Inc. and Forte Hotels, Inc. and (ii) to finance the acquisition,
development or rehabilitation of hotels and motels by the Borrower or a
subsidiary thereof which are the subject of HFS Agreements.
ARTICLE III - CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Advance. The
obligation of the Lender to make its initial Advance is subject to the
conditions precedent that the Lender shall have received on or before the date
of such Advance the following, each dated such day, in form and substance
satisfactory to the Lender:
(i) Certified copies of the resolutions of the Board
of Directors of the Borrower and the Guarantor, approving each
Loan Document to which it is or is to be a party, and of all
documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to each Loan
Document to which it is or is to be a party.
(ii) Certificates of the Secretary or an Assistant
Secretary of the Borrower and the Guarantor, certifying the
names and true signatures of the officers of the Borrower or
Guarantor, as the case may be, authorized to sign each Loan
Document to which it is or is to be a party.
(iii) An amendment to the Pledge Agreement in form
and substance satisfactory to the Lender, duly executed by the
Guarantor.
(iv) A guaranty in form and substance satisfactory to
the Lender (as amended, supplemented or otherwise modified
from time to time in accordance with its terms, the
"Guaranty"), duly executed by the Guarantor.
(v) A certified copy of the Nomura Credit Agreement
as in effect on the date hereof, in form and substance
satisfactory to the Lender, together with all amendments
thereto.
(vi) A favorable opinion of Donovan Leisure Newton &
Irvine, counsel for the Borrower and the Guarantor, in form
and substance satisfactory to the Lender and as to such
matters as the Lender may reasonably request.
(vii) A favorable opinion of Jones, Jones, Close &
Brown, Nevada counsel for the Guarantor, in form and substance
satisfactory to the Lender and as to such matters as the
Lender may reasonably request.
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SECTION 3.02. Conditions Precedent to Each Advance. The
obligation of the Lender to make each Advance (including the initial Advance)
shall be subject to the conditions precedent that on the date of such Advance
(a) the following statements shall be true (and each of the giving of the
applicable notice of a requested Advance given pursuant to Section 2.02 and the
acceptance by the Borrower of the proceeds of such Advance shall constitute a
representation and warranty by the Borrower that on the date of such Advance
such statements are true):
(i) the representations and warranties contained in the Loan
Documents are correct on and as of the date of such Advance, before and
after giving effect to such Advance and to the application of the
proceeds therefrom, as though made on and as of such date, and
(ii) no event has occurred and is continuing, or would result
from such Advance or from the application of the proceeds therefrom,
that constitutes a Default;
and (b) the Lender shall have received such other approvals, opinions or
documents as it may reasonably request.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
indicated at the beginning of this Note.
(b) The execution, delivery and performance by the Borrower of
this Note are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i)
the Borrower's charter or by-laws or (ii) law or any contractual
restriction binding on or affecting the Borrower.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or other third party is required for the due execution, delivery and
performance by the Borrower of this Note.
(d) This Note is the legal, valid and binding obligation of
the Borrower enforceable against the Borrower in accordance with its
terms.
(e) There is no pending or threatened action or proceeding
affecting the Borrower or any of its subsidiaries before any court,
governmental agency or arbitrator, which may materially adversely
affect the financial condition or operations of the Borrower or any
subsidiary or which purports to affect the legality, validity or
enforceability of the Loan Documents.
(f) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of this Note will be used to
purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
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ARTICLE V - COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any amount under the
Loan Documents shall remain unpaid or the Lender shall have any Commitment
hereunder, the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its
property except to the extent contested in good faith..
(b) Maintenance of Insurance. Maintain, and cause each of its
subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which the
Borrower or such subsidiary operates.
(c) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its subsidiaries to preserve and maintain,
its corporate existence, rights (charter and statutory) and franchises;
provided, however, that the Borrower and its subsidiaries may
consummate any merger or consolidation permitted under Section 5.02(c)
and provided further that neither the Borrower nor any of its
subsidiaries shall be required to preserve any right or franchise if
the Board of Directors of the Borrower or such subsidiary shall
determine that the preservation thereof is no longer desirable in the
conduct of the business of the Borrower or such subsidiary, as the case
may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such subsidiary or the Lender.
(d) Keeping of Books. Keep, and cause each of its subsidiaries
to keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(e) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted.
(f) Reporting Requirements. Furnish to the Lender:
(i) as soon as available and in any event within 45
days after the end of each of the first three quarters of each
fiscal year of the Borrower, a consolidated balance sheet of
the Borrower and its subsidiaries as of the end of such
quarter and consolidated statements of income and cash flows
of the Borrower and its subsidiaries for the period commencing
at the end of the previous fiscal year and ending with the end
of such quarter, duly certified (subject to year-end audit
adjustments in connection with the year end audit of Motels of
America, Inc.) by the chief financial officer of the Borrower
as having been prepared in accordance with generally accepted
accounting principles;
(ii) as soon as available and in any event within 90
days after the end of each fiscal year of the Borrower, a
consolidated balance sheets of the Borrower and its
subsidiaries as of the end of such fiscal year and
consolidated statements of income and cash flows of the
Borrower and its subsidiaries for such fiscal year, duly
certified (subject to year-end audit
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adjustments in connection with the year end audit of
Motels of America, Inc.) by the chief financial officer of
the Borrower as having been prepared in accordance with
generally accepted accounting principles;
(iii) as soon as possible and in any event within
five days after the occurrence of each Default continuing on
the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details of
such Default and the action that the Borrower has taken and
proposes to take with respect thereto; and
(iv) such other information respecting the Borrower
or any of its subsidiaries as the Lender may from time to time
reasonably request.
SECTION 5.02. Negative Covenants. So long as any amount under
the Loan Documents shall remain unpaid or the Lender shall have any Commitment
hereunder, the Borrower will not, without the prior written consent of the
Lender:
(a) Debt. At any time create, incur, assume or suffer to
exist, or permit any of its subsidiaries to create, incur, assume or
suffer to exist, any Debt other than:
(i) in the case of the Borrower,
(A) Debt under the Loan Documents,
(ii) in the case of any of its subsidiaries, Debt
owed to the Borrower or to a wholly-owned subsidiary of the
Borrower; and
(iii) in the case of the Borrower and any of its
subsidiaries,
(A) Debt under the Nomura Credit Agreement,
(B) Debt incurred in connection with the
acquisition, development or rehabilitation of hotels
and motels which are the subject of HFS Agreements,
so long as after giving effect to the incurrence of
such Debt and the application of proceeds therefrom,
the Debt Coverage Ratio (calculated on a pro forma
basis based on historical financial statements for
the four fiscal quarters of the Borrower then most
recently ended) shall be greater than or equal to
1.4:1,
(C) Debt incurred the proceeds of which are
used to extend, refinance, renew, repurchase (by
means of tender offer or negotiated sale), replace,
substitute or refund, Debt referred to in clauses (A)
and (B) above (the "Refinancing Debt"); provided,
however, that Refinancing Debt in a principal amount
that exceeds an amount equal to (x) the principal
amount of the Debt so extended, refinanced, renewed,
repurchased, replaced, substituted or refunded plus
(y) the amount of reasonable refinancing fees,
expenses and prepayment premiums and penalties
incurred in connection therewith and accrued and
unpaid interest thereon may be incurred only to the
extent that the amount of such excess principal
amount of Refinancing Debt (the "Excess Refinancing
Proceeds") are applied to prepay an aggregate
principal amount of the Advances equal to the amount
of such Excess Refinancing Proceeds pursuant to
Section 2.05(b)(ii), and
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(D) indorsement of negotiable instruments
for deposit or collection or similar transactions in
the ordinary course of business.
(b) Liens, Etc. Create or suffer to exist, or permit any of
its subsidiaries to create or suffer to exist, any Lien on or with
respect to any of its properties, whether now owned or hereafter
acquired, or assign, or permit any of its subsidiaries to assign, any
right to receive income, other than:
(i) Permitted Liens,
(ii) Liens upon or in any property acquired or held
by the Borrower or any of its subsidiaries securing Debt
permitted under Section 5.02(a)(iii)(B),
(iii) Liens created by the Nomura Credit Agreement as
in effect on the date hereof, and . (iv) the replacement,
extension or renewal of any Lien permitted by clauses (ii)
and (iii) above upon or in the same property theretofore
subject thereto or the replacement, extension or renewal
(without change in any direct or contingent obligor) of the
Debt secured thereby.
(c) Mergers, Etc. Merge or consolidate with or into any
Person, or permit any of its subsidiaries to do so, except that any
subsidiary of the Borrower may merge or consolidate with or into any
other subsidiary of the Borrower, and except that any subsidiary of
the Borrower may merge into the Borrower, provided, in each case, that
no Default shall have occurred and be continuing at the time of such
proposed transaction or would result therefrom.
(d) Accounting Changes. Make or permit, or permit any of its
subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by generally
accepted accounting principles.
(e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its subsidiaries to sell, lease, transfer
or otherwise dispose of, any assets, or grant any option or other
right to purchase, lease or otherwise acquire any assets, except (i)
sales of inventory in the ordinary course of its business, (ii) in a
transaction authorized by subsection (c) of this Section and (iii)
sales of assets for fair value, provided that in the case of the sale
of any asset in a single transaction or a series of related
transactions under this clause (iii) in an aggregate amount exceeding
$20,000, the Net Cash Proceeds thereof, if not otherwise required to
be applied to prepay amounts outstanding under the Nomura Credit
Agreement, shall be applied to prepay the Advances in accordance with
Section 2.05(b)(i).
(f) Change in Nature of Business. Make, or permit any of its
subsidiaries to make, any material change in the nature of its
business as carried on at the date hereof.
ARTICLE VI - EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
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(a) (i) The Borrower shall fail to pay any installment of
principal of this Note when the same becomes due and payable; or (ii)
the Borrower shall fail to pay any interest on any Advance or make any
other payment of other amounts payable under this Note within 15
Business Days after the same becomes due and payable; or
(b) Any representation or warranty made by the Borrower or the
Guarantor (or any of their respective officers) under or in connection
with the Loan Documents shall prove to have been incorrect in any
material respect when made; or
(c) The Borrower or the Guarantor shall fail to perform or
observe (i) any term, covenant or agreement contained in Section
5.01(c), 5.01(f)(iii) or 5.02, or (ii) any other term, covenant or
agreement contained in any Loan Document on its part to be performed or
observed if such failure shall remain unremedied for 15 Business Days
after written notice thereof shall have been given to the Borrower by
the Lender; or
(d) The Borrower or the Guarantor or any of their respective
subsidiaries shall fail to pay any principal of or premium or interest
on any Debt which is outstanding in a principal amount of at least
$250,000 in the aggregate or any amounts owing under any HFS Agreement
(but excluding Debt evidenced by the Loan Documents) of the Borrower or
the Guarantor or such subsidiary (as the case may be), when the same
becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt or HFS Agreement; or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt or HFS Agreement and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt
(unless such default has been waived by the holder or holders of such
Debt) or of obligations outstanding under any HFS Agreement or to
terminate, or to permit the termination of, any HFS Agreement; or any
such Debt or obligations outstanding under any HFS Agreement shall be
declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), redeemed, purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated maturity
thereof; or
(e) The Borrower or the Guarantor or any of their respective
subsidiaries shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the
Borrower or the Guarantor or any of their respective subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, custodian or other similar official for it or
for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either
such proceeding shall remain undismissed or unstayed for a period of 60
days, or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur; or
the Borrower or the Guarantor or any of their respective subsidiaries
shall take any corporate action to authorize any of the actions set
forth above in this subsection (e); or
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(f) any provision of any Loan Document after delivery thereof
pursuant to Section 3.01 shall for any reason cease to be valid and
binding on or enforceable against the Borrower or the Guarantor, as the
case may be, or the Borrower or the Guarantor shall so state in
writing; or
(g) the Pledge Agreement shall for any reason (other than
pursuant to the terms thereof) cease to create a valid and perfected
first priority lien on and security interest in the Collateral
purported to be covered thereby; or
(h) Any judgment or order for the payment of money in excess
of $250,000 shall be rendered against the Borrower or the Guarantor or
any of their respective subsidiaries and either (i) enforcement
proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 30 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
(i) (i) Any Person or two or more Persons acting in concert
other than the Wallace Group shall have acquired after the date hereof
beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of
1934), directly or indirectly, of Voting Stock of the Borrower or the
Guarantor (or other securities convertible into such Voting Stock)
representing 20% or more of the combined voting power of all Voting
Stock of the Borrower or the Guarantor; or (ii) during any period of up
to 24 consecutive months, commencing before or after the date of this
Agreement, individuals who at the beginning of such 24-month period
were directors of the Borrower or the Guarantor shall cease for any
reason (other than due to death or disability) to constitute a majority
of the board of directors of the Borrower or the Guarantor (except to
the extent that individuals who at the beginning of such 24-month
period were replaced by individuals (x) elected by 66-2/3% of the
remaining members of the board of directors of the Borrower or the
Guarantor or (y) nominated for election by a majority of the remaining
members of the board of directors of the Borrower or the Guarantor and
thereafter elected as directors by the shareholders of the Borrower or
the Guarantor); or (iii) any Person or two or more Persons acting in
concert other than the Wallace Group shall have acquired after the date
hereof by contract or otherwise, or shall have entered into a contract
or arrangement that, upon consummation, will result in its or their
acquisition of control over Voting Stock of the Borrower or the
Guarantor (or other securities convertible into such Voting Stock)
representing 20% or more of the combined voting power of all Voting
Stock of the Borrower or the Guarantor,
then, and in any such event, the Lender may, by notice to the Borrower, declare
its obligation to make Advances to be terminated, whereupon the same shall
forthwith terminate and declare this Note, all interest thereon and all other
amounts payable under this Note to be forthwith due and payable, whereupon this
Note, all such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower; provided, however,
that in the event of an actual or deemed entry of an order for relief with
respect to the Borrower under the Federal Bankruptcy Code, the obligation of the
Lender to make Advances shall automatically be terminated and this Note, all
such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower.
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ARTICLE VII - MISCELLANEOUS
SECTION 7.01. Amendments, Etc. No amendment or waiver of any
provision of this Note, nor consent to any departure by the Borrower herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered, if to the Borrower, at its address at 701 Lee
Street, Suite 530, Des Plaines, IL 60016, Attention: Kurt M. Mueller, with a
copy to Donovan Leisure Newton & Irvine, 30 Rockefeller Plaza, New York, NY
10012, Attention: Frank W. Cuiffo; and if to the Lender, at its address at 339
Jefferson Road, P.O. Box 278, Parsippany, NJ 07054-0278, Attention: Executive
Vice President and General Counsel; or, as to each party, at such other address
as shall be designated by such party in a written notice to the other party. All
such notices and communications shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective when deposited in the mails, telecopied,
delivered to the telegraph company, confirmed by telex answerback or delivered
to the cable company, respectively, except that notices to the Lender pursuant
to the provisions of Article II shall not be effective until received by the
Lender.
SECTION 7.03. No Waiver; Remedies. No failure on the part of
the Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 7.04. Costs, Expenses and Taxes. (a) The Borrower
agrees to pay on demand all costs and expenses in connection with (i) the
preparation, execution, delivery (in an amount not to exceed $20,000) and (ii)
administration, modification and amendment, in each case, of the Loan Documents
and any other instruments and documents to be delivered in connection herewith,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Lender with respect thereto and with respect to advising the
Lender as to its rights and responsibilities under the Loan Documents. The
Borrower further agrees to pay on demand all losses, costs and expenses, if any
(including reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
the Loan Documents and any other instruments and documents delivered in
connection herewith, including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of rights under this Section 7.04.
In addition, the Borrower shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of the
Loan Documents and any other instruments and documents delivered in connection
herewith, and agrees to save the Lender harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes.
(b) The Borrower agrees to indemnify and hold harmless the Lender and
each of its Affiliates and their officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities and expenses (including, without limitation,
reasonable fees and expenses of counsel) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of, or in connection with the preparation for a
defense of, any investigation, litigation or proceeding arising out of, related
to or in connection with the Loan Documents, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the
Advances, in each case whether or not such investigation, litigation or
proceeding is brought by the Borrower, the Guarantor, their directors,
shareholders or creditors or an Indemnified Party or any other Person or any
Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated, except
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to the extent such claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
(c) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 7.04 shall survive the payment in full of principal, interest and
all other amounts payable under the Loan Documents.
SECTION 7.05. Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default the Lender is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all indebtedness at any time owing by the Lender to or for the
credit or the account of the Borrower against any and all of the obligations of
the Borrower now or hereafter existing under this Note, whether or not the
Lender shall have made any demand under this Note and although such obligations
may be unmatured. The Lender agrees promptly to notify the Borrower after any
such set-off and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the
Lender under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Lender may
have.
SECTION 7.06. Binding Effect. This Note shall be binding upon
and inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lender.
SECTION 7.07. Governing Law, Jurisdiction, Waiver of Jury
Trial, Etc. (a) This Note shall be governed by, and construed in accordance
with, the laws of the State of New York, United States.
(b) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Note or any other Loan Document,
or for recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in respect
of any such action or proceeding may be heard and determined in any such New
York State court or, to the extent permitted by law, in such federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Note or any other Loan Documents shall affect any right that any party may
otherwise have to bring any action or proceeding relating to the Loan Documents
in the courts of any jurisdiction.
(c) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Note or any other Loan Document in
any New York State or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
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(d) Each of the Borrower and the Lender hereby irrevocably waives all
right to trial by jury in any action, proceeding or counterclaim (whether based
on contract, tort or otherwise) arising out of or relating to this Note or any
other Loan Document or the actions of the Lender in the negotiation,
administration, performance or enforcement thereof.
IN WITNESS WHEREOF, each of the Borrower and the Lender has
caused this Note to be executed by its officer thereunto duly authorized, as of
the date first above written.
MOA-TL HOLDING CORP.
By: /S/Kent M. Mueller
Title: President and Chief Operating
Officer
Above Acknowledged
and Agreed To:
HFS INCORPORATED
By: /S/ James E. Buckman
Title: Executive Vice-President
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EXHIBIT F
<PAGE>
EXECUTION COPY
GUARANTY
GUARANTY dated January 23, 1996 made by NEW IMAGE REALTY,
INC., a Nevada corporation (the "Guarantor"), in favor of HFS INCORPORATED and
its subsidiaries (collectively, together with their successors and assigns, the
"Lender").
PRELIMINARY STATEMENTS. The Lender is the payee of a Note
dated January 23, 1996 (said Note, as it may hereafter be amended, supplemented
or otherwise modified from time to time, being the "Note", the terms defined
therein and not otherwise defined herein being used herein as therein defined)
with MOA-TL Holding Corp., a Delaware corporation and an indirect, non-wholly
owned subsidiary of the Guarantor (the "Borrower"). The Borrower and its
subsidiaries intend to enter into HFS Agreements from time to time with the
Lender. It is a condition precedent to the making of Advances by the Lender
under the Note and the entry by the Lender into HFS Agreements from time to time
that the Guarantor shall have executed and delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lender to make Advances under the Note and to enter into HFS
Agreements from time to time, the Guarantor hereby agrees as follows:
SECTION 1. Guaranty. The Guarantor hereby unconditionally and
irrevocably guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of the Borrower now
or hereafter existing under the Loan Documents, whether for principal, interest,
fees, expenses or otherwise, and all obligations of the Borrower and its
subsidiaries in respect of liquidated damages under the HFS Agreements (the Loan
Documents and the HFS Agreements being, collectively, the "Guaranty Documents",
and all such obligations being the "Guaranteed Obligations"), and agrees to pay
any and all expenses (including counsel fees and expenses) incurred by the
Lender in enforcing any rights under this Guaranty. Without limiting the
generality of the foregoing, the Guarantor's liability shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Borrower or any of its subsidiaries to the Lender under the Guaranty
Documents but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Borrower or such subsidiary.
SECTION 2. Guaranty Absolute. The Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
the Guaranty Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lender with respect thereto. The obligations of the Guarantor
under this Guaranty are independent of the Guaranteed Obligations or any other
obligations of the Borrower or any of its subsidiaries under the Guaranty
Documents, and a separate action or actions may be brought and prosecuted
against the Guarantor to enforce this Guaranty, irrespective of whether any
action is brought against the Borrower or any of its subsidiaries or whether the
Borrower or any of its subsidiaries is joined in any such action or actions. The
liability of the Guarantor under this Guaranty shall be irrevocable, absolute
and unconditional irrespective of, and the Guarantor hereby irrevocably waives
any defenses it may now or hereafter have in any way relating to, any or all of
the following:
(a) any lack of validity or enforceability of any Guaranty
Document or any agreement or instrument relating thereto;
New Image Guaranty
NYL_3/144878.4
<PAGE>
2
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations or any
other obligations of the Borrower or any of its subsidiaries under the
Guaranty Documents, or any other amendment or waiver of or any consent
to departure from any Guaranty Document, including, without limitation,
any increase in the Guaranteed Obligations resulting from the extension
of additional credit to the Borrower or any of its subsidiaries or
otherwise;
(c) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any collateral for all or any of the
Guaranteed Obligations or any other obligations of the Borrower or any
of its subsidiaries under the Guaranty Documents or any other assets of
the Borrower or any of its subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of the Borrower or any of its subsidiaries;
(f) any failure of the Lender to disclose to the Borrower or
any of its subsidiaries or the Guarantor any information relating to
the financial condition, operations, properties or prospects of the
Guarantor or the Borrower or any of its subsidiaries, as the case may
be, now or in the future known to the Lender (the Guarantor waiving any
duty on the part of the Lender to disclose such information); or
(g) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Lender that might otherwise constitute a defense
available to, or a discharge of, the Borrower or any of its
subsidiaries, the Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Lender or any other Person upon the
insolvency, bankruptcy or reorganization of the Borrower or any of its
subsidiaries or the Guarantor or otherwise, all as though such payment had not
been made.
SECTION 3. Waivers and Acknowledgments. (a) The Guarantor
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that the Lender protect, secure, perfect or insure any Lien or any
property subject thereto or exhaust any right or take any action against the
Borrower or any of its subsidiaries or any other Person or any collateral.
(b) The Guarantor hereby waives any right to revoke this
Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.
(c) The Guarantor acknowledges that it will receive
substantial direct and indirect benefits from the financing arrangements
contemplated by the Guaranty Documents and that the waivers set forth in this
Section 3 are knowingly made in contemplation of such benefits.
New Image Guaranty
NYL_3/144878.4
<PAGE>
3
SECTION 4. Subrogation. The Guarantor will not exercise any
rights that it may now or hereafter acquire against the Borrower or any of its
subsidiaries or any other insider guarantor that arise from the existence,
payment, performance or enforcement of the Guarantor's obligations under this
Guaranty or any other Guaranty Document, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the
Lender against the Borrower or any of its subsidiaries or any other insider
guarantor or any collateral, whether or not such claim, remedy or right arises
in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from the Borrower or any of its
subsidiaries or any other insider guarantor, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim, remedy or right, unless and until all of the obligations
and all other amounts payable under this Guaranty shall have been paid in full
in cash and the Commitment shall have expired or terminated. If any amount shall
be paid to the Guarantor in violation of the preceding sentence at any time
prior to the later of the payment in full in cash of the Guaranteed Obligations
and all other amounts payable under this Guaranty and the Termination Date, such
amount shall be held in trust for the benefit of the Lender and shall forthwith
be paid to the Lender to be credited and applied to the Guaranteed Obligations
and all other amounts payable under this Guaranty, whether matured or unmatured,
in accordance with the terms of the Guaranty Documents, or to be held as
collateral for any Guaranteed Obligations or other amounts payable under this
Guaranty thereafter arising. If (i) the Guarantor shall make payment to the
Lender of all or any part of the Guaranteed Obligations, (ii) all of the
Guaranteed Obligations and all other amounts payable under this Guaranty shall
be paid in full in cash and (iii) the Termination Date shall have occurred, the
Lender will, at the Guarantor's request and expense, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 5. Taxes, Etc. The Guarantor shall pay any and all
stamp and other taxes payable or determined to be payable in connection with the
execution and delivery of this Guaranty and the other Guaranty Documents and
agrees to save the Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or failure to pay such taxes.
SECTION 6. Representations and Warranties. The Guarantor
hereby represents and warrants as follows:
(a) The Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
indicated at the beginning of this Guaranty.
(b) The execution, delivery and performance by the Guarantor
of the Loan Documents to which it is or is to be a party are within the
Guarantor's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) the Guarantor's
charter or by-laws or (ii) law or any contractual restriction binding
on or affecting the Guarantor.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or other third party is required for the due execution, delivery and
performance by the Guarantor of the Loan Documents to which it is or is
to be a party.
(d) Each Loan Document to which it is or is to be a party is
the legal, valid and binding obligation of the Guarantor enforceable
against the Guarantor in accordance with its terms.
New Image Guaranty
NYL_3/144878.4
<PAGE>
4
(e) The balance sheets of the Guarantor and its subsidiaries
as at February 28, 1995, and the related statements of income and
retained earnings of the Guarantor and its subsidiaries for the fiscal
year then ended, copies of which have been furnished to the Lender,
fairly present the financial condition of the Guarantor and its
subsidiaries as at such date and the results of the operations of the
Guarantor and its subsidiaries for the period ended on such date, all
in accordance with generally accepted accounting principles
consistently applied, and since February 28, 1995, there has been no
material adverse change in such condition or operations.
(f) There is no pending or threatened action or proceeding
affecting the Guarantor or any of its subsidiaries before any court,
governmental agency or arbitrator, which may materially adversely
affect the financial condition or operations of the Guarantor or any
subsidiary or which purports to affect the legality, validity or
enforceability of the Loan Documents.
(g) There are no conditions precedent to the effectiveness of
this Guaranty that have not been satisfied or waived.
(h) The Guarantor has, independently and without reliance upon
the Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into
each Loan Document to which it is or is to be a party, and the
Guarantor has established adequate means of obtaining from the Borrower
and its subsidiaries on a continuing basis information pertaining to,
and is now and on a continuing basis will be completely familiar with,
the financial condition, operations, properties and prospects of the
Borrower and its subsidiaries.
SECTION 7. Covenants. So long as any amount under the Guaranty
Documents shall remain unpaid or the Lender shall have any Commitment
thereunder, the Guarantor will furnish to the Lenders:
(i) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Guarantor, a consolidated balance sheet of the Guarantor and its
subsidiaries as of the end of such quarter and consolidated statements
of income and cash flows of the Guarantor and its subsidiaries for the
period commencing at the end of the previous fiscal year and ending
with the end of such quarter, duly certified (subject to year-end audit
adjustments) by the chief financial officer of the Guarantor as having
been prepared in accordance with generally accepted accounting
principles;
(ii) as soon as available and in any event within 90 days
after the end of each fiscal year of the Guarantor, a copy of the
annual audit report for such year for the Guarantor and its
subsidiaries, containing a consolidated balance sheet of the Guarantor
and its subsidiaries as of the end of such fiscal year and consolidated
statements of income and cash flows of the Guarantor and its
subsidiaries for such fiscal year, in each case accompanied by an
opinion acceptable to the Lender by Ernst & Young or other independent
public accountants acceptable to the Lender; and
(iii) such other information respecting the Guarantor or any
of its subsidiaries as the Lender may from time to time reasonably
request.
SECTION 8. Amendments, Etc. No amendment or waiver of any
provision of this Guaranty and no consent to any departure by the Guarantor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
New Image Guaranty
NYL_3/144878.4
<PAGE>
5
SECTION 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
to it, if to the Guarantor, addressed to it at 1601 East Flamingo Road, Suite
18, Las Vegas, Nevada 89119, Attention: Paul F. Wallace, if to the Lender, at
its address specified in the Note, or as to any party at such other address as
shall be designated by such party in a written notice to the other party. All
such notices and other communications shall, when mailed, telegraphed,
telecopied or telexed, be effective when deposited in the mails, delivered to
the telegraph company, transmitted by telecopier or confirmed by telex
answerback, respectively.
SECTION 10. No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 11. Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default the Lender is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all indebtedness at any time owing by the Lender to or for the
credit or the account of the Guarantor against any and all of the obligations of
the Guarantor now or hereafter existing under this Guaranty, whether or not the
Lender shall have made any demand under this Guaranty and although such
obligations may be unmatured. The Lender agrees promptly to notify the Guarantor
after any such set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Lender under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Lender may
have.
SECTION 12. Indemnification. Without limitation on any other
obligations of the Guarantor or remedies of the Lender under this Guaranty, the
Guarantor shall, to the fullest extent permitted by law, indemnify, defend and
save and hold harmless each the Lender from and against, and shall pay on
demand, any and all losses, liabilities, damages, costs, expenses and charges
(including the fees and disbursements of the Lender's legal counsel) suffered or
incurred by the Lender as a result of any failure of any Guaranteed Obligations
to be the legal, valid and binding obligations of the Borrower or any of its
subsidiaries enforceable against the Borrower or such subsidiary in accordance
with their terms.
SECTION 13. Continuing Guaranty; Assignments under the Note.
This Guaranty is a continuing guaranty and shall (a) remain in full force and
effect until the latest of: (i) the earlier of (x) January 23, 2003 and (y)
receipt by the Lender of a guaranty, in form and substance satisfactory to the
Lender, duly executed by Motels of America, Inc., (ii) the payment in full in
cash of the Guaranteed Obligations in respect of the Loan Documents and all
other amounts payable under this Guaranty and (iii) the termination or
expiration of the Commitment under the Note, (b) be binding upon the Guarantor,
its successors and assigns and (c) inure to the benefit of and be enforceable by
the Lender and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Lender may assign or otherwise
transfer all or any portion of its rights and obligations under the Note
(including, without limitation, all or any portion of its Commitment and the
Advances owing to it) to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to the Lender
herein or otherwise.
SECTION 14. Governing Law; Jurisdiction; Waiver of Jury Trial,
Etc. (a) This Guaranty shall be governed by, and construed in accordance with,
the laws of the State of New York.
New Image Guaranty
NYL_3/144878.4
<PAGE>
6
(b) The Guarantor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Guaranty or any other Loan
Document to which it is or is to be a party, or for recognition or enforcement
of any judgment, and the Guarantor hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. The Guarantor agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Guaranty shall affect any right that any party may otherwise
have to bring any action or proceeding relating to this Guaranty or any other
Loan Document to which it is or is to be a party in the courts of any
jurisdiction.
(c) The Guarantor irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Guaranty or any other Loan
Document to which it is or is to be a party in any New York State or federal
court. The Guarantor hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.
(d) The Guarantor hereby irrevocably waives all right to trial
by jury in any action, proceeding or counterclaim (whether based on contract,
tort or otherwise) arising out of or relating to any of the Guaranty Documents,
the transactions contemplated thereby or the actions of the Lender in the
negotiation, administration, performance or enforcement thereof.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
NEW IMAGE REALTY, INC.
By
--------------------------
Title:
New Image Guaranty
NYL_3/144878.4
<PAGE>
EXHIBIT G
<PAGE>
EXECUTION COPY
LETTER AMENDMENT
Dated as of January 23, 1996
HFS, Inc.
339 Jefferson Road
P.O. Box 278
Parsippany, NJ 07054-0274
Ladies and Gentlemen:
We refer to the Pledge Agreement dated as of March 31, 1995
(the "Pledge Agreement") made by the undersigned to you. Capitalized terms not
otherwise defined in this Letter Amendment have the same meanings as specified
in the Pledge Agreement.
It is hereby agreed by you and us as follows:
The Pledge Agreement is, effective as of the date of this
Letter Amendment, hereby amended as follows:
(a) Section 1 is amended by adding immediately before the
period at the end of the first sentence thereof the following:
"and under the Guaranty dated January 23, 1996 made
by the Pledgor to the Pledgee (as amended,
supplemented or otherwise modified from time, the
"Guaranty").
(b) Section 3(f) is amended by deleting the word "Lender"
therein and substituting therefor the word "Pledgee".
(c) Section 7(a) is amended by adding immediately after the
word "Note" therein the phrase "or a default under the Guaranty".
(d) Section 11 is amended by adding immediately after the word
"Note" therein the phrase "or the Guaranty, as the case may be".
(e) Section 12 is amended in full to read as follows:
"SECTION 12. Release; Continuing Security Interest;
Termination. (a) Upon the payment in full in cash of (x) the
Obligations under the Note and (y) the Guaranteed Obligations (as
defined in the Guaranty) in respect of the Loan Documents (as defined
in the Note referred to in the Guaranty), the Pledgee will, at the
Pledgor's request and expense, execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to evidence the
release of certain Collateral from the assignment and security interest
granted hereby; provided that the fair market value of the Collateral
remaining subject to the assignment and security interest granted
hereby (as mutually agreed by the Pledgee and the Pledgor or as
determined by an independent appraiser selected by the Pledgee with the
consent of the Pledgor) shall be equal to at least 200% of the then
remaining Guaranteed Obligations (as defined in the Guaranty) in
respect of the HFS Agreements (as defined in the Note referred to in
the Guaranty).
Amendment to Pledge Agreement
SS_NYL3/147057_3
<PAGE>
2
(b) This Agreement shall create a continuing security interest
in the Collateral and shall (a) remain in full force and effect until
the latest of (i) the earlier of (x) January 23, 2003 and (y) receipt
by the Pledgee of a guaranty, in form and substance satisfactory to the
Pledgee, duly executed by Motels of America, Inc., (ii) the payment in
full in cash of (x) the Obligations under the Note and (y) the
Guaranteed Obligations (as defined in the Guaranty) in respect of the
Loan Documents (as defined in the Note referred to in the Guaranty) and
(iii) the termination or expiration of the Commitment under the Note
referred to in the Guaranty, (b) be binding upon the Pledgor, its
successors and assigns and (c) inure, together with the rights and
remedies of the Pledgee hereunder, to the benefit of the Pledgee and
its successors, transferees and assigns. This Agreement shall terminate
and the Pledgor shall be entitled to the return, at the Pledgor's
expense, of such of the Collateral as has not theretofore been sold or
otherwise applied pursuant to this Agreement, together with any moneys
at any time held by the Pledgee, upon payment in full of the
Obligations."
This Letter Amendment shall become effective as of the date
first above written when, and only when, the Pledgee shall have received
counterparts of this Letter Amendment executed by the undersigned and the
Pledgee. This Letter Amendment is subject to the provisions of Section 18 of the
Pledge Agreement.
On and after the effectiveness of this Letter Amendment, each
reference in the Pledge Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Pledge Agreement, and each reference in
the Note and each of the Loan Documents (as defined in the Note referred to in
the Guaranty) to "the Pledge Agreement", "thereunder", "thereof" or words of
like import referring to the Pledge Agreement, shall mean and be a reference to
the Pledge Agreement, as amended by this Letter Amendment.
The Pledge Agreement, as specifically amended by this Letter
Amendment, is and shall continue to be in full force and effect and is hereby in
all respects ratified and confirmed. Without limiting the generality of the
foregoing, the Pledge Agreement and all of the Collateral described therein do
and shall continue to secure the payment of all Obligations of the Pledgor under
the Note and under the Guaranty. The execution, delivery and effectiveness of
this Letter Amendment shall not, except as expressly provided herein, operate as
a waiver of any right, power or remedy of Pledgee under the Pledge Agreement,
nor constitute a waiver of any provision of the Pledge Agreement.
If you agree to the terms and provisions hereof, please
evidence such agreement by executing and returning at least two counterparts of
this Letter Amendment to Shearman & Sterling, 599 Lexington Avenue, New York, NY
10022, Attn: Pamela Borgeson.
This Letter Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Letter Amendment by telecopier shall be
effective as delivery of a manually executed counterpart of this Letter
Amendment.
Amendment to Pledge Agreement
SS_NYL3/147057_3
<PAGE>
3
This Letter Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
Very truly yours,
NEW IMAGE REALTY, INC.
By
---------------------------
Title:
Agreed as of the date first above written:
HFS INCORPORATED,
(formerly known as
Hospitality Franchise
Systems, Inc.), as Pledgee
By
----------------------------
Title:
Amendment to Pledge Agreement
SS_NYL3/147057_3
<PAGE>
SCHEDULES
<PAGE>
Schedule 1.03
LEGAL EXPENSES
Battle Fowler LLP $400,000
Donovan, Leisure, Newton & Irvine $600,000
Kenyon & Kenyon $ 65,000
Shearman & Sterling $750,000
143845.6/NYL3
<PAGE>
Schedule 3.01
OWNED PROPERTIES TO BE TRANSFERRED
Annual Gross Room Revenues
Niagara Falls, NY $304,000
Waukegan, IL $391,000
York, PA $330,000
Orlando Centroplex, FL $592,000
Orlando Central Park, FL $905,000
143845.6/NYL3
EXHIBIT 10.2
<PAGE>
[Conformed copy with Exhibits F, G-1,
G-2 and I conformed as executed]
CREDIT AGREEMENT
among
NATIONAL LODGING CORP.,
VARIOUS BANKS,
CHEMICAL BANK,
as DOCUMENTATION AGENT,
and
BANKERS TRUST COMPANY,
as ADMINISTRATIVE AGENT
----------------------------------
Dated as of January 23, 1996
----------------------------------
0000B3FK.W51
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
SECTION 1. Amount and Terms of Credit............................................................... 1
1.01 The Commitments....................................................................... 1
1.02 Minimum Amount of Each Borrowing...................................................... 2
1.03 Notice of Borrowing................................................................... 2
1.04 Disbursement of Funds................................................................. 3
1.05 Notes................................................................................. 3
1.06 Conversions........................................................................... 4
1.07 Pro Rata Borrowings................................................................... 5
1.08 Interest.............................................................................. 5
1.09 Interest Periods...................................................................... 6
1.10 Increased Costs, Illegality, etc...................................................... 7
1.11 Compensation.......................................................................... 9
1.12 Change of Lending Office.............................................................. 10
1.13 Replacement of Banks.................................................................. 10
SECTION 2. Letters of Credit........................................................................ 12
2.01 Letters of Credit..................................................................... 12
2.02 Minimum Stated Amount................................................................. 13
2.03 Letter of Credit Requests............................................................. 13
2.04 Letter of Credit Participations....................................................... 14
2.05 Agreement to Repay Letter of Credit Drawings.......................................... 16
2.06 Increased Costs....................................................................... 17
SECTION 3. Fees; Reductions of Commitment........................................................... 18
3.01 Fees ................................................................................. 18
3.02 Voluntary Termination of Unutilized Commitments....................................... 19
3.03 Mandatory Reduction of Commitments.................................................... 20
SECTION 4. Prepayments; Payments; Taxes............................................................. 24
4.01 Voluntary Prepayments................................................................. 24
4.02 Mandatory Repayments.................................................................. 25
4.03 Method and Place of Payment........................................................... 26
4.04 Net Payments; Taxes................................................................... 27
SECTION 5. Conditions Precedent to Loans on the Initial Borrowing Date.............................. 29
5.01 Execution of Agreement; Notes......................................................... 29
5.02 Officer's Certificate................................................................. 29
5.03 Fees, etc............................................................................. 29
5.04 Opinion of Counsel.................................................................... 29
(i)
0000B3FK.W51
<PAGE>
Page
5.05 Corporate Documents; Proceedings; etc................................................. 30
5.06 Employee Benefit Plans; Shareholders' Agreements;
Management Agreements; Employment Agreements; Collec-
tive Bargaining Agreements; Debt Agreements; Tax Sharing
Agreements; HFS Agreements; Affiliate Agreements;
Existing Investment Agreements................................................... 30
5.07 Consummation of the Acquisitions. ................................................... 32
5.08 Refinancing........................................................................... 32
5.09 Pledge Agreement...................................................................... 33
5.10 Guaranties............................................................................ 33
5.11 Adverse Change........................................................................ 33
5.12 Litigation............................................................................ 33
5.13 Solvency Certificate; Environmental Assessments; and Insurance
Certificates..................................................................... 34
5.14 Pro Forma Financial Information; Projections.......................................... 34
5.15 Approvals, etc........................................................................ 34
5.16 Cash on Hand.......................................................................... 35
5.17 Absence of Downgrade.................................................................. 35
5.18 HFS Subordination Agreement........................................................... 35
SECTION 6. Conditions Precedent to All Credit Events................................................ 36
6.01 No Default; Representations and Warranties............................................ 36
6.02 Adverse Change, etc................................................................... 36
6.03 Litigation............................................................................ 37
6.04 Notice of Borrowing; Letter of Credit Request......................................... 37
6.05 Certain Requirements With Respect to Revolving Loans
Incurred to Effect Permitted Hotel Acquisitions.................................. 37
SECTION 7. Representations and Warranties........................................................... 37
7.01 Corporate and Partnership Status...................................................... 38
7.02 Corporate or Partnership Power and Authority.......................................... 38
7.03 No Violation.......................................................................... 38
7.04 Governmental Approvals................................................................ 39
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc.................................................... 39
7.06 Litigation............................................................................ 42
7.07 True and Complete Disclosure.......................................................... 42
7.08 Use of Proceeds; Margin Regulations................................................... 42
7.09 Tax Returns and Payments.............................................................. 43
(ii)
0000B3FK.W51
<PAGE>
Page
7.10 Compliance with ERISA................................................................. 43
7.11 The Pledge Agreement.................................................................. 44
7.12 Representations and Warranties in Documents........................................... 44
7.13 Properties............................................................................ 45
7.14 Capitalization........................................................................ 45
7.15 Subsidiaries; Joint Ventures; Unrestricted Subsidiaries............................... 45
7.16 Compliance with Statutes, etc......................................................... 46
7.17 Investment Company Act................................................................ 46
7.18 Public Utility Holding Company Act.................................................... 46
7.19 Environmental Matters................................................................. 46
7.20 Labor Relations....................................................................... 47
7.21 Patents, Licenses, Franchises and Formulas............................................ 47
7.22 Indebtedness.......................................................................... 48
7.23 Acquisitions; Refinancing............................................................. 48
SECTION 8. Affirmative Covenants.................................................................... 48
8.01 Information Covenants................................................................. 49
8.02 Books, Records and Inspections........................................................ 53
8.03 Maintenance of Property; Insurance.................................................... 53
8.04 Corporate Franchises.................................................................. 54
8.05 Compliance with Statutes, etc......................................................... 54
8.06 Compliance with Environmental Laws.................................................... 54
8.07 ERISA................................................................................. 55
8.08 End of Fiscal Years; Fiscal Quarters.................................................. 56
8.09 Performance of Obligations............................................................ 56
8.10 Payment of Taxes...................................................................... 56
8.11 Hotel Franchisors..................................................................... 56
8.12 Joint Venture Distributions........................................................... 57
8.13 Corporate Separateness................................................................ 57
SECTION 9. Negative Covenants....................................................................... 58
9.01 Liens................................................................................. 58
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc................................ 60
9.03 Restricted Payments................................................................... 63
9.04 Indebtedness.......................................................................... 65
9.05 Advances, Investments and Loans....................................................... 68
9.06 Transactions with Affiliates.......................................................... 71
9.07 Capital Expenditures.................................................................. 73
9.08 Minimum Adjusted Consolidated Borrower EBITDA......................................... 74
(iii)
0000B3FK.W51
<PAGE>
Page
9.09 Consolidated Interest Coverage Ratio.................................................. 76
9.10 Maximum Total Leverage Ratio.......................................................... 76
9.11 Consolidated Fixed Charge Coverage Ratio.............................................. 77
9.12 Limitation on Payments of Certain Indebtedness; Modifications
of Certain Indebtedness; Modifications of Certificate of
Incorporation, By-Laws and Certain Agreements; etc............................... 77
9.13 Limitation on Certain Restrictions on Subsidiaries.................................... 78
9.14 Limitation on Issuance of Capital Stock............................................... 79
9.15 Business.............................................................................. 79
9.16 Limitation on Creation of Subsidiaries, Unrestricted Subsidiaries
and Joint Ventures............................................................... 79
SECTION 10. Events of Default....................................................................... 81
10.01 Payments............................................................................. 81
10.02 Representations, etc................................................................. 81
10.03 Covenants............................................................................ 81
10.04 Default Under Other Agreements....................................................... 81
10.05 Bankruptcy, etc...................................................................... 82
10.06 ERISA................................................................................ 82
10.07 Pledge Agreement..................................................................... 83
10.08 Guaranty............................................................................. 83
10.09 HFS Subordination Agreement.......................................................... 84
10.10 Judgments............................................................................ 84
10.11 HFS Franchise Agreements; etc........................................................ 84
10.12 Total Unrestricted Subsidiary Leverage Ratio......................................... 85
10.13 Unrestricted Subsidiary Tax Payments................................................. 85
SECTION 11. Definitions and Accounting Terms........................................................ 86
11.01 Defined Terms........................................................................ 86
SECTION 12. The Agents..............................................................................123
12.01 Appointment..........................................................................123
12.02 Nature of Duties.....................................................................123
12.03 Lack of Reliance on the Agents.......................................................123
12.04 Certain Rights of the Agents.........................................................124
12.05 Reliance.............................................................................124
12.06 Indemnification......................................................................124
12.07 The Agents in their Individual Capacity..............................................125
12.08 Holders..............................................................................125
(iv)
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12.09 Resignation by the Agents............................................................125
SECTION 13. Miscellaneous...........................................................................126
13.01 Payment of Expenses, etc.............................................................126
13.02 Right of Setoff......................................................................127
13.03 Notices..............................................................................128
13.04 Benefit of Agreement.................................................................128
13.05 No Waiver; Remedies Cumulative.......................................................130
13.06 Payments Pro Rata....................................................................130
13.07 Calculations; Computations...........................................................131
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL......................................................132
13.09 Counterparts.........................................................................133
13.10 Effectiveness........................................................................133
13.11 Headings Descriptive.................................................................133
13.12 Amendment or Waiver; etc.............................................................133
13.13 Survival.............................................................................135
13.14 Domicile of Revolving Loans..........................................................135
13.15 Confidentiality......................................................................135
13.16 Register.............................................................................136
13.17 Limitation on Additional Amounts, Etc................................................137
13.18 Certain Provisions Regarding Joint Ventures..........................................137
</TABLE>
SCHEDULE I Commitments
SCHEDULE II Bank Addresses
SCHEDULE III Projections
SCHEDULE IV Real Property
SCHEDULE V Subsidiaries
and Joint Ventures
SCHEDULE VI Existing Indebtedness
SCHEDULE VII Insurance
SCHEDULE VIII Existing Liens
SCHEDULE IX Existing Investments
SCHEDULE X Certain Joint Ventures
SCHEDULE XI Litigation
EXHIBIT A Notice of Borrowing
EXHIBIT B Revolving Note
(v)
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EXHIBIT C Letter of Credit Request
EXHIBIT D Section 4.04(b)(ii) Certificate
EXHIBIT E Officer's Certificate
EXHIBIT F Pledge Agreement
EXHIBIT G-1 HFS Guaranty
EXHIBIT G-2 Subsidiaries Guaranty
EXHIBIT H Officer's Solvency Certificate
EXHIBIT I HFS Subordination Agreement
EXHIBIT J HFS Subordinated Note
EXHIBIT K Assignment and Assumption Agreement
EXHIBIT L-1 Form of Travelodge Franchise Agreement
EXHIBIT L-2 Form of Ramada Franchise Agreement
(vi)
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CREDIT AGREEMENT, dated as of January 23, 1996, among NATIONAL
LODGING CORP. (the "Borrower"), the Banks party hereto from time to time,
CHEMICAL BANK, as Documentation Agent, and BANKERS TRUST COMPANY, as
Administrative Agent (all capitalized terms used herein and defined in Section
11 are used herein as therein defined).
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set
forth herein, the Banks are willing to make available to the Borrower the
respective credit facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 The Commitments. Subject to and upon the terms and
conditions set forth herein, each Bank severally agrees, at any time and from
time to time on and after the Initial Borrowing Date and prior to the Final
Maturity Date, to make a loan or loans (each a "Revolving Loan" and,
collectively, the "Revolving Loans") to the Borrower, which Revolving Loans:
(i) shall, at the option of the Borrower, be Base Rate Loans
or Euro- dollar Loans, provided that (x) except as otherwise
specifically provided in Section 1.10(b), all Revolving Loans
comprising the same Borrowing shall at all times be of the same
Type and (y) no Revolving Loans maintained as Eurodollar Loans
may be incurred prior to the earlier of (1) the 90th day after
the Initial Borrowing Date and (2) the Syndication Date;
(ii) may be repaid and reborrowed in accordance with the
provisions hereof;
(iii) shall not exceed for any Bank at any time outstanding
that aggre- gate principal amount which, when added to the
product of (x) such Bank's Adjusted Percentage and (y) the
aggregate amount of all Letter of Credit Out- standings
(exclusive of Unpaid Drawings which are repaid with the proceeds
of, and simultaneously with the incurrence of, the respective
incurrence of
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<PAGE>
Revolving Loans) at such time, equals the Revolving Loan
Commitment of such Bank at such time; and
(iv) shall not exceed for all Banks at any time outstanding
that aggre- gate principal amount which, when added to the amount
of all Letter of Credit Outstandings (exclusive of Unpaid
Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence
of Revolving Loans) at such time, equals the Total Revolving Loan
Commitment at such time.
Notwithstanding anything to the contrary contained above, the aggregate amount
of Revolving Loans incurred on the Initial Borrowing Date may not exceed
$75,000,000.
1.02 Minimum Amount of Each Borrowing. The aggregate principal
amount of each Borrowing of Revolving Loans shall not be less than $1,000,000.
More than one Borrowing may occur on the same date, but at no time shall there
be out- standing more than eight Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to
incur Revolving Loans hereunder, it shall give the Administrative Agent at its
Notice Office at least one Business Day's prior written notice (or telephonic
notice promptly confirmed in writing) of each Base Rate Loan and at least three
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) of each Eurodollar Loan to be made hereunder, provided that any such
notice shall be deemed to have been given on a certain day only if given before
11:00 A.M. (New York time) on such day. Each such written notice or written
confirmation of telephonic notice (each a "Notice of Borrowing"), except as
otherwise expressly provided in Section 1.10, shall be irrevocable and shall be
given by the Borrower in the form of Exhibit A, appropriately completed to
specify the aggregate principal amount of the Revolving Loans to be made
pursuant to such Borrowing, the date of such Borrowing (which shall be a
Business Day), whether the Revolving Loans being made pursuant to such Borrowing
are to be initially maintained as Base Rate Loans or Eurodollar Loans and, if
Eurodollar Loans, the initial Interest Period to be applicable thereto. The
Administrative Agent shall promptly give each Bank notice of such proposed
Borrowing, of such Bank's proportionate share thereof and of the other matters
required by the immediately preceding sentence to be specified in the Notice of
Borrowing.
(b) Without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice of any Borrowing of Revolving Loans,
the Administrative Agent may act without liability upon the basis of telephonic
notice of such Borrowing believed by the Administrative Agent in good faith to
be from an
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0000B3FK.W51
<PAGE>
Authorized Officer of the Borrower prior to receipt of written confirmation. In
each such case, the Borrower hereby waives the right to dispute the
Administrative Agent's record of the terms of such telephonic notice of such
Borrowing of Revolving Loans.
1.04 Disbursement of Funds. No later than 12:00 Noon (New York
time) on the date specified in each Notice of Borrowing, each Bank will make
available its pro rata portion of each Borrowing requested to be made on such
date. All such amounts shall be made available in Dollars and in immediately
available funds at the Payment Office of the Administrative Agent, and the
Administrative Agent will make available to the Borrower at the Payment Office,
in Dollars and in immediately available funds, the aggregate of the amounts so
made available by the Banks. Unless the Administrative Agent shall have been
notified by any Bank prior to the date of Borrowing that such Bank does not
intend to make available to the Administrative Agent such Bank's portion of any
Borrowing to be made on such date, the Administrative Agent may assume that such
Bank has made available such amount to the Administrative Agent on such date of
Borrowing and the Administrative Agent may, in reliance upon such assumption,
make available to the Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Administrative Agent by such Bank,
the Administrative Agent shall be entitled to recover such corresponding amount
on demand from such Bank. If such Bank does not pay such corresponding amount
forthwith upon the Administrative Agent's demand therefor, the Administrative
Agent shall promptly notify the Borrower and the Borrower shall within one day
thereafter pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover on demand from such Bank
or the Borrower, as the case may be, interest on such corresponding amount in
respect of each day from the date such corresponding amount was made available
by the Administrative Agent to the Borrower until the date such corresponding
amount is recovered by the Administrative Agent, at a rate per annum equal to
(i) if recovered from such Bank, at the overnight Federal Funds Rate and (ii) if
recovered from the Borrower, the rate of interest applicable to the respective
Borrowing, as determined pursuant to Section 1.08. Nothing in this Section 1.04
shall be deemed to relieve any Bank from its obligation to make Revolving Loans
hereunder or to prejudice any rights which the Borrower may have against any
Bank as a result of any failure by such Bank to make Revolving Loans hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal
of, and interest on, the Revolving Loans made by each Bank shall be evidenced by
a promissory note duly executed and delivered by the Borrower substantially in
the form of Exhibit B, with blanks appropriately completed in conformity
herewith (each a "Revolving Note" and, collectively, the "Revolving Notes"). The
Revolving Note issued to each Bank shall (i) be executed by the Borrower, (ii)
be payable to the order
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0000B3FK.W51
<PAGE>
of such Bank or its registered assigns and be dated the Initial Borrowing Date,
(iii) be in a stated principal amount equal to the Revolving Loan Commitment of
such Bank and be payable in the principal amount of the Revolving Loans
evidenced thereby, (iv) mature on the Final Maturity Date, (v) bear interest as
provided in the appropriate clause of Section 1.08 in respect of the Base Rate
Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be
subject to voluntary repayment as provided in Section 4.01, and mandatory
repayment as provided in Section 4.02 and (vii) be entitled to the benefits of
this Agreement and the other Credit Documents.
(b) Each Bank will note on its internal records the amount of
each Revolving Loan made by it and each payment in respect thereof and will
prior to any transfer of any of its Revolving Notes endorse on the reverse side
thereof the outstanding principal amount of Revolving Loans evidenced thereby.
Failure to make any such notation shall not affect the Borrower's obligations in
respect of such Revolving Loans.
1.06 Conversions. The Borrower shall have the option to
convert, on any Business Day occurring on or after the earlier of (1) the 90th
day after the Initial Borrowing Date and (2) the Syndication Date, at least
$1,000,000 of the outstanding principal amount of Revolving Loans made to the
Borrower pursuant to one or more Borrowings of one or more Types of Revolving
Loans into a Borrowing or Borrowings of another Type of Revolving Loan, provided
that (i) except as otherwise provided in Section 1.10(b), Eurodollar Loans may
be converted into Base Rate Loans only on the last day of an Interest Period
applicable to the Revolving Loans being converted and no partial conversion of a
Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of
such Eurodollar Loans made pursuant to a single Borrowing to less than
$1,000,000, (ii) upon the occurrence and during the continuance of any Event of
Default, Base Rate Loans may not be converted into Eurodollar Loans if the
Administrative Agent (acting at the instruction of the Required Banks) has
notified the Borrower that such conversions shall not be permitted during the
continuance of an Event of Default and (iii) no conversion pursuant to this
Section 1.06 shall result in a greater number of Borrowings of Eurodollar Loans
than is permitted under Section 1.02. Each such conversion shall be effected by
the Borrower by giving the Administrative Agent at its Notice Office prior to
11:00 A.M. (New York time) at least three Business Days' prior written notice
(each a "Notice of Conversion") specifying the Revolving Loans to be so
converted, the Borrowing(s) pursuant to which such Revolving Loans were made
and, if to be converted into Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Administrative Agent shall give each Bank
prompt notice of any such proposed conversion. Upon any such conversion the
proceeds thereof will be deemed to be applied directly on the day of such
conversion to prepay the outstanding principal amount of the Revolving Loans
being converted.
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0000B3FK.W51
<PAGE>
1.07 Pro Rata Borrowings. All Borrowings of Revolving Loans
under this Agreement shall be incurred from the Banks pro rata on the basis of
their Revolving Loan Commitments. It is understood that no Bank shall be
responsible for any default by any other Bank of its obligation to make
Revolving Loans hereunder and that each Bank shall be obligated to make the
Revolving Loans provided to be made by it hereunder, regardless of the failure
of any other Bank to make its Revolving Loans hereunder.
1.08 Interest. (a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Base Rate Loan made to the
Borrower from the date the proceeds thereof are made available to the Borrower
until the earlier of (i) the maturity (whether by acceleration or otherwise) of
such Base Rate Loan and (ii) the conversion of such Base Rate Loan to a
Eurodollar Loan pursuant to Section 1.06, at a rate per annum which shall be
equal to the Base Rate in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Eurodollar Loan made to the Borrower from the
date the proceeds thereof are made available to the Borrower until the earlier
of (i) the maturity (whether by acceleration or otherwise) of such Eurodollar
Loan and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan
pursuant to Section 1.06, 1.09 or 1.10, as applicable, at a rate per annum which
shall, during each Interest Period applicable thereto, be equal to the sum of
the Applicable Margin plus the Eurodollar Rate for such Interest Period.
(c) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Revolving Loan and any other overdue amount
payable hereunder shall, in each case, bear interest at a rate per annum equal
to the greater of (x) 2% per annum in excess of the rate otherwise applicable to
Base Rate Loans from time to time and (y) the rate which is 2% in excess of the
rate then borne by such Revolving Loans, in each case with such interest to be
payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable
(i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly
Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iii) in respect of each Revolving
Loan, on any repayment or prepayment (on the amount repaid or prepaid), at
maturity (whether by acceleration or otherwise) and, after such maturity, on
demand.
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0000B3FK.W51
<PAGE>
(e) Upon each Interest Determination Date, the Administrative
Agent shall determine the Eurodollar Rate for the respective Interest Period or
Interest Periods and shall promptly notify the Borrower and the Banks thereof.
Each such determination shall, absent manifest error, be final and conclusive
and binding on all parties hereto.
1.09 Interest Periods. At the time it gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, any Eurodollar Loan (in the case of the initial Interest Period applicable
thereto) or on the third Business Day prior to the expiration of an Interest
Period applicable to such Eurodollar Loan (in the case of any subsequent
Interest Period), the Borrower shall have the right to elect, by giving the
Administrative Agent notice thereof, the interest period (each an "Interest
Period") applicable to such Eurodollar Loan, which Interest Period shall, at the
option of the Borrower, be a one, two, three or six-month period, provided that:
(i) all Eurodollar Loans comprising a Borrowing shall at all
times have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan
shall commence on the date of Borrowing of such Eurodollar Loan
(including the date of any conversion thereto from a Revolving Loan of
a different Type) and each Interest Period occurring thereafter in
respect of such Eurodollar Loan shall commence on the day on which the
next preceding Interest Period applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan
begins on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period, such Interest
Period shall end on the last Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided, however, that if any Interest
Period for a Eurodollar Loan would otherwise expire on a day which is
not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on
the next preceding Business Day;
(v) upon the occurrence and during the continuance of any
Event of Default, no Interest Period may be selected if the
Administrative Agent (acting at the instruction of the Required Banks)
has notified the Borrower that selections of Interest Periods shall not
be permitted during the continuance of an Event of Default;
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<PAGE>
(vi) no Interest Period in respect of any Borrowing of Revolving
Loans shall be selected which extends beyond the Final Maturity Date;
and
(vii) no Interest Period in respect of any Borrowing of any
Revolving Loans shall be selected which extends beyond any date upon
which a mandatory repayment of Revolving Loans will be required to be
made under Section 4.02(a), as a result of reductions to the Total
Revolving Loan Commitment pursuant to Section 3.03(b), unless the
aggregate principal amount of Revolving Loans which are Base Rate Loans
or which have Interest Periods which will expire on or before such date
will be sufficient to make such required repayment.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to such Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to convert
such Eurodollar Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that
any Bank shall have determined (which determination shall, absent manifest
error, be final and conclusive and binding upon all parties hereto but, with
respect to clause (i) below, may be made only by the Administrative Agent):
(i) on any Interest Determination Date that, by reason of
any changes arising after the date of this Agreement affecting the
interbank Eurodollar market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in
the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs
or reductions in the amounts received or receivable hereunder with
respect to any Euro-dollar Loan because of (x) any change since the
date of this Agreement in any applicable law or governmental rule,
regulation, order, guideline or request (whether or not having the
force of law) or in the interpretation or administration thereof and
including the introduction of any new law or governmental rule,
regulation, order, guideline or request, such as, for example, but not
limited to: (A) a change in the basis of taxation of payment to any
Bank of the principal of or interest on the Revolving Notes or any
other amounts payable hereunder (except for changes with respect to any
tax imposed on, or measured by the net income or net profits of such
Bank, or any franchise tax based on the net income or net profits of a
Bank, in either case pursuant to the laws of the jurisdiction in which
such Bank is organized or in which such Bank's principal office
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0000B3FK.W51
<PAGE>
or applicable lending office is located or any subdivision thereof or
therein), or (B) a change in official reserve requirements, but, in all
events, excluding reserves required under Regulation D to the extent
included in the computation of the Eurodollar Rate and/or (y) other
circumstances since the date of this Agreement affecting such Bank or
the interbank Eurodollar market or the position of such Bank in such
market; or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has been made (x) unlawful by any law or governmental
rule, regulation or order, (y) impossible by compliance by any Bank in
good faith with any governmental request (whether or not having force
of law) or (z) impracticable as a result of a contingency occurring
after the date of this Agreement which materially and adversely affects
the interbank Eurodollar market;
then, and in any such event, such Bank (or the Administrative Agent, in the case
of clause (i) above) shall promptly give notice (by telephone confirmed in
writing) to the Borrower and, except in the case of clause (i) above, to the
Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Banks). Thereafter (x) in the
case of clause (i) above, Eurodollar Loans shall no longer be available until
such time as the Administrative Agent notifies the Borrower and the Banks that
the circumstances giving rise to such notice by the Administrative Agent no
longer exist, and any Notice of Borrowing or Notice of Conversion given by the
Borrower with respect to Eurodollar Loans which have not yet been incurred
(including by way of conversion) shall be deemed rescinded by the Borrower, (y)
in the case of clause (ii) above the Borrower shall pay to such Bank, upon
written demand therefor, such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Bank in its sole discretion shall determine) as shall be required to compensate
such Bank for such increased costs or reductions in amounts received or
receivable hereunder (a written notice as to the additional amounts owed to such
Bank, showing the basis for the calculation thereof, submitted to the Borrower
by such Bank in good faith shall, absent manifest error, be final and conclusive
and binding on all the parties hereto) and (z) in the case of clause (iii)
above, the Borrower shall take one of the actions specified in Section 1.10(b)
as promptly as possible and, in any event, within the time period required by
law. Each of the Administrative Agent and each Bank agrees that if it gives
notice to the Borrower of any of the events described in clause (i) or (iii)
above, it shall promptly notify the Borrower and, in the case of any such Bank,
the Administrative Agent, if such event ceases to exist. If any such event
described in clause (iii) above ceases to exist as to a Bank, the obligations of
such Bank to make Eurodollar Loans and to convert Base Rate Loans into
Eurodollar Loans on the terms and conditions contained herein shall be
reinstated.
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<PAGE>
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected by the circumstances described in
Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan is then
being made initially or pursuant to a conversion, cancel the respective
Borrowing by giving the Administrative Agent telephonic notice (confirmed in
writing) on the same date that the Borrower was notified by the affected Bank or
the Administrative Agent pursuant to Section 1.10(a)(ii) or (iii) or (y) if the
affected Eurodollar Loan is then outstanding, upon at least three Business Days'
written notice to the Administrative Agent, require the affected Bank to convert
such Eurodollar Loan into a Base Rate Loan, provided that, if more than one Bank
is affected at any time, then all affected Banks must be treated the same
pursuant to this Section 1.10(b).
(c) If at any time any Bank determines that the introduction
after the Effective Date of, or any change after the Effective Date in, any
applicable law or governmental rule, regulation, order, guideline, directive or
request (whether or not having the force of law) concerning capital adequacy, or
any change after the Effective Date in interpretation or administration thereof
by any governmental authority, central bank or comparable agency, will have the
effect of increasing the amount of capital required or expected to be maintained
by such Bank or any corporation controlling such Bank based on the existence of
such Bank's Revolving Loan Commitment hereunder or its obligations hereunder,
then the Borrower shall pay to such Bank, within 15 days after its written
demand therefor, such additional amounts as shall be required to compensate such
Bank or such other corporation for the increased cost to such Bank or such other
corporation or the reduction in the rate of return to such Bank or such other
corporation as a result of such increase of capital. In determining such
additional amounts, each Bank will act reasonably and in good faith and will use
averaging and attribution methods which are reasonable, provided that such
Bank's reasonable good faith determination of compensation owing under this
Section 1.10(c) shall, absent manifest error, be final and conclusive and
binding on all the parties hereto. Each Bank, upon determining that any
additional amounts will be payable pursuant to this Section 1.10(c), will give
prompt written notice thereof to the Borrower, which notice shall show the basis
for calculation of such additional amounts, although the failure to give any
such notice shall not release or diminish any of the Borrower's Obligations to
pay additional amounts pursuant to this Section 1.10(c).
1.11 Compensation. The Borrower shall compensate each Bank,
upon its written request (which request shall set forth the basis for requesting
such compensation), for all reasonable losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
such Bank to fund its Eurodollar Loans but exclud-
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0000B3FK.W51
<PAGE>
ing any loss of anticipated profit) which such Bank may sustain: (i) if for any
reason (other than a default by such Bank or the Administrative Agent) a
Borrowing of, or conversion from or into, Eurodollar Loans does not occur on a
date specified therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn by the Borrower or deemed withdrawn pursuant to
Section 1.10(a)); (ii) if any repayment (including any repayment made pursuant
to Section 4.01 or 4.02 or as a result of an acceleration of the Revolving Loans
pursuant to Section 10) or conversion of any of the Borrower's Eurodollar Loans
occurs on a date which is not the last day of an Interest Period with respect
thereto; (iii) if any prepayment of any of the Borrower's Eurodollar Loans is
not made on any date specified in a notice of prepayment given by the Borrower;
or (iv) as a consequence of (x) any other default by the Borrower to repay its
Revolving Loans when required by the terms of this Agreement or any Revolving
Note held by such Bank or (y) any election made pursuant to Section 1.10(b).
1.12 Change of Lending Office. Each Bank agrees that on the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 2.06 or Section 4.04 with respect to such Bank,
it will, if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Bank) to designate another lending office
for any Revolving Loans or Letters of Credit affected by such event, provided
that such designation is made on such terms that such Bank and its lending
office suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the operation of such
Section. Nothing in this Section 1.12 shall affect or postpone any of the
obligations of the Borrower or the right of any Bank provided in Sections 1.10,
2.06 and 4.04.
1.13 Replacement of Banks. (x) If any Bank becomes a
Defaulting Bank or otherwise defaults in its obligations to make Revolving Loans
or fund Unpaid Drawings, (y) upon the occurrence of any event giving rise to the
operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.06 or
Section 4.04 with respect to any Bank which results in such Bank charging to the
Borrower increased costs in excess of those being generally charged by the other
Banks, or (z) as provided in Section 13.12(b) in the case of certain refusals by
a Bank to consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Banks, the Borrower shall have the right, if no Default or Event of
Default will exist after giving effect to such replacement, to replace such Bank
(the "Replaced Bank") with one or more other Eligible Transferees, none of whom
shall constitute a Defaulting Bank at the time of such replacement
(collectively, the "Replacement Bank"), and each of whom shall be required to be
reasonably acceptable to the Administrative Agent, provided, that:
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(i) at the time of any replacement pursuant to this Section
1.13, the Replaced Bank and the Replacement Bank shall enter into one
or more Assignment and Assumption Agreements pursuant to Section
13.04(b) (and with all fees payable pursuant to said Section 13.04(b)
to be paid by the Replacement Bank) pursuant to which the Replacement
Bank shall acquire the Revolving Loan Commitment and all outstanding
Revolving Loans of, and in each case participations in Letters of
Credit by, the Replaced Bank and, in connection therewith, shall pay to
(x) the Replaced Bank in respect thereof an amount equal to the sum of
(A) an amount equal to the principal of, and all accrued interest on,
all outstanding Revolving Loans of the Replaced Bank, (B) an amount
equal to all Unpaid Drawings that have been funded by (and not
reimbursed to) such Replaced Bank, together with all then unpaid
interest with respect thereto at such time and (C) an amount equal to
all accrued, but theretofore unpaid, Fees owing to the Replaced Bank
pursuant to Section 3.01, and (y) the respective Issuing Bank an amount
equal to such Replaced Bank's Adjusted Percentage (for this purpose,
determined as if the adjustment described in clause (y) of the
immediately succeeding sentence had been made with respect to such
Replaced Bank) of any Unpaid Drawing (which at such time remains an
Unpaid Drawing) with respect to a Letter of Credit issued by it to the
extent such amount was not theretofore funded by such Replaced Bank;
and
(ii) all obligations of the Borrower owing to the Replaced
Bank (other than those specifically described in clause (i) above in
respect of which the assignment purchase price has been, or is
concurrently being, paid shall be paid in full to such Replaced Bank
concurrently with such replacement.
Upon the execution of the respective Assignment and Assumption Agreements, the
payment of amounts referred to in clauses (i) and (ii) above, and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Revolving Note executed by the Borrower, (x) the Replacement Bank
shall become a Bank hereunder and the Replaced Bank shall cease to constitute a
Bank hereunder, except with respect to indemnification provisions under this
Agreement (including, without limitation, Sections 1.10, 1.11, 2.06, 4.04,
13.01, and 13.06), which shall survive as to such Replaced Bank and (y) in the
case of a replacement of a Defaulting Bank with a Non-Defaulting Bank, the
Adjusted Percentages of the Banks shall be automatically adjusted at such time
to give effect to such replacement (and to give effect to the replacement of a
Defaulting Bank with one or more Non-Defaulting Banks).
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SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions set forth herein, the Borrower may request an Issuing Bank to issue,
at any time and from time to time on and after the Initial Borrowing Date and
prior to (i) the third Business Day preceding the Final Maturity Date in the
case of standby Letters of Credit or (ii) the 30th day preceding the Final
Maturity Date in the case of trade Letters of Credit, (x) for the account of the
Borrower and for the benefit of any holder (or any trustee, agent or other
similar representative for any such holders) of L/C Supportable Indebtedness,
irrevocable standby letters of credit in a form customarily used by such Issuing
Bank or in such other form as has been approved by such Issuing Bank in support
of such L/C Supportable Indebtedness and (y) for the account of the Borrower and
for the benefit of sellers of goods to the Borrower or any of its Subsidiaries,
irrevocable sight trade letters of credit in a form customarily used by such
Issuing Bank or in such other form as has been approved by such Issuing Bank
(each such standby letter of credit and trade letter of credit, a "Letter of
Credit" and collectively, the "Letters of Credit"). All Letters of Credit shall
be denominated in Dollars.
(b) Each Issuing Bank hereby agrees, in its sole discretion,
that it will (subject to the terms and conditions contained herein), and BTCo
hereby agrees that, in the event a requested Letter of Credit is not issued by
any one of the other Issuing Banks, it will (subject to the terms and conditions
contained herein), at any time and from time to time on and after the Initial
Borrowing Date and prior to (i) the third Business Day preceding the Final
Maturity Date in the case of standby Letters of Credit or (ii) the 30th day
preceding the Final Maturity Date in the case of trade Letters of Credit, in
each case following its receipt of the respective Letter of Credit Request,
issue for the account of the Borrower one or more Letters of Credit in support
of such sellers of goods referred to in Section 2.01(a)(y) or such L/C
Supportable Indebtedness as is permitted to remain outstanding without giving
rise to a Default or an Event of Default hereunder; provided that the respective
Issuing Bank shall be under no obligation to issue any Letter of Credit if at
the time of such issuance:
(i) any order, judgment or decree of any governmental
authority or arbitrator shall purport by its terms to enjoin or
restrain such Issuing Bank from issuing such Letter of Credit or any
requirement of law applicable to such Issuing Bank or any request or
directive (whether or not having the force of law) from any
governmental authority with jurisdiction over such Issuing Bank shall
prohibit, or request that such Issuing Bank refrain from, the issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon such Issuing Bank with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which
such Issuing Bank is not otherwise
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compensated) not in effect on the date hereof, or any unreimbursed
loss, cost or expense which was not applicable, in effect or known to
such Issuing Bank as of the date hereof and which such Issuing Bank in
good faith deems material to it;
(ii) such Issuing Bank shall have received notice from the
Required Banks prior to the issuance of such Letter of Credit of the
type described in the last sentence of Section 2.03(b); or
(iii) a Bank Default exists unless such Issuing Bank has
entered into arrangements satisfactory to it and the Borrower to
eliminate such Issuing Bank's risk with respect to the Bank which is
the subject of the Bank Default, including by cash collateralizing such
Bank's Percentage of the Letter of Credit Outstandings.
(c) Notwithstanding the foregoing, (i) no Letter of Credit
shall be issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (x) $15,800,000 or (y) when added to the aggregate principal
amount of all Revolving Loans made by Non-Defaulting Banks then outstanding, an
amount equal to the Adjusted Total Revolving Loan Commitment then in effect,
(ii)(x) each standby Letter of Credit shall by its terms terminate on or before
the date which occurs 12 months after the date of the issuance thereof (although
(A) one or more of the standby Letters of Credit issued in favor of Bank of
America National Trust & Savings Association on the Initial Borrowing Date may
terminate on or before the date which occurs 12 months and 9 days after the date
of issuance thereof and (B) each standby Letter of Credit may be extendable for
successive periods of up to 12 months, but not beyond the third Business Day
preceding the Final Maturity Date, on terms acceptable to the respective Issuing
Bank) and (y) each trade Letter of Credit shall by its terms terminate on or
before the date occurring not later than 180 days after such trade Letter of
Credit's date of issuance and (iii) (x) no standby Letter of Credit shall have
an expiry date occurring later than the third Business Day preceding the Final
Maturity Date and (y) no trade Letter of Credit shall have an expiry date
occurring later than 30 days prior to the Final Maturity Date.
2.02 Minimum Stated Amount. The initial Stated Amount of each
Letter of Credit shall be not less than $100,000 or such lesser amount as is
acceptable to the respective Issuing Bank.
2.03 Letter of Credit Requests. (a) Whenever the Borrower
desires that a Letter of Credit be issued for its account, the Borrower shall
give the Administrative
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Agent and the respective Issuing Bank at least five Business Days' (or such
shorter period as is acceptable to such Issuing Bank in any given case) written
notice prior to the proposed date of issuance (which shall be a Business Day).
Each notice shall be in the form of Exhibit C (each a "Letter of Credit
Request").
(b) The making of each Letter of Credit Request shall be
deemed to be a representation and warranty by the Borrower that such Letter of
Credit may be issued in accordance with, and will not violate the requirements
of, Section 2.01(c). Unless the respective Issuing Bank has received notice from
the Required Banks before it issues a Letter of Credit that one or more of the
conditions specified in Section 5 or 6, as the case may be, are not then
satisfied, or that the issuance of such Letter of Credit would violate Section
2.01(c), then such Issuing Bank may issue the requested Letter of Credit for the
account of the Borrower in accordance with such Issuing Bank's usual and
customary practices.
2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by any Issuing Bank of any Letter of Credit, such Issuing Bank shall be
deemed to have sold and transferred to each Bank, other than such Issuing Bank
(each such Bank, in its capacity under this Section 2.04, a "Participant"), and
each such Participant shall be deemed irrevocably and unconditionally to have
purchased and received from such Issuing Bank, without recourse or warranty, an
undivided interest and participation, to the extent of such Participant's
Adjusted Percentage, in such Letter of Credit, each substitute letter of credit,
each drawing made thereunder and the obligations of the Borrower under this
Agreement with respect thereto, and any security therefor or guaranty pertaining
thereto. Upon any change in the Revolving Loan Commitments or Adjusted
Percentages of the Banks pursuant to Section 1.13 or 13.04 or as a result of a
Bank Default, it is hereby agreed that, with respect to all outstanding Letters
of Credit and Unpaid Drawings, there shall be an automatic adjustment to the
participations pursuant to this Section 2.04 to reflect the new Adjusted
Percentages of the assignor and assignee Bank or of all Banks, as the case may
be.
(b) In determining whether to pay under any Letter of Credit,
such Issuing Bank shall have no obligation relative to the other Banks other
than to confirm that any documents required to be delivered under such Letter of
Credit appear to have been delivered and that they appear to substantially
comply on their face with the requirements of such Letter of Credit. Any action
taken or omitted to be taken by any Issuing Bank under or in connection with any
Letter of Credit issued by it if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for such Issuing Bank any
resulting liability to the Borrower or any Bank.
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(c) In the event that any Issuing Bank makes any payment under
any Letter of Credit issued by it and the Borrower shall not have reimbursed
such amount in full to such Issuing Bank pursuant to Section 2.05(a), such
Issuing Bank shall promptly notify the Administrative Agent, which shall
promptly notify each Participant of such failure, and each Participant shall
promptly and unconditionally pay to the Administrative Agent for the account of
such Issuing Bank the amount of such Participant's Adjusted Percentage of such
unreimbursed payment in Dollars and in same day funds. If the Administrative
Agent so notifies, prior to 11:00 A.M. (New York time) on any Business Day, any
Participant required to fund a payment under a Letter of Credit, such
Participant shall make available to the Administrative Agent at the Payment
Office of the Administrative Agent for the account of the respective Issuing
Bank in Dollars such Participant's Adjusted Percentage of the amount of such
payment on such Business Day in same day funds. If and to the extent such
Participant shall not have so made its Adjusted Percentage of the amount of such
payment available to the Administrative Agent for the account of the respective
Issuing Bank, such Participant agrees to pay to the Administrative Agent for the
account of such Issuing Bank, forthwith on demand such amount, together with
interest thereon, for each day from such date until the date such amount is paid
to the Administrative Agent for the account of such Issuing Bank at the
overnight Federal Funds Rate. The failure of any Participant to make available
to the Administrative Agent for the account of the respective Issuing Bank its
Adjusted Percentage of any payment under any Letter of Credit issued by it shall
not relieve any other Participant of its obligation hereunder to make available
to the Administrative Agent for the account of such Issuing Bank its Adjusted
Percentage of any such Letter of Credit on the date required, as specified
above, but no Participant shall be responsible for the failure of any other
Participant to make available to the Administrative Agent for the account of
such Issuing Bank such other Participant's Adjusted Percentage of any such
payment.
(d) Whenever any Issuing Bank receives a payment of a
reimbursement obligation as to which the Administrative Agent has received for
the account of such Issuing Bank any payments from the Participants pursuant to
clause (c) above, such Issuing Bank shall pay to the Administrative Agent and
the Administrative Agent shall promptly pay each Participant which has paid its
Adjusted Percentage thereof, in Dollars and in same day funds, an amount equal
to such Participant's share (based on the proportionate aggregate amount funded
by such Participant to the aggregate amount funded by all Participants) of the
principal amount of such reimbursement obligation and interest thereon accruing
after the purchase of the respective participations.
(e) Immediately after the issuance of, or amendment to, a
standby Letter of Credit, each Issuing Bank shall immediately notify the
Administrative Agent and each Participant of such issuance or amendment, as the
case may be, and such
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notice shall be accompanied by a copy of the issued standby Letter of Credit or
amendment, as the case may be.
(f) The obligations of the Participants to make payments to
the Administrative Agent for the account of the respective Issuing Bank with
respect to Letters of Credit issued by it shall be irrevocable and not subject
to any qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement under all circumstances,
including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any other Credit Document;
(ii) the existence of any claim, setoff, defense or other
right which the Borrower or any of its Subsidiaries may have at any
time against a beneficiary named in a Letter of Credit, any transferee
of any Letter of Credit (or any Person for whom any such transferee may
be acting), the Administrative Agent, any Bank, any Issuing Bank, any
Participant, or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying transaction
between the Borrower or any of its Subsidiaries and the beneficiary
named in any such Letter of Credit);
(iii) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Agreement to Repay Letter of Credit Drawings. (a) The
Borrower hereby agrees to reimburse the respective Issuing Bank, by making
payment to the Administrative Agent in immediately available funds at the
Payment Office (or by making the payment directly to such Issuing Bank at such
location as may otherwise have been agreed upon by the Borrower and such Issuing
Bank), for any payment or disbursement made by such Issuing Bank under any
Letter of Credit issued by it (each such amount so paid until reimbursed, an
"Unpaid Drawing"), immediately after, and in any event on the date of, such
payment or disbursement, with interest on the amount so paid or disbursed by
such Issuing Bank, to the extent not reimbursed prior to 12:00
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<PAGE>
Noon (New York time) on the date of such payment or disbursement, from and
including the date paid or disbursed to but excluding the date such Issuing Bank
is reimbursed by the Borrower therefor at a rate per annum which shall be the
Base Rate in effect from time to time, provided, however, to the extent such
amounts are not reimbursed prior to 12:00 Noon (New York time) on the third
Business Day following notice to the Borrower by the Administrative Agent or the
respective Issuing Bank of such payment or disbursement, interest shall
thereafter accrue on the amounts so paid or disbursed by such Issuing Bank (and
until reimbursed by the Borrower) at a rate per annum which shall be the Base
Rate in effect from time to time plus 2%, in each such case, with interest to be
payable on demand, it being understood and agreed, however, that the notice
referred to in the immediately preceding proviso shall not be required to be
given if a Default or an Event of Default under Section 10.05 shall have
occurred and be continuing (in which case the Unpaid Drawings shall bear
interest at the rate provided in the foregoing proviso from the third Business
Day following the respective payment or disbursement). The respective Issuing
Bank shall give the Borrower prompt notice of each Drawing under any Letter of
Credit, provided that the failure to give any such notice shall in no way
affect, impair or diminish the Borrower's obligations hereunder.
(b) The obligation of the Borrower under this Section 2.05 to
reimburse the respective Issuing Bank with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower or any of its Subsidiaries may have or
have had against any Bank (including in its capacity as Issuing Bank or as
Participant), including, without limitation, any defense based upon the failure
of any drawing under a Letter of Credit (each a "Drawing") to conform to the
terms of such Letter of Credit or any nonapplication or misapplication by the
beneficiary of the proceeds of such Drawing; provided, however, that the
Borrower shall not be obligated to reimburse such Issuing Bank for any wrongful
payment made by such Issuing Bank under a Letter of Credit issued by it as a
result of acts or omissions constituting willful misconduct or gross negligence
on the part of such Issuing Bank. Any action taken or omitted to be taken by any
Issuing Bank under or in connection with any Letter of Credit if taken or
omitted in the absence of gross negligence or willful misconduct, shall not
create for such Issuing Bank any resulting liability to the Borrower.
2.06 Increased Costs. If at any time after the date hereof any
Issuing Bank or any Participant determines that the introduction of or any
change in any applic- able law, rule, regulation, order, guideline or request or
in the interpretation or admin- istration thereof by any governmental authority
charged with the interpretation or administration thereof, or compliance by any
Issuing Bank or any Participant with any
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request or directive by any such authority (whether or not having the force of
law), or any change in generally acceptable accounting principles shall either
(i) impose, modify or make applicable any reserve, deposit, capital adequacy or
similar requirement against letters of credit issued by any Issuing Bank or
participated in by any Participant, or (ii) impose on any Issuing Bank or any
Participant any other conditions relating, directly or indirectly, to this
Agreement or any Letter of Credit, and the result of any of the foregoing is to
increase the cost to any Issuing Bank or any Participant of issuing, maintaining
or participating in any Letter of Credit, or reduce the amount of any sum
received or receivable by any Issuing Bank or any Participant hereunder or
reduce the rate of return on its capital with respect to Letters of Credit,
then, upon demand to the Borrower by any Issuing Bank or any Participant (a copy
of which demand shall be sent by such Issuing Bank or such Participant to the
Administrative Agent), the Borrower shall pay to such Issuing Bank or such
Participant such additional amount or amounts as will compensate such Bank for
such increased cost or reduction in the amount receivable or reduction on the
rate of return on its capital. Any Issuing Bank or any Participant, upon
determining that any additional amounts will be payable pursuant to this Section
2.06, will give prompt written notice thereof to the Borrower, which notice
shall include a certificate submitted to the Borrower by such Issuing Bank or
such Participant (a copy of which certificate shall be sent by such Issuing Bank
or such Participant to the Administrative Agent), setting forth in reasonable
detail the basis for the calculation of such additional amount or amounts
necessary to compensate such Issuing Bank or such Participant, although failure
to give any such notice shall not release or diminish the Borrower's obligations
to pay additional amounts pursuant to this Section 2.06. The certificate
required to be delivered pursuant to this Section 2.06 shall, absent manifest
error, be final, conclusive and binding on the Borrower.
SECTION 3. Fees; Reductions of Commitment.
3.01 Fees. (a) The Borrower agrees to pay to the
Administrative Agent for distribution to each Non-Defaulting Bank a commitment
commission (the "Commitment Commission") for the period from the Effective Date
to but not including the Final Maturity Date (or such earlier date as the Total
Revolving Loan Commitment shall have been terminated), computed at a rate equal
to .2% per annum on the Unutilized Revolving Loan Commitment of such
Non-Defaulting Bank as in effect from time to time. Accrued Commitment
Commission shall be due and payable quarterly in arrears on each Quarterly
Payment Date and on the Final Maturity Date or such earlier date upon which the
Total Revolving Loan Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent for
distribution to each Non-Defaulting Bank (based on their respective Adjusted
Percentages) a fee in respect of each Letter of Credit issued hereunder (the
"Letter of
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Credit Fee"), for the period from and including the date of issuance of such
Letter of Credit to and including the termination of such Letter of Credit,
computed at a rate per annum equal to the Applicable Margin, as in effect from
time to time, on the daily Stated Amount of such Letter of Credit. Accrued
Letter of Credit Fees shall be due and payable quarterly in arrears on each
Quarterly Payment Date and upon the termination of the Total Revolving Loan
Commitment or the first day thereafter upon which no Letters of Credit remain
outstanding.
(c) The Borrower agrees to pay to the respective Issuing Bank,
for its own account, a facing fee in respect of each Letter of Credit issued for
its own account hereunder (the "Facing Fee"), for the period from and including
the date of issuance of such Letter of Credit to and including the termination
of such Letter of Credit, computed at a rate per annum equal to the higher of
(i) $500 (the "Minimum Facing Fee") and (ii) 1/4 of 1% (or such lesser amount as
may be agreed to in writing by any Issuing Bank) on the daily Stated Amount of
such Letter of Credit. The Minimum Facing Fee, if applicable, is due and payable
on the date of issuance of such Letter of Credit and each annual anniversary
date or extension date thereof. In addition, all other accrued Facing Fees shall
be due and payable quarterly in arrears on each Quarterly Payment Date and upon
the termination of the Total Revolving Loan Commitment or the first day
thereafter upon which no Letters of Credit remain outstanding.
(d) The Borrower agrees to pay to the respective Issuing Bank,
for its own account, upon each payment under, issuance of, or amendment to, any
Letter of Credit, such amount as shall at the time of such event be the
administrative charge and expense which such Issuing Bank is generally imposing
in connection with such occurrence with respect to letters of credit.
(e) The Borrower agrees to pay to the Agents, for their own
account, such other fees as have been agreed to in writing by the Borrower and
the Agents.
3.02 Voluntary Termination of Unutilized Commitments. (a) Upon
at least three Business Days' prior written notice to the Administrative Agent
at its Notice Office (which notice the Administrative Agent shall promptly
transmit to each of the Banks), the Borrower shall have the right, at any time
or from time to time, without premium or penalty, to terminate the Total
Unutilized Revolving Loan Commitment, in whole or in part, in integral multiples
of $1,000,000 in the case of partial reductions to the Total Unutilized
Revolving Loan Commitment, provided that (x) each reduction shall apply to
reduce the then remaining Scheduled Commitment Reductions pro rata based upon
the then remaining amount of such Scheduled Commitment Reductions after giving
effect to all prior reductions thereto, (y) each such reduction shall apply
propor- tionately to permanently reduce the Revolving Loan Commitment of each
Bank and (z)
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the reduction to the Total Unutilized Revolving Loan Commitment shall in no case
be in an amount which would cause the Revolving Loan Commitment of any Bank to
be reduced by an amount which exceeds the Unutilized Revolving Loan Commitment
of such Bank as in effect immediately before giving effect to such reduction.
(b) In the event of certain refusals by a Bank to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Banks as provided in
Section 13.12(b), the Borrower may, upon five Business Days' prior written
notice to the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the Banks) and subject
to obtaining the consents required by Section 13.12(b), terminate all of the
Revolving Loan Commitment of such Bank so long as all Revolving Loans, together
with accrued and unpaid interest, Fees and all other amounts owing to such Bank
are repaid concurrently with the effectiveness of such termination pursuant to
Section 4.01(b) (at which time Schedule I shall be deemed modified to reflect
such changed amounts), and at such time, such Bank shall no longer constitute a
"Bank" for purposes of this Agreement, except with respect to indemnifications
under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.06,
4.04, 13.01 and 13.06), which shall survive as to such repaid Bank.
3.03 Mandatory Reduction of Commitments. (a) The Total
Revolving Loan Commitment (and the Revolving Loan Commitment of each Bank) shall
terminate in its entirety on January 31, 1996 unless the Initial Borrowing Date
has occurred on or before such date.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date set forth below, the Total Revolving
Loan Commitment shall be reduced by the amount set forth opposite such date
(each such reduction, as the same may be reduced as provided in Sections 3.02(a)
and 3.03(i), a "Scheduled Commitment Reduction," and each such date, a
"Scheduled Commitment Reduction Date"):
Scheduled Commitment Reduction Date Amount
March 31, 1997 $ 3,750,000
June 30, 1997 $ 3,750,000
September 30, 1997 $ 3,750,000
December 31, 1997 $ 3,750,000
March 31, 1998 $ 3,750,000
June 30, 1998 $ 3,750,000
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September 30, 1998 $ 3,750,000
December 31, 1998 $ 3,750,000
March 31, 1999 $ 3,750,000
June 30, 1999 $ 3,750,000
September 30, 1999 $ 3,750,000
December 31, 1999 $ 3,750,000
March 31, 2000 $ 3,750,000
June 30, 2000 $ 3,750,000
September 30, 2000 $ 3,750,000
December 31, 2000 $ 3,750,000
March 31, 2001 $ 3,750,000
June 30, 2001 $ 3,750,000
September 30, 2001 $ 3,750,000
December 31, 2001 $ 3,750,000
Final Maturity Date $50,000,000
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date on and after the Effective Date upon
which the Borrower or any of its Subsidiaries or Joint Ventures receives any
proceeds from any capital contribution or any sale or issuance of its equity
(but excluding (w) proceeds from sales or issuances of equity to officers or
directors of the Borrower, so long as the aggregate amount excluded pursuant to
this parenthetical in any fiscal year of the Borrower does not exceed $500,000,
(x) proceeds from Qualified Equity Investments, to the extent the proceeds are
used as provided in the definition of Qualified Equity Investments contained
herein, (y) proceeds from sales or issuances of Chartwell Preferred Stock or the
Borrower's common stock to Chartwell and (z) proceeds from capital contributions
to, or equity investments in, any Subsidiary or Joint Venture of the Borrower to
the extent made by the Borrower, any other Subsidiary of the Borrower or the
respective joint venture partner of such Joint Venture), the Total Revolving
Loan Commitment shall be permanently reduced by an amount equal to 50% of the
Net Cash Proceeds of the respective capital contribution or sale or issuance (or
(i) in the case of a registered public equity offering of the Borrower's common
stock, the Total Revolving Loan Commitment shall be permanently reduced by an
amount equal to 25% of the Net Cash Proceeds therefrom or (ii) in the case of
any capital contribution to, or any sale or issuance of equity by, any Joint
Venture, the Total Revolving Loan Commitment shall be permanently reduced by an
amount equal to 50% of the Borrower's Allocable Share of such Net Cash Proceeds
(but, in the case of a Joint Venture in which the Borrower or a Subsidiary
thereof does not control the timing of distributions by such Joint Venture, only
as and when such Net Cash Proceeds are distributed by such Joint Venture to the
Borrower or a Wholly-Owned Subsidiary thereof)) in each case in accordance with
the requirements of Section 3.03(i); provided
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that, so long as no Default or Event of Default then exists, the Total Revolving
Loan Commitment shall not be required to be reduced pursuant to the requirements
of this Section 3.03(c) at any time to an amount which is less than the Guaranty
Amount then in effect.
(d) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date on and after the Effective Date upon
which the Borrower or any of its Subsidiaries or Joint Ventures receives any
proceeds from any incurrence by the Borrower or any of its Subsidiaries or Joint
Ventures of Indebtedness for borrowed money (other than Indebtedness for
borrowed money permitted to be incurred pursuant to Section 9.04 as such Section
is in effect on the Effective Date, including the Chartwell Preferred
Stock/Subordinated Debt), the Total Revolving Loan Commitment shall be
permanently reduced by an amount equal to 100% of the Net Cash Proceeds of the
respective incurrence (or, in the case of any such incurrence of Indebtedness
for borrowed money by a Joint Venture, the Total Revolving Loan Commitment shall
be permanently reduced by an amount equal to 100% of the Borrower's Allocable
Share of such Net Cash Proceeds (but, in the case of a Joint Venture in which
the Borrower or a Subsidiary thereof does not control the timing of
distributions by such Joint Venture, only as and when such Net Cash Proceeds are
distributed by such Joint Venture to the Borrower or a Wholly-Owned Subsidiary
thereof)) in each case in accordance with the requirements of Section 3.03(i).
(e) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date on and after the Effective Date upon
which the Borrower or any of its Subsidiaries or Joint Ventures receives Cash
Proceeds from any Asset Sale, the Total Revolving Loan Commitment shall be
permanently reduced by an amount equal to 100% of the Net Cash Proceeds
therefrom (or, in the case of any Asset Sale by a Joint Venture, the Total
Revolving Loan Commitment shall be permanently reduced by an amount equal to
100% of the Borrower's Allocable Share of such Net Cash Proceeds (but, in the
case of a Joint Venture in which the Borrower or a Subsidiary thereof does not
control the timing of distributions by such Joint Venture, only as and when such
Net Cash Proceeds are distributed by such Joint Venture to the Borrower or a
Wholly-Owned Subsidiary thereof)) in each case in accordance with the
requirements of Section 3.03(i), provided that so long as no Default or Event of
Default then exists, (i) the Net Cash Proceeds of any Asset Sale pursuant to
Section 9.02(ii) shall not be required to reduce the Total Revolving Loan
Commitment on the date of receipt thereof to the extent that the Borrower has
delivered a certificate to the Administrative Agent on or prior to such date
stating that it intends to reinvest such Net Cash Proceeds in equipment or
materials within 180 days after the respective date of sale or, in lieu thereof,
commit to so invest such Net Cash Proceeds within 180 days after such date of
sale and actually expend the funds pursuant to such commitment
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within 365 days after such date of sale, and (ii) the Net Cash Proceeds from the
sale of any Existing Investment, the sale of the equity interests in any Joint
Venture, the sale of any Hotel Property or from any Recovery Event shall not be
required to reduce the Total Revolving Loan Commitment on the date of receipt
thereof to the extent that (A) the Borrower delivers a certificate to the
Administrative Agent stating that it intends to utilize the Net Cash Proceeds
therefrom to make Permitted Hotel Acquisitions pursuant to Sections 9.02(ix)
and/or 9.05(viii) (and/or, in the case of the Net Cash Proceeds from a Recovery
Event, to replace or restore any properties or assets in respect of which such
proceeds are paid) within 180 days after the date of the respective Asset Sale,
or make Investment Commitments for a Permitted Hotel Acquisition within 180 days
after the date of the respective Asset Sale and actually make the respective
Permitted Hotel Acquisition (or effect such replacement or restoration, as the
case may be) within 365 days after the date of the respective Asset Sale and (B)
after giving effect to any election pursuant to this clause (ii), the
Reinvestment Amount shall at no time outstanding exceed $25,000,000, provided
further, that with respect to each of clauses (i) and (ii) of the immediately
preceding proviso, if all or any portion of the Net Cash Proceeds of the
respective Asset Sale are not in fact utilized for the purposes permitted by
said clauses within 180 days after the respective date of such Asset Sale (or
committed to be so used within 180 days and actually applied within 365 days
after the date of the respective Asset Sale), then on such 180th day after the
date of the respective Asset Sale (or 365th day after the date of the respective
Asset Sale, as the case may be), the amount of Net Cash Proceeds not actually
applied for the purposes permitted by said clauses (i) and (ii) shall be used to
permanently reduce the Total Revolving Loan Commitment as otherwise required by
this Section 3.03(e) in the absence of the immediately preceding proviso.
(f) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each Excess Cash Payment Date, the Total
Revolving Loan Commitment shall be permanently reduced by an amount equal to the
Applicable Excess Cash Flow Recapture Percentage of the Residual Excess Cash
Flow for the relevant Excess Cash Payment Period in accordance with the
requirements of Section 3.03(i); provided that, so long as no Default or Event
of Default then exists, the Total Revolving Loan Commitment shall not be
required to be reduced pursuant to the requirements of this Section 3.03(f) at
any time to an amount which is less than the Guaranty Amount then in effect.
(g) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on the first date on and after the Effective Date
on which the long-term senior unsecured debt credit rating of HFS shall have
been reduced to a level equal to or below BBB- by S&P and/or be unrated by S&P,
which downgrading and/or failure to be rated shall have continued for at least
30 consecutive days, the Total
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Revolving Loan Commitment shall be permanently reduced by an amount equal to
$37,500,000 in accordance with the requirements of Section 3.03(i).
(h) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on the first date on and after the Effective Date
on which the long-term senior unsecured debt credit rating of HFS shall have
been reduced to a level below BBB- by S&P and/or be unrated by S&P, which
downgrading and/or failure to be rated shall have continued for at least 30
consecutive days, the Total Revolving Loan Commitment shall be permanently
reduced by an amount equal to $75,000,000 (less any amount by which the Total
Revolving Loan Commitment had already been reduced pursuant to clause (g) above)
in accordance with the requirements of Section 3.03(i).
(i) The amount of each reduction to the Total Revolving Loan
Commitment made as required by (A) Sections 3.03(c), (e) and (f) shall be
applied to reduce the then remaining Scheduled Commitment Reductions pro rata
based on the then remaining amounts of such Scheduled Commitment Reductions
after giving effect to all prior reductions thereto and (B) Sections 3.03(d),
(g) and (h) shall be applied to reduce the then remaining Scheduled Commitment
Reductions in inverse order of maturity.
(j) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment of each Bank) shall terminate in its entirety on the
Final Maturity Date.
(k) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on the 15th day after each date on which any
Change of Control or HFS Change of Control occurs, the Total Revolving Loan
Commitment (and the Revolving Loan Commitment of each Bank) shall terminate in
its entirety, in each case unless the Required Banks otherwise agree in writing
in their sole discretion.
(l) Each reduction to the Total Revolving Loan Commitment
pursuant to this Section 3.03 shall be applied proportionately to reduce the
Revolving Loan Commitment of each Bank.
SECTION 4. Prepayments; Payments; Taxes.
4.01 Voluntary Prepayments. (a) The Borrower shall have the
right to prepay the Revolving Loans, without premium or penalty, in whole or in
part at any time and from time to time on the following terms and conditions:
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(i) the Borrower shall give the Administrative Agent prior
to 12:00 Noon (New York time) at its Notice Office (x) at least one
Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) of the Borrower's intent to prepay Base Rate
Loans and (y) at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) of the Borrower's
intent to prepay Eurodollar Loans, the amount of such prepayment and
the Types of Revolving Loans to be prepaid and, in the case of
Eurodollar Loans, the specific Borrowing or Borrowings pursuant to
which made, which notice the Administrative Agent shall promptly
transmit to each of the Banks;
(ii) each prepayment shall be in an aggregate principal
amount of at least $500,000, provided, that if any partial prepayment
of Eurodollar Loans made pursuant to any Borrowing shall reduce the
outstanding Eurodollar Loans made pursuant to such Borrowing to an
amount less than $1,000,000, then such Borrowing shall be converted at
the end of the then current Interest Period into a Borrowing of Base
Rate Loans and any election of an Interest Period with respect thereto
given by the Borrower shall have no force or effect; and
(iii) each prepayment in respect of any Revolving Loans
made pursuant to a Borrowing shall be applied pro rata among such
Revolving Loans, provided that, at the Borrower's election in
connection with any prepayment of Revolving Loans pursuant to this
Section 4.01(a), such prepayment shall not be applied to any Revolving
Loan of a Defaulting Bank.
(b) In the event of certain refusals by a Bank to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Banks as provided in
Section 13.12(b), the Borrower shall have the right, upon five Business Days'
prior written notice to the Administrative Agent at its Notice Office (which
notice the Administrative Agent shall promptly transmit to each of the Banks) to
repay all Revolving Loans, together with accrued and unpaid interest, Fees, and
other amounts owing to such Bank in accordance with said Section 13.12(b) so
long as (A) in the case of the repayment of Revolving Loans of any Bank pursuant
to this clause (b) the Revolving Loan Commitment of such Bank is terminated
concurrently with such repayment pursuant to Section 3.02(b) (at which time
Schedule I shall be deemed modified to reflect the changed Revolving Loan
Commitments) and (B) the consents required by Section 13.12(b) in connection
with the repayment pursuant to this clause (b) have been obtained.
4.02 Mandatory Repayments. (a)(i) On any day on which the sum
of the aggregate outstanding principal amount of the Revolving Loans made by
Non-
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<PAGE>
Defaulting Banks and the Letter of Credit Outstandings exceeds the Adjusted
Total Revolving Loan Commitment as then in effect, the Borrower shall prepay on
such day principal of Revolving Loans of Non-Defaulting Banks in an amount equal
to such excess. If, after giving effect to the prepayment of all Revolving Loans
of Non-Defaulting Banks, the aggregate amount of the Letter of Credit
Outstandings exceeds the Adjusted Total Revolving Loan Commitment as then in
effect, the Borrower shall pay to the Agent at the Payment Office on such date
an amount of cash or Cash Equivalents equal to the amount of such excess (up to
a maximum amount equal to the Letter of Credit Outstandings at such time), such
cash or Cash Equivalents to be held as security for all obligations of the
Borrower to Non-Defaulting Banks hereunder in a cash collateral account to be
established by the Administrative Agent.
(ii) On any day on which the aggregate outstanding principal
amount of the Revolving Loans made by any Defaulting Bank exceeds the Revolving
Loan Commitment of such Defaulting Bank, the Borrower shall prepay on such day
principal of Revolving Loans of such Defaulting Bank in an amount equal to such
excess.
(b) With respect to each repayment of Revolving Loans required
by this Section 4.02, the Borrower may designate the Types of Revolving Loans
which are required to be repaid and, in the case of Eurodollar Loans, the
specific Borrowing or Borrowings pursuant to which made, provided that: (i) if
any repayment of Eurodollar Loans made pursuant to a single Borrowing shall
reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an
amount less than $1,000,000, such Borrowing shall be converted at the end of the
then current Interest Period into a Borrowing of Base Rate Loans and (ii) except
for differing treatments of Defaulting Banks and Non-Defaulting Banks as
expressly provided in Section 4.02(a), each repayment of Revolving Loans made
pursuant to a Borrowing shall be applied pro rata among such Revolving Loans. In
the absence of a designation by the Borrower as described in the preceding
sentence, the Administrative Agent shall, subject to the above, make such
designation in its sole discretion.
(c) In addition to any other mandatory repayments required
pursuant to this Section 4.02, on the 15th day after each date on which any
Change of Control or HFS Change of Control occurs, all outstanding Revolving
Loans shall be required to be immediately repaid in full, in each case unless
the Required Banks otherwise agree in writing in their sole discretion.
4.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement or under any
Revolving Note shall be made to the Administrative Agent for the account of the
Bank or Banks entitled thereto not later than 12:00 Noon (New York time) on the
date when due and shall be
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<PAGE>
made in Dollars in immediately available funds at the Payment Office of the
Administrative Agent. Whenever any payment to be made hereunder or under any
Revolving Note shall be stated to be due on a day which is not a Business Day,
the due date thereof shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest shall be payable at the
applicable rate during such extension.
4.04 Net Payments; Taxes. (a) All payments made by the
Borrower hereunder or under any Revolving Note will be made without setoff,
counterclaim or other defense. Except as provided in Section 4.04(b), all such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein with respect
to such payments (but excluding, except as provided in the second succeeding
sentence, any tax imposed on or measured by the net income or net profits of a
Bank, or any franchise tax based on the net income or net profits of a Bank, in
either case pursuant to the laws of the jurisdiction in which it is organized or
the jurisdiction in which the principal office or applicable lending office of
such Bank is located or any subdivision thereof or therein) and all interest,
penalties or similar liabilities with respect to such non-excluded taxes,
levies, imposts, duties, fees or other charges (all such non-excluded taxes,
levies, imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower
agrees to pay the full amount of such Taxes, and such additional amounts as may
be necessary so that every payment of all amounts due under this Agreement or
under any Revolving Note, after withholding or deduction for or on account of
any Taxes, will not be less than the amount provided for herein or in such
Revolving Note. If any amounts are payable in respect of Taxes pursuant to the
preceding sentence, the Borrower agrees to reimburse each Bank, upon the written
request of such Bank, for taxes imposed on or measured by the net income or net
profits of such Bank, or any franchise tax based on the net income or net
profits of a Bank, in either case pursuant to the laws of the jurisdiction in
which such Bank is organized or in which the principal office or applicable
lending office of such Bank is located or under the laws of any political
subdivision or taxing authority of any such jurisdiction in which such Bank is
organized or in which the principal office or applicable lending office of such
Bank is located and for any withholding of income or similar taxes imposed by
the United States of America as such Bank shall determine are payable by, or
withheld from, such Bank in respect of such amounts so paid to or on behalf of
such Bank pursuant to the preceding sentence and in respect of any amounts paid
to or on behalf of such Bank pursuant to this sentence. The Borrower will
furnish to the Administrative Agent within 45 days after the date the payment of
any Taxes is due pursuant to applicable law certified copies of tax receipts
evidencing such payment
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by the Borrower. The Borrower agrees to indemnify and hold harmless each Bank,
and reimburse such Bank upon its written request, for the amount of any Taxes so
levied or imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes agrees to deliver to the Borrower and the Administrative Agent on or
prior to the Effective Date, or in the case of a Bank that is an assignee or
transferee of an interest under this Agreement pursuant to Section 1.13 or 13.04
(unless the respective Bank was already a Bank hereunder immediately prior to
such assignment or transfer), on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement and under any Revolving
Note, or (ii) if the Bank is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form
1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially in
the form of Exhibit D (any such certificate, a "Section 4.04(b)(ii)
Certificate") and (y) two accurate and complete original signed copies of
Internal Revenue Service Form W-8 (or successor form) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments of interest to be made under this Agreement and under any
Revolving Note. In addition, each Bank agrees that from time to time after the
Effective Date, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect, it will
deliver to the Borrower and the Administrative Agent two new accurate and
complete original signed copies of Internal Revenue Service Form 4224 or 1001,
or Form W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such
other forms as may be required in order to confirm or establish the entitlement
of such Bank to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Revolving
Note, or it shall immediately notify the Borrower and the Administrative Agent
of its inability to deliver any such Form or Certificate. Notwithstanding
anything to the contrary contained in Section 4.04(a), but subject to Section
13.04(b) and the immediately succeeding sentence, (x) the Borrower shall be
entitled, to the extent it is required to do so by law, to deduct or withhold
income or similar taxes imposed by the United States (or any political
subdivision or taxing authority thereof or therein) from interest, Fees or other
amounts payable hereunder for the account of any Bank which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) for
U.S. Federal income tax purposes to the extent that such Bank has not provided
to the Borrower U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (y) the Borrower shall not be
obligated pursuant to Section 4.04(a) to gross-up
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payments to be made to a Bank in respect of income or similar taxes imposed by
the United States if (I) such Bank has not provided to the Borrower the Internal
Revenue Service Forms required to be provided to the Borrower pursuant to this
Section 4.04(b) or (II) in the case of a payment, other than interest, to a Bank
described in clause (ii) above, to the extent that such Forms do not establish a
complete exemption from withholding of such taxes. Notwithstanding anything to
the contrary contained in the preceding sentence or elsewhere in this Section
4.04 and except as set forth in Section 13.04(b), the Borrower agrees to pay
additional amounts and to indemnify each Bank in the manner set forth in Section
4.04(a) (without regard to the identity of the jurisdiction requiring the
deduction or withholding) in respect of any Taxes deducted or withheld by it as
described in the immediately preceding sentence as a result of any changes after
the Initial Borrowing Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of such Taxes.
SECTION 5. Conditions Precedent to Loans on the Initial
Borrowing Date. The obligation of each Bank to make Revolving Loans, and the
obligation of each Issuing Bank to issue Letters of Credit, on the Initial
Borrowing Date, is subject at the time of the making of such Revolving Loans or
the issuance of such Letters of Credit to the satisfaction of the following
conditions:
5.01 Execution of Agreement; Notes. On or prior to the Initial
Borrowing Date (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Administrative Agent for the account of each of the
Banks the appro- priate Revolving Note executed by the Borrower, in the amount,
maturity and as other- wise provided herein.
5.02 Officer's Certificate. On the Initial Borrowing Date, the
Administrative Agent shall have received a certificate, dated the Initial
Borrowing Date and signed on behalf of the Borrower by an Authorized Officer,
stating all of the conditions of 5.06, 5.07, 5.08, 5.15, 5.16, 5.17, 6.01, 6.02
and 6.03 have been satisfied on such date.
5.03 Fees, etc. On the Initial Borrowing Date, the Borrower
shall have paid to the Agents and the Banks all costs, fees and expenses
(including, without limitation, legal fees and expenses) payable to the Agents
and the Banks to the extent then due.
5.04 Opinion of Counsel. On the Initial Borrowing Date, the
Admin- istrative Agent shall have received from Skadden, Arps, Slate, Meagher &
Flom, special counsel to HFS, the Borrower and the Subsidiary Guarantors, an
opinion
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addressed to each of the Agents and each of the Banks and dated the Initial
Borrowing Date, which opinion shall be in form and substance satisfactory to the
Agents and the Required Banks and shall cover such matters incident to the
transactions contemplated herein as may be requested by the Agents or the
Required Banks.
5.05 Corporate Documents; Proceedings; etc. (a) On the Initial
Borrowing Date, the Administrative Agent shall have received a certificate,
dated the Initial Borrowing Date, signed by the President, any Vice President,
the Secretary or an Assistant Secretary of each Credit Party, in the form of
Exhibit E with appropriate insertions, together with copies of the certificate
of incorporation and by-laws or other organizational documents of each such
Credit Party and the resolutions of each such Credit Party referred to in such
certificate, and the foregoing shall be acceptable to the Agents.
(b) All corporate and legal proceedings and all instruments
and agree- ments in connection with the transactions contemplated by this
Agreement and the other Documents shall be satisfactory in form and substance to
the Agents and the Required Banks, and the Administrative Agent shall have
received all information and copies of all documents and papers, including
records of corporate proceedings, governmental approvals, good standing
certificates and bring-down telegrams, if any, which the Agents may have
requested in connection therewith, such documents and papers where appropriate
to be certified by proper corporate or governmental authorities.
5.06 Employee Benefit Plans; Shareholders' Agreements;
Management Agreements; Employment Agreements; Collective Bargaining Agreements;
Debt Agree- ments; Tax Sharing Agreements; HFS Agreements; Affiliate Agreements;
Existing Investment Agreements. On or prior to the Initial Borrowing Date, there
shall have been delivered to the Administrative Agent (or otherwise made
available for review by the Agents) true and correct copies, certified as true
and complete by an appropriate officer of the Borrower of:
(i) all "employee benefit plans" as defined in Section 3(3)
of ERISA (other than multiemployer plans as defined in Section
4001(a)(3) of ERISA), any profit sharing plans and deferred
compensation plans, and any other plans or arrangements for the benefit
of employees of the Borrower or any of its Subsidiaries (collectively,
the "Employee Benefit Plans");
(ii) all agreements entered into by the Borrower or any of
its Subsidiaries governing the terms and relative rights of its capital
stock and any agreements entered into by shareholders relating to any
such entity with respect to its capital stock (collectively, the
"Shareholders' Agreements");
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(iii) all agreements with members of, or with respect to,
the manage- ment of the Borrower or any of its Subsidiaries
(collectively, the "Management Agreements");
(iv) any employment agreements entered into by the Borrower
or any of its Subsidiaries (collectively, the "Employment Agreements");
(v) all collective bargaining agreements applying or
relating to any employee of the Borrower or any of its Subsidiaries
(collectively, the "Collective Bargaining Agreements");
(vi) all agreements evidencing or relating to Indebtedness
of the Borrower or any of its Subsidiaries which is to remain
outstanding after giving effect to the incurrence of Revolving Loans on
the Initial Borrowing Date and the consummation of the Acquisitions
(collectively, the "Debt Agreements");
(vii) tax sharing, tax allocation and other similar
agreements entered into by the Borrower or any of its Subsidiaries
(collectively, the "Tax Sharing Agreements");
(viii) the Financing Agreement, the Corporate Services
Agreement, all HFS Franchise Agreements and the Facility Lease, as well
as any other agreements of the Borrower and any of its Subsidiaries
with HFS or any of its Subsidiaries (with all of the agreements
referred to in this clause (viii) being herein collectively called the
"HFS Agreements");
(ix) all other agreements (not delivered pursuant to
preceding clauses (i) through (viii)) between the Borrower and any of
its Subsidiaries, on the one hand, and any Affiliate of the Borrower
(which is not a Subsidiary of the Borrower) on the other hand
(collectively, the "Affiliate Agreements"); and
(x) all agreements evidencing, or relating to, any Existing
Investments (including all existing Joint Ventures) (collectively, the
"Existing Investment Agreements");
all of which Employee Benefit Plans, Shareholders' Agreements, Management Agree-
ments, Employment Agreements, Collective Bargaining Agreements, Debt Agreements,
Tax Sharing Agreements, HFS Agreements, Affiliate Agreements and Existing
Investment Agreements shall be in form and substance satisfactory to the Agents
and the Required Banks and shall be in full force and effect on the Initial
Borrowing Date.
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5.07 Consummation of the Acquisitions. On or prior to the
Initial Borrowing Date, there shall have been delivered to the Banks true and
correct copies of all Acquisition Documents, and all terms and provisions of
such Acquisition Documents shall be in form and substance satisfactory to the
Agents and the Required Banks and shall not be amended in any material respect
without the consent of the Required Banks. The FHI Stock Acquisition, including
all of the terms and conditions thereof, shall have been duly authorized by the
board of directors and (if required by applicable law) the shareholders of the
Borrower, and all Acquisition Documents shall have been duly executed and
delivered by the parties thereto and shall be in full force and effect. The
representations and warranties set forth in the Acquisition Documents shall be
true and correct in all material respects as if made on and as of the Initial
Borrowing Date. Each of the conditions precedent to HFS's, MOA's and the
Borrower's obligations to consummate the respective Acquisitions as set forth in
the respective Acquisition Documents shall have been satisfied to the
satisfaction of the Agents and the Required Banks or waived with the consent of
the Agents and the Required Banks and each Acquisition shall have been
consummated in accordance with all applicable law and the respective Acquisition
Documents (without giving effect to any amendment or modification thereof or
waiver with respect thereto unless consented to by the Agents or the Required
Banks). The consideration paid in the FHI Stock Acquisition shall not exceed
$98,400,000.
5.08 Refinancing. On the Initial Borrowing Date and after
giving effect to the Acquisitions and the Revolving Loans incurred on the
Initial Borrowing Date, neither the Borrower nor any of its Subsidiaries shall
have any Indebtedness outstanding except for (x) the Revolving Loans and (y) the
Existing Indebtedness, which Existing Indebtedness shall not exceed $23,000,000
in aggregate outstanding principal amount. The Agents and the Required Banks
shall be satisfied with the amount of and the terms and conditions of (i) all
Existing Indebtedness and (ii) the repayment of all Indebtedness to be repaid in
connection with the transactions contemplated hereby (collectively, the
"Refinancing") and the amount of all accrued interest, premiums, fees,
commissions and expenses owing in connection with the Refinancing. The
Refinancing shall have been effected in accordance with the requirements of the
immediately preceding sentence and all Liens in connection with such refinanced
Indebtedness shall have been terminated (and all appropriate releases,
termination statements or other instruments of assignment with respect thereto
shall have been obtained) to the satisfaction of the Agents and the Required
Banks. The Administrative Agent shall have received copies, certified as true
and complete by an appropriate officer of the Borrower, of all documents
executed in connection with the repayment of the Indebtedness and the release of
the Liens thereunder (collectively, the "Refinancing Documents").
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5.09 Pledge Agreement. On the Initial Borrowing Date, each
Credit Party (other than HFS) shall have duly authorized, executed and delivered
a Pledge Agreement in the form of Exhibit F (as modified, supplemented or
amended from time to time, the "Pledge Agreement") and shall have delivered to
the Collateral Agent, as Pledgee, all the Pledged Securities (which Pledged
Securities shall be required to include (to the extent provided in the Pledge
Agreement), on the Initial Borrowing Date, all capital stock, partnership and
Joint Venture interests and promissory notes owned by the Borrower and each
Subsidiary Guarantor on the Initial Borrowing Date), if any, referred to therein
then owned by such Credit Party, (x) endorsed in blank in the case of promissory
notes constituting Pledged Securities and (y) together with executed and undated
stock powers, in the case of capital stock constituting Pledged Securities.
5.10 Guaranties. On the Initial Borrowing Date, (i) HFS shall
have duly authorized, executed and delivered a Guaranty in the form of Exhibit
G-1 (as modified, amended or supplemented from time to time, the "HFS Guaranty")
and (ii) each Subsidiary Guarantor shall have duly authorized, executed and
delivered a Subsidiary Guaranty in the form of Exhibit G-2 (as modified, amended
or supplemented from time to time, the "Subsidiaries Guaranty").
5.11 Adverse Change. On the Initial Borrowing Date, nothing
shall have occurred (and the Banks shall have become aware of no facts,
conditions or other information not previously known) which the Agents or the
Required Banks shall reasonably determine could have a material adverse effect
(i) on the Transaction, (ii) on the rights or remedies of the Agents or the
Banks, or on the ability of any Credit Party to perform their respective
obligations to the Agents and the Banks or (iii) on the business, operations,
property, assets, nature of assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole,
FHI and its Subsidiaries taken as a whole or FHI and its Subsidiaries and Joint
Ventures taken as a whole.
5.12 Litigation. On the Initial Borrowing Date, no litigation
by any entity (private or governmental) shall be pending or, to the knowledge of
any of the Credit Parties, threatened with respect to (i) any Acquisition, the
making of the Loans or the Credit Documents or any documentation executed in
connection therewith or the transactions contemplated thereby except as set
forth on Schedule XI or (ii) which the Agents or the Required Banks shall
reasonably determine could have a materially adverse effect on the business,
operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries taken
as a whole, FHI and its Subsidiaries taken as a whole or FHI and its
Subsidiaries and Joint Ventures taken as a whole.
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5.13 Solvency Certificate; Environmental Assessments; and
Insurance Certificates. On or prior to the Initial Borrowing Date, there shall
have been delivered to the Administrative Agent:
(i) a solvency certificate in the form of Exhibit H, addressed
to each of the Agents and each of the Banks and dated the Initial
Borrowing Date from an Authorized Financial Officer of the Borrower
providing the opinion of such Authorized Financial Officer as to the
solvency of the Borrower and its Subsidiaries on a consolidated basis
after giving effect to the Transaction and the financing therefor;
(ii) Phase I environmental assessments from environmental
consult- ants satisfactory to the Agents and in form, scope and
substance reasonably satisfactory to the Agents and the Required Banks;
and
(iii) certificates of insurance complying with the
requirements of Section 8.03 for the business and properties of the
Borrower and its Subsidi- aries, in scope, form and substance
satisfactory to the Agents and the Required Banks.
5.14 Pro Forma Financial Information; Projections. (a) On the
Initial Borrowing Date, the Banks shall have received the audited, the unaudited
and the pro forma financial information required by Section 7.05(a), which shall
be in form and substance satisfactory to the Agents and the Required Banks. In
addition, the Banks shall have received such comfort with respect to the
preparation of such pro forma financial information from the outside auditors of
the Borrower and/or FHI referenced in Section 7.05(a) as may have been requested
by the Agents or the Required Banks, which comfort shall be satisfactory in form
and substance to the Agents and the Required Banks.
(b) On the Initial Borrowing Date, the Banks shall have
received consolidated financial projections for the Borrower and its
Subsidiaries for the six fiscal years ended after the Initial Borrowing Date
(the "Projections"), which Projections, and the supporting assumptions and
explanations thereto, shall be satisfactory in form and substance to the Agents
and the Required Banks and shall be as set forth on Schedule III.
5.15 Approvals, etc. On or prior to the Initial Borrowing
Date, all necessary governmental (domestic and foreign) and third party
approvals in connection with each Acquisition (excluding such immaterial
approvals which may not have been obtained in connection with any Acquisition),
the Refinancing, the transactions
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contemplated by this Agreement and otherwise referred to herein shall have been
obtained and remain in effect, and all applicable waiting periods shall have
expired without any action being taken by any competent authority which
restrains, prevents or imposes materially adverse conditions upon the
consummation of any Acquisition, the making of the Revolving Loans and the
transactions contemplated by the Credit Documents. Additionally, there shall not
exist any judgment, order, injunction or other restraint issued or filed or a
hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon any Acquisition or
the making of the Revolving Loans or the transactions contemplated by the Credit
Documents.
5.16 Cash on Hand. On the Initial Borrowing Date (and without
giving effect to any incurrence of Revolving Loans on such date), the Borrower
shall have cash on hand of at least $45,000,000, and shall have utilized at
least $30,000,000 of such cash toward financing the FHI Stock Acquisition before
incurring Revolving Loans hereunder for such purpose.
5.17 Absence of Downgrade. From and after September 30, 1995,
HFS shall have suffered no rating downgrade (or at any time be unrated) by S&P
and shall not have been placed on "credit watch" with negative implications by
S&P.
5.18 HFS Subordination Agreement. On the Initial Borrowing
Date, HFS, the Borrower and the Administrative Agent shall have duly authorized,
executed and delivered the HFS Subordination Agreement in the form of Exhibit I
(the "HFS Subordination Agreement"), pursuant to which HFS shall have agreed,
among other things, (i) notwithstanding anything to the contrary contained in
any HFS Agreement or otherwise, until the occurrence of the Bank Termination
Date, HFS will not terminate the Corporate Services Agreement or the Facility
Lease (unless in connection with a decision by the Borrower to relocate its
corporate headquarters) for any reason whatsoever without the prior written
consent of the Required Banks, (ii) notwithstanding anything to the contrary
contained in any HFS Agreement or otherwise, until the occurrence of the Bank
Termination Date, fees owing pursuant to the various HFS Agreements shall be
payable only in accordance with the requirements of Section 9.03 and 9.06, (iii)
to the extent that any fees or amounts are owing to HFS or any of its
Subsidiaries pursuant to any HFS Agreement or otherwise as a result of the
activities, operations or revenues of any non-Wholly-Owned Subsidiary,
Unrestricted Subsidiary or Joint Venture of the Borrower, then neither the
Borrower nor any of its Wholly- Owned Subsidiaries shall have any liability to
HFS or any of its Subsidiaries in respect of the amounts so owed, and HFS or its
respective Subsidiary shall have a claim for the respective amounts owed to it
only against the respective non-Wholly-Owned Subsidiary, Unrestricted Subsidiary
or Joint Venture, as the case may be, provided that,
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notwithstanding the foregoing, the Borrower may be liable for its Allocable
Share of any such fees or amounts of only a non-Wholly-Owned Subsidiary or Joint
Venture (but not of an Unrestricted Subsidiary) (as determined for the
respective non-Wholly-Owned Subsidiary or Joint Venture), (iv) HFS shall agree
that all amounts payable to it by the Borrower and its Subsidiaries (except the
amounts expressly provided pursuant to Sections 9.06(iii), (iv), (v), (x)(a) and
(xi)) shall be subordinated to the payment in full of the Obligations on the
terms set forth in the HFS Subordination Agreement and (v) HFS shall agree, and
shall agree to cause its Subsidiaries, not to accept any Restricted Payment
which is not permitted to be paid pursuant to the provisions of this Agreement
and, if any amount is received by it which constitutes a Restricted Payment in
excess of the amounts permitted under this Agreement (including as may occur
pursuant to Section 9.06(vii)), then promptly after HFS has actual knowledge of
its receipt of such excess payment (or promptly after it receives notice from
any Bank thereof), HFS shall reimburse the Borrower in cash for the amount by
which the payments made to HFS and its Subsidiaries exceed the respective
amounts permitted to be paid in accordance with the requirements of this
Agreement.
SECTION 6. Conditions Precedent to All Credit Events. The
obligation of each Bank to make Revolving Loans (including Revolving Loans made
on the Initial Borrowing Date), and the obligation of an Issuing Bank to issue
any Letter of Credit, is subject, at the time of each such Credit Event (except
as hereinafter indicated), to the satisfaction of the following conditions:
6.01 No Default; Representations and Warranties. At the time
of each such Credit Event and also after giving effect thereto (i) there shall
exist no Default or Event of Default and (ii) all representations and warranties
contained herein and in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of the making of such Credit Event (it
being understood and agreed that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and correct in
all material respects only as of such specified date.)
6.02 Adverse Change, etc. Nothing shall have occurred (and the
Banks shall have become aware of no facts or conditions not previously known)
which could reasonably be expected to have a material adverse effect on (x) the
rights or remedies of the Banks or the Agents, (y) on the ability of the
Borrower or any other Credit Party to perform its obligations to the Banks or
(z) on the business, operations, property, assets, nature of assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower, or
the Borrower and its Subsidiaries taken as a whole.
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6.03 Litigation. At the time of each such Credit Event and
also after giving effect thereto, no litigation by any entity (private or
governmental) shall be pending or threatened with respect to this Agreement or
any other Credit Document or the transactions contemplated hereby or thereby or
which could reasonably be expected to have a materially adverse effect on the
business, operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower, the Borrower and its
Subsidiaries taken as a whole or the Borrower and its Subsidiaries and Joint
Ventures taken as a whole.
6.04 Notice of Borrowing; Letter of Credit Request. (a) Prior
to the making of each Revolving Loan, the Administrative Agent shall have
received a Notice of Borrowing meeting the requirements of Section 1.03(a).
(b) Prior to the issuance of each Letter of Credit, the
Administrative Agent and the respective Issuing Bank shall have received a
Letter of Credit Request meeting the requirements of Section 2.03(a).
6.05 Certain Requirements With Respect to Revolving Loans
Incurred to Effect Permitted Hotel Acquisitions. Prior to the making of any
Revolving Loan the proceeds of which are to be used to effect a Permitted Hotel
Acquisition in which the total consideration exceeds $2,000,000, the Borrower
shall have satisfied the relevant requirements of Section 9.02(ix) or
9.05(viii), as the case may be.
The occurrence of the Initial Borrowing Date and the
acceptance of the proceeds or benefits of each Credit Event shall constitute a
representation and warranty by the Borrower to each of the Agents and each of
the Banks that all the conditions specified in Section 5 and in this Section 6
and applicable to such Credit Event exist as of that time. All of the Revolving
Notes, certificates, legal opinions and other documents and papers referred to
in Section 5 and in this Section 6, unless otherwise specified, shall be
delivered to the Agent at the Notice Office for the account of each of the Banks
and, except for the Revolving Notes, in sufficient counterparts for each of the
Banks and shall be in form and substance reasonably satisfactory to the Banks.
SECTION 7. Representations and Warranties. In order to induce
the Banks to enter into this Agreement and to make the Revolving Loans, and
issue (or participate in) the Letters of Credit as provided herein, the Borrower
makes the following representations, warranties and agreements, in each case
after giving effect to the Acquisitions and the Refinancing consummated on the
Initial Borrowing Date, all of which shall survive the execution and delivery of
this Agreement and the Revolving Notes and the making of the Revolving Loans and
issuance of the Letters of Credit, with the occurrence of each Credit Event on
or after the Initial Borrowing Date
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being deemed to constitute a representation and warranty that the matters
specified in this Section 7 are true and correct on and as of the Initial
Borrowing Date and on the date of each such Credit Event (it being understood
and agreed that any representation or warranty which by its terms is made as of
a specified date shall be required to be true and correct in all material
respects only as of such specified date):
7.01 Corporate and Partnership Status. Each of the Borrower
and each of its Subsidiaries (i) is a duly organized and validly existing
corporation or partnership, as the case may be, in good standing (if applicable)
under the laws of the jurisdiction of its organization, (ii) has the corporate
or partnership power and authority to own its property and assets and to
transact the business in which it is engaged and presently proposes to engage
and (iii) is duly qualified and is authorized to do business and is in good
standing (if applicable) in each jurisdiction where the conduct of its business
requires such qualifications except for failures to be so qualified which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the business, operations, property, assets, nature of
assets, liabilities, condition (financial or otherwise) or prospects of the
Borrower or the Borrower and its Subsidiaries taken as a whole.
7.02 Corporate or Partnership Power and Authority. Each Credit
Party has the corporate or partnership power and authority to execute, deliver
and perform the terms and provisions of each of the Documents to which it is a
party and has taken all necessary corporate or partnership action to authorize
the execution, delivery and performance by it of each of such Documents. Each
Credit Party has duly executed and delivered each of the Documents to which it
is a party, and each of such Documents constitutes the legal, valid and binding
obligation of such Credit Party enforceable in accordance with its terms, except
to the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or other similar
laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
7.03 No Violation. Neither the execution, delivery or
performance by any Credit Party of the Documents to which it is a party, nor
compliance by it with the terms and provisions thereof, (i) will contravene any
provision of any applicable law, statute, rule or regulation or any applicable
order, writ, injunction or decree of any court or governmental instrumentality,
(ii) will conflict with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien
(except pursuant to the Pledge Agreement) upon any of the properties or assets
of any Credit Party or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, credit agreement or loan agreement, or any
other material
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<PAGE>
agreement, contract or instrument, to which any Credit Party or any of its
Subsidiaries is a party or by which it or any of its property or assets is bound
or to which it may be subject (excluding, in the case of the Acquisition
Documents and the Refinancing Documents, from the foregoing clauses (i) and (ii)
such immaterial violations, which in no event shall violate the provisions of
this Agreement or otherwise be reasonably expected to have a material adverse
effect on (x) the Transaction, (y) the rights or remedies of the Agent or the
Banks, or on the ability of any Credit Party to perform their respective
obligations to the Agent and the Banks or (z) on the business, operations,
property, assets, nature of assets, liabilities or condition (financial or
otherwise) or prospects of the Borrower or the Borrower and its Subsidiaries
taken as a whole) or (iii) will violate any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of any Credit
Party or any of its Subsidiaries.
7.04 Governmental Approvals. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with (except as have been obtained or made and which remain in full force and
effect), or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection
with, (i) the Acquisitions, (ii) the Refinancing, (iii) the execution, delivery
and performance of any Credit Document or (iv) the legality, validity, binding
effect or enforceability of any such Credit Document.
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc. (a)(i) The audited consolidated balance sheet of
the Borrower for the fiscal year ended in December 1994 and the related
consolidated statements of income and earnings and cash flows of the Borrower
for the fiscal year ended as of said date, which statements have been examined
by Deloitte & Touche LLP or its predecessor in-interest, who delivered an
unqualified opinion with respect thereto and copies of which have heretofore
been delivered to each Bank, present fairly the consolidated financial position
of the respective entities at the dates of said statements and the results of
operations for the periods covered thereby, (ii) the unaudited consolidated
balance sheet of the Borrower for the fiscal quarter ended in September 1995 and
the related consolidated statements of income and earnings and cash flows of the
Borrower for the fiscal quarter ended as of said date, copies of which have
heretofore been delivered to each Bank, present fairly the consolidated
financial position of the respected entities at the dates of such statements and
the results of operations for the periods covered thereby, (iii) the audited
consolidated balance sheets of FHI for the fiscal years ended in January 1995,
1994 and 1993 and the related consolidated statements of income and earnings,
cash flows and shareholders equity of FHI for the fiscal years ended as of said
dates, which statements have been examined by Price Waterhouse LLP or its
predecessor in-interest, who delivered an unqualified opinion with respect
thereto and copies of which have heretofore been delivered to each Bank, present
fairly the
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consolidated financial position of FHI at the dates of said statements and the
results of operations for the periods covered thereby and (iv) the unaudited
consolidated balance sheet of FHI for the fiscal quarter ended in October 1995
and the related consolidated statements of income and earnings and cash flows of
FHI for the fiscal quarter ended as of said date, copies of which have
heretofore been delivered to each Bank, present fairly the consolidated
financial position of FHI at the dates of said statements and the results of
operations for the periods covered thereby. All financial statements referred to
in the preceding sentence have been prepared in accordance with generally
accepted accounting principles and practices consistently applied except (i) in
the case of the audited financial statements, to the extent provided in the
notes to said financial statements and (ii) in the case of the unaudited
financial statements, for the absence of footnotes and for the same being
subject to normal year-end audit adjustments. The selected historical balance
sheets as at September 30, 1995 for each Joint Venture of FHI existing on the
Effective Date and the related summary income statement information for each
such Joint Venture for the period ended as of said date, copies of which have
heretofore been delivered to each Bank, were prepared on a United States tax
basis in accordance with the books and accounts and other financial records of
the respective Joint Venture on a basis consistent with the past practices of
such Joint Venture and fairly present the financial condition of each such Joint
Venture at date of said statement and the results of operations for the period
covered thereby. The unaudited pro forma consolidated balance sheet and income
statement of the Borrower and its Subsidiaries (including FHI and its
Subsidiaries) prepared prior to the Initial Borrowing Date and designated by the
Borrower as the pro forma financial statements referred to in this Section
7.05(a), copies of which have been furnished to the Banks on or prior to the
Initial Borrowing Date, present fairly the consolidated pro forma financial
position and results of operations of the entities covered thereby as at January
31, 1996 (in the case of the pro forma consolidated balance sheet) or for the
twelve month period ended on such date (in the case of the pro forma
consolidated income statement), in each case based on the assumption that the
Acquisitions, the Refinancing, the related financing thereof and the other
transactions contemplated pursuant to this Agreement had been consummated on
January 31, 1996 (in the case of the pro forma consolidated balance sheet) or
January 31, 1995 (in the case of the pro forma consolidated income statement).
The unaudited pro forma consolidated financial statements referred to in the
preceding sentence have been prepared on a basis consistent with the financial
statements of FHI referred to in the first sentence of this Section 7.05(a), and
have been prepared in a manner consistent with the requirements of Regulation
S-X of the SEC which are applicable to pro forma financial information prepared
in accordance with the requirements thereof but shall be subject to audit
adjustments which shall not materially change the information set forth in such
unaudited pro forma financial statements. Since January 31, 1995 (but after
giving effect to the Acquisitions, the Refinancing and the financing of the FHI
Stock
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Acquisition as if same had occurred prior thereto), there has been no material
adverse change in the business, operations, property, assets, nature of assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower,
the Borrower and its Subsidiaries taken as a whole or the Borrower and its
Subsidiaries and Joint Venture taken as a whole.
(b) On and as of the Initial Borrowing Date, on a pro forma
basis after giving effect to the Acquisitions and all other transactions
contemplated by the Documents and to all Indebtedness (including the Revolving
Loans) being incurred or assumed and Liens created by each Credit Party in
connection therewith, (x) the sum of the assets, at a fair valuation, of the
Borrower and its Subsidiaries (taken as a whole) and the Borrower (on a
stand-alone basis) will exceed their respective debts, (y) the Borrower and its
Subsidiaries (taken as a whole) and the Borrower (on a stand-alone basis) have
not incurred and do not intend to incur, and do not believe that they will
incur, debts beyond their ability to pay such debts as such debts mature and (z)
the Borrower and its Subsidiaries (taken as a whole) and the Borrower (on a
stand-alone basis) have sufficient capital with which to conduct its business.
For purposes of this Section 7.05(b) "debt" means any liability on a claim, and
"claim" means (i) right to payment whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(c) Except as fully disclosed in the financial statements
delivered pursuant to Section 7.05(a), there were as of the Initial Borrowing
Date no liabilities or obligations with respect to the Borrower or any of its
Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in aggregate,
would be material to the Borrower or to the Borrower and its Subsidiaries taken
as a whole. As of the Initial Borrowing Date, the Borrower knows of no basis for
the assertion against it of any liability or obligation of any nature that is
not fully disclosed in the financial statements delivered pursuant to Section
7.05(a) which, either individually or in the aggregate, could reasonably be
expected to be material to the Borrower or the Borrower and its Subsidiaries
taken as a whole.
(d) On and as of the Initial Borrowing Date, the Projections
set forth on Schedule III, which include the projected results of the FHI and
which have been delivered to the Agents and the Banks on or prior to the Initial
Borrowing Date, have been prepared on a basis consistent with the pro forma
financial statements referred to
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in Section 7.05(a), and there are no statements or conclusions in any of the
Projections which are based upon or include information known to the Borrower to
be misleading or which fail to take into account material information regarding
the matters reported therein. On the Initial Borrowing Date, the Borrower
believes that the Projections were reasonable and attainable (it being
understood that the Borrower makes no representation or warranty that the
results projected in the Projections will actually be attained).
7.06 Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of the Borrower, threatened (i) with respect
to the Transaction or any Document except as set forth on Schedule XI or (ii)
that could reasonably be expected to materially and adversely affect the
business, operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower, the Borrower and its
Subsidiaries taken as a whole or the Borrower and its Subsidiaries and Joint
Ventures taken as a whole.
7.07 True and Complete Disclosure. All factual information
(taken as a whole) furnished by or on behalf of the Borrower or any of its
Subsidiaries in writing to the Agent or any Bank (including, without limitation,
all information contained in the Documents, but excluding the Projections and
assumptions contained therein, which are covered pursuant to preceding Section
7.05(d)) for purposes of or in connection with this Agreement, the other
Documents or any transaction contemplated herein or therein is, and all other
such factual information (taken as a whole) hereafter furnished by or on behalf
of the Borrower or any of its Subsidiaries in writing to the Agent or any Bank
will be, true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading at
such time in light of the circumstances under which such information was
provided.
7.08 Use of Proceeds; Margin Regulations. (a) Up to
$75,000,000 of proceeds of the Revolving Loans shall be used by the Borrower on
the Initial Borrowing Date (i) to finance, in part, the purchase price of the
FHI Stock Acquisition and (ii) to pay fees and expenses related to the FHI Stock
Acquisition and the financing therefor. The proceeds of all other Revolving
Loans shall be used by the Borrower for the Borrower's and its Subsidiaries'
general corporate purposes, including to finance the working capital needs of
the Borrower and its Subsidiaries and to finance Permitted Hotel Acquisitions
and to pay the fees and expenses in connection therewith (but shall not be used
to pay any portion of the purchase price of the FHI Stock Acquisition, the fees
and expenses related thereto or to effect the Refinancing).
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(b) No part of any Credit Event (or the proceeds thereof) will
be used to purchase or carry any Margin Stock or to extend credit for the
purpose of purchasing or carrying any Margin Stock. Neither the making of any
Revolving Loan nor the use of the proceeds thereof nor the occurrence of any
other Credit Event will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
7.09 Tax Returns and Payments. (a) The Borrower and its
Subsidiaries have timely filed or caused to be timely filed, on the due dates
thereof or within applicable grace periods, with the appropriate taxing
authority, all Federal, state and other material returns, statements, forms and
reports for taxes (the "Returns") required to be filed by or with respect to the
income, properties or operations of the Borrower and/or its Subsidiaries and
Joint Ventures, as the case may be. The Returns accurately reflect in all
material respects all liability for taxes of the Borrower and its Subsidiaries
and Joint Ventures for the periods covered thereby. Each of the Borrower and
each of its Subsidiaries and Joint Ventures has paid all material taxes payable
by them other than taxes which are not delinquent, and other than those
contested in good faith and for which adequate reserves have been established in
accordance with generally accepted accounting principles. There is no material
action, suit, proceeding, investigation, audit, or claim now pending or, to the
best knowledge of the Borrower, threatened by any authority regarding any taxes
relating to the Borrower or any of its Subsidiaries or Joint Ventures. As of the
Initial Borrowing Date, neither the Borrower nor any of its Subsidiaries has
entered into an agreement or waiver or been requested to enter into an agreement
or waiver extending any statute of limitations relating to the payment or
collection of taxes of the Borrower or any its Subsidiaries.
(b) As of the Initial Borrowing Date, the Borrower has
available net operating loss carryovers within the meaning of Section 172(b) of
the Code in the amount of at least $15,000,000, which net operating loss
carryovers expire beginning in the year 2009 and shall be made available by the
Borrower to offset future income of the Borrower and its Subsidiaries.
7.10 Compliance with ERISA. (i) Each Plan is in substantial
compliance with ERISA and the Code; no Reportable Event has occurred with
respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an
Unfunded Current Liability; no Plan has an accumulated or waived funding
deficiency or has applied for an extension of any amortization period within the
meaning of Section 412 of the Code; all contributions required to be made with
respect to a Plan and a Foreign Pension Plan have been timely made; neither the
Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred
any material liability to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or
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4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or expects
to incur any liability (including any indirect, contingent, or secondary
liability) under any of the foregoing Sections with respect to any Plan; no
proceedings have been instituted to terminate or appoint a trustee to administer
any Plan; no condition exists which presents a material risk to the Borrower or
any Subsidiary of the Borrower or any ERISA Affiliate of incurring a liability
to or on account of a Plan pursuant to the foregoing provisions of ERISA and the
Code; using actuarial assumptions and computation methods consistent with Part 1
of subtitle E of Title IV of ERISA, the annual aggregate liabilities of the
Borrower and its Subsidiaries and its ERISA Affiliates to all Plans which are
multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of
a complete withdrawal therefrom, as of the close of the most recent fiscal year
of each such Plan ended prior to the date of the most recent Credit Event, would
not exceed $50,000; no lien imposed under the Code or ERISA on the assets of the
Borrower or any Subsidiary of the Borrower or any ERISA Affiliate exists or is
likely to arise on account of any Plan; and the Borrower and its Subsidiaries
may cease contributions to or terminate any employee benefit plan maintained by
any of them without incurring any material liability.
(ii) Each Foreign Pension Plan has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities. Neither the Borrower nor any of its Subsidiaries has incurred any
obligation in connection with the termination of or withdrawal from any Foreign
Pension Plan. The present value of the accrued benefit liabilities (whether or
not vested) under each Foreign Pension Plan, determined as of the end of the
Borrower's most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.
7.11 The Pledge Agreement. The security interests created in
favor of the Collateral Agent, as Pledgee, for the benefit of the Secured
Creditors under the Pledge Agreement constitute first priority perfected
security interests in the Pledged Securities described in the Pledge Agreement,
subject to no security interests of any other Person. No filings or recordings
are required in order to perfect (or maintain the perfection or priority of) the
security interests created in the Pledged Securities and the proceeds thereof
under the Pledge Agreement.
7.12 Representations and Warranties in Documents. All
representations and warranties set forth in the other Documents were true and
correct in all material respects at the time as of which such representations
and warranties were made (or deemed made) and shall be true and correct in all
material respects as of the Initial
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Borrowing Date as if such representations or warranties were made on and as of
such date, unless stated to relate to a specific earlier date, in which case
such representations or warranties shall be true and correct in all material
respects as of such earlier date.
7.13 Properties. Each of the Borrower and each of its
Subsidiaries and Joint Ventures has good and marketable title to all properties
owned by them, including all property reflected in the consolidated balance
sheets referred to in Section 7.05(a) (except as sold or otherwise disposed of
since the date of such balance sheets in the ordinary course of business), free
and clear of all Liens, other than (i) as referred to in the balance sheets or
in the notes thereto or (ii) Permitted Liens. Schedule IV contains a true and
complete list of each parcel of Real Property owned or leased by the Borrower
and its Subsidiaries and Joint Ventures on the Initial Borrowing Date, and the
type of interest therein held by the Borrower or such Subsidiary or Joint
Venture. The Borrower and each of its Subsidiaries and Joint Ventures have good
and indefeasible title to all fee-owned Real Properties and valid leasehold
title to all Leaseholds.
7.14 Capitalization. On the Initial Borrowing Date and after
giving effect to the Acquisitions, the Refinancing and the other transactions
contemplated hereby, the authorized capital stock of the Borrower shall consist
of 100,000,000 shares of common stock, $0.01 par value per share and 10,000,000
shares of preferred stock, $1.00 par value per share. As of the Initial
Borrowing Date, 5,452,320 shares of common stock of the Borrower are outstanding
and no shares of preferred stock of the Borrower are outstanding. All such
outstanding shares of common stock have been duly and validly issued, are fully
paid and nonassessable and are free of preemptive rights. As of the Initial
Borrowing Date, except for options to purchase 765,000 shares of common stock of
the Borrower granted under its 1994 Stock Option Plan and the obligation of the
Borrower to issue up to 413,910 shares of its common stock under the
Distribution Agreement dated as of November 22, 1994, the Borrower does not have
outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.
7.15 Subsidiaries; Joint Ventures; Unrestricted Subsidiaries.
After giving effect to the Acquisitions, the Borrower will have no Subsidiaries,
Joint Ventures or Unrestricted Subsidiaries other than (i) those Subsidiaries
and Joint Ventures listed (and in each case identified as such) on Schedule V
and (ii) new Subsidiaries, Joint Ventures and Unrestricted Subsidiaries created
in compliance with Section 9.16. On the Initial Borrowing Date, the Borrower has
no Unrestricted Subsidiaries. Schedule V correctly sets forth, as of the Initial
Borrowing Date, the percentage ownership
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(direct or indirect) of the Borrower in each class of capital stock or other
equity interest of each of its Subsidiaries and Joint Ventures and also
identifies the direct owner thereof.
7.16 Compliance with Statutes, etc. Each of the Borrower and
each of its Subsidiaries and Joint Ventures is in compliance with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed by,
all governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls), except such noncompliances as could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
business, operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower, the Borrower and its
Subsidiaries taken as a whole or the Borrower and its Subsidiaries and Joint
Ventures taken as a whole.
7.17 Investment Company Act. Neither the Borrower nor any of
its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
7.18 Public Utility Holding Company Act. Neither the Borrower
nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
7.19 Environmental Matters. (a) Each of the Borrower and each
of its Subsidiaries and Joint Ventures has complied with all applicable
Environmental Laws and the requirements of any permits issued under such
Environmental Laws. There are no pending or threatened Environmental Claims
against the Borrower or any of its Subsidiaries or Joint Ventures or any Real
Property owned or operated by the Borrower or any of its Subsidiaries or Joint
Ventures. There are no facts, circumstances, conditions or occurrences on any
Real Property owned or operated by the Borrower or any of its Subsidiaries or
Joint Ventures or on any property adjoining or in the vicinity of any such Real
Property that could reasonably be expected (i) to form the basis of an
Environmental Claim against the Borrower or any of its Subsidiaries or Joint
Ventures or any such Real Property or (ii) to cause any such Real Property to be
subject to any restrictions on the ownership, occupancy, use or transferability
of such Real Property by the Borrower or any of its Subsidiaries or Joint
Ventures under any applicable Environmental Law.
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(b) To the best knowledge of the Borrower, Hazardous Materials
have not at any time been generated, used, treated or stored on, or transported
to or from, or Released on or from, any Real Property owned or operated by the
Borrower or any of its Subsidiaries or Joint Ventures except in compliance with
all applicable Environmental Laws and reasonably required in connection with the
operation, use and maintenance of any such Real Property by the Borrower's, such
Subsidiary's or such Joint Venture's business.
(c) Notwithstanding anything to the contrary in this Section
7.19, the representations made in this Section 7.19 shall only be untrue if the
aggregate effect of all failures and noncompliance of the types described above
could reasonably be expected to have a material adverse effect on the business,
operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower, the Borrower and its
Subsidiaries taken as a whole or the Borrower and its Subsidiaries and Joint
Ventures taken as a whole.
7.20 Labor Relations. Neither the Borrower nor any of its
Subsidiaries or Joint Ventures is engaged in any unfair labor practice that
could reasonably be expected to have a material adverse effect on the business,
operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower, the Borrower and its
Subsidiaries taken as a whole or the Borrower and its Subsidiaries and Joint
Ventures taken as a whole. There is (i) no unfair labor practice complaint
pending or, to the best knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries or Joint Ventures before the National Labor
Relations Board and no grievance or arbitration proceeding arising out of or
under any collective bargaining agreement is so pending or threatened against
the Borrower or any of its Subsidiaries or Joint Ventures, (ii) no strike, labor
dispute, slowdown or stoppage is pending or, to the best knowledge of the
Borrower, threatened against the Borrower or any of its Subsidiaries or Joint
Ventures and (iii) to the best knowledge of the Borrower, no union
representation question exists with respect to the employees of the Borrower or
any of its Subsidiaries or Joint Ventures, except (with respect to any matter
specified in clause (i), (ii) or (iii) above, either individually or in the
aggregate) such as could not reasonably be expected to have a material adverse
effect on the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower, the Borrower and its
Subsidiaries taken as a whole or the Borrower and its Subsidiaries and Joint
Ventures taken as a whole.
7.21 Patents, Licenses, Franchises and Formulas. Each of the
Borrower and each of its Subsidiaries and Joint Ventures owns all material
patents, trademarks, permits, service marks, trade names, copyrights, licenses,
franchises and formulas, or rights with respect to the foregoing, and has
obtained assignments of all leases and
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other rights of whatever nature, reasonably necessary for the present conduct of
its business, without any known conflict with the rights of others which, or the
failure to obtain which, as the case may be, would result in a material adverse
effect on the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower, the Borrower and its
Subsidiaries taken as a whole or the Borrower and its Subsidiaries and Joint
Ventures taken as a whole.
7.22 Indebtedness. (a) Schedule VI sets forth a true and
complete list of all Indebtedness of the Borrower and its Subsidiaries and Joint
Ventures as of the Initial Borrowing Date (excluding the Loans and any
Indebtedness to be refinanced pursuant to the Refinancing, the "Existing
Indebtedness"), in each case showing the aggregate principal amount thereof and
the name of the respective borrower and any other entity which directly or
indirectly guaranteed such debt.
7.23 Acquisitions; Refinancing. On the Initial Borrowing Date,
the Acquisitions and the Refinancing shall have been consummated in all respects
in accordance with the terms of the respective Documents and all applicable
laws. At the time of consummation of the Acquisitions and the Refinancing, all
consents and approvals of, and filings and registrations with, and all other
actions in respect of, all governmental agencies, authorities or
instrumentalities required in order to make or consummate the Acquisitions and
the Refinancing will have been obtained, given, filed or taken and are or will
be in full force and effect (or effective judicial relief with respect thereto
has been obtained), except, in the case of the Acquisitions, where the failure
to so obtain, give, file or take would not have a material adverse effect on the
Acquisitions or on the business, operations, property, assets, nature of assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower or
the Borrower and its Subsidiaries taken as whole. All applicable waiting periods
with respect thereto have or, prior to the time when required, will have,
expired without, in all such cases, any action being taken by any competent
authority which restrains, prevents, or imposes material adverse conditions upon
the Acquisitions or the Refinancing. Additionally, there does not exist any
judgment, order or injunction prohibiting or imposing material adverse
conditions upon the Acquisitions or the Refinancing, or the occurrence of any
Credit Event or the performance by any Credit Party of its obligations under the
respective Documents. All actions taken by the Credit Parties pursuant to or in
furtherance of the Acquisitions and the Refinancing have been taken in
compliance with the respective Documents and all applicable laws.
SECTION 8. Affirmative Covenants. The Borrower hereby
covenants and agrees that on and after the Effective Date and until the Total
Revolving Loan Commitment and all Letters of Credit have terminated and the
Revolving Loans,
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Revolving Notes and Unpaid Drawings, together with interest, Fees and all other
obligations incurred hereunder and thereunder, are paid in full:
8.01 Information Covenants. The Borrower will furnish to the
Administrative Agent (with sufficient copies for each of the Banks, and the
Administrative Agent will promptly forward to each of the Banks):
(a) Monthly Reports. Within 45 days after the end of each
fiscal month of the Borrower, the monthly management reports prepared
by (or on behalf of) the Borrower or the respective Subsidiary or Joint
Venture for each Hotel Property, which monthly management reports shall
contain the revenues of such Hotel Property for such fiscal month
(including room revenues, food and beverage revenues and other
revenues), the average occupancy rate for such Hotel Property for such
fiscal month, the average daily room rate for such Hotel Property for
such fiscal month and such other information as may be reasonably
requested by any Agent for such Hotel Property to the extent reasonably
available.
(b) Quarterly Financial Statements. Within 60 days after the
close of the first three quarterly accounting periods in each fiscal
year of the Bor- rower, (i) consolidated and consolidating balance
sheets of the Borrower and its consolidated Subsidiaries and
Unrestricted Subsidiaries as at the end of such quarterly accounting
period and the related consolidated statements of income and retained
earnings and statement of cash flows, in each case for such quar- terly
accounting period and for the elapsed portion of the fiscal year ended
with the last day of such quarterly accounting period, in each case
setting forth comparative figures for the related periods in the prior
fiscal year, all of which shall be certified by an Authorized Financial
Officer of the Borrower, subject to normal year-end audit adjustments
and (ii) management's discussion and analysis of the important
operational and financial developments during the quarterly accounting
period and year-to-date periods.
(c) Annual Financial Statements. Within 105 days after the
close of each fiscal year of the Borrower, the consolidated and
consolidating balance sheets of the Borrower and its consolidated
Subsidiaries and Unrestricted Subsidiaries, as at the end of such
fiscal year and the related consolidated and consolidating statements
of income and retained earnings and of cash flows for such fiscal year
setting forth comparative figures for the preceding fiscal year and
certified, in the case of the consolidated statements, by Deloitte &
Touche, LLP or such other independent certified public accountants of
recognized national standing acceptable to the Agents, together with a
report of such
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accounting firm stating that in the course of its regular
audit of the financial statements of the Borrower and its Subsidiaries
and Unrestricted Subsidiaries, which audit was conducted in accordance
with generally accepted auditing standards, such accounting firm
obtained no knowledge of any Default or Event of Default which has
occurred and is continuing under any of Sections 9.03, 9.06 through
9.11, inclusive, and Section 10.12, or, if in the opinion of such
accounting firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(d) Budgets. No later than 30 days after the first day of each
fiscal year of the Borrower, budgets in form satisfactory to the Agents
(including, in any event, budgeted statements of cash flow and budgeted
debt and cash balances) for (x) such fiscal year prepared in detail and
(y) each of the five years immediately following such fiscal year
prepared in summary form, in each case, of the Borrower and its
Subsidiaries and Joint Ventures, accompanied by the statement of an
Authorized Financial Officer of the Borrower to the effect that the
budget is a reasonable estimate for the period covered thereby.
(e) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 8.01(a), (b) and (c), a
certificate of an Authorized Financial Officer of the Borrower to the
effect that no Default or Event of Default has occurred and is
continuing or, if any Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof, which
certificate, if delivered with the financial statements required by
Sections 8.01(b) and (c), shall also (x) set forth the calculations
required to establish whether the Borrower was in compliance with the
provisions of Sections 3.03(e) (and shall show the calculation of the
Reinvestment Amount as of the last day of the period covered by such
financial statements) and (f) (but with respect to Section 3.03(f) only
to the extent delivered with the financial statements required by
Sections 8.01(c)), and 9.03 through 9.11, inclusive, at the end of such
fiscal quarter or year, as the case may be, as well as the calculations
required to establish compliance with the provisions of Section 10.12
at the end of such fiscal quarter or year, as the case may be, (y) set
forth the amounts (and supporting calculations), as at the last day of
the respective fiscal quarter (but after giving effect to the making of
any Restricted Payments pursuant to Section 9.06(vii) in respect of
such fiscal quarter or fiscal year, as the case may be, and any Capital
Expenditure made pursuant to Section 9.07(c) in respect of such fiscal
quarter or fiscal year, as the case may be), of the Cumulative Retained
Residual Excess Cash Flow Amount, as well as a description of all
Restricted Payments made during (or with respect to) the respective
fiscal quarter or fiscal year and showing the calculations establishing
compliance with the provisions
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of Section 9.03 and 9.06, and (z) if delivered with the financial
statements required by Section 8.01(c), set forth the amount of (and
the calculations required to establish) Excess Cash Flow for the
respective Excess Cash Payment Period.
(f) Notice of Default or Litigation; HFS Downgrade. Promptly,
and in any event within three Business Days after an officer of the
Borrower or any of its Subsidiaries obtains knowledge thereof, notice
of (i) the occurrence of any event which constitutes a Default or an
Event of Default, (ii) any litigation or governmental investigation or
proceeding pending or threatened (x) against the Borrower or any of its
Subsidiaries which could reasonably be expected to materially and
adversely affect the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the
Borrower, the Borrower and its Subsidiaries taken as a whole or the
Borrower and its Subsidiaries and Joint Ventures taken as a whole, (y)
with respect to any material Indebtedness of the Borrower or any of its
Subsidiaries or Joint Ventures or (z) with respect to any Document and
(iii) any downgrading or discontinuance of rating of HFS by S&P or any
other rating agency, and any placement by S&P or any other rating
agency of HFS on "credit watch" or any similar action.
(g) Management Letters. Promptly after receipt thereof by the
Borrower or any of its Subsidiaries, a copy of any "management letter"
received by the Borrower or any of its Subsidiaries from its certified
public accountants and the management's responses thereto.
(h) Other Reports and Filings. Promptly, copies of all
financial information, proxy materials and other information and
reports, if any, which the Borrower or any of its Subsidiaries or Joint
Ventures shall file with the Securities and Exchange Commission or any
successor thereto (the "SEC") and copies of all notices and reports
which the Borrower or any of its Subsidiaries or Joint Ventures shall
deliver to holders of its Indebtedness pursuant to the terms of the
documentation governing such Indebtedness (or any trustee, agent or
other representative therefor).
(i) Environmental Matters. Promptly upon, and in any event
within ten Business Days after, an officer of the Borrower or any of
its Subsidiaries obtains knowledge thereof, notice of one or more of
the following environmental matters:
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(i) any pending or threatened material Environmental Claim
against the Borrower or any of its Subsidiaries or Joint Ventures
or any Real Property owned or operated by the Borrower or any of
its Subsidi- aries or Joint Ventures;
(ii) any condition or occurrence on or arising from any Real
Property owned or operated by the Borrower or any of its
Subsidiaries or Joint Ventures that (a) results in non-compliance
by the Borrower or any of its Subsidiaries or Joint Ventures with
any applicable Environmental Law or (b) could reasonably be
expected to form the basis of a material Environmental Claim
against the Borrower or any of its Subsidiaries or Joint Ventures
or any such Real Property:
(iii) any condition or occurrence on any Real Property owned
or operated by the Borrower or any of its Subsidiaries or Joint
Ventures that could reasonably be expected to cause such Real
Property to be subject to any restrictions on the ownership,
occupancy, use or transferability by the Borrower or any of its
Subsidiaries or Joint Ventures of such Real Property under any
Environmental Law; and
(iv) the taking of any removal or remedial action in
response to the actual or alleged presence of any Hazardous
Material on any Real Property owned or operated by the Borrower
or any of its Subsidiaries or Joint Ventures as required by any
Environmental Law or any governmental or other administrative
agency; provided that in any event the Borrower shall deliver to
each Bank all notices received by it or any of its Subsidiaries
from any government or governmental agency under, or pursuant to,
Environmental Law.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial
action and the Borrower's or such Subsidiary's response or proposed
response thereto. In addi- tion, the Borrower and any of its
Subsidiaries and Joint Ventures will provide the Administrative Agent
with copies of all material communications with any government or
governmental agency relating to Environmental Laws, all material
communications with any Person relating to Environmental Claims, and
such detailed reports of any Environmental Claim as may be requested
by any Agent or any Bank.
(j) Annual Meetings with Banks. At the request of the
Administrative Agent, the Borrower shall within 120 days after the
close of each
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fiscal year of the Borrower, hold a meeting (at a mutually agreeable
location and time) with all of the Banks at which meeting shall be
reviewed the financial results of the previous fiscal year and the
financial condition of the Borrower and the budgets presented for the
current fiscal year of the Borrower and its Subsidiaries and Joint
Ventures.
(k) Other Information. From time to time, such other
information or documents (financial or otherwise) with respect to the
Borrower or its Subsidiaries or Joint Ventures as any Agent or any Bank
(through the Administrative Agent) may reasonably request.
8.02 Books, Records and Inspections. The Borrower will, and
will cause each of its Subsidiaries and Joint Ventures to, keep proper books of
record and account in which full, true and correct entries in conformity with
generally accepted accounting principles and all requirements of law shall be
made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of its Subsidiaries and Joint
Ventures to, permit officers and designated representatives of any Agent or the
Banks to visit and inspect, during regular business hours, upon reasonable
advance notice and under guidance of officers of the Borrower, such Subsidiary
or such Joint Venture, any of the properties of the Borrower or any of its
Subsidiaries or Joint Ventures, and to examine the books of account of the
Borrower and any of its Subsidiaries or Joint Ventures and discuss the affairs,
finances and accounts of the Borrower and any of its Subsidiaries or Joint
Ventures with, and be advised as to the same by, its and their respective
officers and independent accountants, all at such times and intervals and to
such extent as any Agent or the Banks may request.
8.03 Maintenance of Property; Insurance. (a) Schedule VII sets
forth a true and complete listing of all insurance maintained by, or on behalf
of, the Borrower and its Subsidiaries and Joint Ventures as of the Initial
Borrowing Date. The Borrower will, and will cause each of its Subsidiaries and
Joint Ventures to, (i) keep all property necessary in its business in good
working order and condition, (ii) maintain insurance on all its property in at
least such amounts and against at least such risks as is consistent and in
accordance with industry practice and (iii) furnish to the Administrative Agent,
upon written request, full information as to the insurance carried. In addition
to the requirements of the immediately preceding sentence, the Borrower will at
all times cause insurance of the types described in Schedule VII to be
maintained (with the same scope of coverage as that described in Schedule VII)
at levels which are at least as great as the respective amount described
opposite the respective type of insurance on Schedule VII. Such insurance shall
include physical damage insurance on all real and personal property (whether now
owned or hereafter acquired) on an all risk
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basis, covering the full repair and replacement costs of all such property and
business interruption insurance for the actual loss sustained. All such
insurance shall be provided by insurers having an A.M. Best general
policyholders service rating of not less than B+VIII.
(b) If the Borrower or any of its Subsidiaries or Joint
Ventures shall fail to maintain all insurance in accordance with this Section
8.03, the Administrative Agent and/or the Collateral Agent shall have the right
(but shall be under no obligation), upon at least 10 days' notice to the
Borrower, to procure such insurance, the Borrower agrees to reimburse the
Administrative Agent or the Collateral Agent, as the case may be, for all costs
and expenses of procuring such insurance.
8.04 Corporate Franchises. The Borrower will, and will cause
each of its Subsidiaries and Joint Ventures to, do or cause to be done, all
things necessary to preserve and keep in full force and effect its existence and
its material rights, franchises, licenses and patents; provided, however, that
nothing in this Section 8.04 shall prevent (i) transactions permitted in
accordance with the applicable requirements of Sections 9.02 and 9.05 or (ii)
the withdrawal by the Borrower or any of its Subsidiaries or Joint Ventures of
its qualification as a foreign corporation in any jurisdiction where such
withdrawal could not reasonably be expected to have a material adverse effect on
the business, operations, property, assets, nature of assets, liabilities,
condition (financial or otherwise) or prospects of the Borrower, the Borrower
and its Subsidiaries taken as a whole or the Borrower and its Subsidiaries and
Joint Ventures taken as a whole.
8.05 Compliance with Statutes, etc. The Borrower will, and
will cause each of its Subsidiaries and Joint Ventures to, comply with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in respect of the
conduct of its business and the ownership of its property, except such
noncompliances as could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of the Borrower, the Borrower and its Subsidiaries taken as a whole or the
Borrower and its Subsidiaries and Joint Ventures taken as a whole.
8.06 Compliance with Environmental Laws. The Borrower will
comply, and will cause each of its Subsidiaries and Joint Ventures to comply, in
all material respects with all Environmental Laws applicable to the ownership or
use of its Real Property now or hereafter owned or operated by the Borrower or
any of its Subsidiaries or Joint Ventures, will promptly pay or cause to be paid
all costs and expenses incurred in connection with such compliance, and will
keep or cause to be kept all such Real
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Property free and clear of any Liens imposed pursuant to such Environmental
Laws. Neither the Borrower nor any of its Subsidiaries or Joint Ventures will
generate, use, treat, store, release or dispose of, or permit the generation,
use, treatment, storage, release or disposal of Hazardous Materials on any Real
Property now or hereafter owned or operated by the Borrower or any of its
Subsidiaries or Joint Ventures, or transport or permit the transportation of
Hazardous Materials to or from any such Real Property except for Hazardous
Materials used or stored at any such Real Properties in material compliance with
all applicable Environmental Laws and reasonably required in connection with the
operation, use and maintenance of any such Real Property.
8.07 ERISA. As soon as possible and, in any event, within 10
days after the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following, the
Borrower will deliver to each of the Banks a certificate of an Authorized
Financial Officer of the Borrower setting forth details as to such occurrence
and the action, if any, that the Borrower, such Subsidiary or such ERISA
Affiliate is required or proposes to take, together with any notices required or
proposed to be given to or filed with or by the Borrower, the Subsidiary, the
ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with
respect thereto: that a Reportable Event has occurred; that an accumulated
funding deficiency has been incurred or an application may be or has been made
to the Secretary of the Treasury for a waiver or modification of the minimum
funding standard (including any required installment payments) or an extension
of any amortization period under Section 412 of the Code with respect to a Plan;
that a contribution required to be made to a Plan or Foreign Pension Plan has
not been timely made; that a Plan has been or may be terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA; that a Plan has an
Unfunded Current Liability giving rise to a lien under ERISA or the Code; that
proceedings may be or have been instituted to terminate or appoint a trustee to
administer a Plan; that a proceeding has been instituted against the Borrower,
any Subsidiary of the Borrower or any ERISA Affiliate pursuant to Section 515 of
ERISA to collect a delinquent contribution to a Plan; that the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate will or may incur any
liability (including any indirect, contingent, or secondary liability) to or on
account of the termination of or withdrawal from a Plan under Section 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under
Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or
502(l) of ERISA; or that the Borrower, or any Subsidiary of the Borrower may
incur any material liability pursuant to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) that provides benefits to retired employees or
other former employees (other than as required by Section 601 of ERISA) or any
employee pension benefit plan (as defined in Section 3(2) of ERISA). The
Borrower will deliver to each of the Banks a complete copy of the annual report
(Form 5500) of each Plan (including, to the extent required,
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the related financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information) required to be filed with
the Internal Revenue Service. In addition to any certificates or notices
delivered to the Banks pursuant to the first sentence hereof, copies of annual
reports and any material notices received by the Borrower, any Subsidiary of the
Borrower or any ERISA Affiliate with respect to any Plan or Foreign Pension Plan
shall be delivered to the Banks no later than 10 days after the date such report
has been filed with the Internal Revenue Service or such notice has been
received by the Borrower, the Subsidiary or the ERISA Affiliate, as applicable.
8.08 End of Fiscal Years; Fiscal Quarters. The Borrower will
cause (i) each of its, and each of its Subsidiaries' and Joint Ventures', fiscal
years to end on December 31, and (ii) each of its, and each of its
Subsidiaries', fiscal quarters to end on the last day of each March, June,
September and December.
8.09 Performance of Obligations. The Borrower will, and will
cause each of its Subsidiaries and Joint Ventures to, perform all of its
obligations under the terms of each mortgage, deed of trust, indenture, loan
agreement or credit agreement and each other material agreement, contract or
instrument by which it is bound, except such non-performances as could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, operations, property, assets, nature of assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower,
the Borrower and its Subsidiaries taken as a whole or the Borrower and its
Subsidiaries and Joint Ventures taken as a whole.
8.10 Payment of Taxes. The Borrower will, and will cause each
of its Subsidiaries and Joint Ventures to, pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, in each case on a
timely basis, and all lawful claims for sums that have become due and payable
which, if unpaid, might become a lien or charge upon any properties of the
Borrower, any such Subsidiary or any such Joint Venture; provided that neither
the Borrower nor any such Subsidiary or any Joint Venture shall be required to
pay any such tax, assessment, charge, levy or claim which is being contested in
good faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with generally accepted accounting principles.
8.11 Hotel Franchisors. The Borrower will take, and will cause
each of its Subsidiaries and Joint Ventures to take, all action necessary so
that (x) except as otherwise provided in Section 10.11, each Hotel Property
owned or leased by the Borrower and its Subsidiaries and Joint Ventures are at
all times operated as a
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"Travelodge", "Thriftlodge" or another nationally recognized hotel brand which
the Board of Directors of the Borrower (or an authorized committee of such
Board) has determined to be in the interests of the Borrower and (y) except in
connection with the sale of any Hotel Property pursuant to the terms of this
Agreement or as otherwise provided in Section 10.11, no Franchise Agreement with
respect to a Hotel Property is terminated.
8.12 Joint Venture Distributions. To the extent any Joint
Venture receives any Net Cash Proceeds from any of the events specified in
Sections 3.03(c), (d) and (e) then, to the extent such Net Cash Proceeds would
have to be applied to reduce the Total Revolving Loan Commitment in accordance
with the requirements of Sections 3.03(c), (d) and/or (e), as the case may be,
if received by a Wholly-Owned Subsidiary of the Borrower, the Borrower will use
its best efforts to cause such Joint Venture to distribute to the Borrower or a
Wholly-Owned Subsidiary thereof, concurrently with or as soon after the
respective event as is practicable, the Borrower's Allocable Share of such Net
Cash Proceeds received by such Joint Venture.
8.13 Corporate Separateness. The Borrower will take, and will
cause each of its Subsidiaries, Joint Ventures and Unrestricted Subsidiaries to
take, all action as is necessary to keep the operations of the Borrower and its
Subsidiaries and Joint Ventures separate and apart from those of any
Unrestricted Subsidiaries including, without limitation, ensuring that all
customary formalities regarding their respective corporate existence, including
holding regular board of directors' and shareholders' meetings and maintenance
of corporate offices and records, are followed. Neither the Borrower nor any of
its Subsidiaries or Joint Ventures shall make any payment to a creditor of any
Unrestricted Subsidiary in respect of any liability of any Unrestricted
Subsidiary. All financial statements provided to creditors shall clearly
evidence the corporate separateness of the Borrower and its Subsidiaries and
Joint Ventures from any Unrestricted Subsidiaries, and the Borrower and its
Subsidiaries and Joint Ventures shall maintain their own respective payroll (if
any) and separate books of account and bank accounts from Unrestricted
Subsidiaries. Each Unrestricted Subsidiary shall pay its respective liabilities,
including all administrative expenses, from its own separate assets, and assets
of the Borrower and its Subsidiaries and Joint Ventures shall at all times be
separately identified and segregated from the assets of Unrestricted
Subsidiaries. Finally, neither the Borrower nor any of its Subsidiaries, Joint
Ventures or Unrestricted Subsidiaries shall take any action, or conduct its
affairs in a manner which is likely to result in the corporate existence of any
Unrestricted Subsidiary being ignored, or in the assets and liabilities of any
Unrestricted Subsidiary being substantively consolidated with those of the
Borrower or any of its Subsidiaries or Joint Ventures in a bankruptcy,
reorganization or other insolvency proceeding.
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SECTION 9. Negative Covenants. The Borrower covenants and
agrees that on and after the Effective Date and until the Total Revolving Loan
Commitment and all Letters of Credit have terminated and the Revolving Loans,
Revolving Notes and Unpaid Drawings, together with interest, Fees and all other
Obligations incurred hereunder and thereunder, are paid in full:
9.01 Liens. The Borrower will not, and will not permit any of
its Subsidiaries or Joint Ventures to, create, incur, assume or suffer to exist
any Lien upon or with respect to any property or assets (real or personal,
tangible or intangible) of the Borrower or any of its Subsidiaries or Joint
Ventures, whether now owned or hereafter acquired, or sell any such property or
assets subject to an understanding or agreement, contingent or otherwise, to
repurchase such property or assets (including sales of accounts receivable with
recourse to the Borrower or any Subsidiary or Joint Venture of the Borrower), or
assign any right to receive income or permit the filing of any financing
statement under the UCC or any other similar notice of Lien under any similar
recording or notice statute, provided that the provisions of this Section 9.01
shall not prevent the creation, incurrence, assumption or existence of the
following (Liens described below are herein referred to as "Permitted Liens"):
(i) inchoate Liens for taxes, assessments or governmental
charges or levies not yet due and payable or Liens for taxes,
assessments or governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves have
been established in accordance with generally accepted accounting
principles;
(ii) Liens in respect of property or assets of the Borrower
or any of its Subsidiaries or Joint Ventures imposed by law, which were
incurred in the ordinary course of business and do not secure
Indebtedness for borrowed money, such as carriers', warehousemen's,
materialmen's and mechanics' liens and other similar Liens arising in
the ordinary course of business, and (x) which do not in the aggregate
materially detract from the value of the Borrower's, such Subsidiary's
or such Joint Venture's property or assets or materially impair the use
thereof in the operation of the business of the Borrower, such
Subsidiary or such Joint Venture or (y) which are being contested in
good faith by appropriate proceedings, which proceedings have the
effect of preventing the forfeiture or sale of the property or assets
subject to any such Lien;
(iii) Liens in existence on the Initial Borrowing Date which
are listed, and the property subject thereto described, in Schedule
VIII (which Schedule VIII need not set forth the Liens created pursuant
to the Pledge Agreement), but only to the respective date, if any, set
forth in such Schedule VIII for the
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removal and termination of any such Liens, but no renewals or
extensions of such Liens shall be permitted;
(iv) Liens created pursuant to the Credit Documents;
(v) leases or subleases granted by the Borrower or any of its
Subsidiaries or Joint Ventures to other Persons in the ordinary course
of business not materially interfering with the conduct of the
business of the Borrower or any of its Subsidiaries or Joint Ventures;
(vi) Liens upon assets subject to Capitalized Lease Obligations
to the extent such Capitalized Lease Obligations are permitted by
Section 9.04, provided that (x) such Liens only serve to secure the
payment of Indebtedness arising under such Capitalized Lease
Obligation and (y) the Lien encumbering the asset giving rise to the
Capitalized Lease Obligation does not encumber any other asset of the
Borrower or any Subsidiary or Joint Venture of the Borrower;
(vii) Liens placed upon equipment or machinery used in the
ordinary course of business of the Borrower or any of its Subsidiaries
or Joint Ventures at the time of acquisition thereof by the Borrower
or any such Subsidiary or Joint Venture or within 60 days thereafter
to secure Indebtedness incurred to pay all or a portion of the
purchase price thereof, provided that (x) the aggregate outstanding
principal amount of all Indebtedness secured by Liens permitted by
this clause (vii) shall not at any time exceed $2,000,000 and (y) in
all events, the Lien encumbering the equipment or machinery so
acquired does not encumber any other asset of the Borrower, such
Subsidiary or such Joint Venture;
(viii) easements, rights-of-way, restrictions, encroachments and
other similar charges or encumbrances, and minor title deficiencies,
in each case not securing Indebtedness and not materially interfering
with the conduct of the business of the Borrower or any of its
Subsidiaries or Joint Ventures;
(ix) Liens arising from precautionary UCC financing statement
filings regarding operating leases entered into by the Borrower or any
of its Subsidiaries or Joint Ventures in the ordinary course of
business;
(x) statutory and common law landlords' liens under leases to
which the Borrower or any of its Subsidiaries or Joint Ventures is a
party;
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(xi) Liens (other than Liens created or imposed under ERISA)
incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of
tenders, statutory obligations, surety bonds, bids, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money); and
(xii) Liens arising out of judgments or awards in respect of
which the Borrower or any of its Subsidiaries or Joint Ventures shall
in good faith be prosecuting an appeal or proceedings for review in
respect of which there shall have been secured a subsisting stay of
execution pending such appeal or proceedings, provided that the
aggregate amount of all such judgments or awards does not exceed
$5,000,000 at any time outstanding.
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc.
The Borrower will not, and will not permit any of its Subsidiaries or Joint
Ventures to, wind up, liquidate or dissolve its affairs or enter into any
transaction of merger or consolidation, or convey, sell, lease or otherwise
dispose of (or agree to do any of the foregoing at any future time) all or any
part of its property or assets, or enter into any sale-leaseback transactions,
or purchase or otherwise acquire (in one or a series of related transactions)
any part of the property or assets (other than purchases or other acquisitions
of inventory, materials and equipment in the ordinary course of business) of any
Person, except that:
(i) Capital Expenditures (including payments in respect of
Capitalized Lease Obligations) by the Borrower and its Subsidiaries
and Joint Ventures shall be permitted to the extent not in violation
of Section 9.07;
(ii) the Borrower and each of its Subsidiaries and Joint Ventures
may in the ordinary course of business, sell, lease (as lessor) or
otherwise dispose of equipment and materials which, in the reasonable
opinion of such Person, are obsolete, uneconomic or no longer useful
in the conduct of such Person's business, provided that (x) except to
the extent the respective equipment or materials are transferred in
like-kind exchanges and/or trade-in-value is received on purchases of
like-kind assets, at least 80% of the consideration therefor (taking
the amount of cash and the fair market value of any non-cash
consideration or, if greater, the principal amount of any non-cash
consideration) shall be in the form of cash, (y) the aggregate Net
Cash Proceeds of all assets sold or otherwise disposed of pursuant to
this clause (ii) shall not exceed $2,000,000 in any fiscal year of the
Borrower and (z) the Net Cash Proceeds
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from each Asset Sale pursuant to this clause (ii) are applied in
accordance with the requirements of Section 3.03(e);
(iii) Investments may be made to the extent permitted by Section
9.05;
(iv) the Borrower and each of its Subsidiaries and Joint Ventures
may lease (as lessee) real or personal property in the ordinary course
of business (so long as any such lease does not create a Capitalized
Lease Obligation unless permitted by clause (i) of this Section 9.02);
(v) the Borrower and each of its Subsidiaries and Joint Ventures
may make sales of inventory in the ordinary course of business;
(vi) the Acquisition shall be permitted as contemplated in the
FHI Stock Acquisition Documents;
(vii) the Borrower and its Subsidiaries may sell any Specified
Existing Investment, so long as (i) each sale is in an arms' length
transaction and the Borrower or the respective Subsidiary receives at
least fair market value (as determined in good faith by the Board of
Directors of the Borrower or any authorized committee of such Board of
Directors) and (ii) the Net Cash Proceeds from each Asset Sale
pursuant to this clause (vii) are applied in accordance with the
requirements of Section 3.03(e);
(viii) the Borrower and each of its Subsidiaries and Joint
Ventures may sell Hotel Properties (or the entire equity interests of
any Subsidiary or Joint Venture owning or leasing the respective Hotel
Properties), so long as (i) no Default or Event of Default then exists
or would result therefrom, (ii) each sale is in an arms' length
transaction and the Borrower or the respective Subsidiary or Joint
Venture receives at least fair market value (as determined in good
faith by the Board of Directors of the Borrower or any authorized
committee of such Board of Directors), (iii) the total consideration
received by the Borrower or such Subsidiary is at least 75% in cash
with respect to the sale of any wholly-owned Hotel Property of the
Borrower or a Wholly-Owned Subsidiary thereof (or with respect to the
sale of any Wholly-Owned Subsidiary of the Borrower) or with respect
to the sale of any Joint Venture (or any Hotel Property of such Joint
Venture) set forth on Schedule X, provided that, (x) in lieu of
receiving cash in any sale of the entire equity interest in any Joint
Venture existing on the Initial Borrowing Date, the Borrower or the
respective Subsidiary may exchange the entire equity interest of such
Joint Venture for equity interests (not theretofore owned, directly or
indirectly, by the Borrower) of one or more other
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Joint Ventures existing on the Initial Borrowing Date so long as the
effect of any such exchange is to increase the Borrower's direct or
indirect, as the case may be, equity interests in the Joint Venture or
Joint Ventures so acquired and (y) with respect to the sale of any
Joint Venture (or any Hotel Property owned by such Joint Venture)
(other than with respect to the sale of any Joint Venture (or any Hotel
Property owned by such Joint Venture) listed on Schedule X) the
aggregate amount of all non-cash consideration held at any one time
shall not exceed $10,000,000 (taking the face amount of debt and the
fair market value of all other non-cash collateral, and determined
without regard to any write-downs or write-offs thereof), (iv) the
aggregate Net Cash Proceeds of all assets sold pursuant to this clause
(viii) shall not exceed $25,000,000 in any fiscal year of the Borrower
and (v) the Net Cash Proceeds from each Asset Sale pursuant to this
clause (viii) are applied in accordance with the requirements of
Section 3.03(e); and
(ix) the Borrower and each of its Wholly-Owned Subsidiaries
may acquire Hotel Properties (including by purchasing 100%, but not
less than 100%, of the capital stock or partnership interests of the
Person that owns such Hotel Properties) so long as (i) such Hotel
Properties are wholly-owned by the Borrower or such Wholly-Owned
Subsidiary, (ii) such Hotel Properties are located in the United
States, Canada, Mexico or Puerto Rico, (iii) prior to the date of
acquisition of any such Hotel Property, the Borrower shall have
delivered to each of the Banks a Phase I environmental assessment on
such Hotel Property from an environmental firm, certified to and in
form, scope and substance, reasonably satisfactory to the Required
Banks, (iv) with respect to the acquisition of any Hotel Property
subject to a Leasehold (and which will not be owned by the Borrower or
the respective Wholly-Owned Subsidiary in fee), such Hotel Property may
be acquired only if the respective Leasehold shall have a remaining
term (including a right of extension by the Borrower or such
Wholly-Owned Subsidiary) of at least 15 years, (v) at least 10 Business
Days prior to the consummation of any acquisition of any Hotel Property
the Borrower shall have delivered to each of the Banks the Information
Package relating to such Hotel Property, and in the case of any
acquisition of any Hotel Property or group of related Hotel Properties
in which the total consideration exceeds $15,000,000, the Required
Banks shall have not informed the Borrower in writing prior to the end
of 10 Business Days after the Bank's receipt of the respective
Information Package that they do not approve of such acquisition, (vi)
each Hotel Property shall be operated as a "Travelodge", a
"Thriftlodge" or another nationally recognized hotel brand which the
Board of Directors of the Borrower (or an authorized committee of such
Board) has determined to be in the best interests of the Borrower and
shall be subject to a Franchise
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Agreement, a copy of which Franchise Agreement shall be delivered to
each of the Banks on or prior to the date of the consummation of the
acquisition of such Hotel Property, and (vii) in the case of any
acquisition of any Hotel Property or group of related Hotel Properties
in which the total consideration exceeds $2,000,000, (I) based on
calculations made by the Borrower on a Pro Forma Basis after giving
effect to the respective acquisition, no Default or Event of Default
will exist under, or would have existed during the period of four
consecutive fiscal quarters last reported (or required to be reported
pursuant to Section 8.01(b) or (c), as the case may be) prior to the
date of the respective acquisition pursuant to, the financial covenants
contained in Sections 9.08 through 9.11, inclusive, (II) based on good
faith projections prepared by the Borrower for the period from the date
of the consummation of the acquisition to the date which is one year
thereafter or based on the historical financial statements (but after
giving effect to all Scheduled Commitment Reductions that will occur
during the one year period after the date of the consummation of the
respective acquisition) delivered in the Information Package for such
Hotel Property or Hotel Properties calculated on a Pro Forma Basis
after giving effect to the respective acquisition, the level of
financial performance measured by the covenants set forth in Sections
9.08 through 9.11, inclusive, shall be better than or equal to such
level as would be required to provide that no Default or Event of
Default will exist under the financial covenants contained in such
Sections 9.08 through 9.11, inclusive, as compliance with such
covenants will be required through the date which is one year from the
date of the consummation of the respective acquisition, and (III) the
Borrower shall have delivered to the Administrative Agent an officer's
certificate executed by an Authorized Financial Officer of the
Borrower, certifying to the best of such officer's knowledge,
compliance with the requirements of this clause (vii) and containing
the calculations (in reasonable detail) required by this clause (vii)
To the extent the Required Banks waive the provisions of this Section 9.02 with
respect to the sale of any Pledged Securities, or any Pledged Securities are
sold or otherwise disposed of as permitted by this Section 9.02, such Pledged
Securities shall be sold or otherwise transferred or disposed of free and clear
of the Liens created by the Pledge Agreement and the Administrative Agent and
the Collateral Agent shall be authorized to take any actions deemed appropriate
in order to effect the foregoing.
9.03 Restricted Payments. The Borrower will not, and will not
permit any of its Subsidiaries or Joint Ventures to, authorize, declare or pay
any Restricted Payments, except:
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(i) any Subsidiary or Joint Venture of the Borrower may make
Restricted Payments to the Borrower or any Wholly-Owned Subsidiary of
the Borrower;
(ii) any Subsidiary of the Borrower which is not a Wholly-Owned
Subsidiary of the Borrower or any Joint Venture of the Borrower may
make Restricted Payments so long as the Borrower and each Subsidiary
of the Borrower which has an ownership interest in such
non-Wholly-Owned Subsidiary or Joint Venture receives a portion of
such Restricted Payment which is at least as great as the percentage
ownership interest of the Borrower or such other Subsidiary of the
Borrower in the respective Subsidiary or Joint Venture which is making
the Restricted Payment;
(iii) after the execution and delivery of any HFS Subordinated
Note in accordance with the requirements of Section 9.04(vii), the
Borrower may make regularly scheduled payments of interest in respect
thereof (at the interest rate described in Section 9.04(vii)), so long
as (x) no Default or Event of Default shall exist at the time of the
making of such payment or immediately after giving effect thereto and
(y) the respective payment is permitted in accordance with the HFS
Subordination Agreement;
(iv) the Borrower may make Restricted Payments as specifically
permitted by clauses (iii) through (xi) of Section 9.06;
(v) after the issuance of any Redeemable Capital Stock in
accordance with the requirements of Section 9.04(viii), the Borrower
may pay cash dividends to HFS in respect thereof at times that the
Borrower could have paid interest on any HFS Subordinated Note (i.e.,
such dividends shall be permitted to be paid at the end of each
successive three-month Interest Period with respect thereto), so long
as (x) no Default or Event of Default shall exist at the time of the
making of such payment or immediately after giving effect thereto, (y)
the respective payment is permitted in accordance with the HFS
Subordination Agreement and (z) the amount of dividends paid in cash
with respect to the HFS Redeemable Capital Stock shall not exceed the
amounts permitted to be paid pursuant to Section 9.04(viii)(y) (after
giving effect to the proviso thereto);
(vi) any Excess Corporate Services Fees that are not permitted to
be paid in accordance with the provisions of Section 9.06(vii) because
they are in excess of the amounts permitted to be paid thereunder may
be paid by the Borrower at any time pursuant to this clause (vi) so
long as (x) no Default or Event of Default is then in existence or
would exist immediately after giving
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effect to the respective payment and (y) the amount of the respective
payment shall not exceed the Cumulative Retained Residual Excess Cash
Flow Amount as is in effect immediately prior to the making of the
respective payment; and
(vii) after the issuance of any Chartwell Preferred
Stock/Subordinated Debt, the Borrower may pay cash dividends or make
cash interest payments, as the case may be, to Chartwell in respect
thereof, so long as (x) no Default or Event of Default shall exist at
the time of the making of such payment or immediately after giving
effect thereto, (y) the aggregate amount of Restricted Payments made
pursuant to this clause (vii) does not exceed the Cumulative
Unrestricted Subsidiary Dividend Amount as in effect immediately prior
to the making of such payment, and (z) the terms of such Chartwell
Preferred Stock/Subordinated Debt satisfy the requirements of Section
9.04(ix).
9.04 Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries or Joint Ventures to, contract, create, incur, assume or
suffer to exist any Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(ii) Existing Indebtedness to the extent the same is listed on
Schedule VI, but no refinancing or renewals thereof, provided that in
no event shall the aggregate outstanding principal amount of
Indebtedness under the Bank of America Facility exceed $15,000,000 at
any one time;
(iii) Indebtedness under Interest Rate Protection Agreements
entered into with respect to Indebtedness outstanding under this
Agreement (i.e., to provide protection against fluctuations in
floating interest rates with respect to a notional amount not to
exceed, at the time of the entering into of the respective Interest
Rate Protection Agreement, the aggregate principal amount of Loans
outstanding pursuant to this Agreement);
(iv) Indebtedness of the Borrower and its Subsidiaries and Joint
Ventures evidenced by Capitalized Lease Obligations entered into after
the Initial Borrowing Date, in each case so long as the respective
Capitalized Lease Obligation relates to an acquisition of assets made
after the Initial Borrowing Date in accordance with Section 9.07 and
the Liens arising as a result thereof are permitted pursuant to
Section 9.01, and so long as the aggregate outstanding principal
amount of Capitalized Lease Obligations at no time exceeds $5,000,000;
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(v) Indebtedness of the Borrower and its Subsidiaries and Joint
Ventures subject to Liens permitted under Section 9.01(vii), so long
as the aggregate principal amount of Indebtedness outstanding pursuant
to this clause (v) is limited as provided in said Section 9.01(vii);
(vi) intercompany Indebtedness among the Borrower and its
Subsidiaries and Joint Ventures to the extent permitted by Section
9.05;
(vii) unsecured subordinated Indebtedness of the Borrower issued
to HFS upon a downgrading of HFS' long-term senior unsecured debt
credit rating by S&P triggering a mandatory commitment reduction
pursuant to Section 3.03(g) or (h) (the "HFS Subordinated
Indebtedness") so long as (x) the aggregate outstanding principal
amount of HFS Subordinated Indebtedness does not exceed the aggregate
cash proceeds actually loaned by HFS to the Borrower to enable it to
make mandatory repayments of Revolving Loans pursuant to Section
4.02(a) as a result of a reduction to the Total Revolving Loan
Commitment pursuant to Sections 3.03(g) and/or (h)), (y) the HFS
Subordinated Indebtedness shall not be guaranteed and shall be
evidenced by a subordinated promissory note or notes (subject to the
limitation on the aggregate outstanding principal amount thereof
provided in preceding clause (x)) in the form of Exhibit J, which
shall mature not earlier than the date which occurs one year after the
Final Maturity Date and shall bear interest at a rate per annum not to
exceed the Eurodollar Rate (as determined for successive interest
periods of 3 months) plus the Applicable Margin as in effect from time
to time (each an "HFS Subordinated Note") and (z) 100% of the cash
proceeds loaned to the Borrower as evidenced by the HFS Subordinated
Indebtedness shall be used for the purposes described in preceding
clause (x);
(viii) Redeemable Capital Stock of the Borrower issued to HFS
upon a downgrading of HFS' long-term senior unsecured debt credit
rating by S&P triggering a mandatory reduction pursuant to Section
3.03(g) or (h) (the "HFS Redeemable Capital Stock") so long as (x) the
aggregate amount thereof does not exceed the aggregate cash proceeds
invested by HFS in the Borrower by way of such Redeemable Capital Stock
investment to enable it to make mandatory repayments of Revolving Loans
pursuant to Section 4.02(a) as a result of the reduction to the Total
Revolving Loan Commitment pursuant to Sections 3.03(g) and/or (h)), (y)
the HFS Redeemable Capital Stock shall not be guaranteed and shall have
no required redemptions and no required offers to purchase same by the
Borrower or any of its Subsidiaries or Joint Ventures, whether through
the lapse of time, the occurrence of certain contingencies or
otherwise, at any time prior to the date which occurs one year after
the Final
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Maturity Date and such HFS Redeemable Capital Stock shall accrue
dividends at a rate per annum not to exceed the Eurodollar Rate (as
determined for successive interest periods of 3 months) plus the
Applicable Margin as in effect from time to time, provided that the
amount of dividends permitted to be paid in cash on any HFS Redeemable
Capital Stock issued pursuant to this clause (viii) at the end of any
such interest period shall not exceed an amount equal to the dividends
which would accrue on such HFS Redeemable Capital Stock for such
interest period at the rate described above multiplied by an amount
equal to 1 minus the then Current Consolidated Tax Rate of the Borrower
during such period, with any dividends which is not permitted to be
paid in cash for any interest period because of the immediately
preceding proviso to be deferred (with no additional dividends to
accrue on such deferred amounts) until after the Bank Termination Date,
and (z) 100% of the cash proceeds invested by the Borrower in return
for the issuance of the HFS Redeemable Capital Stock shall be used for
the purposes described in preceding clause (x); and
(ix) Chartwell Preferred Stock/Subordinated Debt issued to
Chartwell so long as (u) the aggregate amount thereof does not exceed
the aggregate cash proceeds invested by Chartwell in the Borrower by
way of a Chartwell Preferred Stock investment (provided that, in any
event, the aggregate amount of Chartwell Preferred Stock/Subordinated
Debt shall not exceed $70,000,000), in each case except to the extent
such excess has resulted from the accrual of dividends or interest
thereon (as the case may be), (v) the Chartwell Preferred
Stock/Subordinated Debt shall be issued by the Borrower, shall not be
guaranteed and shall have no required redemptions or amortizations and
no required offers to purchase same by the Borrower or any of its
Subsidiaries or Joint Ventures, whether through the lapse of time, the
occurrence of certain contingencies or otherwise, at any time prior to
the date which occurs one year after the Final Maturity Date, (w) the
Chartwell Preferred Stock/Subordinated Debt shall accrue dividends or
interest, as the case may be, at a rate per annum not to exceed 8.5%,
(x) the Chartwell Preferred Stock/Subordinated Debt shall not have any
covenants restricting the business or operations of the Borrower or
any of its Subsidiaries or Joint Ventures and shall expressly provide
that any payments in respect thereof, whether in respect of accrued
dividends or interest, mandatory redemptions or payments of principal,
may only be made to the extent permitted by the terms of this
Agreement (including Sections 9.03, 9.04 and 9.06), as same may be
amended, supplemented, amended and restated, or refinanced from time
to time, and (z) Chartwell Subordinated Debt may be issued only upon
the conversion thereto of outstanding Chartwell Preferred Stock
theretofore issued in accordance with the requirements of this
Agreement, and prior to (and the Chartwell Preferred Stock shall
provide that as a condition
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to) the conversion of the Chartwell Preferred Stock into Chartwell
Subordinated Debt, the prior written consent of the Required Banks is
obtained.
Notwithstanding anything to the contrary contained in (A) clauses (vii) and
(viii) above, the sum of the aggregate principal amount of HFS Subordinated
Indebtedness incurred pursuant to such clause (vii) and the aggregate
liquidation preference of all HFS Redeemable Capital Stock issued pursuant to
such clause (viii) shall in no event exceed the aggregate repayments theretofore
made pursuant to Section 4.02(a) (as a result of reductions to the Total
Revolving Loan Commitment pursuant to Sections 3.03(g) and/or (h)) made with
funds provided to the Borrower by HFS (except to the extent the increase in the
aggregate liquidation preference of any such HFS Redeemable Capital Stock is
attributable to the accrual of dividends with respect thereto) and (B) clause
(ix) above, the sum of the aggregate principal amount of Chartwell Subordinated
Debt plus the aggregate liquidation preference of all Chartwell Preferred Stock
(excluding Chartwell Preferred Stock theretofore converted into Chartwell
Subordinated Debt) shall in no event exceed the aggregate cash investments made
by Chartwell in the Borrower (except to the extent that any increase in the
aggregate principal amount of any Chartwell Subordinated Debt or any increase in
the aggregate liquidation preference of any such Chartwell Preferred Stock is
attributable to the accrual of dividends or interest, as the case may be, with
respect thereto).
9.05 Advances, Investments and Loans. The Borrower will not,
and will not permit any of its Subsidiaries or Joint Ventures to, directly or
indirectly, lend money or credit or make advances to any Person, or purchase or
acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, any other Person, or purchase or own a futures
contract or otherwise become liable for the purchase or sale of currency or
other commodities at a future date in the nature of a futures contract,
(collectively, "Investments"), or permit any Investment to remain outstanding,
or agree or commit to make any Investment (any such agreement or commitment an
"Investment Commitment"), except that the following shall be permitted (but only
so long as no Default or Event of Default exists at the time of the making of
the respective Investment or Investment Commitment (or would exist immediately
after giving effect thereto) in the case of Investments or Investment
Commitments described in following clauses (viii) through (xii), inclusive):
(i) the Borrower and its Subsidiaries and Joint Ventures may
acquire and hold accounts receivables owing to any of them, if created
or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary terms;
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(ii) the Borrower and its Subsidiaries and Joint Ventures may
acquire and hold cash and Cash Equivalents;
(iii) the Borrower may enter into Interest Rate Protection
Agreements to the extent permitted by Section 9.04(iii);
(iv) (x) any Subsidiary or Joint Venture of the Borrower may make
intercompany loans of cash to the Borrower or to any Wholly-Owned
Subsidiary of the Borrower, any Wholly-Owned Subsidiary of the
Borrower may make cash equity investments in any other Wholly-Owned
Subsidiary of the Borrower, and the Borrower may make intercompany
loans of cash to, or cash equity investments in, its Wholly-Owned
Subsidiaries, provided that to the extent that any such intercompany
loan is evidenced by a promissory note, such promissory note shall be
pledged to the Collateral Agent pursuant to the Pledge Agreement and
(y) the Borrower or any of its Wholly-Owned Subsidiaries may make
intercompany loans to, cash capital contributions in, guaranty the
obligations of, or have Letters of Credit issued for the benefit of,
any Joint Venture of the Borrower (other than any Joint Venture that
constitutes a Specified Existing Investment) or any joint venture
partner of such Joint Venture, provided that (i) the aggregate amount
of all such Investments (including, without limitation, the maximum
amount of all guarantees, the maximum amount of all Letters of Credit
and the amount of all intercompany loans and capital contributions as
described in following clause (ii)) outstanding at any one time shall
not exceed $15,000,000 (determined without regard to any write-downs
or write-offs thereof), (ii) the aggregate amount of all such
intercompany loans and cash capital contributions outstanding at any
one time shall not exceed $5,000,000 (determined without regard to any
write-downs or write-offs thereof) and (iii) to the extent that any
such intercompany loan is evidenced by promissory note, such
promissory note shall be pledged to the Collateral Agent pursuant to
the Pledge Agreement;
(v) non-cash consideration received by the Borrower or any of its
Subsidiaries in connection with Asset Sales permitted pursuant to
Sections 9.02(ii), (vii) and (viii), provided that the amount of such
non-cash consideration shall not exceed the limitations provided in
Section 9.02(ii) or (viii), as the case may be;
(vi) the Borrower and its Subsidiaries and Joint Ventures may
make loans and advances in the ordinary course of business to their
respective employees so long as the aggregate principal amount thereof
at any time
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outstanding (determined without regard to any write-downs or
write-offs of such loans and advances) shall not exceed $1,000,000;
(vii) the Borrower and its Subsidiaries and Joint Ventures may
permit to remain outstanding the Investments that were made prior to
the Initial Borrowing Date to the extent that same are set forth on
Schedule IX (the "Existing Investments") (provided that any additional
Investments with respect thereto shall be permitted only if
independently justified under the other provisions of this Section
9.05);
(viii) in addition to Investments made as otherwise permitted
pursuant to this Section 9.05, the Borrower and its Wholly-Owned
Subsidiaries may make Investments in Hotel Properties (including by
making the respective investment in the Person (other than an
Unrestricted Subsidiary) which owns the respective Hotel Property but
which shall not be a Wholly-Owned Subsidiary of the Borrower) that are
not wholly-owned by the Borrower or any of its Wholly-Owned
Subsidiaries so long as (i) no Default or Event of Default then exists
or would result therefrom, (ii) all of the applicable requirements of
Section 9.02(ix) (other than clause (i) thereof) are satisfied with
respect to such Investment and (iii) the aggregate amount of
Investments made pursuant to this Section 9.05(viii) in any fiscal year
of the Borrower does not exceed $5,000,000;
(ix) the Borrower and its Wholly-Owned Subsidiaries may make
Investment Commitments from time to time so long as (i) the respective
Investment Commitment is in respect of an Investment of the type
described in clause (viii) of this Section 9.05, (ii) the respective
Investment Commitment expressly provides that the Borrower or its
respective Wholly-Owned Subsidiary has no obligation to make the
respective Investment unless same is in compliance with this Agreement
or the consent of the Required Banks pursuant to this Agreement is
obtained (and so long as the Borrower shall suffer no penalty or loss
of funds as a result of any failure to make the Investment for the
reasons set forth above in this clause (ii)), (iii) all of the
applicable conditions set forth in Section 9.05(viii) are satisfied
with respect to the Investment to be made pursuant to the respective
Investment Commitment (but only to the extent that such Investment is
made) and (iv) the maximum amount which could be required to be
invested pursuant to the respective Investment Commitment in any
fiscal year of the Borrower shall not exceed that amount set forth in
clause (viii) of this Section 9.05, and with any amount so invested
pursuant to the respective Investment Commitment to be considered an
Investment made pursuant to clause (viii) of this Section 9.05;
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(x) the Borrower may establish Subsidiaries, Joint Ventures and
Unrestricted Subsidiaries to the extent permitted by Section 9.16;
(xi) the Borrower and its Wholly-Owned Subsidiaries may (i) make
Investments (other than Investments in Unrestricted Subsidiaries) so
long as all consideration therefor paid by the Borrower and its
Subsidiaries in respect of such Investment consists solely of
Qualified Capital Stock of the Borrower and (b) enter into commitments
or agreements to make Investments ("Qualified Equity Commitments") so
long as all consideration to be paid for the respective Investment
pursuant to the Qualified Equity Commitment consists solely of
Qualified Capital Stock of the Borrower; and
(xii) the Borrower and its Wholly-Owned Subsidiaries may make
cash Investments in Unrestricted Subsidiaries so long as the aggregate
amount of all such Investments does not exceed the aggregate Net Cash
Proceeds (including, for this purpose, net of any amounts paid by the
Borrower to HFS pursuant to Section 9.06(viii)) received by the
Borrower from cash equity investments by Chartwell.
9.06 Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries or Joint Ventures to, enter into any
transaction or series of related transactions with any Affiliate of the Borrower
or any of its Subsidiaries or Joint Ventures, other than in the ordinary course
of business and on terms and conditions substantially as favorable to the
Borrower, such Subsidiary or such Joint Venture as would reasonably be obtained
by the Borrower, such Subsidiary or such Joint Venture at that time in a
comparable arm's-length transaction with a Person other than an Affiliate,
except that the following transactions, whether or not such transactions would
otherwise be permitted by this Section 9.06, shall be permitted:
(i) Restricted Payments may be paid to the extent provided in
Section 9.03 (excluding clause (iv) thereof);
(ii) loans may be made and other transactions may be entered into
by the Borrower and its Subsidiaries and Joint Ventures to the extent
permitted by Sections 9.04 and 9.05;
(iii) the Borrower may make quarterly payments (in advance) of
the Corporate Services Fee, provided that the aggregate amount
permitted to be paid pursuant to this clause (iii) in any fiscal
quarter of the Borrower shall not exceed the lesser of (x) the amount
actually owing by the Borrower in respect of such quarter (or in
respect of any prior quarter in the same fiscal year to the extent
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not permitted to be paid in such prior fiscal quarter because of the
limitation contained in following clause (y)) under the Corporate
Services Agreement and (y) $625,000;
(iv) the Borrower may make payments to HFS pursuant to the
Facility Lease (the "HFS Facility Lease Payments") so long as the
aggregate payments thereunder in any fiscal year of the Borrower do not
exceed $150,000;
(v) the Borrower and its Subsidiaries and Joint Ventures may
pay to HFS or a Subsidiary thereof the Marketing and Reservation Fee as
and when due pursuant to the terms of the respective HFS Franchise
Agreement, and the Borrower and its Subsidiaries and Joint Ventures may
pay to HFS or a Subsidiary thereof the Licensing Fee as and when due
pursuant to the terms of the HFS Master License Agreement;
(vi) on the Initial Borrowing Date, the Borrower may pay to
HFS an advisory fee with respect to the FHI Stock Acquisition in an
amount not to exceed $2,000,000;
(vii) the Borrower may pay to HFS any amounts actually owed to
it in respect of Excess Corporate Services Fees, provided that (i) any
such fees payable with respect to any fiscal year of the Borrower shall
be paid quarterly in arrears within 10 days after each date upon which
the financial statements for the fiscal quarter last ended have
actually been delivered pursuant to Section 8.01(b) or (c), as the case
may be, (ii) the actual amount of fees paid at any time with respect to
any fiscal year pursuant to this clause (vii) shall not exceed the
amount of Excess Cash Flow for the period from the first day of the
respective fiscal year in respect of which paid through the last day of
the fiscal quarter most recently ended for which financial statements
have been delivered pursuant to Section 8.01(b) or (c), as the case may
be, (iii) if for any reason the amount of fees actually paid pursuant
to this clause (vii) exceeds the amount of Excess Cash Flow for the
respective fiscal year (whether because of a miscalculation, negative
Excess Cash Flow in subsequent fiscal quarters during the respective
fiscal year or otherwise) then HFS shall promptly reimburse (and shall
have agreed to make such reimbursements pursuant to the HFS
Subordination Agreement) the Borrower for the amount by which the
payments made pursuant to this clause (viii) exceed Excess Cash Flow
for the respective fiscal year, provided that if HFS does not promptly
reimburse the Borrower for any such amounts, such amount shall apply to
reduce subsequent payments otherwise permitted to be made to HFS
pursuant to this clause (vii) until the unreimbursed amount has been
fully offset by the reductions to permitted
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payments to HFS under this clause (vii) and (iv) no payment shall be
permitted to be made pursuant to this clause (vii) at any time while a
Default or an Event of Default exists or would exist immediately after
giving effect thereto;
(viii) on the date of any cash equity investment made by
Chartwell in the Borrower and so long as no Default or Event of Default
then exists, the Borrower may pay to HFS an advisory fee in an amount
not to exceed 2% of the cash proceeds so invested in the Borrower;
(ix) so long as no Default or Event of Default then exists, the
Borrower may pay to HFS an annual guaranty fee (payable quarterly in
arrears) (the "Guaranty Fee") pursuant to the Financing Agreement in
an aggregate amount not to exceed 2% of the Guaranty Amount then in
effect, provided that such Guaranty Fee shall otherwise be subject to
the terms of the HFS Subordination Agreement;
(x) (a) the Borrower and its Subsidiaries and Joint Ventures
may pay to HFS or a Subsidiary thereof the Standard Termination Fees
set forth in the HFS Franchise Agreements and (b) so long as no Default
or Event of Default then exists, the Borrower and its Subsidiaries and
Joint Ventures may pay to HFS or a Subsidiary thereof the Excess
Termination Fees set forth in the HFS Franchise Agreements, provided
that such Excess Termination Fees shall otherwise be subject to the
terms of the HFS Subordination Agreement; and
(xi) (a) the Borrower and its Subsidiaries and Joint Ventures
may pay to HFS or a Subsidiary thereof pursuant to the respective HFS
Franchise Agreements such other customary and arm's length charges and
expenses that HFS charges (and on the same basis on which HFS charges)
to its other similarly situated franchisees and (b) the Borrower may
pay to HFS or a Subsidiary thereof the Borrower's allocable share of
the lease payments and other overhead expenses associated with the
Borrower's offices in El Cajon, California, and also may pay to HFS or
a Subsidiary thereof its allocable share of the expenses of other
assets the usage of which is shared on a similar basis with HFS, so
long as all such amounts are charged on an arm's length basis.
Except as expressly permitted by clauses (i) through (xi) above, neither the
Borrower nor any of its Subsidiaries or Joint Ventures shall pay any management,
consultant, advisory or other fees to HFS or any Subsidiary of HFS, and neither
the Borrower nor any of its Subsidiaries or Joint Ventures shall pay any
management, consultant, advisory or similar fees to any other Affiliate of the
Borrower or HFS (excluding
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<PAGE>
payments made by Subsidiaries of the Borrower to the Borrower or a Wholly-Owned
Subsidiary of the Borrower).
9.07 Capital Expenditures. (a) The Borrower will not, and will
not permit any of its Subsidiaries or Joint Ventures to, make any Capital
Expenditures, except that during any fiscal year of the Borrower, the Borrower
and its Subsidiaries and Joint Ventures may make Capital Expenditures so long as
the aggregate amount of Capital Expenditures made by the Borrower and its
Wholly-Owned Subsidiaries in any such fiscal year when added to the Borrower's
Allocable Share of the Capital Expenditure made by its Joint Ventures for such
fiscal year, does not exceed an amount equal to 5% of Total Hotel Revenues for
such fiscal year.
Notwithstanding anything to the contrary contained above, to the extent that
Capital Expenditures made during any fiscal year of the Borrower are less than
the amount permitted to be made for such fiscal year as set forth above such
unused amount may be carried forward to the immediately succeeding fiscal year
and utilized to make Capital Expenditures of the type permitted above in this
Section 9.07 in excess of the amount permitted above in the following fiscal
year, provided that (x) any amounts carried forward from the immediately
preceding fiscal year may not be utilized during the current fiscal year unless
and until the relevant amount for such current fiscal year shall have been
utilized in full to make Capital Expenditures during such fiscal year and (y) no
amounts once carried forward to the next fiscal year may be carried forward to
fiscal years thereafter. In addition to the foregoing, the Borrower and its
Subsidiaries may make additional Capital Expenditures to the extent that any
Permitted Hotel Acquisition made as permitted by Section 9.02(ix) and/or
9.05(viii) constitutes Capital Expenditures.
(b) In addition to the Capital Expenditures permitted to be
made pursuant to clause (a) of this Section 9.07 and following clause (c) of
this Section 9.07, the amount of insurance proceeds received by the Borrower and
its Subsidiaries from any Recovery Event may be used by the Borrower and its
Subsidiaries to make Capital Expenditures to replace or restore any properties
or assets in respect of which such proceeds were paid, in each case to the
extent such proceeds are not used to make Permitted Hotel Acquisitions or are
not required to be applied pursuant to Section 3.03(e), provided that any
proceeds that are so used to make Capital Expenditures pursuant to this clause
(b) are, to the extent required by Section 3.03(e) used within the period of
time as is set forth in such Section 3.03(e).
(c) In addition to the Capital Expenditures permitted to be
made pursuant to clauses (a) and (b) of this Section 9.07, the Borrower and its
Wholly-Owned Subsidiaries may make Capital Expenditures in any fiscal year of
the Borrower
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beginning with its fiscal year commencing on January 1, 1997 in an amount equal
to the Cumulative Retained Residual Excess Cash Amount as in effect immediately
prior to the making of the respective Capital Expenditure.
9.08 Minimum Adjusted Consolidated Borrower EBITDA. The
Borrower will not permit Adjusted Consolidated Borrower EBITDA for any Test
Period ended on the last day of a fiscal quarter set forth below to be less than
the amount set forth opposite such fiscal quarter below:
Fiscal Quarter
Ended Amount
March 31, 1996 $1,527,000
June 30, 1996 $4,582,000
September 30, 1996 $8,655,000
December 31, 1996 $10,182,000
March 31, 1997 $10,485,000
June 30, 1997 $11,092,000
September 30, 1997 $11,901,000
December 31, 1997 $12,204,000
March 31, 1998 $12,301,000
June 30, 1998 $12,494,000
September 30, 1998 $12,751,000
December 31, 1998 $12,848,000
March 31, 1999 $12,900,000
June 30, 1999 $13,004,000
September 30, 1999 $13,143,000
December 31, 1999 $13,195,000
March 31, 2000 $13,248,000
June 30, 2000 $13,354,000
September 30, 2000 $13,495,000
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December 31, 2000 $13,548,000
March 31, 2001 $13,607,000
June 30, 2001 $13,726,000
September 30, 2001 $13,884,000
December 31, 2001 $13,943,000
9.09 Consolidated Interest Coverage Ratio. The Borrower will
not permit the Consolidated Interest Coverage Ratio for any Test Period ended on
the last day of a fiscal quarter set forth below to be less than the ratio set
forth opposite such fiscal quarter below:
Fiscal Quarter
Ended Ratio
March 31, 1996 1.75:1.00
June 30, 1996 1.75:1.00
September 30, 1996 1.75:1.00
December 31, 1996 1.75:1.00
March 31, 1997 1.85:1.00
June 30, 1997 2.00:1.00
September 30, 1997 2.00:1.00
December 31, 1997 2.00:1.00
March 31, 1998 2.25:1.00
June 30, 1998 2.25:1.00
September 30, 1998 2.25:1.00
December 31, 1998 2.25:1.00
March 31, 1999 2.50:1.00
June 30, 1999 2.50:1.00
September 30, 1999 2.50:1.00
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December 31, 1999 2.50:1.00
March 31, 2000 3.00:1.00
and thereafter
9.10 Maximum Total Leverage Ratio. The Borrower will not
permit the Total Leverage Ratio at any time during a period set forth below to
be greater than the ratio set forth opposite such period below:
Period Ratio
Initial Borrowing Date through and 6.75:1.00
including March 30, 1997
March 31, 1997 through and including 6.00:1.00
March 30, 1998
March 31, 1998 through and including 5.50:1.00
March 30, 1999
March 31, 1999 through and including 4.75:1.00
March 30, 2000
March 31, 2000 through and including 4.50:1.00
March 30, 2001
Thereafter 4.00:1.00
9.11 Consolidated Fixed Charge Coverage Ratio. The Borrower
will not permit the Consolidated Fixed Charge Coverage Ratio for any Test Period
ended on the last day of a fiscal quarter set forth below to be less than the
ratio set forth opposite such fiscal quarter below:
Fiscal Quarter
Ended Ratio
March 31, 1996 1.10:1.00
June 30, 1996 1.10:1.00
September 30, 1996 1.10:1.00
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December 31, 1996 1.10:1.00
March 31, 1997 1.15:1.00
June 30, 1997 1.20:1.00
September 30, 1997 1.25:1.00
and thereafter
9.12 Limitation on Payments of Certain Indebtedness;
Modifications of Certain Indebtedness; Modifications of Certificate of
Incorporation, By-Laws and Certain Agreements; etc. The Borrower will not, and
will not permit any of its Subsidiaries or Joint Ventures to, (i) make (or give
any notice in respect of) any voluntary or optional payment or prepayment on or
redemption or acquisition for value of, or any prepayment or redemption as a
result of any change of control or similar event of, including, in each case
without limitation, by way of depositing with the trustee with respect thereto
money or securities before due for the purpose of paying when due, any HFS
Subordinated Indebtedness or any Chartwell Subordinated Debt, (ii) amend or
modify, or permit the amendment or modification of, any provision of the Bank of
America Facility, the HFS Subordinated Indebtedness or any Chartwell
Subordinated Debt or any agreement (including, without limitation, any HFS
Subordinated Note) related thereto, (iii) amend or modify, or permit the
amendment or modification of, any provision of any FHI Stock Acquisition
Document, Management Agreement, Tax Sharing Agreement, HFS Agreement or
Affiliate Agreement (other than any amendment or modification thereto which
would not violate or be inconsistent with any of the terms or provisions of this
Agreement and the other Credit Documents and could not be adverse to the
interests of the Banks in any respect) or enter into any new agreement which
would have constituted a Tax Sharing Agreement, HFS Agreement or Affiliate
Agreement if same had been in effect on the Initial Borrowing Date except for
Unrestricted Subsidiary Tax Sharing Agreements entered into in compliance with
Section 9.16(c) and additional HFS Franchise Agreements in connection with the
acquisition of new Hotel Properties or (iv) amend, modify or change its
certificate of incorporation (including, without limitation, by the filing or
modification of any certificate of designation) or by-laws, or any agreement
entered into by it, with respect to its capital stock, or enter into any new
agreement with respect to its capital stock, other than any amendments,
modifications or changes pursuant to this clause (iv) or any such new agreements
pursuant to this clause (iv) which would not violate or be inconsistent with any
of the terms of this Agreement and the other Credit Documents and could not in
any way adversely affect the interests of the Banks.
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9.13 Limitation on Certain Restrictions on Subsidiaries and
Joint Ventures. The Borrower will not, and will not permit any of its
Subsidiaries or Joint Ventures to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Subsidiary or Joint Venture of the Borrower to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any of its
Subsidiaries or Joint Ventures, or pay any Indebtedness owed to the Borrower or
any Subsidiary or Joint Venture of the Borrower, (b) make loans or advances to
the Borrower or any Subsidiary or Joint Venture of the Borrower or (c) transfer
any of its properties or assets to the Borrower or any of its Subsidiaries or
Joint Ventures, except in each case for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) this Agreement and the
other Credit Documents, (iii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of the Borrower or any
Subsidiary or Joint Venture of the Borrower, (iv) customary provisions
restricting assignment of any licensing agreement entered into by the Borrower
or any Subsidiary or Joint Venture of the Borrower in the ordinary course of
business, and (v) restrictions on the transfer of any assets subject to a Lien
permitted by this Agreement.
9.14 Limitation on Issuance of Capital Stock. (a) The Borrower
will not issue (i) any class of preferred stock (except (x) preferred stock of
the Borrower issued in accordance with the requirements of Sections 9.04(viii)
and (ix) and (y) any class of preferred stock which has no required redemptions
and no required offers to purchase same by the Borrower or any of its
Subsidiaries or Joint Ventures, whether through the lapse of time, the
occurrence of certain contingencies or otherwise) or (ii) any class of
redeemable (except at the sole option of the Borrower) common stock.
(b) The Borrower will not permit any of its Subsidiaries or
Joint Ventures to issue any capital stock (including by way of sales of treasury
stock) or any options or warrants to purchase, or securities convertible into,
capital stock, except (i) for transfers and replacements of then outstanding
shares of capital stock, (ii) for stock splits, stock dividends and similar or
additional issuances which do not decrease the percentage ownership of the
Borrower or any of its Subsidiaries in any class of the capital stock of such
Subsidiary or Joint Venture and (iii) to qualify directors to the extent
required by applicable law.
9.15 Business. The Borrower will not, and will not permit any
of its Subsidiaries or Joint Ventures to, engage (directly or indirectly) in any
business other than the businesses in which FHI and its Subsidiaries and Joint
Ventures are engaged on the Initial Borrowing Date and reasonable extensions
thereof and businesses incidental thereto, provided that the Borrower (x) may
not expand or develop any
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gaming business or venture after the Initial Borrowing Date and (y) may wind
down its existing gaming business and related Specified Existing Investments.
9.16 Limitation on Creation of Subsidiaries, Unrestricted
Subsidiaries and Joint Ventures. (a) The Borrower will not, and will not permit
any of its Subsidiaries or Joint Ventures to, establish, create or acquire any
additional Subsidiaries or Joint Ventures, except that the Borrower and its
Wholly-Owned Subsidiaries shall be permitted to establish, create or acquire (x)
Joint Ventures as provided in Section 9.16(b) and (y) Wholly-Owned Subsidiaries
in connection with Permitted Hotel Acquisitions so long as (i) the capital stock
of such new Wholly-Owned Subsidiary (to the extent that same is a corporation)
is pledged pursuant to (and to the extent required by) the Pledge Agreement and
the certificates representing such stock, together with stock powers duly
executed in blank, are delivered to the Collateral Agent, (ii) the partnership
interests of such new Wholly-Owned Subsidiary (to the extent that same is a
partnership) are pledged and assigned pursuant to (and to the extent required
by) the Pledge Agreement and (iii) any such new Wholly-Owned Domestic Subsidiary
executes a counterpart of the Subsidiaries Guaranty and the Pledge Agreement. In
addition, each such new Wholly-Owned Domestic Subsidiary shall execute and
deliver, or cause to be executed and delivered, all other relevant documentation
of the type described in Section 5 as such new Wholly-Owned Domestic Subsidiary
would have had to deliver if such new Wholly-Owned Domestic Subsidiary were a
Credit Party on the Initial Borrowing Date.
(b) The Borrower will not, and will not permit any of its
Subsidiaries or Joint Ventures to, establish, create or acquire any additional
Joint Ventures after the Initial Borrowing Date, except that the Borrower or any
Wholly-Owned Subsidiary of the Borrower referenced in following clause (z) may
establish, create or acquire Joint Ventures in connection with Investments
permitted by Section 9.05 from time to time, in each case so long as (x) no
Default or Event of Default exists at the time of the establishment, creation or
acquisition of the respective Joint Venture or shall exist immediately after
giving effect thereto, (y) all Investments therein are permitted pursuant to
Section 9.05 and (z) all equity interests in each Joint Venture are owned
directly by the Borrower or a Wholly-Owned Subsidiary of the Borrower which
engages in no business or activities other than the holding of ownership
interests in one or more Joint Ventures and all equity interests therein are
pledged pursuant to (and to the extent required by) the Pledge Agreement,
provided that if any Joint Venture is in the form of a partnership, joint
venture or other business form other than a corporation, the equity interests
therein shall not be directly owned by the Borrower (but shall be owned by a
Wholly-Owned Subsidiary thereof as referenced above in this clause (z)).
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(c) The Borrower will not, and will not permit any of its
Subsidiaries or Joint Ventures to, establish, create or acquire any Unrestricted
Subsidiary, except that any Wholly-Owned Domestic Subsidiary of the Borrower
referenced in following clause (z) may establish, create or acquire Unrestricted
Subsidiaries solely in connection with Investments permitted by Section
9.05(xii) from time to time, in each case so long as (w) no Default or Event of
Default exists at the time of the establishment, creation or acquisition of the
respective Unrestricted Subsidiary or shall exist immediately after giving
effect thereto, (x) all Investments therein (including as a result of the
designation thereof as provided in the definition of Unrestricted Subsidiary)
are permitted pursuant to Section 9.05(xii), (y) all equity interests in each
Unrestricted Subsidiary are owned directly by a Wholly-Owned Domestic Subsidiary
of the Borrower which engages in no business or activities other than the
holding of ownership interests in one or more Unrestricted Subsidiaries and all
equity interests therein are pledged pursuant to (and to the extent required by)
the Pledge Agreement and (z) each such Unrestricted Subsidiary enters into, or
becomes a party to, an Unrestricted Subsidiary Tax Sharing Agreement on terms
and conditions satisfactory to the Required Banks.
SECTION 10. Events of Default. Upon the occurrence of any of
the following specified events (each an "Event of Default"):
10.01 Payments. The Borrower shall (i) default in the payment
when due of any principal of any Revolving Loan or any Revolving Note, (ii)
default in the payment of any Unpaid Drawing for three or more Business Days
after the date the respective Drawing was made or, if no Default or Event of
Default exists pursuant to Section 10.05, for three or more Business Days after
the receipt by the Borrower of notice of the respective Drawing by the
Administrative Agent or the respective Issuing Bank or (iii) default, and such
default shall continue unremedied for three or more Business Days, in the
payment when due of any interest on any Revolving Loan or Revolving Note or
Unpaid Drawing, or any Fees or any other amounts owing hereunder or under any
other Credit Document; or
10.02 Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or in
any certificate delivered pursuant hereto or thereto shall prove to be untrue in
any material respect on the date as of which made or deemed made; or
10.03 Covenants. Any Credit Party shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 8.01(f)(i), 8.08 or 8.11 or Section 9 or (ii) default in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement and
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such default shall continue unremedied for a period of 30 days after written
notice to the Borrower by any Agent or any Bank; or
10.04 Default Under Other Agreements. (i) The Borrower or any
of its Subsidiaries or Joint Ventures shall (x) default in any payment of any
Indebtedness (other than the Obligations) beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created or (y) default in the observance or performance of any agreement or
condition relating to any Indebtedness (other than the Obligations) or contained
in any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause (determined without regard to whether any notice is required), any such
Indebtedness to become due prior to its stated maturity, or (ii) any
Indebtedness (other than the Obligations) of the Borrower or any of its
Subsidiaries or Joint Ventures shall be declared to be due and payable, or
required to be prepaid other than by a regularly scheduled required prepayment,
prior to the stated maturity thereof, provided that (A) it shall not be a
Default or an Event of Default under this Section 10.04 unless the aggregate
principal amount of all Indebtedness as described in preceding clauses (i) and
(ii) is at least $1,000,000 and (B) in making any determination pursuant to
preceding clause (A), there shall be excluded any Indebtedness of the type
described in preceding clauses (i) and (ii) to the extent same was incurred by
any Immaterial Non-Subsidiary Joint Venture (and is not a Contingent Obligation
of the Borrower or any Subsidiary thereof); or
10.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries
or Joint Ventures (excluding any Immaterial Non-Subsidiary Joint Ventures) shall
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the
Borrower or any of its Subsidiaries or any such Joint Ventures and the petition
is not controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower or any of its Subsidiaries or any such Joint Ventures or the
Borrower or any of its Subsidiaries or any such Joint Ventures commences any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or any
of its Subsidiaries or any such Joint Ventures, or there is commenced against
the Borrower or any of its Subsidiaries or any such Joint Ventures any such
proceeding which remains undismissed for a period of 60 days, or the Borrower or
any of its Subsidiaries or any such Joint
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Ventures is adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered and is not vacated or
stayed within 60 days; or the Borrower or any of its Subsidiaries or any such
Joint Ventures suffers any appointment of any custodian or the like for it or
any substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or the Borrower or any of its Subsidiaries or any such Joint
Ventures makes a general assignment for the benefit of creditors; or any
partnership and/or corporate action is taken by the Borrower or any of its
Subsidiaries or any such Joint Ventures for the purpose of effecting any of the
foregoing; or
10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof or a waiver of such
standard or extension of any amortization period is sought or granted under
Section 412 of the Code, any Plan shall have had or is likely to have a trustee
appointed to administer such Plan, any Plan is, shall have been or is likely to
be terminated or to be the subject of termination proceedings under ERISA, any
Plan shall have an Unfunded Current Liability, a contribution required to be
made to a Plan or a Foreign Pension Plan has not been timely made, the Borrower
or any Subsidiary of the Borrower or any ERISA Affiliate has incurred or is
likely to incur a liability to or on account of a Plan under Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971, 4975 or 4980 of the Code, or the Borrower or any of
its Subsidiaries has incurred or is likely to incur liabilities pursuant to one
or more employee welfare benefit plans (as defined in Section 3(1) of ERISA)
that provide benefits to retired employees or other former employees (other than
as required by Section 601 of ERISA) or employee pension benefit plans (as
defined in Section 3(2) of ERISA) or Foreign Pension Plans; (b) there shall
result from any such event or events the imposition of a lien, the granting of a
security interest, or a liability or a material risk of incurring a liability;
(c) which lien, security interest or liability, individually and/or in the
aggregate, in the opinion of the Required Banks, could reasonably be expected to
have a material adverse effect upon the business, operations, property, assets,
nature of assets, liabilities, condition (financial or otherwise) or prospects
of the Borrower, the Borrower and its Subsidiaries taken as a whole or the
Borrower and its Subsidiaries and Joint Ventures taken as a whole; or
10.07 Pledge Agreement. The Pledge Agreement shall cease to be
in full force and effect, or shall cease to give the Collateral Agent for the
benefit of the Secured Creditors, the Liens, rights, powers and privileges
purported to be created thereby (including, without limitation, a perfected
security interest in, and Lien on, all of the Collateral), in favor of the
Collateral Agent superior to and prior to the rights of all third Persons, and
subject to no other Liens, or any Credit Party shall default in the due
performance or observance of any term, covenant or agreement on its part to
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be performed or observed pursuant to the Pledge Agreement and such default shall
continue beyond any grace period specifically applicable thereto pursuant to the
terms of the Pledge Agreement; or
10.08 Guaranty. Any Guaranty shall cease to be in full force
or effect as to the relevant Guarantor, or any Guarantor or Person acting by or
on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under the relevant Guaranty, or any Guarantor Event of Default shall occur, or
at any time the Maximum Guaranteed Amount for any reason whatsoever shall be
less than an amount equal to the remainder of (x) $75,000,000 less (y) the
aggregate amount of cash actually loaned by HFS to the Borrower after the
Initial Borrowing Date pursuant to Section 9.04(vii) and/or invested by HFS in
the Borrower pursuant to Qualified Equity Investments as described in the
definition thereof contained herein, so long as all such cash loaned or invested
was actually used by the Borrower to repay the principal of Revolving Loans
pursuant to the requirements of Section 4.02(a) (as a result of a reduction to
the Total Revolving Loan Commitment pursuant to Sections 3.03(g) and (h)); or
10.09 HFS Subordination Agreement. The HFS Subordination
Agreement shall cease to be in full force or effect for any reason, or HFS or
any Person acting by or on behalf of HFS shall deny or disaffirm HFS's
obligations thereunder, or HFS shall default, and such default shall continue
unremedied for a period of 10 days after written notice to HFS by the
Administrative Agent or any Bank, in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed pursuant
thereto; or
10.10 Judgments. One or more judgments or decrees shall be
entered against the Borrower or any of its Subsidiaries or Joint Ventures
(excluding any Immaterial Non-Subsidiary Joint Ventures) involving in the
aggregate for the Borrower and its Subsidiaries and any such Joint Ventures a
liability (not fully covered by a reputable and solvent insurance company or not
paid) and such judgments and decrees either shall be final and non-appealable or
shall not be vacated, discharged or stayed or bonded pending appeal for any
period of 30 consecutive days, and the aggregate amount of all such judgments
exceeds $1,000,000; or
10.11 HFS Franchise Agreements; etc. (i) Any Franchise
Agreement shall be terminated or any event or condition shall exist which would
enable any party to such Franchise Agreement to terminate or suspend its
obligations thereunder or (ii) at any time any Hotel Property shall be operated
as other than a "Travelodge", "Thriftlodge" or any other nationally recognized
hotel brand which the Board of Directors of the Borrower (or an authorized
committee of such Board) has determined to be in the best interests of the
Borrower, provided that (A) a Hotel Property shall not
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be deemed to be subject to the events described in preceding clause (i) or (ii)
if the respective Hotel Property, in the ordinary course of business and with
the approval of the Board of Directors of the Borrower (or an authorized
committee of such Board), is being changed to another nationally recognized
hotel brand, and in connection with the change-over, the respective Hotel
Property is for a period, in no event to exceed 90 days, operating other than
under a nationally recognized hotel brand and (B) it shall not be a Default or
an Event of Default under clause (i) or (ii) of this Section 10.11 so long as
all Hotel Properties subject to any of the events described above in this
Section 10.11 (after giving effect to preceding clause (A)) at any time do not
represent either more than 5% of the total assets of the Borrower and its
Subsidiaries (after reduction for minority interests) as of the last day of the
most recently ended fiscal quarter of the Borrower or more than 5% of the Total
Hotel Revenues of the Borrower and its Subsidiaries (after reduction for
minority interests) for the Test Period then most recently ended; or
10.12 Total Unrestricted Subsidiary Leverage Ratio. The Total
Unrestricted Subsidiary Leverage Ratio at any time is greater than 5.00:1.00; or
10.13 Unrestricted Subsidiary Tax Payments. Any Unrestricted
Subsidiary of the Borrower shall not pay any amounts owing by it under any
Unrestricted Subsidiary Tax Sharing Agreement to which it is a party and such
failure shall continue unremedied for 10 or more days;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent, upon the written request of
the Required Banks, shall by written notice to the Borrower, take any or all of
the following actions, without prejudice to the rights of the Administrative
Agent, any Bank or the holder of any Revolving Note to enforce its claims
against any Credit Party (provided, that, if an Event of Default specified in
Section 10.05 shall occur with respect to the Borrower or if a Guarantor Event
of Default specified in Section 14(d) of the HFS Guaranty shall occur with
respect to HFS, the result which would occur upon the giving of written notice
by the Administrative Agent to the Borrower as specified in clauses (i) and (ii)
below shall occur automatically without the giving of any such notice): (i)
declare the Total Revolving Loan Commitment terminated, whereupon the Revolving
Loan Commitment of each Bank shall forthwith terminate immediately and any
Commitment Commission shall forthwith become due and payable without any other
notice of any kind; (ii) declare the principal of and any accrued interest in
respect of all Revolving Loans and the Revolving Notes and all Obligations owing
hereunder and thereunder to be, whereupon the same shall become, forthwith due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Credit Party; (iii) terminate any Letter
of Credit, which may be terminated, in
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accordance with its terms; (iv) direct the Borrower to pay (and the Borrower
agrees that upon receipt of such notice, or upon the occurrence of an Event of
Default specified in Section 10.05 with respect to the Borrower, it will pay) to
the Collateral Agent at the Payment Office such additional amount of cash, to be
held as security by the Collateral Agent, as is equal to the aggregate Stated
Amount of all Letters of Credit issued for the account of the Borrower and then
outstanding; (v) enforce, as Collateral Agent, all of the Liens and security
interests created pursuant to the Pledge Agreement; and (vi) take any of the
actions specified in clause (ii) of the proviso to Section 1.06 or in clause (v)
of the proviso to Section 1.09.
SECTION 11. Definitions and Accounting Terms.
11.01 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Accrued Chartwell Preferred Dividends" shall have the meaning
provided in Section 9.03(vii).
"Acquisition" shall mean and include each of the FHI Stock
Acquisition, the HFS Acquisition and the MOA Acquisition.
"Acquisition Documents" shall mean the FHI Stock Acquisition
Documents, the HFS Acquisition Documents and the MOA Acquisition Documents.
"Adjusted Certificate of Deposit Rate" shall mean, on any day,
the sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by
dividing (x) the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market as
published in the most recent Federal Reserve System publication entitled "Select
Interest Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Administrative Agent on the basis of quotations
for such certificates received by it from three certificate of deposit dealers
in New York of recognized standing or, if such quotations are unavailable, then
on the basis of other sources reasonably selected by the Administrative Agent,
by (y) a percentage equal to 100% minus the stated maximum rate of all reserve
requirements as specified in Regulation D applicable on such day to a
three-month certificate of deposit of a member bank of the Federal Reserve
System in excess of $100,000 (including, without limitation, any marginal,
emergency, supplemental, special or other reserves), plus (2) the then daily net
annual assessment rate as estimated by the
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Administrative Agent for determining the current annual assessment payable by
the Agent to the Federal Deposit Insurance Corporation for insuring three-month
certificates of deposit.
"Adjusted Consolidated Borrower EBITDA" for any period shall
mean Adjusted Consolidated EBITDA of the Borrower for such period, provided that
in determining Consolidated EBITDA (as required pursuant to the definition of
Adjusted Consolidated EBITDA) of the Borrower for such period, Consolidated
Borrower Net Income (and not Consolidated Net Income) shall be used, with the
term "Consolidated Borrower Net Income" being deemed inserted in lieu of the
term "Consolidated Net Income" in each place such term is used in the definition
of Consolidated EBITDA contained herein.
"Adjusted Consolidated EBITDA" any Person for any period shall
mean Consolidated EBITDA of such Person for such period, but without giving
effect to any gains or losses from sales of assets other than inventory in the
ordinary course of business.
"Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities at such time.
"Adjusted Percentage" shall mean (x) at a time when no Bank
Default exists, for each Bank, such Bank's Percentage and (y) at a time when a
Bank Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii)
for each Bank that is a Non-Defaulting Bank, the percentage determined by
dividing such Bank's Revolving Loan Commitment at such time by the Adjusted
Total Revolving Loan Commitment at such time, it being understood that all
references herein to Revolving Loan Commitments and the Adjusted Total Revolving
Loan Commitment at a time when the Total Revolving Loan Commitment or Adjusted
Total Revolving Loan Commitment, as the case may be, has been terminated shall
be references to the Revolving Loan Commitments or Adjusted Total Revolving Loan
Commitment, as the case may be, in effect immediately prior to such termination,
provided that (A) no Bank's Adjusted Percentage shall change upon the occurrence
of a Bank Default from that in effect immediately prior to such Bank Default if
after giving effect to such Bank Default, and any repayment of Revolving Loans
at such time pursuant to Section 4.02(a) or otherwise, the sum of (i) the
aggregate outstanding principal amount of Revolving Loans of all Non-Defaulting
Banks plus (ii) the Letter of Credit Outstandings, exceed the Adjusted Total
Revolving Loan Commitment; (B) the changes to the Adjusted Percentage that would
have become effective upon the occurrence of a Bank Default but that did not
become effective as a result of the preceding clause (A) shall become effective
on the
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first date after the occurrence of the relevant Bank Default on which the sum of
(i) the aggregate outstanding principal amount of the Revolving Loans of all
Non-Defaulting Banks plus (ii) the Letter of Credit Outstandings is equal to or
less than the Adjusted Total Revolving Loan Commitment; and (C) if (i) a
Non-Defaulting Bank's Adjusted Percentage is changed pursuant to the preceding
clause (B) and (ii) any repayment of such Bank's Revolving Loans, or of Unpaid
Drawings with respect to Letters of Credit, that were made during the period
commencing after the date of the relevant Bank Default and ending on the date of
such change to its Adjusted Percentage must be returned to the Borrower as a
preferential or similar payment in any bankruptcy or similar proceeding of the
Borrower, then the change to such Non-Defaulting Bank's Adjusted Percentage
effected pursuant to said clause (B) shall be reduced to that positive change,
if any, as would have been made to its Adjusted Percentage if (x) such
repayments had not been made and (y) the maximum change to its Adjusted
Percentage would have resulted in the sum of the outstanding principal of
Revolving Loans made by such Bank plus such Bank's new Adjusted Percentage of
Letter of Credit Outstand-ings equalling such Bank's Revolving Loan Commitment
at such time.
"Adjusted Total Revolving Loan Commitment" shall mean, at any
time, the Total Revolving Loan Commitment at such time less the aggregate
Revolving Loan Commitments of all Defaulting Banks at such time.
"Administrative Agent" shall mean Bankers Trust Company, in
its capacity as Administrative Agent for the Banks hereunder, and shall include
any successor to the Administrative Agent appointed pursuant to Section 12.09.
"Affiliate" shall mean, with respect to any Person, any other
Person (i) directly or indirectly controlling (including, but not limited to,
all directors, officers and partners of such Person) controlled by, or under
direct or indirect common control with, such Person or (ii) that directly or
indirectly owns more than 5% of any class of the voting securities or capital
stock of or equity interests in such Person. A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through the ownership of voting securities, by contract or
otherwise. Notwithstanding anything to the contrary contained above, for all
purposes of this Agreement, HFS and its Subsidiaries and Affiliates shall be
deemed to be Affiliates of the Borrower and its Subsidiaries.
"Affiliate Agreements" shall have the meaning provided in
Section 5.06.
"Agent" shall mean and include the Administrative Agent and
the Documentation Agent.
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"Agreement" shall mean this Credit Agreement, as modified,
supplemented, amended, restated, extended, renewed, refinanced or replaced from
time to time.
"Allocable Share" shall mean, with respect to any Joint
Venture and event or circumstance under this Agreement that requires the
determination thereof, that percentage of such Joint Venture's equity interests
that are owned (directly or indirectly) by the Borrower.
"Applicable Excess Cash Flow Recapture Percentage" shall mean,
at any time, 50%.
"Applicable Margin" shall mean, on any day, the respective
percentage per annum set forth in clause (A), (B), (C), (D), (E) or (F) below to
the extent that the applicable condition set forth in any such clause below is
met on any such day:
(A) .75% if on any day the Total Outstandings on such day is
greater than the sum of (i) the Guaranty Amount then in effect plus
(ii) $40,000,000;
(B) .70% if on any day the Total Outstandings on such day is
greater than the sum of (i) the Guaranty Amount then in effect plus
(ii) $30,000,000, and clause (A) above is not applicable;
(C) .65% if on any day the Total Outstandings on such day is
greater than the sum of (i) the Guaranty Amount then in effect plus
(ii) $20,000,000, and neither clause (A) nor clause (B) above is
applicable;
(D) .60% if on any day the Total Outstandings on such day is
greater than the sum of (i) the Guaranty Amount then in effect plus
(ii) $10,000,000, and none of clauses (A), (B) or (C) above are
applicable;
(E) .50% if on any day the Total Outstandings on such day is
greater than the Guaranty Amount then in effect, and none of clauses
(A), (B), (C), (D) or (E) above are applicable; or
(F) .40% if on any day the Total Outstandings on such day is
equal to or less than the Guaranty Amount then in effect.
Notwithstanding anything to the contrary contained above in
this definition, the Applicable Margin shall be .75% on any day on which an
Event of Default shall exist.
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"Approved Bank" shall have the meaning provided in the
definition of "Cash Equivalents."
"Asset Sale" shall mean (i) any Recovery Event or (ii) any
sale, transfer or other disposition by the Borrower or any of its Subsidiaries
or Joint Ventures to any Person other than the Borrower or a Wholly-Owned
Subsidiary of the Borrower of any asset (including, without limitation, any
capital stock or other securities of another Person) of the Borrower or any of
its Subsidiaries or Joint Ventures other than (x) any sale, transfer or
disposition permitted by Sections 9.02(v) and (y) any sale, transfer or
disposition where the fair market value of the consideration therefor is less
than or equal to $10,000.
"Assignment and Assumption Agreement" shall mean the
Assignment and Assumption Agreement substantially in the form of Exhibit K
(appropriately completed).
"Authorized Financial Officer" of any Credit Party shall mean
any of the Chief Financial Officer, the Treasurer or the Chief Accounting
Officer of such Credit Party.
"Authorized Officer" of any Credit Party shall mean any of the
President, any Authorized Financial Officer or any Vice-President of such Credit
Party or any other officer of such Credit Party which is designated in writing
to the Administrative Agent by any of the foregoing officers of such Credit
Party as being authorized to give such notices under this Agreement.
"Bank" shall mean each financial institution listed on
Schedule I, as well as any Person which becomes a "Bank" hereunder pursuant to
13.04(b).
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing in violation
of this Agreement or (ii) a Bank having notified in writing the Borrower and/or
the Administrative Agent that it does not intend to comply with its obligations
under Section 1.01 including, without limitation, as a result of any takeover of
such Bank by any regulatory authority or agency.
"Bank of America Facility" shall mean the credit facilities
made available by Bank of America National Trust & Savings Association to Joint
Ventures of FHI pursuant to the terms of that certain Letter Loan Agreement,
dated June 17, 1994, among Bank of American National Trust & Savings
Association, FHI, Forte (U.K.)
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Limited, Forte Plc and certain affiliates thereof, as in effect on the Initial
Borrowing Date.
"Bank Termination Date" shall mean that date occurring after
the Effective Date upon which the Total Revolving Loan Commitment and all
Letters of Credit shall have terminated and all Revolving Loans, Revolving Notes
and Unpaid Drawings, together with interest, Fees and all other Obligations
incurred hereunder and thereunder, are paid in full to the Banks; provided that
if any amount so received by the Banks must be disgorged by them, then the Bank
Termination Date shall be deemed to have not occurred until such future time as
the foregoing conditions are once again satisfied.
"Bankruptcy Code" shall have the meaning provided in Section
10.05.
"Base Rate" at any time shall mean the highest of (i) the rate
which is 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate, (ii)
1/2 of 1% in excess of Federal Funds Rate and (iii) the Prime Lending Rate.
"Base Rate Loan" shall mean each Revolving Loan designated or
deemed designated as such by the Borrower at the time of the incurrence thereof
or conversion thereto.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrowing" shall mean the borrowing of one Type of Revolving
Loan from all the Banks on a given date (or resulting from a conversion or
conversions on such date) having in the case of Eurodollar Loans the same
Interest Period, provided that Base Rate Loans incurred pursuant to Section
1.10(b) shall be considered part of the related Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company in its individual
capacity.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day which
shall be in New York City a legal holiday or a day on which banking institutions
are authorized or required by law or other government action to close and (ii)
with respect to all notices and determinations in connection with, and payments
of principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) above and which is also a day for trading by and between
banks in the New York interbank Euro-dollar market.
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"Calculation Period" shall mean the period of four consecutive
fiscal quarters last ended before the date of the respective Permitted Hotel
Acquisition which requires calculations to be made on a Pro Forma Basis.
"Capital Expenditures" shall mean, with respect to any Person,
all expenditures by such Person which should be capitalized in accordance with
generally accepted accounting principles, including all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with
generally accepted accounting principles) and the amount of Capitalized Lease
Obligations incurred by such Person, provided that the Deferred Maintenance
Capital Expenditures shall not be considered Capital Expenditures for purposes
of this Agreement.
"Capital Stock" of any Person means all shares, interests,
participations, partnership interests or other equivalents (however designated)
of such Persons' capital stock or other equity interests.
"Capitalized Interest" shall mean interest that is capitalized
and is not counted as interest expense in accordance with GAAP.
"Capitalized Lease Obligations" of any Person shall mean all
rental obligations which, under generally accepted accounting principles, are or
will be required to be capitalized on the books of such Person, in each case
taken at the amount thereof accounted for as indebtedness in accordance with
such principles.
"Cash Equivalents" shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having maturities of
not more than six months from the date of acquisition, (ii) U.S. dollar
denominated time deposits, certificates of deposit and bankers acceptances of
(x) any Bank or (y) any bank whose short-term commercial paper rating from S&P
is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank or Bank, an "Approved Bank"), in each case
with maturities of not more than six months from the date of acquisition, (iii)
commercial paper issued by any Approved Bank or by the parent company of any
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, or guaranteed by any industrial company with a long term unsecured debt
rating of at least A or A2, or the equivalent of each thereof, from S&P or
Moody's, as the case may be, and in each case maturing within six months after
the date of acquisition, (iv) market-
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able direct obligations issued by any state of the United States of America or
any political subdivision of any such state or any public instrumentality
thereof maturing within six months from the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings obtainable from
either S&P or Moody's and (v) investments in money market funds substantially
all the assets of which are comprised of securities of the types described in
clauses (i) through (iv) above.
"Cash Proceeds" shall mean, with respect to any Asset Sale,
the aggregate cash payments (including any cash received by way of deferred
payment, pursuant to a note, receivable or otherwise, in connection with such
Asset Sale, but only as and when so received) received by the Borrower or any of
its Subsidiaries or Joint Ventures from such Asset Sale.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time to
time, 42 U.S.C. ss. 9601 et seq.
"Change of Control" shall mean (i) the direct or indirect
acquisition by any Person or a group (as such term is defined in Section
13(d)(3) of the Securities Exchange Act), other than (x) HFS and its
Subsidiaries and/or (y) Chartwell, of beneficial ownership (as such term is
defined in Rule 13D-3 promulgated under the Securities Exchange Act), of 30% or
more of the outstanding shares of common stock of the Borrower (on a fully
diluted basis) or (ii) the Board of Directors of the Borrower shall not consist
of a majority of Continuing Directors.
"Chartwell" shall mean Chartwell Leisure Associates, L.P., any
other partnership controlled by one or more of the existing partners of
Chartwell Leisure Associates, L.P. on the Initial Borrowing Date or any
Affiliate thereof or other investors therein in each case reasonably acceptable
to the Agents.
"Chartwell Preferred Stock" shall mean the class of the
Borrower's preferred stock issued to Chartwell satisfying the applicable
requirements of Section 9.04(ix) and containing such other terms as are
reasonably acceptable to the Agents.
"Chartwell Preferred Stock/Subordinated Debt" shall mean, as
the context may require, the Chartwell Preferred Stock and/or the Chartwell
Subordinated Debt.
"Chartwell Subordinated Debt" shall mean the subordinated debt
of the Borrower issued upon conversion of any outstanding shares of Chartwell
Preferred Stock in accordance with the terms thereof, it being understood and
agreed, however,
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that (i) the Chartwell Preferred Stock may not be so converted (and shall
expressly provide that no such conversion shall be effective) without the prior
written consent of the Required Banks (which consent may be granted or withheld
by the Banks in their sole discretion), (ii) the Chartwell Subordinated Debt
shall satisfy the applicable requirements of Section 9.04(ix) and (iii) all
terms and conditions of the Chartwell Subordinated Debt shall be required to be
satisfactory in form and substance to the Required Banks.
"Claims" shall have the meaning provided in the definition of
"Environmental Claims."
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and ruling issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement, and to any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all property (whether real or
personal) with respect to which any security interests have been granted (or
purported to be granted) pursuant to the Pledge Agreement.
"Collateral Agent" shall mean the Administrative Agent acting
as collateral agent for the Secured Creditors pursuant to the Pledge Agreement.
"Collective Bargaining Agreements" shall have the meaning
provided in Section 5.06.
"Commitment Commission" shall have the meaning provided in
Section 3.01(a).
"Consolidated Borrower Net Income" shall mean, for any period,
the net income (or loss) of the Borrower and its Subsidiaries for such period,
determined on a consolidated basis; provided that (i) the net income (if
positive) for such period of any other Person which is not a Wholly-Owned
Subsidiary of the Borrower or is accounted for by the Borrower by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions actually paid by such Person during such period to
the Borrower or a Wholly-Owned Subsidiary of the Borrower (provided that any
such payments made in January 1997 shall, for purposes of this Agreement, be
treated as though made in December 1996), (ii) the net income (or loss) of any
other Person acquired by the Borrower or a Subsidiary of the Borrower in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be
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excluded, (iii) Consolidated Net Income shall, without duplication, be reduced
by the aggregate amount of fees and payments by the Borrower or its Subsidiaries
pursuant to Section 9.06(iii), (iv), (v), (vii), (ix), (x) and (xi), but shall
not be reduced by any other fees paid by the Borrower and its Subsidiaries to
HFS as otherwise permitted by this Agreement and (iv) the net income of each
Unrestricted Subsidiary shall be wholly excluded.
"Consolidated Current Assets" shall mean, at any time, the
amounts that would be classified as consolidated current assets of the Borrower
and its Subsidiaries in accordance with generally accepted accounting principles
in a consolidated balance sheet.
"Consolidated Current Liabilities" shall mean, at any time,
the amounts that would be classified as consolidated current liabilities of the
Borrower and its Subsidiaries at such time in accordance with generally accepted
accounting principles in a consolidated balance sheet, but excluding the current
portion of any Indebtedness under this Agreement and the current portion of any
other long-term Indebtedness which would otherwise be included therein.
"Consolidated Debt" shall mean, at any time, all Indebtedness
of the Borrower and its Wholly-Owned Subsidiaries plus, without duplication, the
Borrower's Allocable Share of any Indebtedness of a Joint Venture, in either
case as would be required to be reflected on the liability side of a balance
sheet as prepared in accordance with generally accepted accounting principles
and as determined on a consolidated basis, but including, in any event, (x) all
Revolving Loans and Letters of Credit, (y) the aggregate amount of Indebtedness
then outstanding as evidenced by Redeemable Capital Stock (including any such
Redeemable Capital Stock issued in accordance with Section 9.04(viii)) and (z)
the amount of outstanding HFS Subordinated Indebtedness, if any, provided that,
notwithstanding the foregoing, the term Consolidated Debt shall exclude all
outstanding Chartwell Preferred Stock/Subordinated Debt.
"Consolidated EBITDA" shall mean, for any Person and period,
(A) the sum of the amounts for such Person and period of (i) Consolidated Net
Income, (ii) consolidated interest expense of such Person for such period, to
the extent same reduced Consolidated Net Income for such period, (iii)
provisions for taxes based on income, to the extent same reduced Consolidated
Net Income for such period, (iv) depreciation expense, to the extent same
reduced Consolidated Net Income for such period, (v) amortization expense, to
the extent same reduced Consolidated Net Income for such period, (vi) any other
non-cash items reducing the Consolidated Net Income of such Person for such
period, and (vii) any cash receipts of such Person or a Wholly-Owned
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Subsidiary of such Person during such period that represent items included in
Consolidated Net Income of such Person for a prior period which were excluded
from Consolidated EBITDA of such Person for such prior period by virtue of
clause (B)(i) of this definition, minus (B) the sum of (i) all non-cash items
increasing the Consolidated Net Income of such Person for such period and (ii)
any cash expenditures of such Person during such period to the extent such cash
expenditures (x) did not reduce the Consolidated Net Income of such Person for
such period and (y) were applied against reserves that constituted non-cash
items which reduced the Consolidated Net Income of such Person during prior
periods, all as determined on a consolidated basis for such Person and its
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" shall mean, for any
period, the ratio of (x) Adjusted Consolidated EBITDA of the Borrower for such
period to (y) Consolidated Fixed Charges of the Borrower for such period.
"Consolidated Fixed Charges" shall mean, for any period, the
sum of (i) Consolidated Interest Expense of the Borrower for such period and the
Borrower's Allocable Share of all Interest Expense of its Joint Ventures for
such period, (ii) the amount of all cash taxes paid by the Borrower and its
Wholly-Owned Subsidiaries during such period, plus, without duplication, the
Borrower's Allocable Share of all cash taxes paid by Joint Ventures during such
period, but excluding that portion of any cash taxes that are paid by the
Borrower which are attributable to the operations of any Unrestricted Subsidiary
but only to the extent that the Borrower has been reimbursed by such
Unrestricted Subsidiary for such cash taxes, and (iii) the amount of all Capital
Expenditures made by the Borrower and its Wholly-Owned Subsidiaries during such
period plus, without duplication, the Borrower's Allocable Share of Capital
Expenditures made by Joint Ventures during such period (other than Capital
Expenditures made pursuant to the last sentence of Section 9.07(a) and pursuant
to Sections 9.07(b) and (c) during such period).
"Consolidated Interest Coverage Ratio" shall mean, for any
period, the ratio of (x) Adjusted Consolidated EBITDA of the Borrower for such
period to (y) Consolidated Interest Expense of the Borrower for such period.
"Consolidated Interest Expense" shall mean, for any Person and
period, the total consolidated interest expense of such Person and its
Wholly-Owned Subsidiaries for such period (calculated without regard to any
limitations on the payment thereof) plus, without duplication, that portion of
Capitalized Lease Obligations of such Person and its Wholly-Owned Subsidiaries
representing the interest factor for such period, but excluding the amortization
of any deferred financing costs incurred in connection with this Agreement.
Notwithstanding any to the contrary contained
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elsewhere in this Agreement or the requirements of generally accepted accounting
principles, in calculating Consolidated Interest Expense of the Borrower, (v)
the amount of Capitalized Interest incurred during any period shall be added as
a component of Consolidated Interest Expense, (w) the amount of the Guaranty Fee
paid or accrued during any period shall be added as a component of Consolidated
Interest Expense, (x) accrued dividends on any Redeemable Capital Stock
(excluding accrued dividends on the Chartwell Preferred Stock) shall be added as
a component of Consolidated Interest Expense, (y) the interest expense on the
Chartwell Subordinated Debt shall be excluded and (z) the interest expense of
any non-Wholly-Owned Subsidiary shall be excluded.
"Consolidated Net Income" shall mean, for any Person and
period, the net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis; provided that (i) in determining
Consolidated Net Income of the Borrower, the net income of any other Person
which is not a Wholly-Owned Subsidiary of the Person or is accounted for by such
specified Person by the equity method of accounting shall be included only to
the extent of the Borrower's direct or indirect equity interests in such net
income (taking the Borrower's direct or indirect distributable share thereof),
in each case reduced to the extent that the declaration or payment of dividends
or distributions by such other Person during such period is not at the time
permitted by operation of the terms of its charter or any other agreement or
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such other Person or requires the consent of any other Person
other than the specified Person as a Wholly-Owned Subsidiary thereof, (ii) the
net income (or loss) of any other Person acquired by such specified Person or a
Subsidiary of such Person in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded, (iii) Consolidated Net
Income of the Borrower shall, without duplication, be reduced by the aggregate
amount of fees and payments by the Borrower or its Subsidiaries pursuant to
Sections 9.06(iii), (iv), (v), (vii), (ix), (x) and ( xi), but shall not be
reduced by any other fees paid by the Borrower and its Subsidiaries to HFS as
otherwise permitted by this Agreement and (iv) in determining Consolidated Net
Income of the Borrower, the net income of each Unrestricted Subsidiary shall be
wholly excluded.
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person as a result of such Person being a general partner of
the other Person, unless the underlying obligation is expressly made
non-recourse as to such general partner, and any obligation of such Person
guaranteeing or intended to guarantee any Indebtedness, leases, dividends or
other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect
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security therefor, (ii) to advance or supply funds (x) for the purchase or
payment of any such primary obligation or (y) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency 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 such
primary obligation against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Continuing Directors" shall mean the directors of the
Borrower on the Effective Date and each other director, if such other director's
nomination for election to the Board of Directors of the Borrower is recommended
by a majority of the then Continuing Directors or is recommended by a committee
of the Board of Directors a majority of which is composed of the then Continuing
Directors.
"Corporate Services Agreement" shall mean the Corporate
Services Agreement, dated as of November 22, 1994, between the Borrower and HFS.
"Corporate Services Fee" shall mean an annual fee equal to the
greater of $1,500,000 (subject to increase based on the Consumer Price Index as
provided in the Corporate Services Agreement) and 2% of the total revenues of
the Borrower and its Wholly-Owned Subsidiaries plus, without duplication, 2% of
the Borrower's Allocable Share of the total revenues of its Joint Ventures, up
to a maximum fee of $10,000,000 annually (subject to increase based on the
Consumer Price Index as provided in the Corporate Services Agreement), which
Corporate Services Fee shall be payable on a quarterly basis in advance of the
services to be performed. Notwithstanding anything to the contrary contained in
the immediately preceding sentence, prior to the Effective Date HFS shall have
agreed, pursuant to the HFS Subordination Agreement, that to the extent the
Corporate Services Fee is based upon the revenues generated by non-Wholly-Owned
Subsidiaries, Joint Ventures or Unrestricted Subsidiaries of the Borrower, then
the obligation to pay that portion of the Corporate Services Fee shall be an
obligation solely of the respective non-Wholly-Owned Subsidiary, Joint Venture
or Unrestricted Subsidiary, as the case may be, and shall not constitute an
obligation of (and shall not be paid by) the Borrower or any of
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its Wholly-Owned Subsidiaries, except to the extent expressly set forth in the
proviso to clause (iii) of Section 5.18.
"Credit Documents" shall mean this Agreement and, after the
execution and delivery thereof pursuant to the terms of this Agreement, each
Note, the Pledge Agreement, each Guaranty and the HFS Subordination Agreement.
"Credit Event" shall mean the making of any Revolving Loan or
the issuance of any Letter of Credit.
"Credit Party" shall mean HFS, the Borrower and each
Subsidiary Guarantor.
"Cumulative Retained Residual Excess Cash Flow Amount" shall
initially be $0, provided that the Cumulative Retained Residual Excess Cash Flow
Amount shall be (i) increased on each Excess Cash Payment Date (so long as any
commitment reduction required by Section 3.03(f) on such date has actually been
made) by an amount equal to 50% of the Residual Excess Cash Flow for the
immediately preceding fiscal year (or if Residual Excess Cash Flow is a negative
amount for such fiscal year, Cumulative Retained Residual Excess Cash Flow shall
be reduced by 100% of such amount) and (ii) reduced, on each date upon which (x)
any Restricted Payment is made pursuant to Section 9.03(vi), by the amount of
such Restricted Payment and (y) any Capital Expenditures are made pursuant to
Section 9.07(c), by the amount of such Capital Expenditure.
"Cumulative Unrestricted Subsidiary Dividend Amount" shall
mean, at any time, the aggregate amount of cash dividends or distributions
received by the Borrower or a Wholly-Owned Subsidiary thereof from all
Unrestricted Subsidiaries (other than any such dividends or distributions the
proceeds of which are to pay any such Unrestricted Subsidiary's portion of any
taxes payable by the Borrower or a Wholly-Owned Subsidiary thereof), with the
Cumulative Unrestricted Subsidiary Dividend Amount to be reduced on each date on
which, and in the amount by which, the Borrower makes a Restricted Payment
pursuant to Section 9.03(vii).
"Current Consolidated Tax Rate" means, with respect to any
Person for any period, the combined highest marginal U.S. federal, state and
local income tax rate (calculated by (i) taking into account the deductibility
of state and local income taxes for U.S. federal income tax purposes and (ii)
using the highest marginal state income tax rate imposed by any state in which
the Borrower is doing business) during such period on any incremental ordinary
income (i.e., income in excess of the income generated by such Person during the
respective period) of such Person.
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"Debt Agreements" shall have the meaning provided in Section
5.06.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a
Bank Default is in effect.
"Deferred Maintenance Capital Expenditures" shall mean (i)
with respect to those Hotel Properties that are wholly-owned (directly or
indirectly) by the Borrower on the Initial Borrowing Date, up to $8,000,000 of
Capital Expenditures that have been deferred from periods prior to the Initial
Borrowing Date and (ii) with respect to those Hotel Properties that are not
wholly-owned (directly or indirectly) by the Borrower on the Initial Borrowing
Date, up to $3,000,000 of the Borrower's Allocable Share of Capital Expenditures
that have been deferred from periods prior to the Initial Borrowing Date, in
each case to the extent such deferred capital expenditures are made within the
one year period following the Initial Borrowing Date for maintenance Capital
Expenditures.
"Dividends" with respect to any Person shall mean that such
Person has declared or paid a dividend or returned any equity capital to its
stockholders or partners or authorized or made any other distribution, payment
or delivery of property (other than common stock of such Person) or cash to its
stockholders or partners as such, or redeemed, retired, purchased or otherwise
acquired, directly or indirectly, for a consideration any shares of any class of
its capital stock or any partnership interests outstanding on or after the
Effective Date (or any options or warrants issued by such Person with respect to
its capital stock), or set aside any funds for any of the foregoing purposes, or
shall have permitted any of its Subsidiaries to purchase or otherwise acquire
for a consideration any shares of any class of the capital stock or any
partnership interests of such Person outstanding on or after the Effective Date
(or any options or warrants issued by such Person with respect to its capital
stock). Without limiting the foregoing, "Dividends" with respect to any Person
shall also include all payments made or required to be made by such Person with
respect to any stock appreciation rights, plans, equity incentive or achievement
plans or any similar plans or setting aside of any funds for the foregoing
purposes, in each case except to the extent the payments described in this
sentence are booked as an expense which reduces Consolidated Net Income.
"Documentation Agent" shall mean Chemical Bank, in its
capacity as Documentation Agent for the Banks hereunder.
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"Documents" shall mean the Credit Documents, the Acquisition
Documents and the Refinancing Documents.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Drawing" shall have the meaning provided in Section 2.05.
"Effective Date" shall have the meaning provided in Section
13.10.
"Eligible Transferee" shall mean, with respect to any Bank
party to this Agreement on the date hereof or that becomes a Bank pursuant to
Sections 1.13 or 13.04, a commercial bank, financial institution or other
"accredited investor" as defined in Regulation D of the Securities Act.
"Employee Benefit Plans" shall have the meaning provided in
Section 5.06.
"Employment Agreements" shall have the meaning provided in
Section 5.06.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-com-pliance or violation, investigations, orders or proceedings
relating in any way to any Environmental Law (hereafter "Claims") or any permit
issued under any such law, including, without limitation, (a) any and all Claims
by governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any applicable Federal, state,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy and rule of common
law now or hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgement relating to the environment, employee health
and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA;
the Federal Water Pollution Control Act, 33 U.S.C. ss. 2601 et seq., the Clean
Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.
3803 et seq.; the Oil Pollution Act of 1990,
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33 U.S.C. ss. 2701 et seq.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 U.S.C. ss. 11001 et seq., the Hazardous Material
Transportation Act, 49 U.S.C. ss. 1801 et seq. and the Occupational Safety and
Health Act, 29 U.S.C. ss. 651 et seq. (to the extent it regulates occupational
exposure to Hazardous Materials); and any state and local or foreign
counterparts or equivalents, in each case as amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower or Subsidiary of the
Borrower or HFS would be deemed to be a "single employer" (i) within the meaning
of Section 414(b),(c), (m) or (o) of the Code or (ii) as a result of the
Borrower, or a Subsidiary of the Borrower or HFS being or having been a general
partner of such person.
"Eurodollar Loan" shall mean each Revolving Loan designated as
such by the Borrower at the time of the incurrence thereof or conversion
thereto.
"Eurodollar Rate" shall mean (a) the offered quotation to
first-class banks in the New York interbank Eurodollar market by BTCo for Dollar
deposits of amounts in immediately available funds comparable to the outstanding
principal amount of the Eurodollar Loan of BTCo with maturities comparable to
the Interest Period applicable to such Eurodollar Loan commencing two Business
Days thereafter as of 10:00 A.M. (New York time) on the date which is two
Business Days prior to the commencement of such Interest Period, divided (and
rounded off to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to
the next highest 1/16 of 1%) by (b) a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves required by
applicable law) applicable to any member bank of the Federal Reserve System in
respect of Eurocurrency funding or liabilities as defined in Regulation D (or
any successor category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section
10.
"Excess Cash Flow" shall mean, for any period, the remainder
of (a) the sum of (i) Adjusted Consolidated EBITDA of the Borrower for such
period and (ii) the decrease, if any, in Adjusted Consolidated Working Capital
from the first day to the
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last day of such period, minus (b) the sum of (i) the amount of Capital
Expenditures made by the Borrower and its Wholly-Owned Subsidiaries during such
period plus, without duplication, the Borrower's Allocable Share of Capital
Expenditures made by Joint Ventures during such period (but excluding Capital
Expenditures (x) financed with the proceeds of Indebtedness or equity or with
the proceeds of Asset Sales or (y) made pursuant to the last sentence of Section
9.07(a) or pursuant to Section 9.07(b) or (c)), (ii) the aggregate amount of
permanent principal payments of Indebtedness for borrowed money of the Borrower
and its Wholly-Owned Subsidiaries (but excluding payments pursuant to the
Refinancing and repayments of Loans, provided that repayments of Revolving Loans
shall be deducted in determining Excess Cash Flow if such repayments were (A)
required as a result of a Scheduled Commitment Reduction under Section 3.03(b)
(but not as a reduction to the amount of Scheduled Commitment Reductions
pursuant to another provision of this Agreement) or (B) made as a voluntary
prepayment pursuant to Section 4.01(a) with internally generated funds during
such period (but only to the extent accompanied by a voluntary reduction to the
Total Revolving Loan Commitment pursuant to Section 3.02(a)), (iii) the amount
of Consolidated Interest Expense (excluding payments of dividends in respect of
Redeemable Capital Stock) actually paid in cash during such period, (iv) the
amount of cash taxes actually paid during such period (excluding cash taxes
which must be paid, or reimbursed to the Borrower or its Wholly-Owned
Subsidiaries, by one or more Unrestricted Subsidiaries, whether pursuant to the
Unrestricted Subsidiary Tax Sharing Agreements or otherwise) and (v) the
increase, if any, in Adjusted Consolidated Working Capital from the first day to
the last day of such period.
"Excess Cash Payment Date" shall mean the earlier of (i) the
date occurring 105 days after the last day of each fiscal year of the Borrower
and (ii) the date which occurs 15 days after the date of delivery of the
financial statements pursuant to Section 8.01(c), in either case beginning with
the Borrower's fiscal year ended December 31, 1997.
"Excess Cash Payment Period" shall mean, with respect to the
repayment required on each Excess Cash Payment Date, the immediately preceding
fiscal year of the Borrower.
"Excess Corporate Services Fees" shall mean any amount of
Corporate Services Fee which is owed by the Borrower to HFS (after giving effect
to the last sentence of the definition of Corporate Services Fee) in excess of
$625,000 with respect to any fiscal quarter of the Borrower.
"Excess Termination Fees" shall mean, with respect to any HFS
Franchise Agreement entered into in connection with any Hotel Property existing
on the
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Initial Borrowing Date, any Termination Fee payable pursuant to such HFS
Franchise Agreement in excess of 2% of the total gross revenues for the
respective Hotel Property for the immediately preceding twelve month period in
respect of which such Termination Fee is paid. It is acknowledged and agreed
that Excess Termination Fees shall not be payable in connection with Hotel
Properties acquired after the Initial Borrowing Date, unless expressly consented
to by the Required Banks.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Existing Indebtedness" shall have the meaning provided in
Section 7.22.
"Existing Investment Agreements" shall have the meaning
provided in Section 5.06.
"Existing Investments" shall have the meaning provided in
Section 9.05(vii).
"Facility Lease" shall mean the Sublease dated November 22,
1994 between the Borrower and HFS, pursuant to which the Borrower subleases
approximately 7,500 square feet of office space located at 339 Jefferson Road,
Parsippany, New Jersey 07054 from HFS.
"Facing Fee" shall have the meaning provided in Section
3.01(c).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to or referred
to in Section 3.01.
"FHI" shall mean Forte Hotels, Inc., a Delaware corporation,
which promptly following the Initial Borrowing Date shall change its name to NL
Hotels, Inc.
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"FHI Stock Acquisition" shall mean the acquisition by the
Borrower of 100% of the outstanding capital stock of FHI pursuant to, and in
accordance with the terms of, the FHI Stock Acquisition Documents.
"FHI Stock Acquisition Documents" shall mean the Stock
Purchase Agreement, dated as of December 19, 1995, between the Borrower and
Forte USA, Inc., a Delaware corporation, and all other documents or agreements
entered into in connection with the FHI Stock Acquisition.
"Final Maturity Date" shall mean January 23, 2002.
"Financing Agreement" shall mean the Amended and Restated
Interim Financing Agreement, dated as of January 23, 1996, between the Borrower
and HFS
"Foreign Pension Plan" means any plan, fund (including,
without limitation, any superannuation fund) or other similar program
established or maintained outside the United States of America by the Borrower
or any one or more of its Subsidiaries primarily for the benefit of employees of
the Borrower or such Subsidiaries residing outside the United States of America,
which plan, fund or other similar program provides, or results in, retirement
income, a deferral of income in contemplation of retirement or payments to be
made upon termination of employment, and which plan is not subject to ERISA or
the Code.
"Franchise Agreement" shall mean (i) with respect to any Hotel
Property in which HFS is the franchisor, an HFS Franchise Agreement and (ii)
with respect to any other Hotel Property, a franchise agreement that the
respective franchisor customarily uses with respect to similarly situated
franchises.
"Guarantor" shall mean HFS and each Subsidiary Guarantor.
"Guarantor Event of Default" shall have the meaning provided
in the HFS Guaranty.
"Guaranty" shall mean the HFS Guaranty and the Subsidiaries
Guaranty.
"Guaranty Amount" shall mean the amount of the HFS Guaranty
then in effect.
"Guaranty Fee" shall have the meaning provided in Section
9.06(ix).
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"Hazardous Materials" shall mean (a) oil as defined by the Oil
Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq., (b) any petrochemical or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formal-dehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; and (b) any chemicals, materials or substances defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "restricted hazardous materials," "extremely hazardous
wastes," "restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect under any applicable Environmental Law.
"HFS" shall mean HFS Incorporated, a Delaware corporation.
"HFS Acquisition" shall mean the acquisition by HFS of certain
assets of FHI pursuant to, and in accordance with the terms of, the HFS
Acquisition Documents.
"HFS Acquisition Documents" shall mean the Purchase Agreement,
dated as of December 19, 1995, by and among HFS, FHI and Forte USA, Inc., a
Delaware corporation, and all other documents or agreements entered into in
connection with the HFS Acquisition.
"HFS Agreements" shall have the meaning provided in Section
5.06.
"HFS Change of Control" shall mean (i) the acquisition by any
Person of ownership or control of more than 30% of the voting common stock of
HFS on a fully diluted basis at any time or (ii) if at any time, individuals who
at the date hereof constituted the Board of Directors of HFS (together with any
new directors whose election by such Board of Directors or whose nomination for
election by the shareholders of HFS, as the case may be, was approved by a vote
of a majority of the directors then still in office who are either directors at
the date hereof or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of HFS then in office.
"HFS Facility Lease Payments" shall have the meaning provided
in Section 9.06.
"HFS Franchise Agreement" shall mean a Travelodge license
agreement in the form of Exhibit L-1 or such other form of Travelodge license
agreement which at the time is in substantially the same form as is then being
offered by HFS or a Subsidiary thereof in the then current form of Uniform
Franchise Offering Circular for
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Travelodge license agreements, or a Ramada Plaza license agreement in the form
of Exhibit L-2, or a license agreement for any HFS affiliated hotel or motel
franchise system substantially in the form then being offered to prospective
licensees in the then current Uniform Franchise Offering Circular for the
applicable HFS affiliated franchise system.
"HFS Guaranty" shall have the meaning provided in Section 5.10.
"HFS Master License Agreement" shall mean the License
Agreement, dated as of January 23, 1996, between Bear Acquisition Corp. (which
is a Subsidiary of HFS) and FHI.
"HFS Subordinated Indebtedness" shall have the meaning
provided in Section 9.04.
"HFS Subordinated Note" shall have the meaning provided in
Section 9.04.
"HFS Subordination Agreement" shall have the meaning provided
in Section 5.18.
"Hotel Property" shall mean each hotel or motel owned or
leased by the Borrower or any of its Subsidiaries or Joint Ventures (including
the furniture, fixtures and equipment thereon).
"Immaterial Non-Subsidiary Joint Venture" shall mean any
Non-Subsidiary Joint Venture that, when aggregated with all other Non-Subsidiary
Joint Ventures subject to any of the events specified in Section 10.04, 10.05 or
10.10, contributed less than 5% of the Total Hotel Revenues for the Test Period
then most recently ended and whose assets accounted for less than 5% of the
total consolidated assets of the Borrower and its Subsidiaries (after reduction
for minority interests) as calculated on the last day of the most recently ended
fiscal quarter of the Borrower, and in each case so long as (i) all obligations
of such Joint Venture are non-recourse to the Borrower and its other
Subsidiaries and Joint Ventures and (ii) the aggregate amount of credit support
provided by the Borrower and its other Subsidiaries and Non-Subsidiary Joint
Ventures for the obligations of all such Non-Subsidiary Joint Ventures does not
exceed $1,000,000.
"Indebtedness" shall mean, as to any Person, without
duplication, (i) all indebtedness (including principal, interest, fees and
charges) of such Person for bor-
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rowed money or for the deferred purchase price of property or services (but
excluding accrued expenses and current trade accounts payable incurred in the
ordinary course of business), (ii) the maximum amount available to be drawn
under all letters of credit issued for the account of such Person and all unpaid
drawings in respect of such letters of credit, (iii) all Indebtedness of the
types described in clause (i), (ii), (iv), (v), (vi), (vii) or (viii) of this
definition secured by any Lien on any property owned by such Person, whether or
not such Indebtedness has been assumed by such Person, (iv) the aggregate amount
required to be capitalized under leases under which such Person is the lessee,
(v) all obligations of such person to pay a specified purchase price for goods
or services, whether or not delivered or accepted, i.e., take-or-pay and similar
obligations, (vi) all Contingent Obligations of such Person, (vii) all
obligations under any Interest Rate Protection Agreement or Other Hedging
Agreement or under any similar type of agreement or arrangement and (viii) all
Redeemable Capital Stock and, without duplication, any Chartwell Preferred Stock
of such Person valued at the greater of its voluntary or involuntary maximum
fixed repurchase price plus accrued and unpaid dividends. For purposes hereof,
the "maximum fixed repurchase price" of any Redeemable Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to this Agreement and, if such price is based upon, or measured by, the
fair market value of such Redeemable Capital Stock, such fair market value shall
be determined in good faith by the board of directors of the Borrower.
"Information Package" shall mean, with respect to each Hotel
Property, an information package consisting of (i) a description of the
respective Hotel Property, (ii) management's discussion and analysis of the
respective Hotel Property and discussing any improvements or changes to be made
with respect thereto, (iii) historical financial statements (which may be
unaudited) for the respective Hotel Property for at least the two full fiscal
years most recently ended and the latest 12-month period ended with the last day
of the fiscal quarter last ended, (iv) projections for the respective Hotel
Property for the four years after the respective acquisition and (v) any other
information which the Borrower determines should be furnished so that the
Information Package for the respective Hotel Property is true and correct in all
material respects and is not incomplete by omitting to state any fact necessary
to make the information (taken as a whole) contained therein not misleading in
any material respect, which Information Package shall include an officer's
certificate of the Borrower certifying (i) the cost to acquire the respective
Hotel Property, (ii) the purchase of related working capital in connection with
the acquisition of such Hotel Property, (iii) the amount expected to be used to
pay fees and expenses in connection with the acquisition of the respective Hotel
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Property, and (iv) the amount anticipated to be spent within one year after the
date of the acquisition of the respective Hotel Property to pay preopening costs
and to make improvements of the respective Hotel Property so acquired.
"Initial Borrowing Date" shall mean the date occurring on or
after the Effective Date on which the initial Borrowing of Revolving Loans
hereunder occurs.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Expense" shall mean, with respect to any Joint
Venture, the total interest expense of such Joint Venture for such period,
adjusted by (x) excluding any interest expense owing to the Borrower or one or
more of its Wholly-Owned Subsidiaries and (y) including as interest expense any
accrued dividends payable on any Redeemable Capital Stock of such Joint Venture.
"Interest Period" shall have the meaning provided in Section
1.09.
"Interest Rate Protection Agreement" shall mean any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedging agreement, interest rate floor agreement or
other similar agreement or arrangement.
"Investment" shall have the meaning provided in Section 9.05.
"Investment Commitment" shall have the meaning provided in
Section 9.05.
"Issuing Bank" shall mean BTCo and any Bank which at the
request of the Borrower and with the consent of the Administrative Agent agrees,
in such Bank's sole discretion, to become an Issuing Bank for the purpose of
issuing Letters of Credit pursuant to Section 2. The sole Issuing Bank on the
Initial Borrowing Date is BTCo.
"Joint Venture" shall mean any Person (other than an
Unrestricted Subsidiary) in which the Borrower or any Subsidiary of the Borrower
owns, directly or indirectly (except through one or more Unrestricted
Subsidiaries), more than 5% but less than 100% of the voting or equity interests
or in which the Borrower or a Subsidiary of the Borrower has general partnership
liability.
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"L/C Supportable Indebtedness" shall mean (i) obligations of
the Borrower or any of its Subsidiaries or Joint Ventures incurred in the
ordinary course of business with respect to insurance obligations and workers'
compensation, surety bonds and other similar statutory obligations, (ii)
obligations under the Bank of America Facility and (iii) such other obligations
of the Borrower or any of its Subsidiaries or Joint Ventures as are reasonably
acceptable to the respective Issuing Bank and otherwise permitted to exist
pursuant to the terms of this Agreement.
"Leaseholds" of any Person means all the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in
Section 3.01(b).
"Letter of Credit Outstandings" shall mean, at any time, the
sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit and
(ii) the amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in
Section 2.03(a).
"Licensing Fee" shall mean the licensing fees paid pursuant to
the HFS Master License Agreement, which Licensing Fee is generally based on up
to 4.5% of revenues of the respective Hotel Property.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other) or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Management Agreements" shall have the meaning provided in
Section 5.06.
"Marketing and Reservation Fee" shall mean the separate fee or
payment to cover the marketing and reservation services referred to in the
respective HFS
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Franchise Agreement, which Marketing and Reservation Fee is generally based on
up to 4.5% of revenues of the respective Hotel Property.
"Margin Stock" shall have the meaning provided in Regulation
U.
"Maximum Guaranteed Amount" shall have the meaning provided in
the HFS Guaranty.
"Minimum Facing Fee" shall have the meaning provided in
Section 3.01(c).
"MOA" shall mean Motels of America, Inc., a Delaware
corporation.
"MOA Acquisition" shall mean the acquisition by MOA (or a
Subsidiary thereof) of certain assets of FHI pursuant to, and in accordance with
the terms of, the MOA Acquisition Documents.
"MOA Acquisition Documents" shall mean the Asset Purchase
Agreement, dated as of December 19, 1995, by and among MOA, FHI and Forte USA,
Inc., a Delaware corporation, and all other documents or agreements entered into
in connection with the MOA Acquisition.
"Moody's" shall mean Moody's Investors Service, Inc.
"Net Cash Proceeds" shall mean, with (i) respect to any Asset
Sale, the Cash Proceeds resulting therefrom net of (x) cash expenses of sale
(including, without limitation, brokerage and attorneys' fees, if any, and
payment of principal, premium and interest of Indebtedness other than the Loans
required to be repaid as a result of such Asset Sale) and (y) incremental taxes
paid or payable as a result thereof and (ii) with respect to any issuance of
debt or equity, the Cash Proceeds (including any cash received by way of
deferred payment pursuant to a promissory note, receivable or otherwise, but
only as and when received) received from such event, net of transaction costs
(including, as applicable, any underwriting, brokerage or other customary
commissions and reasonable legal and other fees and expenses associated
therewith) incurred in connection therewith.
"Non-Defaulting Bank" shall mean and include each Bank other
than a Defaulting Bank.
"Non-Subsidiary Joint Venture" shall mean any Joint Venture of
the Borrower that is not also a Subsidiary of the Borrower.
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"Notice of Borrowing" shall have the meaning provided in
Section 1.03.
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Administrative
Agent located at 130 Liberty Street, New York, New York 10006, Attention: Steven
Park, or such other office as the Administrative Agent may hereafter designate
in writing as such to the other parties hereto.
"Obligations" shall mean all amounts owing to the
Administrative Agent, the Documentation Agent, the Collateral Agent or any Bank
pursuant to the terms of this Agreement or any other Credit Document.
"Other Hedging Agreements" shall mean any foreign exchange
contracts, currency swap agreements, commodity agreements or other similar
agreements or arrangements designed to protect against the fluctuations in
currency values.
"Participant" shall have the meaning provided in Section 2.04.
"Payment Office" shall mean the office of the Administrative
Agent located at 130 Liberty Street, New York, New York 10006, or such other
office as the Administrative Agent may hereafter designate in writing as such to
the other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Bank at such time and the denominator of which is the Total
Revolving Loan Commitment at such time, provided that if the Percentage of any
Bank is to be determined after the Total Revolving Loan Commitment has been
terminated, then the Percentages of the Banks shall be determined immediately
prior (and without giving effect) to such termination.
"Permitted Hotel Acquisition" shall mean an acquisition of a
Hotel Property (or the equity interest of the Person owning such Hotel Property)
pursuant to Sections 9.02(ix) and/or 9.05(viii).
"Permitted Liens" shall have the meaning provided in Section
9.01.
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"Person" shall mean any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or instrumentality
thereof.
"Plan" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of), the Borrower or a Subsidiary
of the Borrower or an ERISA Affiliate, and each such plan for the five-year
period immediately following the latest date on which, the Borrower or a
Subsidiary of the Borrower or an ERISA Affiliate maintained, contributed to or
had an obligation to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section
5.09.
"Pledged Securities" shall have the meaning provided in the
Pledge Agreement.
"Pledgee" shall have the meaning provided in the Pledge
Agreement.
"Prime Lending Rate" shall mean the rate which BTCo announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. BTCo may make commercial loans or other loans
at rates of interest at, above or below the Prime Lending Rate.
"Pro Forma Basis" shall mean, with respect to any Permitted
Hotel Acquisition, the calculation of the consolidated results of the Borrower
and its Subsidiaries otherwise determined in accordance with this Agreement as
if the respective Permitted Hotel Acquisition (and all Indebtedness incurred or
Permitted Hotel Acquisitions effected during the respective Calculation Period
or thereafter and on or prior to the date of determination) (each such date, a
"Determination Date") had been effected on the first day of the respective
Calculation Period; provided that all such calculations shall take into account
the following assumptions:
(i) except as provided in following clause (ii), pro forma
effect shall be given to (1) any Indebtedness incurred subsequent to
the end of the Calculation Period and prior to the date of
determination, (2) any Indebtedness incurred during such period to the
extent such Indebtedness is outstanding at the date of determination
and (3) any Indebtedness to be incurred on the date of determination,
in each case as if such Indebtedness had been incurred on the
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first day of such Calculation Period and after giving effect to the
application of the proceeds thereof;
(ii) in calculating interest expense attributable to
Revolving Loans, it shall be assumed that (x) the average principal
amount of Revolving Loans actually outstanding during the Calculation
Period (or, if the Initial Borrowing Date occurs after the first day of
the Calculation Period, during the period from the Initial Borrowing
Date to the respective Determination Date) had been outstanding at all
times during the period from the first day of the Calculation Date
until the Determination Date and (y) in addition to the outstandings as
calculated pursuant to preceding clause (x), to the extent that any
Revolving Loans were incurred during the Calculation Period or
thereafter but on or prior to the date of determination to finance
Permitted Hotel Acquisitions, such Revolving Loans will be deemed to
have been outstanding from the first day of the respective Calculation
Period until the date of the incurrence thereof (or if earlier, the
last day of the respective Calculation Period);
(iii) interest expense attributable to interest on any
Indebtedness (whether existing or being incurred) bearing a floating
interest rate shall be computed as if the rate in effect on the date of
computation (taking into account any Interest Rate Protection Agreement
applicable to such Indebtedness if such Interest Rate Protection
Agreement has a remaining term in excess of 12 months) had been the
applicable rate for the entire period;
(iv) except as provided in preceding clause (ii), there shall
be excluded from interest expense any interest expense related to any
amount of Indebtedness that was outstanding during such Calculation
Period or thereafter but that is not outstanding or is to be
permanently repaid on the date of determination; and
(v) pro forma effect shall be given to all sales of Hotel
Properties and Permitted Hotel Acquisitions (by excluding or including,
as the case may be, the historical financial results for the respective
Hotel Properties) that occur during such Calculation Period or
thereafter and on or prior to the Determination Date (including any
Indebtedness assumed or acquired in connection therewith) as if they
had occurred on the first day of such Calculation Period.
"Projections" shall have the meaning provided in Section
5.14(b).
"Qualified Capital Stock" of any Person shall mean all Capital
Stock of such Person which is not Redeemable Capital Stock.
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"Qualified Equity Commitment" shall have the meaning provided
in Section 9.05.
"Qualified Equity Investment" shall mean any equity investment
made by HFS in the Borrower (including in return for Redeemable Capital Stock
issued as permitted by Section 9.04(viii) and/or Qualified Capital Stock of the
Borrower) so long as 100% of the Net Cash Proceeds thereof are actually used by
the Borrower to make mandatory repayments of Revolving Loans as a result of a
reduction to the Total Revolving Loan Commitment pursuant to Sections 3.03(g)
and/or (h).
"Quarterly Payment Date" shall mean the last Business Day of
each March, June, September and December occurring after the Initial Borrowing
Date.
"RCRA" shall mean the Resource Conservation and Recovery Act,
as the same may be amended from time to time, 42 U.S.C. ss. 6901 et seq.
"Real Property" of any Person shall mean all the right, title
and interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by the Borrower or any
of its Subsidiaries or Joint Ventures of any cash insurance proceeds (other than
from business interruption insurance) or condemnation award payable (i) by
reason of theft, loss, physical destruction, damage or taking or any other
similar event with respect to any property or assets of the Borrower or any of
its Subsidiaries or Joint Ventures and (ii) under any policy of insurance
required to be maintained under Section 8.03.
"Redeemable Capital Stock" means any Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or otherwise, is or upon the happening of any event of passage
of time would be, required to be redeemed or repurchased, or is redeemable or
required to be repurchased at the option of the holder thereof, or is
convertible into or exchangeable for debt securities at any time (unless solely
at the option of the Borrower).
"Refinancing" shall have the meaning provide in Section 5.08.
"Refinancing Documents" shall have the meaning provided in
Section 5.08.
"Register" shall have the meaning provided in Section 13.16.
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"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Regulation T" shall mean Regulation T of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Reinvestment Amount" shall mean the aggregate amount of Net
Cash Proceeds received from Asset Sales which would have been required to be
applied in accordance with Section 3.03(e) (absent clause (ii) of the first
proviso to such Section 3.03(e)), but which have not been applied to reduce the
Total Revolving Loan Commitment pursuant to Section 3.03(e) because the Borrower
has elected to reinvest such Net Cash Proceeds pursuant to clause (ii) of the
first proviso of such Section 3.03(e), with the Reinvestment Amount to be
reduced on each date on which, and in the amount by which, such Net Cash
Proceeds have been reinvested as provided in clause (ii) of the first proviso of
such Section 3.03(e) or have been applied to reduce the Total Revolving Loan
Commitment pursuant to the second proviso of such Section 3.03(e).
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing or migration into the environment.
"Replaced Bank" shall have the meaning provided in Section
1.13.
"Replacement Bank" shall have the meaning provided in Section
1.13.
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"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan other than those events as to which the
30-day notice period is waived under subsection .13, .14, .16, .18, .19 or .20
of PBGC Regulation Section 2615.
"Required Banks" shall mean Non-Defaulting Banks, the sum of
whose outstanding Revolving Loan Commitments (or after the termination thereof,
outstanding Revolving Loans and Adjusted Percentage of Letter of Credit
Outstandings) represent an amount greater than 50% of the Adjusted Total
Revolving Loan Commitment (or after the termination thereof, the sum of the then
total outstanding Revolving Loans of Non-Defaulting Banks and the aggregate
Adjusted Percentages of all Non-Defaulting Banks of the total Letter of Credit
Outstandings at such time). If any Affiliate of the Borrower (other than any
Person that would qualify as an Affiliate of the Borrower solely by reason of
its status as a creditor of the Borrower or any Affiliate thereof or by the
exercise of any remedies under the Pledge Agreement) holds any Revolving Loans
or Revolving Loan Commitments, then, unless such Affiliates own 100% of all
outstanding Revolving Loans and Revolving Loan Commitments, (x) no such
Affiliate shall be included as a Bank for purposes of this definition and (y)
the amount of such Revolving Loans or Revolving Loan Commitments shall be
subtracted from the total amounts of such Revolving Loan or Revolving Loan
Commitments based on which the calculation of Required Banks is made.
"Residual Excess Cash Flow" shall mean, for any fiscal year of
the Borrower, Excess Cash Flow for such fiscal year less the aggregate amount of
payments of fees made with respect to such fiscal year as permitted by Section
9.06(vii).
"Restricted Payment" shall mean (a) any authorization,
declaration or payment of any Dividends with respect to the Borrower or any of
its Subsidiaries or Joint Ventures, (b) the making (or the giving of any notice
in respect thereof) by the Borrower or any of its Subsidiaries or Joint Ventures
of any voluntary or mandatory payment, purchase, acquisition or redemption,
whether by the making of any payments of the principal, interest or otherwise,
in respect of any loan, advance or extension of credit made to the Borrower or
any of its Subsidiaries or Joint Ventures by, or in respect of any guarantee or
Contingent Obligation made for the benefit of the Borrower or any of its
Subsidiaries or Joint Ventures by, or in respect of any other obligation of the
Borrower or any of its Subsidiaries or Joint Ventures owed to, any Affiliate of
the Borrower (excluding the Borrower and its Wholly-Owned Subsidiaries) and (c)
the payment of any fees or expenses (including the reimbursement thereof by the
Borrower or any of its Subsidiaries or Joint Ventures) to any Affiliate of the
Borrower (excluding the Borrower and its Wholly-Owned Subsidiaries), it being
understood that, in any
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event, any payment on or in respect of, any Chartwell Preferred
Stock/Subordinated Debt, any HFS Subordinated Indebtedness or any Redeemable
Capital Stock shall be a Restricted Payment.
"Returns" shall have the meaning provided in Section 7.09.
"Revolving Loan Commitment" shall mean, for each Bank, the
amount set forth opposite such Bank's name in Schedule I directly below the
column entitled "Revolving Loan Commitment," as the same may be (x) reduced from
time to time pursuant to Sections 3.02, 3.03 and/or 10 or (y) adjusted from time
to time as a result of assignments to or from such Bank pursuant to 1.13 or
13.04(b).
"Revolving Loans" shall have the meaning provided in Section
1.01.
"Revolving Note" shall have the meaning provided in Section
1.05(a).
"S&P" shall mean Standard & Poor's Ratings Group.
"Scheduled Commitment Reduction" shall have the meaning
provided in Section 3.03(b).
"Scheduled Commitment Reduction Date" shall have the meaning
provided in Section 3.03(b).
"SEC" shall have the meaning provided in Section 8.01(h).
"Section 4.04(b)(ii) Certificate" shall have the meaning
provided in Section 4.04(b).
"Secured Creditors" shall have the meaning provided in the
respective Security Documents.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Shareholders' Agreements" shall have the meaning provided in
Section 5.06.
"Specified Existing Investments" shall mean those Existing
Investments that relate to the Borrower's previous gaming businesses and
designated as such on Schedule IX.
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"Standard Termination Fee" shall mean (x) with respect to any
HFS Franchise Agreement entered into in connection with any Hotel Property
existing on the Initial Borrowing Date, any Termination Fee payable pursuant to
such HFS Franchise Agreement up to 2% of the total gross revenues for the
respective Hotel Property for the immediately preceding twelve month period in
respect of which such Termination Fee is paid and (y) with respect to any HFS
Franchise Agreement entered into in connection with any Hotel Property acquired
after the Initial Borrowing Date, that portion of the Termination Fee with
respect to such Hotel Property which equals that amount customarily charged by
HFS to other similarly situated franchisees.
"Stated Amount" of each Letter of Credit shall, at any time,
mean the maximum amount available to be drawn thereunder (in each case
determined without regard to whether any conditions to drawing could then be
met).
"Subsidiaries Guaranty" shall have the meaning provided in
Section 5.10.
"Subsidiary" shall mean, as to any Person, (i) any corporation
50% or more of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has a 50% or greater equity interest at the time. Notwithstanding
the foregoing (and except for purposes of the definition of Unrestricted
Subsidiary contained herein), an Unrestricted Subsidiary shall be deemed not to
be a Subsidiary of the Borrower or any of its other Subsidiaries for purposes of
this Agreement. Unless the context otherwise requires, all references herein to
"Subsidiaries" shall be to Subsidiaries of the Borrower.
"Subsidiary Guarantor" shall mean each Wholly-Owned Domestic
Subsidiary of the Borrower.
"Supermajority Banks" shall mean those Non-Defaulting Banks
which would constitute the Required Banks under, and as defined in, this
Agreement if the percentage "50%" contained therein were changed to "66-2/3%."
"Syndication Date" shall mean that date upon which the Agents
determine in their sole discretion (and notify the Borrower) that the primary
syndication (and resultant addition of institutions as Banks pursuant to Section
13.04) has been completed.
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"Tax Sharing Agreements" shall have the meaning provided in
Section 5.06.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Termination Fee" shall mean any fees (whether in the form of
liquidated damages or otherwise) that is due and payable by the Borrower or any
of its Subsidiaries or Joint Ventures to HFS pursuant to Section Paragraph 30(k)
an existing HFS Franchise Agreement or the equivalent section of any other HFS
Franchise Agreement.
"Test Period" shall mean each period of four consecutive
fiscal quarters of the Borrower (or, if shorter, the period beginning on the
Initial Borrowing Date and ending on the last day of a fiscal quarter of the
Borrower ended after the Initial Borrowing Date), in each case taken as one
accounting period, ended after the Initial Borrowing Date.
"Total Hotel Revenues" shall mean, for any period, the sum of
(i) the gross total revenues of all wholly-owned Hotel Properties owned or
leased by the Borrower and its Wholly-Owned Subsidiaries plus (ii) the
Borrower's Allocable Share of the gross total revenues of all non-wholly-owned
Hotel Properties owned or leased by the Borrower and its Subsidiaries and Joint
Ventures plus (iii) the Borrower's Allocable Share of the gross total revenues
from the retail operations at the Fisherman's Wharf Travelodge located in San
Francisco, it being understood that Total Hotel Revenues shall include results
of operations of Hotel Properties only for periods after the acquisition thereof
by the Borrower or the respective Subsidiary or Joint Venture.
"Total Leverage Ratio" shall mean, at any time, the ratio of
(x) Consolidated Debt at such time to (y) Adjusted Consolidated EBITDA of the
Borrower for the Test Period then last ended, provided that for purposes of
calculating the Total Leverage Ratio for Test Periods ending on or prior to
September 30, 1996, Adjusted Consolidated EBITDA of the Borrower shall be the
Adjusted Consolidated EBITDA of the Borrower for each such Test Period divided
by (i) 15%, in the case of the Test Period ending on March 31, 1996, (ii) 45%,
in the case of the Test Period ending on June 30, 1996 and (iii) 85%, in the
case of the Test Period ending on September 30, 1996.
"Total Outstandings" at any time shall mean the sum of the
aggregate principal amount of Revolving Loans then outstanding plus the
aggregate amount of Letter of Credit Outstandings at such time.
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"Total Revolving Loan Commitment" shall mean, at any time, the
sum of the Revolving Loan Commitments of each of the Banks.
"Total Unrestricted Subsidiary Leverage Ratio" shall mean, at
any time, the ratio of (x) all Indebtedness of all Unrestricted Subsidiaries at
such time as would be required to be reflected on the liability side of a
balance sheet as prepared in accordance with generally accepted accounting
principles and as determined on a consolidated basis plus, without duplication,
the amount of all Redeemable Capital Stock of all Unrestricted Subsidiaries
(determined in accordance with the definition of Indebtedness contained herein)
to (y) Adjusted Consolidated EBITDA of all Unrestricted Subsidiaries (calculated
by using the Adjusted Consolidated EBITDA of the parent Unrestricted Subsidiary
or, if more than one Unrestricted Subsidiary is directly owned by the Borrower
or a Wholly-Owned Domestic Subsidiary thereof, by calculating the Adjusted
Consolidated EBITDA of the Unrestricted Subsidiaries on a combined basis) for
the Test Period then last ended.
"Total Unutilized Revolving Loan Commitment" shall mean, at
any time, an amount equal to the remainder of (x) the then Total Revolving Loan
Commitment, less (y) the sum of the aggregate principal amount of Revolving
Loans outstanding plus the then aggregate amount of Letter of Credit
Outstandings.
"Transaction" shall mean the Acquisitions and the Refinancing.
"Type" shall mean the type of Revolving Loan determined with
regard to the interest option applicable thereto, i.e., whether a Base Rate Loan
or a Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to
time in effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan means the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"United States" and "U.S." shall each mean the United States
of America.
"Unpaid Drawing" shall have the meaning provided for in
Section 2.05.
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"Unrestricted Subsidiary" shall mean any Subsidiary of the
Borrower created or acquired after the Initial Borrowing Date that, at the time
of such creation or acquisition, shall be an Unrestricted Subsidiary (as
designated by the Borrower, as provided below) provided that such Subsidiary
does not and shall not engage, to any substantial extent, in any line or lines
of business activity other than as provided in Section 9.15. The Borrower may
designate any such Person to be an Unrestricted Subsidiary if (a) no Default or
Event of Default is existing or will occur as a consequence thereof, (b) such
Subsidiary, at the time of designation thereof, has no assets (except assets
which could be invested in such Unrestricted Subsidiary at the time of
designation as described in the immediately succeeding sentence), (c) such
Subsidiary does not own any equity interests in, or hold any Lien on any
property of, the Borrower or any other Subsidiary or Joint Venture of the
Borrower (excluding other Unrestricted Subsidiaries) and (d) the designation of
the respective Unrestricted Subsidiary shall be made in compliance with any
additional requirements contained in Section 9.16(c). The only asset that may be
invested in any such Unrestricted Subsidiary by the Borrower in any of its other
Subsidiaries or Joint Ventures is the Net Cash Proceeds of the Chartwell
Preferred Stock. The Borrower may designate any Unrestricted Subsidiary to be a
Subsidiary, provided that no Default or Event of Default is existing or will
occur as a consequence thereof and all actions which would be required to be
taken pursuant to Section 9.16(a) in connection with the creation or acquisition
of a new Subsidiary are taken at the time of the respective such designation.
Each such designation shall be evidenced by filing with the Administrative Agent
a certified copy of the resolution giving effect to such designation and an
officers' certificate of an Authorized Officer of the Borrower certifying that
such designation complied with the foregoing conditions.
"Unrestricted Subsidiary Tax Sharing Agreement" shall mean any
tax sharing agreement entered into by the Borrower with an Unrestricted
Subsidiary pursuant to the requirements of Section 9.16(c), with the terms and
conditions of any such tax sharing agreement to be required to be in form and
substance satisfactory to the Required Banks, and with any changes thereto made
after the entering into of any such tax sharing agreement to be required to be
satisfactory to the Required Banks.
"Unutilized Revolving Loan Commitment" with respect to any
Bank, at any time, shall mean such Bank's Revolving Loan Commitment at such time
less the sum of (i) the aggregate outstanding principal amount of Revolving
Loans made by such Bank and (ii) such Bank's Adjusted Percentage of the total
Letter of Credit Outstandings at such time.
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"Wholly-Owned Domestic Subsidiary" shall mean any Wholly-Owned
Subsidiary of the Borrower that is incorporated or organized in the United
States or any state or territory thereof.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i)
any corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint venture
or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest at such time.
SECTION 12. The Agents.
12.01 Appointment. The Banks hereby designate Bankers Trust
Company as Administrative Agent (for purposes of this Section 12, the term
"Administrative Agent" shall include BTCo in its capacity as Collateral Agent
pursuant to the Pledge Agreement) to act as specified herein and in the other
Credit Documents. The Banks hereby designate Chemical Bank as Documentation
Agent to act as specified herein and in the other Credit Documents. Each Bank
hereby irrevocably authorizes, and each holder of any Revolving Note by the
acceptance of such Note shall be deemed irrevocably to authorize, each Agent to
take such action on its behalf under the provisions of this Agreement, the other
Credit Documents and any other instruments and agreements referred to herein or
therein and to exercise such powers and to perform such Revolving duties
hereunder and thereunder as are specifically delegated to or required of the
each Agent by the terms hereof and thereof and such other powers as are
reasonably incidental thereto. Each Agent may perform any of its duties
hereunder by or through its respective officers, directors, agents, employees or
affiliates.
12.02 Nature of Duties. Neither Agent shall have any duties or
responsibilities except those expressly set forth in this Agreement and in the
other Credit Documents. Neither Agent nor any of its respective officers,
directors, agents, employees or affiliates shall be liable for any action taken
or omitted by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, unless caused by its or their gross negligence
or willful misconduct. The duties of each Agent shall be mechanical and
administrative in nature; neither Agent shall have by reason of this Agreement
or any other Credit Document a fiduciary relationship in respect of any Bank or
the holder of any Revolving Note; and nothing in this Agreement or any other
Credit Document, expressed or implied, is intended to or shall be so construed
as to impose upon any Agent any obligations in respect of this
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Agreement or any other Credit Document except as expressly set forth herein or
therein.
12.03 Lack of Reliance on the Agents. Independently and
without reliance upon any Agent, each Bank and the holder of each Revolving
Note, to the extent it deems appropriate, has made and shall continue to make
(i) its own independent investigation of the financial condition and affairs of
each of HFS and the Borrower and its Subsidiaries and Joint Ventures in
connection with the making and the continuance of the Revolving Loans and the
taking or not taking of any action in connection herewith and (ii) its own
appraisal of the creditworthiness of each of HFS and the Borrower and its
Subsidiaries and Joint Ventures and, except as expressly provided in this
Agreement, neither Agent shall have any duty or responsibility, either initially
or on a continuing basis, to provide any Bank or the holder of any Revolving
Note with any credit or other information with respect thereto, whether coming
into its possession before the making of the Revolving Loans or at any time or
times thereafter. Neither Agent shall be responsible to any Bank or the holder
of any Note for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or any other Credit Document or the financial condition of HFS or the
Borrower and its Subsidiaries and Joint Ventures or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any other Credit Document, or the
financial condition of HFS or the Borrower and its Subsidiaries and Joint
Ventures or the existence or possible existence of any Default or Event of
Default.
12.04 Certain Rights of the Agents. If any Agent shall request
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, such Agent shall be entitled to refrain from such act or taking such
action unless and until the Agent shall have received instructions from the
Required Banks; and neither Agent shall incur liability to any Person by reason
of so refraining. Without limiting the foregoing, no Bank or the holder of any
Revolving Note shall have any right of action whatsoever against any Agent as a
result of such Agent acting or refraining from acting hereunder or under any
other Credit Document in accordance with the instructions of the Required Banks.
12.05 Reliance. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that such Agent believed to
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be the proper Person, and, with respect to all legal matters pertaining to this
Agreement and any other Credit Document and its duties hereunder and thereunder,
upon advice of counsel selected by such Agent.
12.06 Indemnification. To the extent any Agent is not
reimbursed and indemnified by the Borrower the Banks will reimburse and
indemnify such Agent, in proportion to their respective "percentages" as used in
determining the Required Banks, for and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, costs,
expenses or disbursements of whatsoever kind or nature which may be imposed on,
asserted against or incurred by such Agent in performing its respective duties
hereunder or under any other Credit Document, in any way relating to or arising
out of this Agreement or any other Credit Document; provided that no Bank shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from such Agent's gross negligence or willful misconduct.
12.07 The Agents in their Individual Capacity. With respect to
its obligation to make Revolving Loans under this Agreement, each Agent shall
have the rights and powers specified herein for a "Bank" and may exercise the
same rights and powers as though it were not performing the duties specified
herein; and the term "Banks," "Required Banks," "holders of Revolving Notes" or
any similar terms shall, unless the context clearly otherwise indicates, include
each Agent in its individual capacity. Each Agent may accept deposits from, lend
money to, and generally engage in any kind of banking, trust or other business
with any Credit Party or any Affiliate of any Credit Party as if they were not
performing the duties specified herein, and may accept fees and other
consideration from the Borrower or any other Credit Party for services in
connection with this Agreement and otherwise without having to account for the
same to the Banks.
12.08 Holders. Each Agent may deem and treat the payee of any
Revolving Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Revolving Note shall be
conclusive and binding on any subsequent holder, transferee, assignee or
indorsee, as the case may be, of such Revolving Note or of any Revolving Note or
Revolving Notes issued in exchange therefor.
12.09 Resignation by the Agents. (a) The Administrative Agent
may resign from the performance of all its functions and duties hereunder and/or
under the
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other Credit Documents at any time by giving 15 Business Days' prior written
notice to the Borrower and the Banks, and such resignation shall take effect
upon the appointment of a successor Administrative Agent pursuant to clauses (b)
and (c) below or as otherwise provided below. The Documentation Agent may resign
from the performance of all its functions and duties hereunder and/or under the
other Credit Documents at any time by giving written notice thereof to the
Borrower and the Banks, and such resignation shall take effect immediately.
(b) Upon any such notice of resignation by the Administrative
Agent, the Required Banks shall appoint a successor Administrative Agent
hereunder or there-under who shall be a commercial bank or trust company
reasonably acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with the
consent of the Borrower (which consent shall not be unreasonably withheld),
shall then appoint a commercial bank or trust company with capital and surplus
of not less than $250,000,000 as successor Administrative Agent who shall serve
as Administrative Agent hereunder or thereunder until such time, if any, as the
Required Banks appoint a successor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 20th Business Day after the date such
notice of resignation was given by the Administrative Agent, the Administrative
Agent's resignation shall become effective and the Banks shall thereafter
perform all the duties of the Administrative Agent hereunder and/or under any
other Credit Document until such time, if any, as the Required Banks appoint a
successor Administrative Agent as provided above.
SECTION 13. Miscellaneous.
13.01 Payment of Expenses, etc. The Borrower shall: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of each Agent (including, without
limitation, the reasonable fees and disbursements of White & Case and local
counsel) in connection with the preparation, execution and delivery of this
Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein and any amendment, waiver or consent relating
hereto or thereto, of the Agents in connection with their syndication efforts
with respect to this Agreement and of each Agent and, following and during the
continuation of an Event of Default, each of the Banks in connection with the
enforcement of this Agreement and the other Credit Documents and the documents
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and instruments referred to herein and therein (including, without limitation,
the reasonable fees and disbursements of counsel for each Agent and, following
and during the continuation of an Event of Default, for each of the Banks); (ii)
pay and hold each of the Banks harmless from and against any and all present and
future stamp, excise and other similar taxes with respect to the foregoing
matters and save each of the Banks harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to such Bank) to pay such taxes; and (iii) indemnify
each Agent and each Bank, and each of their respective officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all liabilities, obligations (including removal or remedial
actions), losses, damages, penalties, claims, actions, judgments, suits, costs,
expenses and disbursements (including reasonable attorneys' and consultants'
fees and disbursements) incurred by, imposed on or assessed against any of them
as a result of, or arising out of, or in any way related to, or by reason of,
(a) any investigation, litigation or other proceeding (whether or not any Agent
or any Bank is a party thereto) related to the entering into and/or performance
of this Agreement or any other Credit Document or the use of any Letter of
Credit or the proceeds of any Revolving Loans hereunder or the consummation of
any transactions contemplated herein (including, without limitation, the
Acquisitions or the Refinancing) or in any other Credit Document or the exercise
of any of their rights or remedies provided herein or in the other Credit
Documents, or (b) the actual or alleged presence of Hazardous Materials in the
air, surface water or groundwater or on the surface or subsurface of any Real
Property owned or at any time operated by the Borrower or any of its
Subsidiaries, Joint Ventures or Unrestricted Subsidiaries, the generation,
storage, transportation, handling or disposal of Hazardous Materials at any
location, whether or not owned or operated by the Borrower or any of its
Subsidiaries, Joint Ventures or Unrestricted Subsidiaries, the non-compliance of
any Real Property with foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable to any Real
Property, or any Environmental Claim asserted against the Borrower or any of its
Subsidiaries, Joint Ventures or Unrestricted Subsidiaries or any Real Property
owned or at any time operated by the Borrower or any of its Subsidiaries, Joint
Ventures or Unrestricted Subsidiaries, including, in each case, without
limitation, the reasonable fees and disbursements of counsel and other
consultants incurred in connection with any such investigation, litigation or
other proceeding (but excluding any losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified). To the extent that the undertaking
to indemnify, pay or hold harmless any Agent or any Bank set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, the Borrower shall make the maximum contribution to the payment
and satisfaction of each of the indemnified liabilities which is permissible
under applicable law.
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13.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
an Event of Default, each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to the
Borrower or any Subsidiary Guarantor or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and apply any and
all deposits (general or special) and any other Indebtedness at any time held or
owing by such Bank (including, without limitation, by branches and agencies of
such Bank wherever located) to or for the credit or the account of the Borrower
or any Subsidiary Guarantor against and on account of the Obligations and
liabilities of the Borrower or such Subsidiary Guarantor to such Bank under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations purchased by such Bank pursuant to
Section 13.06(b), and all other claims of any nature or description arising out
of or connected with this Agreement or any other Credit Document, irrespective
of whether or not such Bank shall have made any demand hereunder and although
said Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
13.03 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered: if to the Borrower, at
the Borrower's address specified opposite its signature below; if to any Bank or
the Documentation Agent, at its address specified opposite its name on Schedule
II; and if to the Administrative Agent, at its Notice Office; or, as to any
Credit Party or any Agent, at such other address as shall be designated by such
party in a written notice to the other parties hereto and, as to each Bank, at
such other address as shall be designated by such Bank in a written notice to
the Borrower and the Administrative Agent. All such notices and communications
shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by
overnight courier, be effective when deposited in the mails, delivered to the
telegraph company, cable company or overnight courier, as the case may be, or
sent by telex or telecopier, except that notices and communications to each
Agent and the Borrower shall not be effective until received by such Agent or
the Borrower, as the case may be.
13.04 Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however, no Credit Party
may assign or transfer any of its rights, obligations or interest hereunder or
under any other Credit Document without the prior written consent of the
Required Banks (or all Banks in the case of the Borrower or HFS) and, provided
further, that, although any Bank may transfer, assign or grant participations in
its rights hereunder, such Bank shall remain a "Bank" for all
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purposes hereunder (and may not transfer or assign all or any portion of its
Revolving Loan Commitments hereunder except as provided in Section 13.04(b)) and
the transferee, assignee or participant, as the case may be, shall not
constitute a "Bank" hereunder and, provided further, that no Bank shall transfer
or grant any participation under which the participant shall have rights to
approve any amendment to or waiver of this Agreement or any other Credit
Document except to the extent such amendment or waiver would (i) extend the
final scheduled maturity of any Revolving Loan, Revolving Note or Letter of
Credit (unless such Letter of Credit is not extended beyond the Final Maturity
Date) in which such participant is participating, or reduce the rate or extend
the time of payment of interest or Fees thereon (except in connection with a
waiver of applicability of any post-default increase in interest rates) or
reduce the principal amount thereof, or increase the amount of the participant's
participation over the amount thereof then in effect (it being understood that a
waiver of any Default or Event of Default or of a mandatory reduction in the
Total Revolving Loan Commitment shall not constitute a change in the terms of
such participation, and that an increase in the Revolving Loan Commitment shall
be permitted without the consent of any participant if the participant's
participation is not increased as a result thereof), (ii) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement or (iii) release all or substantially all of the Collateral
(except as expressly provided in the Credit Documents) supporting the Revolving
Loans hereunder in which such participant is participating. In the case of any
such participation, the participant shall not have any rights under this
Agreement or any of the other Credit Documents (the participant's rights against
such Bank in respect of such participation to be those set forth in the
agreement executed by such Bank in favor of the participant relating thereto)
and all amounts payable by the Borrower hereunder shall be determined as if such
Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank
together with one or more other Banks) may (x) assign all or a portion of its
Revolving Loan Commitment (and related outstanding Obligations hereunder) to its
parent company and/or any affiliate of such Bank which is at least 50% owned by
such Bank or its parent company or to one or more Banks or (y) assign all, or if
less than all, a portion equal to at least $5,000,000 in the aggregate for the
assigning Bank or assigning Banks, of such Revolving Loan Commitments (and
related outstanding Obligations) hereunder to one or more Eligible Transferees,
each of which assignees shall become a party to this Agreement as a Bank by
execution of an Assignment and Assumption Agreement, provided that, (i) at such
time Schedule I shall be deemed modified to reflect the Revolving Loan
Commitments of such new Bank and of the existing Banks, (ii) new Revolving Notes
will be issued, at the Borrower's expense, to such new Bank and to the assigning
Bank upon the request of such new Bank or assigning Bank, such new Revolving
Notes to be in conformity with the requirements of Section 1.05 (with
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appropriate modifications) to the extent needed to reflect the revised Revolving
Loan Commitments, (iii) the consent of BTCo and any other Issuing Bank shall be
required in connection with any such assignment pursuant to clause (y) above
(which consent, in each case, shall not be unreasonably withheld) and (iv) the
Administrative Agent shall receive at the time of each such assignment, from the
assigning or assignee Bank, the payment of a non-refundable assignment fee of
$3,500. To the extent of any assignment pursuant to this Section 13.04(b), the
assigning Bank shall be relieved of its obligations hereunder with respect to
its assigned Revolving Loan Commitment. At the time of each assignment pursuant
to this Section 13.04(b) to a Person which is not already a Bank hereunder and
which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for Federal income tax purposes, the respective
assignee Bank shall, to the extent legally entitled to do so, provide to the
Borrower and the Administrative Agent the appropriate Internal Revenue Service
Forms (and, if applicable, a Section 4.04(b)(ii) Certificate) described in
Section 4.04(b). To the extent that an assignment of all or any portion of a
Bank's Revolving Loan Commitment and related outstanding Obligations pursuant to
Section 1.13 or this Section 13.04(b) would, at the time of such assignment,
result in increased costs under Section 1.10, 1.11, 2.06 or 4.04 from those
being charged by the respective assigning Bank prior to such assignment, then
the Borrower shall not be obligated to pay such increased costs (although the
Borrower shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
assignment).
(c) Nothing in this Agreement shall prevent or prohibit any
Bank from pledging its Revolving Loans and Revolving Notes hereunder to a
Federal Reserve Bank in support of borrowings made by such Bank from such
Federal Reserve Bank.
(d) The parties hereto acknowledge and agree that HFS has
certain rights to repurchase the Revolving Loans and Revolving Loan Commitments
in full as provided in Section 5 of the HFS Subordination Agreement.
13.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of any Agent or any Bank or any holder of any Revolving Note in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Borrower or any other Credit Party
and any Agent or any Bank or the holder of any Revolving Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein or in any other
Credit Document expressly provided are cumulative and not exclusive of any
rights, powers or remedies which any Agent or any Bank or the
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holder of any Revolving Note would otherwise have. No notice to or demand on any
Credit Party in any case shall entitle any Credit Party to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of any Agent or any Bank or the holder of any Revolving Note to any other
or further action in any circumstances without notice or demand.
13.06 Payments Pro Rata. (a) Except as otherwise provided in
this Agreement, the Administrative Agent agrees that promptly after its receipt
of each payment from or on behalf of the Borrower in respect of any Obligations
hereunder, it shall distribute such payment to the Banks (other than any Bank
that has consented in writing to waive its pro rata share of any such payment)
pro rata based upon their respective shares, if any, of the Obligations with
respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Revolving Loans, Unpaid Drawings, Commitment Commission or Letter of
Credit Fees, of a sum which with respect to the related sum or sums received by
other Banks is in a greater proportion than the total of such Obligation then
owed and due to such Bank bears to the total of such Obligation then owed and
due to all of the Banks immediately prior to such receipt, then such Bank
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Banks an interest in the Obligations of the respective
Credit Party to such Banks in such amount as shall result in a proportional
participation by all the Banks in such amount; provided that if all or any
portion of such excess amount is thereafter recovered from such Bank, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of the preceding Sections 13.06(a) and (b) shall be subject to
the express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.
13.07 Calculations; Computations. (a) The financial statements
to be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved (except as set forth in the
notes thereto or as otherwise disclosed in writing by the Borrower to the
Banks); provided that, (i) as provided in the definition of Subsidiary,
Unrestricted Subsidiaries shall not be included for any
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purposes of this Agreement (including the computations and calculations
described in the immediately succeeding clause (ii)) as Subsidiaries of the
Borrower, (y) except as otherwise specifically provided herein, all computations
of Excess Cash Flow and the Cumulative Retained Residual Excess Cash Flow
Amount, and all computations determining compliance with Sections 9.03 and 9.05
through 9.11, inclusive, shall utilize accounting principles and policies in
conformity with those used to prepare the historical pro forma financial
statements delivered to the Banks pursuant to Section 7.05(a) and (iii) for
purposes of determining compliance with Sections 9.10 and 10.12 only, Adjusted
Consolidated EBITDA of the Borrower or the Unrestricted Subsidiaries, as the
case may be, shall be determined giving pro forma effect to sales and
acquisitions of Hotel Properties on the same basis as is provided in clause (v)
of the definition of Pro Forma Basis contained herein.
(b) All computations of interest, Commitment Commission and
other Fees hereunder shall be made on the basis of a year of 360 days for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest, Commitment Commission or Fees
are payable.
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER
OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH
COURTS LACK JURISDICTION OVER THE BORROWER, AND AGREES NOT TO PLEAD OR CLAIM, IN
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURT
LACKS JURISDICTION OVER THE BORROWER. THE BORROWER FURTHER IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS
SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH
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MAILING. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF
PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT THAT
SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY AGENT UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF
ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER
JURISDICTION.
(b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE
AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
13.09 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agent.
13.10 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which the Borrower and each of the Banks
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered the same to the Administrative Agent at
its Notice Office or, in the case of the Banks, shall have given to the
Administrative Agent telephonic (confirmed in writing), written or telex notice
(actually received) at such office that the same has been signed and mailed to
it. The Administrative Agent will give the Borrower and each Bank prompt written
notice of the occurrence of the Effective Date.
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13.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor
any other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the respective Credit Parties party thereto
and the Required Banks (or, as contemplated by Section 13(b) of the HFS
Guaranty, by the Agents), provided that no such change, waiver, discharge or
termination shall, without the consent of each Bank (other than a Defaulting
Bank) (with Obligations being directly affected in the case of following clause
(i)), (i) extend the final scheduled maturity of any Revolving Loan or Revolving
Note or extend the stated maturity of any Letter of Credit beyond the Final
Maturity Date, or reduce the rate or extend the time of payment of interest or
Fees thereon, or reduce the principal amount thereof (except to the extent
repaid in cash), (ii) release all or substantially all of the Collateral (except
as expressly provided in the Credit Documents), (iii) release HFS from its
payment obligations pursuant to the HFS Guaranty (except as expressly provided
therein), (iv) amend, modify or waive any provision of this Section 13.12, (v)
reduce the percentage specified in the definition of Required Banks (it being
understood that, with the consent of the Required Banks, additional extensions
of credit pursuant to this Agreement may be included in the determination of the
Required Banks on substantially the same basis as the extensions of Revolving
Loan Commitments are included on the Effective Date) or (vi) consent to the
assignment or transfer by the Borrower or HFS of any of its rights and
obligations under this Agreement or the HFS Guaranty, as the case may be;
provided further, that no such change, waiver, discharge or termination shall
(v) increase the Revolving Loan Commitment of any Bank over the amount thereof
then in effect without the consent of such Bank (it being understood that
waivers or modifications of conditions precedent, covenants, Defaults or Events
of Default or of a mandatory reduction in the Total Revolving Loan Commitment
shall not constitute an increase of the Revolving Loan Commitment of any Bank,
and that an increase in the available portion of the Revolving Loan Commitment
of any Bank shall not constitute an increase in the Revolving Loan Commitment of
such Bank), (w) without the consent of BTCo, amend, modify or waive any
provision of Section 2 or alter its rights or obligations with respect to
Letters of Credit, (x) without the consent of each Agent, amend, modify or waive
any provision of Section 12 as same applies to such Agent or any other provision
as same relates to the rights or obligations of such Agent, (y) without the
consent of the Collateral Agent, amend, modify or waive any provision relating
to the rights or obligations of the Collateral Agent or (z) without the consent
of the Supermajority Banks, amend, modify or waive any Scheduled Commitment
Reduction.
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(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clauses (i) through (vi), inclusive, of the first proviso to
Section 13.12(a), the consent of the Required Banks is obtained but the consent
of one or more of such other Banks whose consent is required is not obtained,
then the Borrower shall have the right, so long as all non-consenting Banks
whose individual consent is required are treated as described in either clauses
(A) or (B) below, to either (A) replace each such non-consenting Bank or Banks
with one or more Replacement Banks pursuant to Section 1.13 so long as at the
time of such replacement, each such Replacement Bank consents to the proposed
change, waiver, discharge or termination or (B) terminate such non-consenting
Bank's Revolving Loan Commitment in accordance with Sections 3.02(b) and/or
4.01(b), provided that, unless the Revolving Loan Commitment is terminated, and
Revolving Loans repaid, pursuant to preceding clause (B) are immediately
replaced in full at such time through the addition of new Banks or the increase
of the Revolving Loan Commitments of existing Banks (who in each case must
specifically consent thereto), then in the case of any action pursuant to
preceding clause (B) the Required Banks (determined after giving effect to the
proposed action) shall specifically consent thereto, provided further, that in
any event the Borrower shall not have the right to replace a Bank, terminate its
Revolving Loan Commitment or repay its Revolving Loans solely as a result of the
exercise of such Bank's rights (and the withholding of any required consent by
such Bank) pursuant to the second proviso to Section 13.12(a).
(c) It is understood and agreed by the parties hereto that, to
the extent (and only to the extent) expressly provided in Section 2.06 of the
HFS Subordination Agreement, certain amendments to the Credit Agreement shall,
to the extent provided in said Section 2.06, require the consent of HFS.
13.13 Survival. All indemnities set forth herein including,
without limitation, in Sections 1.10, 1.11, 2.06, 4.04, 13.01 and 13.06 shall,
survive the execution, delivery and termination of this Agreement and the
Revolving Notes and the making and repayment of the Revolving Loans.
13.14 Domicile of Revolving Loans. Each Bank may transfer and
carry its Revolving Loans at, to or for the account of any office, Subsidiary or
Affiliate of such Bank. Notwithstanding anything to the contrary contained
herein, to the extent that a transfer of Revolving Loans pursuant to this
Section 13.14 would, at the time of such transfer, result in increased costs
under Section 1.10, 1.11, 2.06 or 4.04 from those being charged by the
respective Bank prior to such transfer, then the Borrower shall not be obligated
to pay such increased costs (although the Borrower shall be obligated to pay any
other increased costs of the type described above resulting from changes after
the date of the respective transfer).
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13.15 Confidentiality. (a) Subject to the provisions of clause
(b) of this Section 13.15, each Bank agrees that it will use its best efforts
not to disclose without the prior consent of the Borrower (other than to its
employees, auditors, advisors or counsel or to another Bank if the Bank or such
Bank's holding or parent company in its sole discretion determines that any such
party should have access to such information, provided such Persons shall be
subject to the provisions of this Section 13.15 to the same extent as such Bank)
any information with respect to the Borrower or any of its Subsidiaries which is
now or in the future furnished pursuant to this Agreement or any other Credit
Document and which is designated by the Borrower to the Banks in writing as
confidential, provided that any Bank may disclose any such information (a) as
has become generally available to the public, (b) as may be required or
appropriate in any report, statement or testimony submitted to any municipal,
state or Federal regulatory body having or claiming to have jurisdiction over
such Bank or to the Federal Reserve Board or the Federal Deposit Insurance
Corporation or similar organizations (whether in the United States or elsewhere)
or their successors, (c) as may be required or appropriate in respect to any
summons or subpoena or in connection with any litigation, (d) in order to comply
with any law, order, regulation or ruling applicable to such Bank, (e) to any
Agent or the Collateral Agent or any Bank and (f) to any prospective or actual
transferee or participant in connection with any contemplated transfer or
participation of any of the Revolving Notes or Revolving Loan Commitments or any
interest therein by such Bank, provided, that such prospective transferee agrees
to be bound by the provisions contained in this Section.
(b) The Borrower hereby acknowledges and agrees that each Bank
may share with any of its affiliates any information related to the Borrower or
any of its Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of the Borrower and its Subsidiaries,
provided such Persons shall be subject to the provisions of this Section 13.15
to the same extent as such Bank).
13.16 Register. The Borrower hereby designates the
Administrative Agent to serve as the Borrower's agent, solely for purposes of
this Section 13.16, to maintain a register (the "Register") on which it will
record the Revolving Loan Commitments from time to time of each of the Banks,
the Revolving Loans made by each of the Banks and each repayment in respect of
the principal amount of the Revolving Loans of each Bank. Failure to make any
such recordation, or any error in such recordation shall not affect the
Borrower's obligations in respect of such Revolving Loans. With respect to any
Bank, the transfer of the Revolving Loan Commitment of such Bank and the rights
to the principal of, and interest on, any Revolving Loan made pursuant to such
Revolving Loan Commitment shall not be effective until such transfer is recorded
on the Register maintained by the Administrative Agent with respect to
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ownership of such Revolving Loan Commitment and Revolving Loans and prior to
such recordation all amounts owing to the transferor with respect to such
Revolving Loan Commitment and Revolving Loans shall remain owing to the
transferor. The registration of assignment or transfer of all or part of the
Revolving Loan Commitment and the Revolving Loans shall be recorded by the
Administrative Agent on the Register only upon the acceptance by the
Administrative Agent of a properly executed and delivered Assignment and
Assumption Agreement pursuant to Section 13.04(b). Coincident with the delivery
of such an Assignment and Assumption Agreement to the Administrative Agent for
acceptance and registration of assignment or transfer of all or part of a
Revolving Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Revolving Note evidencing such Revolving
Loan, and thereupon one or more new Revolving Notes in the same aggregate
principal amount shall be issued to the assigning or transferor Bank and/or the
new Bank. The Borrower agrees to indemnify the Administrative Agent from and
against any and all losses, claims, damages and liabilities of whatsoever nature
which may be imposed on, asserted against or incurred by the Administrative
Agent in performing its duties under this Section 13.16.
13.17 Limitation on Additional Amounts, Etc. Notwithstanding
anything to the contrary contained in Section 1.10, 1.11, 2.06 or 4.04, unless a
Bank gives notice to the Borrower that is obligated to pay an amount under any
such Section within 180 days after the later of (x) the date the Bank incurs the
respective increased costs, Taxes, loss, expense or liability, reduction in
amounts received or receivable or reduction in return on capital or (y) the date
such Bank has actual knowledge of its incurrence of the respective increased
costs, Taxes, loss, expense or liability, reductions in amounts received or
receivable or reduction in return on capital, then such Bank shall only be
entitled to be compensated for such amount by the Borrower pursuant to said
Section 1.10, 1.11, 2.06 or 4.04, as the case may be, to the extent the costs,
Taxes, loss, expense or liability, reduction in amounts received or receivable
or reduction in return on capital are incurred or suffered on or after the date
which occurs 180 days prior to such Bank giving notice to the Borrower that it
is obligated to pay the respective amounts pursuant to said Section 1.10, 1.11,
2.06 or 4.04, as the case may be. This Section 13.17 shall have no applicability
to any Section of this Agreement other than said Sections 1.10, 1.11, 2.06 and
4.04.
13.18 Certain Provisions Regarding Joint Ventures.
Notwithstanding anything to the contrary contained in this Agreement, (i) no
Default or Event of Default shall arise under Section 10.02 or 10.03 as a result
of any action (or failure to take any action) by any Non-Subsidiary Joint
Venture, or as a result of any event, condition, fact or circumstance with
respect to any Non-Subsidiary Joint Venture, in each case to the extent that
neither the Borrower nor any of its Subsidiaries have voting or management
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control with respect to the affairs of such Non-Subsidiary Joint Venture and
neither the Borrower nor any such Subsidiary thereof consented to any such
action (or failure to act), (ii) neither the Borrower nor any of its
Subsidiaries will relinquish voting or management control over any Joint Venture
in which it has such control other than in connection with the sale of the
Borrower's or such Subsidiary's entire equity interest in such Joint Venture,
(iii) neither the Borrower nor any of its Subsidiaries will reduce their
ownership interest in any Joint Venture except in connection with the sale by
the Borrower or such Subsidiary of their entire equity interest in such Joint
Venture and (iv) neither the Borrower nor any of its Subsidiaries shall consent
to any action to be taken by any Joint Venture if such action would give rise to
a Default or an Event of Default hereunder.
* * *
-138-
0000B3FK.W51
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
339 Jefferson Road NATIONAL LODGING CORP.
Parsippany, New Jersey 07054
Telephone No.: (201) 428-9700
Telecopier No.: (201) 428-5269
Attention: Robert Kingsley By /s/ James E. Buckman
Title: Executive Vice President
BANKERS TRUST COMPANY,
Individually and as Administrative
Agent
By /s/ Cynthia Jay
Title: Vice President
CHEMICAL BANK,
Individually and as Documentation Agent
By /s/ William Caggiano
Title: Managing Director
-139-
0000B3FK.W51
<PAGE>
SCHEDULE I
COMMITMENTS
Revolving Loan
Bank Commitment
Bankers Trust Company $62,500,000
Chemical Bank $62,500,000
TOTAL: $125,000,000
0000B3FK.W51
<PAGE>
SCHEDULE II
BANK ADDRESSES
Bankers Trust Company 130 Liberty Street
New York, New York 10006
Telephone No.: (212) 250-2855
Telecopier No.: (212) 250-7218
Attention: Cindy Jay
Chemical Bank 270 Park Avenue
New York, New York 10017
Telephone No.: (212) 270-2945
Telecopier No.: (212) 270-1063
Attention: William Hobbs
0000B3FK.W51
<PAGE>
SCHEDULE III
PROJECTIONS
SCHEDULE III TO CREDIT AGREEMENT
THE FOLLOWING SCHEDULE III TO THE CREDIT AGREEMENT CONTAINS
PROJECTIONS WHICH WERE PREPARED BY NATIONAL LODGING CORP.'S (THE "COMPANY")
FORMER MANAGEMENT AND WERE FURNISHED TO CERTAIN BANKS, AS PARTIES TO THE CREDIT
AGREEMENT (THE "BANKS"), SOLELY FOR THE PURPOSE OF THE BANKS' REVIEW IN
CONNECTION WITH THE CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THE CREDIT
AGREEMENT TO WHICH THIS SCHEDULE III IS ANNEXED.
THE PROJECTIONS WERE BASED UPON A NUMBER OF ESTIMATES AND ASSUMPTIONS
MADE BY THE COMPANY'S FORMER MANAGEMENT IN JANUARY 1996. ALL OF THE MEMBERS OF
THE COMPANY'S CURRENT SENIOR MANAGEMENT ASSUMED THEIR POSITIONS DURING THE
FIRST QUARTER OF 1996. THE COMPANY'S CURRENT MANAGEMENT WAS NOT INVOLVED IN THE
PREPARATION, ANALYSIS OR EVALUATION OF THE PROJECTIONS OR ANY OF THE
ASSUMPTIONS OR ESTIMATES UPON WHICH THE PROJECTIONS WERE BASED, AND IS NOT
UTILIZING THEM AS A MEASURE OF PERFORMANCE IN THE MANAGEMENT OF THE COMPANY'S
BUSINESS. SUCH ESTIMATES ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS,
ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE
BEYOND THE COMPANY'S CONTROL, AND UPON ASSUMPTIONS WITH RESPECT TO FUTURE
BUSINESS STRATEGIES AND PRACTICES THAT ARE SUBJECT TO CHANGE. THE PROJECTIONS
AND ACTUAL RESULTS WILL VARY, AND THOSE VARIATIONS MAY BE MATERIAL. FOR ALL OF
THE FOREGOING REASONS, THE COMPANY'S CURRENT MANAGEMENT EXPRESSES NO OPINION AS
TO THE ACCURACY OR VALIDITY OF THE PROJECTIONS OR THE ASSUMPTIONS UPON WHICH
THEY WERE BASED.
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH GUIDELINES ESTABLISHED BY THE COMMISSION OR THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE COMPANY DID NOT ENGAGE ANY
INDEPENDENT AUDITORS OR ACCOUNTANTS TO EXAMINE, COMPILE OR OTHERWISE BECOME
INVOLVED WITH THE PREPARATION OF THE PROJECTIONS.
THE PROJECTIONS ARE INCLUDED AS SCHEDULE III TO THE PUBLICLY-FILED
COPY OF THE CREDIT AGREEMENT SOLELY BECAUSE THEY WERE FURNISHED TO THE BANKS
FOR THEIR REVIEW IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE CREDIT
AGREEMENT, AND THESE PROJECTIONS SHOULD NOT BE RELIED UPON FOR ANY PURPOSE. THE
INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS A REPRESENTATION
BY THE COMPANY OR ANY OTHER PERSON THAT THE PROJECTIONS WILL BE ACHIEVED. THE
COMPANY DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO
REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE
OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF PROJECTIONS
ARE SHOWN TO BE INACCURATE. INVESTORS ARE CAUTIONED NOT TO RELY ON THE
PROJECTIONS IN MAKING INVESTMENT DECISIONS WITH RESPECT TO THE COMPANY'S
SECURITIES.
<PAGE>
National Lodging Corp.
Management Case
MODEL SUMMARY
==================================
($ in thousands)
YEAR ENDED DECEMBER 31, Historical
---------------------------------------
--------------------------
1992 1993 1994 1995E
---------------------------------------
Net Revenues $86,407 $87,989
% Combined Revenue Growth 1.8%
Combined EBITDA (1) $16,471 $14,833
% margin 19.1% 16.9%
Capital Expenditures (NLC) $4,615 $2,950 $2,546 $4,798
% of owned Revenue 9.3%
JV Capital Expenditures $1,427 $1,358 $2,491 $2,301
% JV Revenue 6.9%
Depreciation & Amortization $7,021 $5,488 $5,516 $5,696
Changes in Working Capital
Interest Expense (including JV) 6,767
-----------------------------------------------------------------
Cash for Debt Service
Cumulative Cash for Debt Service
-----------------------------------------------------------------
-----------------------------------------------------------------
--------
CREDIT RATIOS Pro Forma
At Close
--------
EBITDA/Interest 2.2x
(EBITDA-Cap Ex)/Interest 1.5x
Net Senior Debt/EBITDA 4.8x
Net Total Debt/EBITDA 4.8x
Net Senior Debt/(EBITDA-Cap Ex) 7.0x
Net Total Debt/(EBITDA-CapEx) 7.0x
-----------------------------------------------------------------
CAPITALIZATION
--------
At Close
--------
Cash on Balance Sheet $8,673
Debt:
Reducing Revolver 60,000
Capital Leases 4,300
LC's Outstanding 15,000
========
Total Debt $79,300
========
% of debt repaid 0.0%
Equity 84,795
--------
Total Capitalization $164,095
========
-----------------------------------------------------------------
Committed Bank Debt $125,000
Bank Debt Outstanding $60,000
LC Outstanding $15,000
--------
Availability $50,000
-----------------------------------------------------------------
-----------------------------------------------------------------
(1) Includes JV EBITDA
Confidential
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, Projected
----------------- ----------------------------- ---------------------------------------------- ---------
--------------------------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
----------------- ----------------------------- ---------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $93,639 $101,435 $105,005 $107,942 $110,959 $114,105 $117,356 $120,782 $124,311 $127,945
% Combined Revenue Growth 6.4% 8.3% 3.5% 2.8% 2.8% 2.8% 2.8% 2.9% 2.9% 2.9%
Combined EBITDA (1) $16,057 $18,365 $19,244 $19,747 $20,259 $20,827 $21,425 $22,120 $22,837 $23,579
$ margin 17.1% 18.1% 18.3% 18.3% 18.3% 18.3% 18.3% 18.3% 18.4% 18.4%
Capital Expenditures (NLC) $8,623 $970 $1,907 $2,585 $2,661 $2,738 $2,817 $2,899 $2,984 $3,070
% of owned Revenue 15.5% 1.6% 3.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
JV Capital Expenditures $5,129 $2,236 $2,309 $2,378 $2,450 $2,523 $2,599 $2,677 $2,757 $2,840
% JV Revenue 14.7% 6.1% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Depreciation & Amortization $3,491 $3,940 $4,120 $4,400 $4,728 $5,066 $5,413 $5,770 $6,138 $6,516
Changes in Working Capital (8) 1 (18) (8) (8) (9) (10) (11) (11) (12)
Interest Expense (including JV) 6,767 5,836 5,054 4,276 3,539 2,804 801 453 86 (302)
----------------------------------------------------------------------------------------------------------------------------------
Cash for Debt Service $13,167 $10,687 $11,414 $10,596 $10,189 $10,278 $10,939 $11,597 $12,242 $12,955
Cumulative Cash for Debt Service $13,167 $23,854 $35,268 $45,864 $56,053 $66,331 $77,270 $88,866 $101,108 $114,063
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CREDIT RATIOS -------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA/Interest 2.8x 3.6x 4.5x 5.6x 7.2x 26.0x 47.2x 256.6x 0.0x 0.0x
(EBITDA-Cap Ex)/Interest 1.3x 3.4x 4.1x 4.8x 6.3x 22.6x 41.0x 233.0x 0.0x 0.0x
Net Senior Debt/EBITDA 3.9x 2.9x 2.1x 1.5x 1.0x 0.5x 0.0x 0.0x 0.0x 0.0x
Net Total Debt/EBITDA 3.9x 2.9x 2.1x 1.5x 1.0x 0.5x 0.0x 0.0x 0.0x 0.0x
Net Senior Debt/(EBITDA-Cap Ex) 8.5x 3.0x 2.4x 1.8x 1.1x 0.5x 0.0x 0.0x 0.0x 0.0x
Net Total Debt/(EBITDA-CapEx) 8.5x 3.0x 2.4x 1.8x 1.1x 0.5x 0.0x 0.0x 0.0x 0.0x
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CAPITALIZATION
-------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash on Balance Sheet $560 $560 $560 $560 $560 $6,891 $17,830 $29,426 $41,668 $54,623
Debt:
Reducing Revolver 46,833 36,146 24,732 14,136 3,947 0 0 0 0 0
Capital Leases 4,300 4,300 4,300 4,300 4,300 4,300 4,300 4,300 4,300 4,300
LC's Outstanding 12,500 12,500 12,500 12,500 12,500 12,500 0 0 0 0
=================================================================================================
Total Debt $63,633 $52,946 $41,532 $30,936 $20,747 $16,800 $4,300 $4,300 $4,300 $4,300
=================================================================================================
% of debt repaid 19.8% 33.2% 47.6% 61.0% 73.8% 78.8% 94.6% 94.6% 94.6% 94.6%
Equity 87,117 90,090 98,396 104,142 109,087 114,566 121,368 128,528 136,127 144,120
-------------------------------------------------------------------------------------------------
Total Capitalization $150,750 $145,036 $139,928 $135,078 $129,834 $131,366 $125,668 $132,828 $140,427 $148,420
=================================================================================================
----------------------------------------------------------------------------------------------------------------------------------
Committed Bank Debt $125,000 $110,000 $95,000 $80,000 $65,000 $0 $0 $0 $0 $0
Bank Debt Outstanding $46,833 $36,146 $24,732 $14,136 $3,947 $0 $0 $0 $0 $0
LC Outstanding $12,500 $12,500 $12,500 $12,500 $12,500 $12,500 $0 $0 $0 $0
-------------------------------------------------------------------------------------------------
Availability $65,667 $61,354 $57,768 $53,364 $48,553 ($12,500) $0 $0 $0 $0
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
(1) Includes JV EBITDA
Confidential
</TABLE>
Page 2
<PAGE>
National Lodging Corp. Management Case
ASSUMPTIONS SUMMARY
===================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
INTEREST RATES LIBOR+ 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIBOR 5.50% 5.50% 5.50% 5.50%
Reducing Revolver 7.00% 7.00% 7.00% 7.00%
Guarantee Fee (On $75MM) 2.00% 2.00% 2.00% 2.00%
Unused Fee on Revolver 0.20% 0.20% 0.20% 0.20%
LC Fee 0.25% 0.25% 0.25% 0.25%
Capital Leases 10.00% 10.00% 10.00% 10.00%
Interest on Cash Balance 3.00% 3.00% 3.00% 3.00%
Commitment Reduction on Reducing Revolver 0 15,000 15,000 15,000
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
WORKING CAPITAL ASSUMPTIONS 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accounts Receivable (days) 14.1 14.1 14.1 14.1 14.1
Accounts Payable (days) 8.9 8.9 8.9 8.9 8.9
Prepaid Expenses (% Owned Hotel and Motel Revenue) 7.4% 7.4% 7.4% 7.4% 7.4%
Other Liab. & Accrued Exp. (% Owned Hotel and Motel Revenue) 9.3% 9.3% 9.3% 9.3% 9.3%
Debt Issue Costs Amortization (years) 8 103 103 103 103
Goodwill Amortization (years) 30 0 0 0 0
Effective tax rate 38.5% 38.5% 38.5% 38.5%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
INCOME STATEMENT ASSUMPTIONS 1996 1997 1998 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue Growth:
Owned Hotels 8.6% 12.2% 3.0% 3.0%
Retail 3.0% 3.0% 3.0% 3.0%
Owned Motels 5.0% 7.6% 3.0% 3.0%
---------------------------------------
Total 6.4% 8.3% 3.5% 2.8%
JV's Revenue Growth 5.0% 5.0% 5.0% 3.0%
Confidential
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
INTEREST RATES 2000 2001 2002 2003 2004 2005
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIBOR 5.50% 5.50% 5.50% 5.50% 5.50% 5.50%
Reducing Revolver 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
Guarantee Fee (On $75MM) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Unused Fee on Revolver 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
LC Fee 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Capital Leases 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Interest on Cash Balance 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Commitment Reduction on Reducing Revolver 15,000 65,000 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
WORKING CAPITAL ASSUMPTIONS 2000 2001 2002 2003 2004 2005
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts Receivable (days) 14.1 14.1 14.1 14.1 14.1 14.1
Accounts Payable (days) 8.9 8.9 8.9 8.9 8.9 8.9
Prepaid Expenses (% Owned Hotel and Motel Revenue) 7.4% 7.4% 7.4% 7.4% 7.4% 7.4%
Other Liab. & Accrued Exp. (% Owned Hotel and Motel Revenue) 9.3% 9.3% 9.3% 9.3% 9.3% 9.3%
Debt Issue Costs Amortization (years) 8 103 103 103 103 0 0
Goodwill Amortization (years) 30 0 0 0 0 0 0
Effective tax rate 38.5% 38.5% 38.5% 38.5% 38.5% 38.5%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT ASSUMPTIONS 2000 2001 2002 2003 2004 2005
- ----------------------------------------------------------------------------------------------------------------------
Revenue Growth:
Owned Hotels 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Retail 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Owned Motels 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
---------------------------------------------------------
Total 2.8% 2.8% 2.8% 2.9% 2.9% 2.9%
JV's Revenue Growth 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
</TABLE>
Confidential
Page 3
<PAGE>
National Lodging Corp. Management Case
CONSOLIDATED INCOME STATEMENT
===============================================================================
($ in thousands)
<TABLE>
<CAPTION>
Historical Projected
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1992 1993 1994 1995E 1996 1997 1998 1999
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Gaming $569 $569 $569 $481 $384 $277
Owned Hotels 39,449 41,120 46,655 50,105 51,609 53,157
Retail Property (SF Wharf) 2,077 2,137 2,201 2,267 2,335 2,405
Owned Motels (West) 7,241 7,763 8,152 8,774 9,037 9,308
----------------------------------------------------------
49,336 51,589 55,577 61,627 63,365 65,147
Management Fees & Other (1) 3,449 3,155 3,155 3,155 3,155 3,155
----------------------------------------------------------
Total Revenues 52,785 54,744 58,732 64,782 66,520 68,302
% Combined Revenue Growth 3.7% 7.3% 10.3% 2.7% 2.7%
OPERATING EXPENSES
Operating Expense (23,346) (23,710) (25,588) (27,845) (28,517) (29,372)
Rent (4,678) (4,765) (5,120) (5,669) (5,839) (6,014)
Sales & Marketing (2,330) (2,445) (2,642) (2,944) (3,032) (3,123)
Repair & Maintenance (2,728) (3,001) (3,237) (3,600) (3,706) (3,819)
Property Taxes & Other (2,201) (3,497) (3,767) (4,182) (4,306) (4,437)
----------------------------------------------------------
(35,283) (37,418) (40,354) (44,239) (45,403) (46,765)
Royalty Fees (1,469) (1,546) (1,690) (1,884) (1,941) (1,999)
Corporate G&A (6,935) (8,872) (9,049) (9,230) (9,415) (9,603)
HFS Corporate Services Fee (1,500) (1,500) (1,500) (1,500) (1,500) (1,500)
NLC G&A (1,100) (1,100) (1,133) (1,167) (1,202) (1,238)
----------------------------------------------------------
Total Operating Expense (46,287) (50,436) (53,726) (58,020) (59,460) (61,105)
----------------------------------------------------------
EBITDA 6,498 4,308 5,006 6,762 7,060 7,197
% Margin 12.3% 7.9% 8.5% 10.4% 10.6% 10.5%
- --------------------------------------------------------------------------------------------------------------------------------
Covenant % 100% 100% 100% 100%
Covenant EBITDA $6,498 $4,??? $5,006 $6,762 $7,060 $7,197
- --------------------------------------------------------------------------------------------------------------------------------
Depreciation & Amortization (6,281) (6,475) (3,491) (3,940) (4,120) (4,400)
----------------------------------------------------------
EBIT 217 (2,167) 1,515 2,822 2,940 2,797
% Margin 0.4% -4.0% 2.6% 4.4% 4.4% 4.1%
Interest Calculation Rate(%)
New Revolver 7.00% 0 0 0 0
LC Fee 0.25% (34) (31) (31) (31)
Unused Fee 0.20% (118) (112) (104) (96)
Reducing Revolver 7.00% (3,739) (2,904) (2,131) (1,360)
Capital Leases 10.00% (430) (430) (430) (430)
----------------------------------------------------------
Total Interest Expense (4,322) (3,478) (2,696) (1,918)
Interest on Cash Balance 3.00% 17 17 17 17
HFS Guarantee Fee (1,500) (1,500) (1,500) (1,500) (1,500)
----------------------------------------------------------
Net Interest Expense (5,805) (4,961) (4,179) (3,401)
Amortization of Deferred Financing Fees (103) (103) (103) (103)
Income (Loss) from JV's 5,852 7,284 6,715 7,216 7,649 7,922
EBT 2,322 4,973 6,306 7,215
- --------------------------------------------------------------------------------------------------------------------------------
Beginning NOL 17,000 14,678 9,705 3,399
Use of NOL (2,322) (4,973) (6,306) (3,399)
Contribution to NOL 0 0 0 0
Ending NOL 14,678 9,705 3,399 0
- --------------------------------------------------------------------------------------------------------------------------------
After NOL Taxable Earnings 0 0 0 3,816
Income Tax Expense 0 0 0 1,469
---------------------------------------
Net Earnings 2,322 4,973 6,306 5,746
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME TO COMMON $2,322 $4,973 $6,306 $5,746
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Combined EBITDA (2) $16,471 $14,833 $16,057 $18,365 $19,244 $19,747
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes management fees from about 30 JV properties and rental income from
various properties.
(2) Includes JV EBITDA.
Confidential
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2000 2001 2002 2003 2004 2005
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Gaming $159 $75 $0 $0 $0 $0
Owned Hotels 54,752 56,394 58,086 59,829 61,624 63,472
Retail Property (SF Wharf) 2,477 2,552 2,628 2,707 2,788 2,872
Owned Motels (West) 9,587 9,875 10,171 10,476 10,790 11,114
---------------------------------------------------------
66,975 68,896 70,885 73,012 75,202 77,458
Management Fees & Other (1) 3,155 3,155 3,155 3,155 3,155 3,155
---------------------------------------------------------
Total Revenues 70,130 72,051 74,040 76,167 78,357 80,613
% Combined Revenue Growth 2.?% 2.7% 2.8% 2.9% 2.9% 2.9%
OPERATING EXPENSES
Operating Expense (30,253) (31,161) (32,096) (33,058) (34,050) (35,072)
Rent (6,194) (6,380) (6,572) (6,769) (6,972) (7,181)
Sales & Marketing (3,217) (3,313) (3,413) (3,515) (3,620) (3,729)
Repair & Maintenance (3,933) (4,051) (4,173) (4,298) (4,427) (4,560)
Property Taxes & Other (4,570) (4,707) (4,848) (4,994) (5,143) (5,298)
---------------------------------------------------------
(48,167) (49,612) (51,101) (52,634) (54,213) (55,839)
Royalty Fees (2,059) (2,121) (2,184) (2,250) (2,317) (2,387)
Corporate G&A (9,795) (9,991) (10,191) (10,395) (10,603) (10,815)
HFS Corporate Services Fee (1,500) (1,500) (1,500) (1,500) (1,500) (1,500)
NLC G&A (1,275) (1,313) (1,353) (1,393) (1,435) (1,478)
---------------------------------------------------------
Total Operating Expense (62,797) (64,538) (66,329) (68,172) (70,068) (72,019)
---------------------------------------------------------
EBITDA 7,333 7,513 7,711 7,995 8,289 8,594
% Margin 10.5% 10.4% 10.4% 10.5% 10.6% 10.7%
- -------------------------------------------------------------------------------------------------------------
Covenant % 100% 100% 100% 100% 100% 100%
Covenant EBITDA $7,333 $7,513 $7,711 $7,995 $8,289 $8,594
- -------------------------------------------------------------------------------------------------------------
Depreciation & Amortization (4,728) (5,066) (5,413) (5,770) (6,138) (6,516)
---------------------------------------------------------
EBIT 2,605 2,447 2,298 2,225 2,151 2,078
% Margin 3.7% 3.4% 3.1% 2.9% 2.7% 2.6%
Interest Calculation Rate(%)
New Revolver 7.00% 0 0 0 0 0 0
LC Fee 0.25% (31) (31) (31) (31) (31) (31)
Unused Fee 0.20% (87) (36) 0 0 0 0
Reducing Revolver 7.00% (633) (138) 0 0 0 0
Capital Leases 10.00% (430) (430) (430) (430) (430) (430)
---------------------------------------------------------
Total Interest Expense (1,181) (635) (461) (461) (461) (461)
Interest on Cash Balance 3.00% 17 207 535 883 1,250 1,639
HFS Guarantee Fee (1,500) (1,500) 0 0 0 0
---------------------------------------------------------
Net Interest Expense (2,664) (1,929) 74 422 789 1,177
Amortization of Deferred Financing Fees (103) (103) (103) (103) 0 0
Income (Loss) from JV's 8,204 8,493 8,792 9,099 9,416 9,742
EBT 8,041 8,908 11,061 11,642 12,356 12,997
- -------------------------------------------------------------------------------------------------------------
Beginning NOL 0 0 0 0 0 0
Use of NOL 0 0 0 0 0 0
Contribution to NOL 0 0 0 0 0 0
Ending NOL 0 0 0 0 0 0
- -------------------------------------------------------------------------------------------------------------
After NOL Taxable Earnings 8,041 8,908 11,061 11,642 12,356 12,997
Income Tax Expense 3,096 3,430 4,258 4,482 4,757 5,004
---------------------------------------------------------
Net Earnings 4,945 5,479 6,802 7,160 7,599 7,993
- -------------------------------------------------------------------------------------------------------------
NET INCOME TO COMMON $4,945 $5,479 $6,802 $7,160 $7,599 $7,993
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Combined EBITDA (2) $20,259 $20,827 $21,425 $22,120 $22,837 $23,579
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes management fees from about 30 JV properties and rental income from
various properties.
(2) Includes JV EBITDA.
Confidential
Page 4
<PAGE>
<TABLE>
<CAPTION>
National Lodging Corp.
JV MOTELS INCOME STATEMENT- TRL SHARE Actual Projected
--------------------------------------------------------------------------------------
($ in thousands) 1992 1993 1994 1995E 1996 1997 1998 1999
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $33,622 $33,245 $34,907 $36,653 $38,485 $39,640
% growth 5.0% 5.0% 5.0% 3.0%
Operating Expenses (23,649) (22,720) (23,856) (25,049) (26,301) (27,090)
- --------------------------------------------------------------------------------------------------------------------------------
EBITDA 9,973 10,525 11,051 11,604 12,184 12,550
% margin 29.7% 31.7% 31.7% 31.7% 31.7% 31.7%
- --------------------------------------------------------------------------------------------------------------------------------
Covenant % 100% 100% 100% 100%
Covenant EBITDA $9,973 $10,525 $11,051 $11,604 $12,184 $12,550
- --------------------------------------------------------------------------------------------------------------------------------
Existing Depreciation (2,921) (2,660) (2,793) (2,932) (3,079) (3,171)
New Depreciation from Write- Up 0 0 (581) (581) (581) (581)
- --------------------------------------------------------------------------------------------------------------------------------
EBIT 7,052 7,865 7,678 8,091 8,524 8,797
Interest Expense (1,200) (581) (963) (875) (875) (875)
- --------------------------------------------------------------------------------------------------------------------------------
Net Income (loss) to NLC $5,852 $7,284 $6,715 $7,216 $7,649 $7,922
- --------------------------------------------------- ==========================================================
+ Depreciation & Amortization $2,921 $2,660 $3,374 $3,513 $3,660 $3,752
- -CapEx (net of loan draw) ($2,000) ($2,100) $0 $0 $0 $0
- -Other/Debt Repayment ($800) ($300) ($6,379) ($2,236) ($2,309) ($2,378)
----------------------------------------------------------
CF to NLC $5,973 $7,544 $3,709 $8,493 $9,000 $9,296
==========================================================
- --------------------------------------------------------------------------------------------------------------------------------
Combined EBITDA $16,471 $14,833 $16,057 $18,365 $19,244 $19,747
- --------------------------------------------------------------------------------------------------------------------------------
Confidential
</TABLE>
Management Case
<TABLE>
<CAPTION>
---------------------------------------------------------
($ in thousands) 2000 2001 2002 2003 2004 2005
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $40,829 $42,054 $43,315 $44,615 $45,953 $47,332
% growth 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Operating Expenses (27,903) (28,740) (29,602) (30,490) (31,405) (32,347)
- ---------------------------------------------------------------------------------------------------
EBITDA 12,926 13,314 13,713 14,125 14,548 14,985
% margin 31.7% 31.7% 31.7% 31.7% 31.7% 31.7%
- ---------------------------------------------------------------------------------------------------
Covenant % 100% 100% 100% 100% 100% 100%
Covenant EBITDA $12,926 $13,314 $13,713 $14,125 $14,548 $14,985
- ---------------------------------------------------------------------------------------------------
Existing Depreciation (3,266) (3,364) (3,465) (3,569) (3,676) (3,787)
New Depreciation from Write- Up (581) (581) (581) (581) (581) (581)
- ---------------------------------------------------------------------------------------------------
EBIT 9,079 9,368 9,667 9,974 10,291 10,617
Interest Expense (875) (875) (875) (875) (875) (875)
- ---------------------------------------------------------------------------------------------------
Net Income (loss) to NLC $8,204 $8,493 $8,792 $9,099 $9,416 $9,742
- ------------------------------------------=========================================================
+ Depreciation & Amortization $3,847 $3,945 $4,046 $4,150 $4,257 $4,368
- -CapEx (net of loan draw) $0 $0 $0 $0 $0 $0
- -Other/Debt Repayment ($2,450) ($2,523) ($2,599) ($2,677) ($2,757) ($2,840)
---------------------------------------------------------
CF to NLC $9,601 $9,916 $10,239 $10,573 $10,916 $11,270
=========================================================
- ---------------------------------------------------------------------------------------------------
Combined EBITDA $20,259 $20,827 $21,425 $22,120 $22,837 $23,579
- ---------------------------------------------------------------------------------------------------
</TABLE>
Confidential
Page 5
<PAGE>
National Lodging Corp. Management Case
<TABLE>
<CAPTION>
PROJECTED CASH FLOW STATEMENT
===============================================================================
($ in thousands)
- -------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income $2,322 $4,973 $6,306 $5,746 $4,945
+ Depreciation & Amortization 3,491 3,940 4,120 4,400 4,728
+ Goodwill Amortization 0 0 0 0 0
+ Amortization of Capitalized Financing Fees 103 103 103 103 103
+ Cash Dividends minus Net Income from JV's (3,006) 1,277 1,351 1,374 1,398
(Inc) Dec in Trade Receivables (219) (302) (138) (114) (117)
(Inc) Dec in Prepaid Expenses (292) (452) (131) (135) (139)
(Dec) Inc in Payables 137 189 87 71 73
(Dec) Inc in Other Current Liabilities & Accrued Expenses 365 565 165 169 174
-------------------------------------------------
- - Changes in Working Capital (8) (1) (18) (8) (8)
(Inc) Dec in Receivables from JV 0 0 0 0 0
(Inc) Dec in Investments- Other 0 0 0 0 0
(Dec) Inc in Deferred Income 0 0 0 0 0
-------------------------------------------------
Funds from Operations 2,903 10,295 11,862 11,615 11,166
CapEx (510) (970) (1,907) (2,585) (2,661)
Extraordinary CapEx (8,113) 0 0 0 0
Pittsburgh Loan Repayment 9,500 0 0 0 0
-------------------------------------------------
Funds from Investing Activities 877 (970) (1,907) (2,585) (2,661)
Cash from Balance Sheet 8,113 0 0 0 0
Funds from Financing Activities 8,113 0 0 0 0
Cash Available before Rainbow Loan 11,893 9,325 9,955 9,030 8,505
Scheduled Debt Amortization
Reducing Revolver 0 0 0 0 0
Rainbow Loan 1,274 1,362 1,459 1,566 1,684
-------------------------------------------------
Total Scheduled Amortization 1,274 1,362 1,459 1,566 1,684
Cash Available for Debt Amortization 13,167 10,687 11,414 10,596 10,189
Refinanced Debt 0 0 0 0 0
New Revolver 0 0 0 0 0
Reducing Revolver (13,167) (10,687) (11,414) (10,596) (10,189)
Capital Leases 0 0 0 0 0
-------------------------------------------------
Excess Cash $0 $0 $0 $0 $0
- -------------------------------------------------------------------------------------------------------------
JV CASH FLOW STATEMENT
- -------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
-------------------------------------------------
JV Net Income $6,715 $7,216 $7,649 $7,922 $8,204
+ Existing depreciation from JV's 2,793 2,932 3,079 3,171 3,266
+ New Depreciation from JV Write up 581 581 581 581 581
-------------------------------------------------
Funds from JV Operations 10,089 10,729 11,309 11,675 12,051
JV CapEx (2,129) (2,236) (2,309) (2,378) (2,450)
JV Extraordinary CapEx (3,000) 0 0 0 0
B of A draw to cover CapEx (NLC portion) 5,129 2,236 2,309 2,378 2,450
-------------------------------------------------
JV CF available for Debt Service 10,089 10,729 11,309 11,675 12,051
Repayment of B of A principal (NLC Portion) (6,379) (2,236) (2,309) (2,378) (2,450)
-------------------------------------------------
JV CF available for Distribution $3,709 $8,493 $9,000 $9,296 $9,601
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Confidential
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
2001 2002 2003 2004 2005
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income $5,479 $6,802 $7,160 $7,599 $7,993
+ Depreciation & Amortization 5,066 5,413 5,770 6,138 6,516
+ Goodwill Amortization 0 0 0 0 0
+ Amortization of Capitalized Financing Fees 103 103 103 0 0
+ Cash Dividends minus Net Income from JV's 1,422 1,447 1,473 1,500 1,528
(Inc) Dec in Trade Receivables (122) (126) (133) (137) (141)
(Inc) Dec in Prepaid Expenses (144) (148) (152) (157) (162)
(Dec) Inc in Payables 76 79 83 86 88
(Dec) Inc in Other Current Liabilities & Accrued Expenses 180 185 191 196 202
--------------------------------------------------
- - Changes in Working Capital (9) (10) (11) (11) (12)
(Inc) Dec in Receivables from JV 0 0 0 0 0
(Inc) Dec in Investments- Other 0 0 0 0 0
(Dec) Inc in Deferred Income 0 0 0 0 0
--------------------------------------------------
Funds from Operations 12,061 13,756 14,496 15,225 16,026
CapEx (2,738) (2,817) (2,899) (2,984) (3,070)
Extraordinary CapEx 0 0 0 0 0
Pittsburgh Loan Repayment 0 0 0 0 0
--------------------------------------------------
Funds from Investing Activities (2,738) (2,817) (2,899) (2,984) (3,070)
Cash from Balance Sheet 0 0 0 0 0
Funds from Financing Activities 0 0 0 0 0
Cash Available before Rainbow Loan 9,323 10,939 11,597 12,242 12,955
Scheduled Debt Amortization
Reducing Revolver 0 0 0 0 0
Rainbow Loan 955 0 0 0 0
--------------------------------------------------
Total Scheduled Amortization 955 0 0 0 0
Cash Available for Debt Amortization 10,278 10,939 11,597 12,242 12,955
Refinanced Debt 0 0 0 0 0
New Revolver 0 0 0 0 0
Reducing Revolver (3,947) 0 0 0 0
Capital Leases 0 0 0 0 0
--------------------------------------------------
Excess Cash $6,331 $10,939 $11,597 $12,242 $12,955
- --------------------------------------------------------------------------------------------------------------
JV CASH FLOW STATEMENT
- --------------------------------------------------------------------------------------------------------------
2001 2002 2003 2004 2005
--------------------------------------------------
JV Net Income $8,493 $8,792 $9,099 $9,416 $9,742
+ Existing depreciation from JV's 3,364 3,465 3,569 3,676 3,787
+ New Depreciation from JV Write up 581 581 581 581 581
--------------------------------------------------
Funds from JV Operations 12,439 12,838 13,250 13,673 14,110
JV CapEx (2,523) (2,599) (2,677) (2,757) (2,840)
JV Extraordinary CapEx 0 0 0 0 0
B of A draw to cover CapEx (NLC portion) 2,523 2,599 2,677 2,757 2,840
--------------------------------------------------
JV CF available for Debt Service 12,439 12,838 13,250 13,673 14,110
Repayment of B of A principal (NLC Portion) (2,523) (2,599) (2,677) (2,757) (2,840)
--------------------------------------------------
JV CF available for Distribution $9,916 $10,239 $10,573 $10,916 $11,270
- --------------------------------------------------------------------------------------------------------------
Confidential Page 6
</TABLE>
<PAGE>
National Lodging Corp. Management Case
<TABLE>
<CAPTION>
COMBINED OPENING AND PROJECTED BALANCE SHEETS
=============================================================================================================
($ in thousands)
--------- -------------------
Combined Adjustments Pro Forma
-------------------
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NLC TL 12/31/1995 + - 12/31/1995 1996 1997 1998 1999
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash $50,000 $2,000 $52,000 $0 ($43,327) $8,673 $560 $560 $560 $560
Trade Accounts Receivable 0 3,407 3,407 0 0 3,407 3,626 3,928 4,066 4,180
Prepaid Expenses 0 3,636 3,636 0 0 3,636 3,928 4,380 4,511 4,646
---------------------------- -------------------------------------------------
Total Current Assets 50,000 9,043 59,043 0 (43,327) 15,716 8,114 8,867 9,137 9,386
Gaming Investments 35,100 0 35,100 0 0 35,100 24,326 22,964 21,505 19,939
Notes Receivable 0 7,300 7,300 0 0 7,300 7,300 7,300 7,300 7,300
Receivables from JV's 0 2,800 2,800 0 0 2,800 2,800 2,800 2,800 2,800
Investments in JV's 0 16,700 16,700 8,356 0 25,056 28,062 26,784 25,434 24,060
Investments- Other 0 200 200 0 0 200 200 200 200 200
Property & Equipment 0 43,300 43,300 25,662 0 68,962 74,093 71,124 68,910 67,095
Capitalized Financing Costs 0 827 827 0 0 827 724 620 517 414
Other Assets 0 3,132 3,132 0 (3,132) 0 0 0 0 0
TOTAL ASSETS $85,100 $83,302 $168,402 $34,018 ($46,459) $155,961 $145,618 $140,659 $135,803 $131,193
============================ =================================================
Trade Accounts Payable $305 $1,832 $2,137 $0 $0 $2,137 $2,274 $2,464 $2,550 $2,622
Accrued Exp. & Other Liab. 0 4,551 4,551 0 0 4,551 4,916 5,482 5,646 5,815
---------------------------- -------------------------------------------------
Total Current Liabilities 305 6,383 6,688 0 0 6,688 7,191 7,945 8,196 8,437
New Revolver 0 0 0 0 0 0 0 0 0 0
Existing Debt 0 300 300 0 (300) 0 0 0 0 0
Reducing Revolver 0 0 0 60,000 0 60,000 46,833 36,146 24,732 14,136
Capital Lease Obligations 0 4,300 4,300 0 0 4,300 4,300 4,300 4,300 4,300
---------------------------- -------------------------------------------------
Total Debt 0 4,600 4,600 60,000 (300) 64,300 51,133 40,446 29,032 18,436
0 0 0 0 0 0 0 0 0 0
Deferred Income 0 178 178 0 0 178 178 178 178 178
---------------------------- -------------------------------------------------
Total Liabilities 305 11,161 11,466 60,000 (300) 71,166 58,502 48,569 37,406 27,051
Equity 84,795 72,141 156,936 0 (72,141) 84,795 87,117 92,090 98,396 104,142
---------------------------- -------------------------------------------------
Total Equity 84,795 72,141 156,936 0 (72,141) 84,795 87,117 92,090 98,396 104,142
TOTAL LIAB & S-E $85,100 $83,302 $168,402 $60,000 ($72,441) $155,961 $145,618 $140,659 $135,803 $131,193
- ------------------------------------------------------------ -------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Check 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- --------------------------------------------------------------------------------------------------------------------------------
Net Working Capital 355 363 362 380 389
Change in Working Capital (8) (2) (18) (8)
Working Capital as a % of Sales 0.4% 0.9% 0.8% 0.8% 0.8%
</TABLE>
Confidential
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
YEAR ENDED 2000 2001 2002 2003 2004 2005
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash $560 $6,891 $17,830 $29,426 $41,668 $54,623
Trade Accounts Receivable 4,296 4,418 4,544 4,677 4,813 4,954
Prepaid Expenses 4,786 4,929 5,077 5,229 5,386 5,548
----------------------------------------------------------
Total Current Assets 9,642 16,238 27,451 39,332 51,868 65,125
Gaming Investments 18,255 17,300 17,300 17,300 17,300 17,300
Notes Receivable 7,300 7,300 7,300 7,300 7,300 7,300
Receivables from JV's 2,800 2,800 2,800 2,800 2,800 2,800
Investments in JV's 22,662 21,240 19,793 18,320 16,820 15,292
Investments- Other 200 200 200 200 200 200
Property & Equipment 65,028 62,700 60,104 57,233 54,079 50,633
Capitalized Financing Costs 310 207 103 0 0 0
Other Assets 0 0 0 0 0 0
TOTAL ASSETS $126,197 $127,985 $135,051 $142,485 $150,366 $158,650
==========================================================
Trade Accounts Payable $2,695 $2,771 $2,850 $2,933 $3,019 $3,107
Accrued Exp. & Other Liab. 5,900 6,170 6,355 6,545 6,742 6,944
----------------------------------------------------------
Total Current Liabilities 8,685 8,941 9,205 9,479 9,761 10,051
New Revolver 0 0 0 0 0 0
Existing Debt 0 0 0 0 0 0
Reducing Revolver 3,947 0 0 0 0 0
Capital Lease Obligations 4,300 4,300 4,300 4,300 4,300 4,300
----------------------------------------------------------
Total Debt 8,247 4,300 4,300 4,300 4,300 4,300
0 0 0 0 0 0
Deferred Income 178 178 178 178 178 178
----------------------------------------------------------
Total Liabilities 17,110 13,419 13,683 13,957 14,239 14,529
Equity 109,087 114,566 121,368 128,528 136,127 144,120
----------------------------------------------------------
Total Equity 109,087 114,566 121,368 128,528 136,127 144,120
TOTAL LIAB & S-E $126,197 $127,985 $135,051 $142,485 $150,366 $158,650
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Check 0.0 0.0 0.0 0.0 0.0 0.0
- ------------------------------------------------------------------------------------------
Net Working Capital 397 407 416 427 439 451
Change in Working Capital (8) (9) (10) (11) (11) (12)
Working Capital as a % of Sales 0.7% 0.7% 0.7% 0.7% 0.7% 0.7%
Confidential
</TABLE>
<PAGE>
National Lodging Corp. Management Case
<TABLE>
<CAPTION>
OPERATING EXPENSE BACKUP
($ in thousands)
--------------------------------------------------------------------------------------
1995E 1996 1997 1998 1999
--------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Owned Hotel/Retail:
Hotel Revenue $41,120 $44,655 $50,105 $51,609 $53,157
Retail Revenue $2,137 $2,201 $2,267 $2,335 $2,405
--------------------------------------------------------------------------------------
$43,257 $46,856 $52,372 $53,944 $55,562
Owned Hotel/Retail Expense ($20,860) ($22,596) ($24,730) ($25,354) ($26,114)
Rent ($3,519) ($3,812) ($4,261) ($4,388) ($4,520)
Sales & Marketing ($2,239) ($2,425) ($2,711) ($2,792) ($2,876)
Repair & Maintenance ($2,581) ($2,796) ($3,125) ($3,219) ($3,315)
Property Taxes & Other ($2,853) ($3,090) ($3,454) ($3,558) ($3,665)
Royalty Fees ($1,316) ($1,429) ($1,603) ($1,651) ($1,701)
Corporate G&A ($3,483) ($3,553) ($3,624) ($3,696) ($3,770)
--------------------------------------------------------------------------------------
($36,851) ($39,701) ($43,507) ($44,658) ($45,961)
Owned Hotels/Retail EBITDA $6,406 $7,156 $8,864 $9,286 $9,601
% margin 14.8% 15.3% 16.9% 17.2% 17.3%
Other:
Gaming Revenues $569 $569 $481 $384 $277
Management Fee and Rental Rev. $3,155 $3,155 $3,155 $3,155 $3,155
Corporate G&A Fee ($4,718) ($4,812) ($4,909) ($5,007) ($5,107)
NLC G&A ($1,100) ($1,133) ($1,167) ($1,202) ($1,238)
HFS Corporate Service Fee ($1,500) ($1,500) ($1,500) ($1,500) ($1,500)
Owned Motels:
Motel Revenue $7,763 $8,152 $8,774 $9,037 $9,308
Owned Motel Expense ($2,850) ($2,993) ($3,115) ($3,163) ($3,258)
Rent ($1,246) ($1,308) ($1,408) ($1,450) ($1,494)
Sales & Marketing ($206) ($216) ($233) ($240) ($247)
Repair & Maintenance ($420) ($441) ($475) ($489) ($504)
Property Taxes & Other ($644) ($676) ($728) ($750) ($772)
Royalty Fees ($230) ($261) ($281) ($289) ($298)
Corporate G&A ($671) ($684) ($698) ($712) ($726)
--------------------------------------------------------------------------------------
($6,267) ($6,580) ($6,937) ($7,093) ($7,299)
Owned Motels EBITDA $1,496 $1,572 $1,837 $1,944 $2,009
% margin 19.3% 19.3% 20.9% 21.5% 21.6%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
2000 2001 2002 2003
----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Owned Hotel/Retail:
Hotel Revenue $54,752 $56,394 $58,086 $59,829
Retail Revenue $2,477 $2,552 $2,628 $2,707
----------------------------------------------------------------------------
$57,229 $58,946 $60,714 $62,536
Owned Hotel/Retail Expense ($26,898) ($27,705) ($28,536) ($29,392)
Rent ($4,656) ($4,795) ($4,939) ($5,087)
Sales & Marketing ($2,962) ($3,051) ($3,143) ($3,237)
Repair & Maintenance ($3,415) ($3,517) ($3,623) ($3,731)
Property Taxes & Other ($3,775) ($3,888) ($4,004) ($4,125)
Royalty Fees ($1,752) ($1,805) ($1,859) ($1,915)
Corporate G&A ($3,846) ($3,922) ($4,001) ($4,081)
----------------------------------------------------------------------------
($47,302) ($48,683) ($50,104) ($51,567)
Owned Hotels/Retail EBITDA $9,927 $10,263 $10,610 $10,969
% margin 17.3% 17.4% 17.5% 17.5%
Other:
Gaming Revenues $159 $75 $0 $0
Management Fee and Rental Rev. $3,155 $3,155 $3,155 $3,155
Corporate G&A Fee ($5,209) ($5,313) ($5,419) ($5,528)
NLC G&A ($1,275) ($1,313) ($1,353) ($1,393)
HFS Corporate Service Fee ($1,500) ($1,500) ($1,500) ($1,500)
Owned Motels:
Motel Revenue $9,587 $9,875 $10,171 $10,476
Owned Motel Expense ($3,355) ($3,456) ($3,560) ($3,667)
Rent ($1,539) ($1,585) ($1,632) ($1,681)
Sales & Marketing ($254) ($262) ($270) ($278)
Repair & Maintenance ($519) ($534) ($550) ($567)
Property Taxes & Other ($795) ($819) ($844) ($869)
Royalty Fees ($307) ($316) ($325) ($335)
Corporate G&A ($741) ($756) ($771) ($786)
----------------------------------------------------------------------------
($7,510) ($7,728) ($7,952) ($8,183)
Owned Motels EBITDA $2,077 $2,147 $2,218 $2,293
% margin 21.7% 21.7% 21.8% 21.9%
</TABLE>
-----------------------------
2004 2005
-----------------------------
- --------------------------------------------------------------------------
Owned Hotel/Retail:
Hotel Revenue $61,624 $63,472
Retail Revenue $2,788 $2,872
-----------------------------
$64,412 $66,344
Owned Hotel/Retail Expense ($30,274) ($31,182)
Rent ($5,240) ($5,397)
Sales & Marketing ($3,334) ($3,434)
Repair & Maintenance ($3,843) ($3,959)
Property Taxes & Other ($4,248) ($4,376)
Royalty Fees ($1,972) ($2,031)
Corporate G&A ($4,163) ($4,246)
-----------------------------
($53,074) ($54,624)
Owned Hotels/Retail EBITDA $11,338 $11,720
% margin 17.6% 17.7%
Other:
Gaming Revenues $0 $0
Management Fee and Rental Rev. $3,155 $3,155
Corporate G&A Fee ($5,638) ($5,751)
NLC G&A ($1,435) ($1,478)
HFS Corporate Service Fee ($1,500) ($1,500)
Owned Motels:
Motel Revenue $10,790 $11,114
Owned Motel Expense ($3,777) ($3,890)
Rent ($1,732) ($1,784)
Sales & Marketing ($286) ($295)
Repair & Maintenance ($584) ($601)
Property Taxes & Other ($895) ($922)
Royalty Fees ($345) ($356)
Corporate G&A ($802) ($818)
-----------------------------
($8,421) ($8,666)
Owned Motels EBITDA $2,369 $2,448
% margin 22.0% 22.0%
<TABLE>
<CAPTION>
National Lodging Corp. Management Case
--------------------------------------------------------------------------------------
1995E 1996 1997 1998 1999
--------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSE BACKUP
(% of Revenues)
Owned Hotel/Retail
Hotel Revenue $41,120 $44,655 $50,105 $51,609 $53,157
Retail Revenue $2,137 $2,201 $2,267 $2,335 $2,405
--------------------------------------------------------------------------------------
$43,257 $46,856 $52,372 $53,944 $55,562
Owned Hotel/Retail Expense 48.22% 48.22% 47.22% 47.00% 47.00%
Rent 8.4% 8.14% 8.14% 8.14% 8.14%
Sales & Marketing 5.18% 5.18% 5.18% 5.18% 5.18%
Repair & Maintenance 5.97% 5.97% 5.97% 5.97% 5.97%
Property Taxes & Other 6.60% 6.60% 6.60% 6.60% 6.60%
Corporate G&A (Growth) 2.00% 2.00% 2.00% 2.00% 2.00%
Owned Motels:
Motel Revenue $7,763 $8,152 $8,774 $9,037 $9,308
Owned Motel Expense 36.71% 36.71% 35.50% 35.00% 35.00%
Rent 16.05% 16.05% 16.05% 16.05% 16.05%
Sales & Marketing 2.65% 2.65% 2.65% 2.65% 2.65%
Repair & Maintenance 5.41% 5.41% 5.41% 5.41% 5.41%
Property Taxes & Other 8.30% 8.30% 8.30% 8.30% 8.30
Corporate G&A (Growth) 2.00% 2.00% 2.00% 2.00% 2.00%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005
------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSE BACKUP
(% of Revenues)
Owned Hotel/Retail
Hotel Revenue $54,752 $56,394 $58,086 $59,829 $61,624 $63,472
Retail Revenue $2,477 $2,552 $2,628 $2,707 $2,788 $2,872
------------------------------------------------------------------------------------------------
$57,229 $58,946 $60,714 $62,536 $64,412 $66,344
Owned Hotel/Retail Expense 47.00% 47.00% 47.00% 47.00% 47.00% 47.00%
Rent 8.14% 8.14% 8.14% 8.14% 8.14% 8.14%
Sales & Marketing 5.18% 5.18% 5.18% 5.18% 5.18% 5.18
Repair & Maintenance 5.97% 5.97% 5.97% 5.97% 5.97% 5.97%
Property Taxes & Other 6.60% 6.60% 6.60% 6.60% 6.60% 6.60%
Corporate G&A (Growth) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Owned Motels:
Motel Revenue $9,587 $9,875 $10,171 $10,476 $10,790 $11,114
Owned Motel Expense 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%
Rent 16.05% 16.05% 16.05% 16.05% 16.05% 16.05%
Sales & Marketing 2.65% 2.65% 2.65% 2.65% 2.65% 2.65%
Repair & Maintenance 5.41% 5.41% 5.41% 5.41% 5.41% 5.41%
Property Taxes & Other 8.30% 8.30% 8.30% 8.30% 8.30% 8.30%
Corporate G&A (Growth) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
</TABLE>
<PAGE>
National Lodging Corp. Management Case
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NLC CapEx and Depreciation
--------------------------------------------------------------------------
(Does Not Include JV's) 1996 1997 1998 1999
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FF&E $68,962 $74,093 $71,124 $68,910
Additions 8,623 970 1,907 2,585
Total Depreciation 3,491 3,540 4,120 4,400
--------------------------------------------------------------------------
Total FF&E $74,093 $71,124 $68,910 $67,095
- -----------------------------------------------------------------------------------------------------------------------------------
CapEx Calculations:
--------------------------------------------------------------------------
1996 1997 1998 1999
--------------------------------------------------------------------------
Owned Hotels
Revenues $44,655 $50,105 $51,609 $53,157
CapEx as a % Revenues 0.8% 1.5% 3.0% 4.0%
--------------------------------------------------------------------------
CapEx $357 $751 $1,548 $2,126
Owned Motels
Revenues $8,152 $8,774 $9,037 $9,308
CapEx as a % Revenues 0.8% 1.5% 3.0% 4.0%
--------------------------------------------------------------------------
CapEx $65 $132 $271 $372
Retail
Revenues $2,201 $2,267 $2,335 $2,405
CapEx as a % Revenues 4.0% 3.8% 3.7% 3.6%
--------------------------------------------------------------------------
CapEx $87 $87 $87 $87
Sub- Total $510 $970 $1,907 $2,585
==========================================================================
JV Motels
Revenues $34,907 $36,653 $38,485 $39,640
CapEx as a % Revenues 6.1% 6.1% 6.0% 6.0%
--------------------------------------------------------------------------
CapEx $2,129 $2,236 $2,309 $2,378
Extraordinary CapEx (NLC) 8,113 0 0 0
Extraordinary CapEx (JV) 3,000 0 0 0
--------------------------------------------------------------------------
Total CapEx $13,752 $3,206 $4,216 $4,963
==========================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
Deferred Financing Amortization
--------------------------------------------------------------------------
1996 1997 1998 1999
--------------------------------------------------------------------------
Beginning balance $827 $724 $620 $517
Amortization 103 103 103 103
--------------------------------------------------------------------------
Ending balance $724 $620 $517 $414
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NLC CapEx and Depreciation
--------------------------- ------------------------------------------------- ----------------
(Does Not Include JV's) 2000 2001 2002 2003 2004 2005
--------------------------- ------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
FF&E $67,095 $65,028 $62,700 $60,104 $57,233 $54,079
Additions 2,661 2,738 2,817 2,899 2,984 3,070
Total Depreciation 4,728 5,066 5,413 5,770 6,138 6,516
----------------------------------------------------------------------------------------------
Total FF&E $65,028 $62,700 $60,104 $57,233 $54,079 $50,633
- --------------------------------------------------------------------------------------------------------------------------------
CapEx Calculations:
----------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005
----------------------------------------------------------------------------------------------
Owned Hotels
Revenues $54,752 $56,394 $55,086 $59,829 $61,624 $63,472
CapEx as a % Revenues 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
----------------------------------------------------------------------------------------------
CapEx $2,190 $2,256 $2,323 $2,393 $2,465 $2,539
Owned Motels
Revenues $9,587 $9,875 $10,171 $10,476 $10,790 $11,114
CapEx as a % Revenues 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
----------------------------------------------------------------------------------------------
CapEx $384 $395 $407 $419 $432 $445
Retail
Revenues $2,477 $2,552 $2,628 $2,707 $2,788 $2,872
CapEx as a % Revenues 3.5% 3.4% 3.3% 3.2% 3.1% 3.0%
----------------------------------------------------------------------------------------------
CapEx $87 $87 $87 $87 $87 $87
Sub- Total $2,661 $2,738 $2,817 $2,899 $2,984 $3,070
==============================================================================================
JV Motels
Revenues $40,829 $42,054 $43,315 $44,615 $45,953 $47,332
CapEx as a % Revenues 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
----------------------------------------------------------------------------------------------
CapEx $2,450 $2,523 $2,599 $2,677 $2,757 $2,840
Extraordinary CapEx (NLC) 0 0 0 0 0 0
Extraordinary CapEx (JV) 0 0 0 0 0 0
----------------------------------------------------------------------------------------------
Total CapEx $5,111 $5,261 $5,416 $5,576 $5,741 $5,910
==============================================================================================
- --------------------------------------------------------------------------------------------------------------------------------
Deferred Financing Amortization
----------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005
----------------------------------------------------------------------------------------------
Beginning balance $414 $310 $207 $103 $0 $0
Amortization 103 103 103 103 0 0
----------------------------------------------------------------------------------------------
Ending balance $310 $207 $103 $0 $0 $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Depreciation Schedule
-----------------------------------------
1996 1997
-----------------------------------------
<S> <C> <C>
Capital Expenditures $8,623 $970
Est. existing basis in P&E $43,300
Revalued P&E for hotels/ motels $68,962
Years
20 $3,103 $3,103
1996 $8,623 10 388 776
1997 $970 8 61
1998 $1,907 8
1999 $2,585 8
2000 $2,661 8
2001 $2,738 8
2002 $2,817 8
2003 $2,899 8
2004 $2,984 8
2005 $3,070 8
-----------------------------------------
Depreciation on New capital expenditures 388 837
Total Depreciation of P&E $3,491 $3,940
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------
1998 1999 2000 2001
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Expenditures $1,907 $2,585 $2,661 2,738
Years
20 $3,103 $3,103 $3,103 $3,103
1996 $8,623 10 776 776 776 776
1997 $970 8 121 121 121 121
1998 $1,907 8 119 238 238 238
1999 $2,585 8 162 323 323
2000 $2,661 8 166 333
2001 $2,738 8 171
2002 $2,817 8
2003 $2,899 8
2004 $2,984 8
2005 $3,070 8
--------------------------------------------------------------------
Depreciation on New capital expenditures 1,016 1,297 1,625 1,963
Total Depreciation of P&E $4,120 $4,400 $4,728 $5,066
</TABLE>
<TABLE>
<CAPTION>
---------------------------------- ---------------------------------
2002 2003 2004 2005
---------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Capital Expenditures $2,817 $2,899 $2,984 $3,070
Years
20 $3,103 $3,103 $3,103 $3,103
1996 $8,623 10 776 776 776 776
1997 $970 8 121 121 121 121
1998 $1,907 8 238 238 238 238
1999 $2,585 8 323 323 323 323
2000 $2,661 8 333 333 333 333
2001 $2,738 8 342 342 342 342
2002 $2,817 8 176 352 352 352
2003 $2,899 8 181 362 362
2004 $2,984 8 186 373
2005 $3,070 8 192
Depreciation on New capital expenditures 2,310 2,667 3,035 3,413
Total Depreciation of P&E $5,413 $5,770 $6,138 $6,516
</TABLE>
<PAGE>
National Lodging Corp.
<TABLE>
<CAPTION>
Management Case
Interest Expense
--------------------------------------
1996 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Average Bank Debt Outstanding $53,417 $41,490
Bank Interest Rate 7.00% $3,739 $2,904
2 Average Balance of Capital Leases $4,300 $4,300
Capital Lease Interest Rate 10.00% $430 $430
3 LC Fees 0.25% $34 $31
4 Reducing Revolver Commitments $125,000 $110,000
Average Balance Outstanding $53,417 $41,490
LC Outstanding $12,500 $12,500
--------------------------------------
Unused Revolver $59,083 $56,010
Unused Fee (20BPS on Unused Portion) 0.20% $118 $112
------------------------------------------------------
5 B of A JV Loan 1995E 1996 1997
------------------------------------------------------
Total BT LC Commitment $15,000 $15,000 $15,000
Max Drawn $12,500 $12,500 $12,500
Total B of A Funded- BOY $15,000 $15,000 $12,500
JV Cap Ex x (2) $10,259 $4,472
Total B of A drawn $10,259 $4,472
JV CF for Debt Service $10,089 $10,729
Total Repayments ($12,759) ($4,472)
Total B of A Funded - EOY $15,000 $12,500 $12,500
Average B of A Outstanding $15,000 $13,750 $12,500
JV Interest 7.0% $963 $875
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------
1998 1999 2000
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Average Bank Debt Outstanding $30,439 $19,434 $9,042
Bank Interest Rate $2,131 $1,360 $633
2 Average Balance of Capital Leases $4,300 $4,300 $4,300
Capital Lease Interest Rate $430 $430 $430
3 LC Fees $31 $31 $31
4 Reducing Revolver Commitments $95,000 $80,000 $65,000
Average Balance Outstanding $30,439 $19,434 $9,042
LC Outstanding $12,500 $12,500 $12,500
----------------------------------------------------
Unused Revolver $52,061 $48,066 $43,458
Unused Fee (20BPS on Unused Portion) $104 $96 $87
----------------------------------------------------
5 B of A JV Loan 1998 1999 2000
----------------------------------------------------
Total BT LC Commitment $15,000 $15,000 $15,000
Max Drawn $12,500 $12,500 $12,500
Total B of A Funded- BOY $12,500 $12,500 $12,500
JV Cap Ex x (2) $4,618 $4,757 $4,899
Total B of A drawn $4,618 $4,757 $4,899
JV CF for Debt Service $11,309 $11,675 $12,051
Total Repayments ($4,618) ($4,757) ($4,899)
Total B of A Funded - EOY $12,500 $12,500 $12,500
Average B of A Outstanding $12,500 $12,500 $12,500
JV Interest 7.0% $875 $875 $875
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------
2001 2002 2003
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Average Bank Debt Outstanding $1,974 $0 $0
Bank Interest Rate $138 $0 $0
2 Average Balance of Capital Leases $4,300 $4,300 $4,300
Capital Lease Interest Rate $430 $430 $430
3 LC Fees $31 $31 $31
4 Reducing Revolver Commitments $32,500 $0 $0
Average Balance Outstanding $1,974 $0 $0
LC Outstanding $12,500
------------------------------------------------
Unused Revolver $18,026 $0 $0
Unused Fee (20BPS on Unused Portion) $36 $0 $0
------------------------------------------------
5 B of A JV Loan 2001 2002 2003
------------------------------------------------
Total BT LC Commitment $15,000 $15,000 $15,000
Max Drawn $12,500 $12,500 $12,500
Total B of A Funded- BOY $12,500 $12,500 $12,500
JV Cap Ex x (2) $5,046 $5,198 $5,354
Total B of A drawn $5,046 $5,198 $5,354
JV CF for Debt Service $12,439 $12,838 $13,250
Total Repayments ($5,046) ($5,198) ($5,354)
Total B of A Funded - EOY $12,500 $12,500 $12,500
Average B of A Outstanding $12,500 $12,500 $12,500
JV Interest 7.0% $875 $875 $875
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------
2004 2005
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Average Bank Debt Outstanding $0 $0
Bank Interest Rate $0 $0
2 Average Balance of Capital Leases $4,300 $4,300
Capital Lease Interest Rate $430 $430
3 LC Fees $31 $31
4 Reducing Revolver Commitments $0 $0
Average Balance Outstanding $0 $0
LC Outstanding
--------------------------------
Unused Revolver $0 $0
Unused Fee (20BPS on Unused Portion) $0 $0
--------------------------------
5 B of A JV Loan 2004 2005
--------------------------------
Total BT LC Commitment $15,000 $15,000
Max Drawn $12,500 $12,500
Total B of A Funded- BOY $12,500 $12,500
JV Cap Ex x (2) $5,514 $5,680
Total B of A drawn $5,514 $5,680
JV CF for Debt Service $13,673 $14,110
Total Repayments ($5,514) ($5,680)
Total B of A Funded - EOY $12,500 $12,500
Average B of A Outstanding $12,500 $12,500
JV Interest 7.0% $875 $875
- ----------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE IV
REAL PROPERTY
1. National Lodging Corp.
None.
2. Forte Hotels, Inc., Travel Beverages, Inc., FHI/San Diego
Inc.
See attached
3. National Gaming Mississippi, Inc.
None.
375900.1
<PAGE>
SCHEDULE IV
REAL PROPERTY
(a) Owned or Leased Real Property
I. OWNED REAL PROPERTY
A. HOTELS
1. Property: Portland
1441 Northeast Second Avenue
Portland, OR 97232
2. Property: Toronto Canada
55 Hallcrown Place
Toronto, Ontario, Canada M2J R41
3. Property: Houston
2828 South West Freeway
Houston, TX 77098
B. MOTELS
1. Property: Monterey Fairgrounds/Carmel1
2030 North Fremont Street
Monterey, CA 93940
2. Property: Niagara Falls Thriftlodge2
200 Rainbow Blvd.
Niagara Falls, NY 14303
3. Property: Beachwood
3795 Orange Place
Beachwood, OH 44122
4. Property: Greensboro
2112 West Meadowview Road
Greensboro, NC 27403
- --------
1 Property is owned by the Company in common with E.M. Smith, an individual,
and leased to a joint venture; see Item 9 under Section II.B of this
Schedule 2.16(a).
2 Property is owned by the Company in common with Russell Larke, an
individual, and leased to the Company; see Item 6 under Section II.B of
this Schedule 2.16(a).
-2-
375900.1
<PAGE>
5. Property: Fort Lauderdale
1500 West Commercial Blvd.
Fort Lauderdale, FL 33309
6. Property: Jacksonville
8765 Baymeadows Road
Jacksonville, FL 32256
7. Property: Willoughby
34600 Maplegrove Road
Willoughby, OH 44094
8. Property: Louisville
9340 Blairwood Road
Louisville, KY 40222
9. Property: Detroit Novi
21100 Haggerty Road
Northville, MI 48167
10. Property: Columbia West
2210 Bush River Road
Columbia, SC 29210
11. Property: Naperville (Chicago)
1617 Naperville Road
Naperville, IL 60563
12. Property: Pelham
410 Oak Mountain Circle
Pelham, AL 35124
13. Property: Cambridge
I-70 & SR-209
Exit 178
Cambridge, OH 43725
14. Property: Columbus (Worthington)
7480 North High Street
Columbus, OH 43235
15. Property: Pittsfield
16 Chesire Road (Route 8)
Pittsfield, MA 01201
-3-
375900.1
<PAGE>
16. Property: Orlando Central Park3
7101 South Orange Blossom Trail
Orlando, FL 32809
17. Property: Revelstoke Lodge (Canada)4
601 1st St. West
Revelstoke, B.C.
Canada V0E 250
18. Property: Omak
122 North Main Street
Omak, WA 98841
19. Property: Paso Robles5
2701 Spring Street
Paso Robles, CA 93446
C. JOINT VENTURE PROPERTIES6
1. Property: El Paso City Central7
409 East Missouri Street
El Paso, TX 79901
- --------
3 A portion of this property is leased by the Company to a
third party; see Item 17 under Section II.E. of this
Schedule 2.16(a).
4 Property is leased to Travelodge Ltd. and Moberly Holdings
Ltd.; see Item 65 under Section II.C of this Schedule
2.16(a). The Company owns this property in common with
Jubar Holdings.
5 Property is leased to Travelodge International Inc., remote
predecessor-in-interest to Forte Hotels, Inc., et al.; see Item 60 under
Section II.C of this Schedule 2.16(a).
6 The interests in the "Joint Venture Properties" are held by (1) the
Company in common with other entities or individuals and/or (2) a joint
venture (in which the Company is a venture partner), either singly or in
common with other entities or individuals.
7 An associated "alley" parcel is leased by a third party to the Company and
one individual; see Item 87 under Section II.C of this Schedule 2.16(a).
Also, a portion of this property is leased by the Company to a third
party; see Item 15 under Section II.E of this Schedule 2.16(a).
-4-
375900.1
<PAGE>
2. Property: Santa Rosa Downtown8
College at Mendocino
635 Healdsburg Avenue
Santa Rosa, CA 95401
3. Property: Williams9
430 East Bill Williams Avenue
Williams, AZ 86046
4. Property: Santa Barbara Beach10
22 Castillo Street
Santa Barbara, CA 93101
5. Property: San Antonio Alamo11
405 Broadway
San Antonio, TX 78205
6. Property: Monterey
675 Munras Avenue
Monterey, CA 93940
7. Property: San Francisco Central
1707 Market Street
San Francisco, CA 94103
8. Property: Alexandria
1146 MacArthur Drive
Alexandria, LA 71303
9. Property: Athens Thriftlodge
1325 Highway 72 East
Athens, AL 35611
10. Property: Chambersburg
565 Lincoln Way East
Chambersburg, PA 17201
- --------
8 Property is leased to the Company; see Item 76 under Section
II.C of this Schedule 2.16(a).
9 Property is owned by the Company in common with an individual and is
leased to a joint venture and an individual; see Item 80 under Section
II.C of this Schedule 2.16(a).
10 Property is owned by the joint venture in common with the Company and is
leased to the Company; see Item 83 under Section II.C of this Schedule
2.16(a).
11 A portion of this property is leased by the Company to a third party; see
Item 14 under Section II.E of this Schedule 2.16(a).
-5-
375900.1
<PAGE>
11. Property: Lake Park
I-75, Exit 2
Lake Park, GA 31636
12. Property: Lancaster
2101 Columbia Avenue
Lancaster, PA 17603
13. Property: Boise
1314 Grove Street
Boise, ID 83702
14. Property: Salt Lake Downtown
524 South West Temple Street
Salt Lake City, UT 84101
15. Property: Roseburg12
315 West Harvard Blvd.
Roseburg, OR 97470
D. UNDEVELOPED PROPERTY
1. Property: Elizabethtown
104 Buffalo Creek Drive
[(a/k/a, I-65 & U.S. 62)]
Elizabethtown, KY 42701
2. Property: Pooler, GA
Lot #3 on Plot of Pooler
Square Subdivision Phase-II
Chatham County
- --------
12 Property is leased to a joint venture; see Item 66 under
Section II.C. of this Schedule 2.16(a).
-6-
375900.1
<PAGE>
II. LEASED REAL PROPERTY
A. HOTELS13
1. Property: Disney World
2000 Hotel Plaza Blvd.
(P.O. Box 22205)
Lake Buena Vista, FL 32830-2205
Lessor: Lake Buena Vista Communities,
Inc.14
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 2/1/71
2. Property: Mt. Laurel
1111 Rt. 73
Mt. Laurel, NJ 08054
Lessor: American Real Estate Holdings
Limited Partnership15
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 4/11/73
3. Property: San Diego Harbor Island
1960 Harbor Island Drive
San Diego, CA 92101-1097
Lessor: San Diego Unified Port District
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 11/5/68
4. Property: J.F.K.
J.F.K. International Airport
Van Wyck Expressway
Jamaica, NY 11430-1613
Lessor: Port Authority of New York and New
Jersey
Lessee: Forte Hotels, Inc.
Date of Lease: 12/2/55
- --------
13 Unless otherwise indicated, the named lessors and lessees are the lessors
and lessees of record.
14 Fee owner(s) of record.
15 Fee owner(s) of record.
-7-
375900.1
<PAGE>
5. Property: San Francisco Wharf
250 Beach Street
San Francisco, CA 94133
Lessor: Block 14 Associates; Bank of
America National Trust and Savings
Association
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 3/1/61
6. Property: Dallas
4500 Harry Hines Blvd.
Dallas, TX 75219
Lessor: The Hotel Investors
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 6/25/71
7. Property: Long Beach16
700 Queensway Drive
Long Beach, CA 90802
Lessor: City of Long Beach
Lessee: Forte Hotels International, Inc.,
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 5/12/88
- --------
16 A contract for the sale of this property was executed
12/8/95. See Item 37 on Schedule 2.10.
-8-
375900.1
<PAGE>
B. MOTELS17
1. Property: Orlando Centroplex
409 North Magnolia Avenue
Orlando, FL 32801
Lease 1
Lessor: Individuals18
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 3/11/57
Lease 2
Lessor: Individuals19
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 12/23/57
2. Property: Cincinnati Riverfront
222 York Street
Newport, KY 41071
Lessor: The Stille & Duhlmeier Company20
Lessee: Forte Hotels International, Inc.,
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 5/24/66
3. Property: Waukegan Thriftlodge21
222 West Grand Avenue
Waukegan, IL 60085
Lessor: Individuals22
Lessee: Forte Hotels, Inc.
Date of Lease: 8/27/63
- --------
17 Unless otherwise indicated, the named lessors and lessees are the lessors
and lessees of record.
18 Fee owner(s) of record.
19 Fee owner(s) of record.
20 Fee owner(s) of record.
21 A portion of this property is leased by the Company to a third party; see
Item 16 under Section II.E of this Schedule 2.16(a).
22 Fee owner(s) of record.
-9-
375900.1
<PAGE>
4. Property: York
132-140 North George Street
York, PA 17401
Lessor: Daniel & Elaine Blank
Lessee: Forte Hotels International, Inc.,
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 12/18/62
5. Property: Tallahassee23
691 West Tennessee Street
Tallahassee, FL 32304
Lessor: Lively Sisters, Ltd.; R.L.
Wilson24
Lessee: Forte Hotels International, Inc.,
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 9/20/61
6. Property: Niagara Falls Thriftlodge
200 Rainbow Blvd.
Niagara Falls, NY 14303
Lessor: Forte Hotels, Inc.; Russell
Larke25
Lessee: Travelodge International, Inc.,
remote predecessor-in-interest to
Forte Hotels, Inc.
Date of Lease: 9/10/63
7. Property: San Francisco International Airport
326 South Airport Blvd.
South San Francisco, CA 94080
Lessor: International Inn, Inc.26
Lessee: Forte Hotels, Inc.
- --------
23 The landlords of the Tallahassee Travelodge property
recently brought suit alleging a loss of percentage rent due
to the poor maintenance of the hotel. In a May 1995 trial,
the jury awarded damages to the plaintiffs for lost rent and
the court, in the bench portion of the trial, terminated the
lease. The Company has paid the damages in full and
appealed the order terminating the lease. The Company is
currently in settlement negotiations with the landlords.
See Wilson v. FHI listed as Item 13 on Annex A.II of
Schedule 2.15 for additional information.
24 Fee owner(s) of record.
25 Fee owner(s) of record.
26 Fee owner(s) of record.
-10-
375900.1
<PAGE>
Date of Lease: 4/25/90
8. Property: Las Vegas South Strip
3735 Las Vegas Blvd. South
Las Vegas, NV 89109
Lessor: Brooks Family Trust
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 5/1/87
9. Property: Monterey Fairgrounds/ Carmel27
2030 North Fremont Street
Monterey, CA 93940
Lessors: Forte Hotels, Inc.; E.M. Smith
Lessee: Monterey Fairgrounds Travelodge
Date of Lease: 5/16/89
10. Property: El Cajon
1220 West Main Street
El Cajon, CA 92020
Lessor: G. & M. Neishi
Lessee: Travelodge International Inc.,
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 12/26/67
11. Property: Hayward
21598 Foothill Blvd.
Hayward, CA 94541
Lessor: William & Mae Struthers
Lessee: Hayward Travelodge
Date of Lease: 6/19/60
12. Property: Anaheim
1166 West Katella Avenue
Anaheim, CA 92802
Lessor: Clarence & Elizabeth Mauerhan
Lessee: Forte Hotels, Inc.
Date of Lease: 7/24/64
- --------
27 Property is owned in fee by the Company in common with an
individual; see Item 1 under Section I.B of this Schedule 2.16(a).
-11-
375900.1
<PAGE>
13. Property: Sacramento Downtown
1111 H Street (at 11th Street)
Sacramento, CA 95814
Lease 1
Lessor: Whitworth College28
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 9/1/60
Lease 2
Lessor: Sheldon Food and Beverage;
E.M. Gerlinger29
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 7/16/59
Lease 3
Lessor: Sheldon Food and Beverage30
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 7/16/59
14. Property: Colton Thriftlodge
225 East Valley Blvd.
Colton, CA 92324
Lessor: Colton Development Co.
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 2/23/73
- --------
28 Fee owner(s) of record.
29 Fee owner(s) of record.
30 Fee owner(s) of record.
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<PAGE>
C. JOINT VENTURE PROPERTIES31
1. Property: Chicago O'Hare
3003 Mannheim Road (at Higgins)
Des Plaines, IL 60018-3605
Lessor: Duilia Bonasera and M.G. Buzanis32
Lessee: Chicago O'Hare Travelodge
Date of Lease: 6/7/61
2. Property: Las Vegas Strip
2830 Las Vegas Blvd. South
Las Vegas, NV 89109
Lessor: Linda Kaplan
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc. et al.
Date of Lease: 4/3/57
3. Property: Mission Valley33
1201 Hotel Circle South
San Diego, CA 92108
Sublease
Sublessor: Hiwayhouse Hotels of Arizona, Inc.
Sublessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of SubLease:1/1/59
Sub-sublease
Sub-sublessor: Mission Valley Travelodge
Sub-sublessee: Adam's & Albie's Inc.
Date of Sub-
sublease: Recorded 9/8/86
- --------
31 The leasehold interests in the "Joint Venture Properties"
are held by (1) the Company in common with other entities or
individuals and/or (2) a joint venture (in which the Company
is a venture partner), either singly or in common with other
entities or individuals. Unless otherwise indicated, the
named lessors and lessees are the lessors and lessees of
record.
32 Fee owner(s) of record.
33 Subject to two (2) groundlease(s) of record, each dated March 27, 1959,
between a third party lessor and the Sublessor, as ground lessee.
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<PAGE>
4. Property: San Francisco Downtown
790 Ellis Street
San Francisco, CA 94109
Lessor: Sleepy Bear Investors, Ltd.
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; Individuals and
Trusts
Date of Lease: 10/26/56
5. Property: Santa Monica
3102 Pico Blvd.
Santa Monica, CA 90405
Lessor: Paul W. Beidler, et al.
Lessee: Forte Hotels, Inc.; W.G.
Enterprises, Inc.; G.H. & J.E. Gage
Date of Lease: 3/16/56
6. Property: Seattle Downtown
2213 8th Avenue
Seattle, WA 98121
Lessor: Scott Building, Inc.
Lessee: Forte Hotels, Inc.; Margaret M.
Hurley Trust
Date of Lease: 10/17/56
7. Property: Space Needle
200 6th Avenue North
Seattle, WA 98109
Lessor: Jaygees Holdings, Ltd.
Lessee: Forte Hotels, Inc.; Safter Inc.;
Individuals
Date of Lease: 9/28/59
8. Property: Tahoe City
455 North Lake Blvd.
P.O. Box 84
Tahoe City, CA 96145
Lessor: Bechdolt Investments, Ltd.34
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; Individuals
Date of Lease: 8/24/61
- --------
34 Fee owner(s) of record.
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<PAGE>
9. Property: University (Seattle)
4725 25th Avenue Northeast
Seattle, WA 98105
Lease 1
Lessor: P.B. Investments Ltd.
Partnership35
Lessee: University TraveLodge Joint Venture
Date of Lease: 4/29/87
Lease 2
Lessor: Individuals36
Lessee: University TraveLodge Joint Venture
Date of Lease: 4/29/87
10. Property: Ashtabula
Corner of SR-45 & I-90, Exit 223
(P.O. Box 218)
Austinburg, OH 44010-0218
Lessor: Jelso Brothers Enterprises,
Inc., et al.37
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; L.F. Epstein, et al.
Date of Lease: 5/5/64
11. Property: Atlanta Central (Downtown)
311 Courtland St., Northeast
Atlanta, GA 30303
Lessor: Trust Company Bank; C.S. & L.A.
Mitchell38
Lessee: Trusthouse Forte Hotels, Inc.; L.R.
Clark
Date of Lease: 3/30/62
- --------
35 Fee owner(s) of record.
36 Fee owner(s) of record.
37 Fee owner(s) of record.
38 Fee owner(s) of record.
-15-
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<PAGE>
12. Property: Bedford
285 Great Road
Bedford, MA 01730
Lessor: C.G. Drucker39
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; Harshad Patel
Date of Lease: 3/27/64
13. Property: Cincinnati
3244 Central Parkway
Cincinnati, OH 45225
Lessor: Edwin F. Baier
Lessee: Forte Hotels, Inc., et al.
Date of Lease: 5/6/60
14. Property: Clearwater
22950 U.S. Highway 19 North
Clearwater, FL 34625
Lessor: Gundlach's Florida Properties, Inc.
Lessee: Forte Hotels, Inc.; Individuals
Date of Lease: 8/16/63
15. Property: Fort Myers
2038 West First Street
Fort Myers, FL 33901
Lessor: Philip R. Fager
Lessee: Forte Hotels International, Inc.,
predecessor-in-interest to Forte
Hotels, Inc.; Sara-Myers, Inc.
Date of Lease: 1/21/64
16. Property: Gainesville
3103 N.W. 13th St.
Gainesville, FL 32609
Lessor: C. Pinkoson et al.
Lessee: Forte Hotels, Inc.; Individuals
Date of Lease: 9/26/61
17. Property: Lafayette Center
1101 West Pinhook Road
Lafayette, LA 70503
Lessor: H.P. Chastant
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; Individuals
Date of Lease: 4/17/63
- --------
39 Fee owner(s) of record.
-16-
375900.1
<PAGE>
18. Property: Lawrence
801 Iowa Street
Lawrence, KS 66049
Lessor: RBG, L.L.C.40
Lessee: Forte Hotels, Inc.; Individuals
Date of Lease: 5/10/68
19. Property: Louisville
2nd & Liberty Streets
(401 South 2nd Street)
Louisville, KY 40202
Lessor: The First Montgomery Co.41
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 1/14/63
20. Property: Mason City Thriftlodge
24 5th Street Southwest
Mason City, IA 50401
Lessor: Sude Naifeh42
Lessee: Travelodge International, Inc.,
remote predecessor-in-interest to
Forte Hotels, Inc.; R.A. and V.L.
Davis
Date of Lease: 1/27/64
21. Property: Natick
1350 Worcester Road
Natick, MA 01760
Lessor: H.C. Atlantic Development Limited
Partnership43
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 8/31/63
- --------
40 Fee owner(s) of record.
41 Fee owner(s) of record.
42 Fee owner(s) of record.
43 Fee owner(s) of record.
-17-
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<PAGE>
22. Property: Ocala
1626 Southwest Pine Avenue
Ocala, FL 34474
Lessor: Celia Wimmer
Lessee: Travelodge International, Inc.,
remote predecessor-in-interest to
Forte Hotels, Inc.; Grow Mountain
Corporation
Date of Lease: 9/4/63
23. Property: Quincy
200 South 3rd Street
Quincy, IL 62301
Lease 1
Lessor: Lortola, Inc.; Estate of John
Ennis44
Lessee: Quincy Travelodge
Date of Lease: 6/5/61
Lease 2
Lessor: Lortola, Inc.; Estate of John
Ennis45
Lessee: Quincy Travelodge
Date of Lease: 3/31/60
24. Property: Sarasota Thriftlodge
270 North Tamiami Trail
Sarasota, FL 34236
Lessor: D.W. and F. Boomhower
Lessee: Forte Hotels, Inc.; R.J. Grace;
Artex Development Co.
Date of Lease: 6/8/61
25. Property: South Sioux City
400 Dakota Avenue
South Sioux City, NE 68776
Lessor: M.W. and A.G. Marsh46
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 1/22/64
- --------
44 Fee owner(s) of record.
45 Fee owner(s) of record.
46 Fee owner(s) of record.
-18-
375900.1
<PAGE>
26. Property: Terre Haute Thriftlodge
530 South 3rd Street
Terre Haute, IN 47807
Lessor: M.A. Powers, Inc.; W.W. and M.M.
Davidson
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 5/26/63
27. Property: Utica
1700 Genessee Street
Utica, NY 13502
Lessor: Individuals
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forest
Hotels, Inc.
Date of Lease: 10/11/61
28. Property: Zanesville Thriftlodge
58 North 6th Street
Zanesville, OH 43701
Lessor: Various Trusts and Individuals47
Lessee: Forte Hotels, Inc.; F.J. Grant,
III, et al.
Date of Lease: 4/18/62
29. Property: Balboa Park
840 Ash Street
San Diego, CA 92101
Lessor: J. Mark Grosvenor48
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 6/6/52
30. Property: Bayview Thriftlodge
1943 Pacific Highway
San Diego, CA 92101
Lessor: A. Sanfilippo, et al.49
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 12/15/53
- --------
47 Fee owner(s) of record.
48 Fee owner(s) of record.
49 Fee owner(s) of record.
-19-
375900.1
<PAGE>
31. Property: Bellevue
11011 Northeast 8th Street
Bellevue, WA 98004
Lease 1
Lessor: Tochterman Investment Co., Inc.
Lessee: Bellevue Travelodge
Date of Lease: 3/11/64
Lease 2
Lessor: Tochterman Investment Co., Inc.
Lessee: Bellevue Travelodge
Date of Lease: 1/11/62
32. Property: Bellingham
202 East Holly Street
Bellingham, WA 98225
Lessor: Individuals
Lessee: Travelodge of Washington, Inc.,
remote predecessor-in-interest to
Forte Hotels, Inc., et al.
Date of Lease: 7/1/61
33. Property: Berkeley
1820 University Avenue
Berkeley, CA 94703
Lessor: Elinor Wiley Dobbins
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; The Bentitou
Partnership
Date of Lease: 6/1/55
34. Property: Billings
3311 2nd Avenue North
Billings, MT 59101
Lessor: Individuals
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; D.J. Schock, Inc.
Date of Lease: 10/9/61
-20-
375900.1
<PAGE>
35. Property: Burbank
1112 North Hollywood Way
Burbank, CA 91505
Lease 1
Lessor: Hilda Sugarman
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 9/15/61
Lease 2
Lessor: Frank Gruen and Rachel Gruen50
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 4/15/57
36. Property: Cabrillo Central
840 A Street
San Diego, CA 92101
Lessor: Miriam Powers Barney
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 4/1/53
37. Property: Durango
2970 Main Avenue
Durango, CO 81301
Lessor: Marilyn M. Cagnoni
Lessee: Durango Travelodge
Date of Lease: 1/9/65
38. Property: Eagle Rock Welcome Inn
1840 West Colorado Blvd.
Los Angeles, CA 90041
Lessor: Phil Gershon
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 8/1/49
- --------
50 Not of record.
-21-
375900.1
<PAGE>
39. Property: Embarcadero-Harbor
1305 Pacific Highway
San Diego, CA 92101
Lessor: Catellus Development Corporation51
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 9/12/50
40. Property: Ephrata
31 South Basin Street, SW
Ephrata, WA 98823
Lessor: Individuals
Lessee: Forte Hotels, Inc.; C.J. Vaughn;
A.W. and L.B. Van De Vanter
Date of Lease: 10/4/61
41. Property: Eureka
4 Fourth Street (Fourth and B St.)
Eureka, CA 95501
Lessor: Sandra L. Robinson, et al.52
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 1/17/60
42. Property: Flagstaff
2520 East Lucky Lane
Flagstaff, AZ 86004
Lessors: The United States National Bank of
San Diego, et al.53
Lessee: Forte Hotels, Inc.; J.M. & W.C.
Perry, III
Date of Lease: 10/22/59
43. Property: Golden Gate
2230 Lombard Street
San Francisco, CA 94123
Lessors: Betsey H. Keller, et al.
Lessee: Travelodge International, Inc.,
remote predecessor-in-interest to
Forte Hotels, Inc., et al.
Date of Lease: 8/9/54
- --------
51 Fee owner(s) of record.
52 Fee owner(s) of record.
53 Fee owner(s) of record.
-22-
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<PAGE>
44. Property: Hollywood (Travel Inn)
7370 Sunset Blvd.
Hollywood, CA 90046
Lessor: Alice S. Ewing Trust
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; G.C. & M. Grief
Date of Lease: 3/7/55
45. Property: Kamloops (Canada)
430 Columbia Street
Kamloops, B.C.
Canada V2C 2T5
Lease 1
Lessor: Gallagher Investments, Ltd.
Lessee: Travelodge, Ltd., remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 6/10/63
Lease 2
Lessor: Harold Hugh Gallagher
Lessee: Travelodge, Ltd., remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 3/11/59
46. Property: La Jolla Beach
6750 La Jolla Blvd.
La Jolla, CA 92037
Lease 1
Lessor: Cecil A. & Caroline Smith54
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 12/30/63
Lease 2
Lessor: Caroline Smith55
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 12/2/63
- --------
54 Fee owner(s) of record.
55 Fee owner(s) of record.
-23-
375900.1
<PAGE>
47. Property: La Jolla Cove
1141 Silverado Street
La Jolla, CA 92037
Lessor: Humphrey F. and Jane B. Murphy56
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 1/26/53
48. Property: Las Vegas Downtown
2028 East Fremont Street
Las Vegas, NV 89101
Lessor: Jimma Lee Beam57
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; Las Vegas Downtown
Travelodge; Individuals
Date of Lease: 1/18/61
49. Property: Long Beach Downtown
80 Atlantic Avenue
Long Beach, CA 90802
Lessor: J. Frank Hubbard and Beverly A.
Piatelli
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 12/13/63
50. Property: Mercer Island
7645 Sunset Highway
Mercer Island, WA 98040
Lessor: Jim M. & Connie S. Ahn
Lessee: Forte Hotels International, Inc.,
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 5/15/57
51. Property: Mesa
22 S. Country Club Drive
Mesa, AZ 85210
Lessor: Dobson/Stewart Management
Lessee: Mesa Travelodge
Date of Lease: 3/25/64
- --------
56 Fee owner(s) of record.
57 Fee owner(s) of record.
-24-
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<PAGE>
52. Property: Milpitas
378 West Calaveras Blvd.
Milipitas, CA 95035
Lessor: Margaret A. Donovan
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc. et al.
Date of Lease: 4/21/67
53. Property: Missoula
420 West Broadway
Missoula, MT 59802
Lessor: Rudolph E. Wirth & Yvette M.
Wirth58
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; Missoula Travelodge;
Individuals
Date of Lease: 3/12/68
54. Property: Moses Lake
316 South Pioneer Way
Moses Lake, WA 98837
Lease 1
Lessor: Penhallick Trust
Lessee: Forte Hotels, Inc.; E.A. and R.M.
Tudor
Date of Lease: 6/14/58
Lease 2
Sublessor: Forte Hotels, Inc.; E.A. and R.M.
Tudor
Sublessee: Travelodge of Washington, Inc.;
E.A. and R.M. Tudor
Date of Sublease: 6/14/58
55. Property: Oceanside
1401 North Hill Street
Oceanside, CA 92054
Lessor: M.S. Arbogast, et al.
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; Shah & Patel
Date of Lease: 7/1/53
- --------
58 Fee owner(s) of record.
-25-
375900.1
<PAGE>
56. Property: Ogden
2110 Washington Blvd.
Ogden, UT 84401
Lease 1
Lessor: O. Leslie Stone, et al.59
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 7/9/59
Lease 2
Lessor: Ray H. Buchanan60
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 7/18/64
57. Property: Ontario
755 North Euclid Avenue
Ontario, CA 91762
Lessor: E.W. Rehkop
Lessee: Forte Hotels, Inc.; Arthur R. Boag
Date of Lease: 12/13/57
58. Property: Palm Springs
333 East Palm Canyon Drive
Palm Springs, CA 92264
Lessor: Merced C. Samish
Lessee: Forte Hotels International, Inc.
remote predecessor-in-interest to
Forte Hotels, Inc., et al.
Date of Lease: 3/26/63
59. Property: Palo Alto
3255 El Camino Real
Palo Alto, CA 94306
Lease 1
Lessor: Sydney Joseph Trust
Lessee: Forte Hotels International, Inc.,
predecessor-in-interest to Forte
Hotels, Inc.; J.D. Bhakta and P.J.
Bhakta
Date of Lease: 6/18/53
- --------
59 Fee owner(s) of record.
60 Fee owner(s) of record.
-26-
375900.1
<PAGE>
Lease 2
(Pool Property)
Lessor: Donald D. Graham
Lessee: Forte Hotels International, Inc.,
remote predecessor-in-interest to
Forte Hotels, Inc.; George N. and
Natalie I. Bazisin
Date of Lease: 12/30/55
60. Property: Paso Robles
2701 Spring Street
Paso Robles, CA 93446
Lessor: Travelodge International, Inc.,
remote predecessor-in-interest to
Forte Hotels, Inc.
Lessee: Travelodge International, Inc.,
remote predecessor-in-interest to
Forte Hotels, Inc.; G.L. and M.L.
Hines
Date of Lease: 5/23/79
61. Property: Portland Thriftlodge (Central)
949 East Burnside Street
Portland, OR 97214
Lessor: D.G. Frank Bouthillier
Lessee: Forte Hotels, Inc.; S.J. Karia
Date of Lease: 6/27/58
62. Property: Presidio
2755 Lombard Street
San Francisco, CA 94123
Lessor: Alice Bloom, et al.
Lessee: Forte Hotels, Inc.; Individuals
Date of Lease: 9/2/55
63. Property: Rancho Bernardo
16929 West Bernardo Drive
San Diego, CA 92127
Lessor: Kawaguchi Bros.61
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 1/22/69
64. Property: Reno
655 West 4th Street
Reno, NV 89503
Lessor: Estate of Louie Pacini, et al.
- --------
61 Fee owner(s) of record.
-27-
375900.1
<PAGE>
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 11/27/60
65. Property: Revelstoke Lodge (Canada)
601 1st St. West
Revelstoke, B.C.
Canada V0E 250
Lessor: Travelodge Ltd., remote
predecessor-in-interest to Forte
Hotels, Inc.
Lessee: Travelodge Ltd., remote
predecessor-in-interest to Forte
Hotels, Inc.; Moberly Holdings Ltd.
Date of Lease: 10/9/63
66. Property: Roseburg
315 West Harvard Blvd.
Roseburg, OR 97470
Lessor: Travelodge International, Inc.,
remote predecessor-in-interest to
Forte Hotels, Inc.; George H. Gage,
Jr.; Denzell M. Gage; Grimes
Corporation62
Lessee: Travelodge of Oregon, Inc., et al.
Date of Lease: 12/30/63
67. Property: San Francisco Airport South
110 South El Camino Real
Millbrae, CA 94030
Lessor: Ellsworth R. Eidenmuller; Gene N.
Connell; Virginia Eidenmuller
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; Individuals
Date of Lease: 6/9/61
68. Property: Salt Lake City
144 West North Temple St.
Salt Lake City, UT 84103
Lessor: Deseret Title Holding Corporation;
George Q. Morris Foundation
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 6/27/58
- --------
62 Fee owner(s) of record.
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<PAGE>
69. Property: San Diego Airport
2353 Pacific Highway
San Diego, CA 92101
Lease 1
Lessor: M. & J. Bernardini
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 5/11/61
Lease 2
Lessor: A.T. & M. Procopio
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 5/11/61
70. Property: San Diego Airport/Pt. Loma
5102 North Harbor Drive
San Diego, CA 92106
Lessor: Robert L. & Patricia P. Woodard, et
al.63
Lessee: Point Loma Travelodge
Date of Lease: 9/10/53
71. Property: San Luis Obispo
1825 Monterey Street
San Luis Obispo, CA 93401
Lessor: Kimball Motor Company, Inc.
Lessee: Forte Hotels, Inc.
Date of Lease: 7/21/61
72. Property: Santa Barbara City Center
1816 State Street
Santa Barbara, CA 93101
Lessor: J.D. and Z. Hill
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.64
Date of Lease: 10/5/53
73. Property: Santa Cruz
525 Ocean Street
Santa Cruz, CA 95060
Lessor: Ocean Plaza
Lessee: Forte Hotels, Inc., et al.
- --------
63 Fee owner(s) of record.
64 Not of record.
-29-
375900.1
<PAGE>
Date of Lease: 2/28/67
74. Property: Santa Fe
646 Cerillos Road
Santa Fe, NM 87501
Lessor: Mabel Glenn Ham65
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 12/6/62
75. Property: Santa Rosa
1815 Santa Rosa Avenue
Santa Rosa, CA 95407
Lessor: P. Gershon
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 6/11/54
76. Property: Santa Rosa Downtown
College at Mendocino
635 Healdsburg Avenue
Santa Rosa, CA 95401
Lessors: W.B. Groff, Inc., as per assignment
of lease dated 12/1/67 from
Travelodge of Illinois, Inc.
Lessee: Forte Hotels, Inc.; et al.
Date of Lease: 2/17/67
77. Property: South Tahoe
P.O. Box 70512
3489 Lake Tahoe Blvd.
South Lake Tahoe, CA 96156
Lessor: J.D. and E.J. Gay66
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; KLM Corporation;
Individuals
Date of Lease: 7/20/62
78. Property: Visalia Thriftlodge
4645 West Mineral King Avenue
Visalia, CA 93277
Lessor: Robert M. Scott
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
- --------
65 Fee owner(s) of record.
66 Fee owner(s) of record.
-30-
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<PAGE>
Hotels, Inc.; Visalia Lodging
Associates
Date of Lease: 7/27/59
79. Property: Walla Walla
421 East Main Street
Walla Walla, WA 99362
Lessor: Whitman College67
Lessee: Forte Hotels International, Inc.,
predecessor-in-interest to Forte
Hotels, Inc.; J.G. and M. Ahlgren;
D.H. Lundstrom
Date of Lease: 4/24/62
80. Property: Williams
430 East Bill Williams Avenue
Williams, AZ 86046
Lessor: Forte Hotels International, Inc.,
remote predecessor-in-interest to
Forte Hotels, Inc.; Vijay Desai
Lessee: Williams Travelodge
Date of Lease: 7/20/56
81. Property: Yakima
110 South Naches Avenue
Yakima, WA 98901
Lessor: J.E. and N.W. Tonkin68
Lessee: Travelodge of Washington, Inc.;
W.H. Miller and D. Sharma
Date of Lease: 11/1/59
82. Property: Yuma
2050 South 4th Avenue
Yuma, AZ 85364
Lessor: J.E. Murphy, et al.69
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.
Date of Lease: 11/18/58
- --------
67 Fee owner(s) of record.
68 Fee owner(s) of record.
69 Fee owner(s) of record.
-31-
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<PAGE>
83. Property: Santa Barbara Beach
22 Castillo Street
Santa Barbara, CA 93101
Lessor: Twin Pines Apartments; Travelodge
International, Inc., remote
predecessor-in-interest to Forte
Hotels, Inc.70
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 3/31/51
84. Property: San Diego Uptown Welcome Inn
1550 East Washington Street
San Diego, CA 92103
Lessor: Geraldine L. and Robert J. Dunne71
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 5/18/53
85. Property: San Diego Downtown
1345 Tenth Avenue
San Diego, CA 92101
Ground Lease 1
Lessor: Charlotte A. Peterson;
The Salvation Army, et al.72
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 6/13/51
Sublease 1
Sublessor: San Diego Downtown Thriftlodge
Joint Venture
Sublessee: Jacquelyn J. Carroll
Date of Sublease: 8/12/94
- --------
70 Fee owner(s) of record.
71 Fee owner(s) of record.
72 Fee owner(s) of record.
-32-
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<PAGE>
Ground Lease 2
Lessor: John K. & Kathryn R. Ma; James E. &
Teresa P. Rubnitz73
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 10/30/63
Sublease 2
Sublessor: San Diego Downtown Thriftlodge
Joint Venture
Sublessee: Jacquelyn J. Carroll
Date of Sublease: 8/12/94
86. Property: Ghiradelli Square
1201 Columbus Avenue
San Francisco, CA 94133
Lessor: Samuel R. Hutton
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.
Date of Lease: 7/20/55
87. Property: El Paso City Central74
409 East Missouri Street
El Paso, TX 79901
Lessor: City of El Paso
Lessees: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.; R.R. Chesak
Date of Lease: 5/15/69
88. Property: Mojave
2201 Highway 58
Mojave, CA 93501
Lessor: Phil Gershon and Bernice Gershon75
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc., et al.76
Date of Lease: 4/5/57
- --------
73 Fee owner(s) of record.
74 This is an "alley" parcel associated with other parcels owned in fee by
the joint venture; see Item 1 under Section I.C of this Schedule 2.16(a).
75 Not of record.
76 Not of record.
-33-
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<PAGE>
89. Property: Harborside Inn/Civic Center
1505 Pacific Highway
San Diego, CA 92101
Ground Lease
Lessor: Phil Gershon77
Lessee: The Travelodge Corporation, remote
predecessor-in-interest to Forte
Hotels, Inc.78
Date of Lease: 6/3/49
Sublease79
Sublessor: Forte Hotels, Inc.80
Sublessee: Jacquelyn J. Carroll81
Date of Sublease: 6/14/94
D. HEADQUARTERS FACILITIES LEASES
1. Property: El Cajon
1957 Friendship Drive
Suite H
El Cajon, CA 92020
Lessor: RB Co.-R.E., L.P.82
Lessee: FHI/San Diego, Inc.83
Date of Lease: 4/15/95
- --------
77 Not of record.
78 Not of record.
79 Although this sublease was terminated by a letter agreement dated 5/31/95,
it is currently in force on a month-to-month basis.
80 Not of record.
81 Not of record.
82 Not of record.
83 Not of record.
-34-
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<PAGE>
2. Property: Gillespie Field84
1973 Friendship Drive
El Cajon, CA 92020
Lessor: Frank M. Goldberg85
Lessee: Forte Hotels, Inc.
Date of Lease: 1/14/92
E. RETAIL LEASES
1. Property: San Francisco Wharf86 (Arcade)
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels, Inc.
Lessee: Pronto Gourmet Foods, Inc.
Date of Lease: 12/14/89
2. Property: San Francisco Wharf (Arcade)
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels, Inc.
Lessee: Pacific Sun Investments Corporation
Date of Lease: 3/19/90
3. Property: San Francisco Wharf (Arcade)
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels, Inc.
Lessee: Golden Bay Tour Company
Date of Lease: 6/15/92
4. Property: San Francisco Wharf (Arcade)
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels, Inc.
Lessee: S & J Camera, Inc.
Date of Lease: 3/19/90
- --------
84 Subject to Ground Lease dated 10/30/80, between The County of San Diego, as
groundlessor, and Frank M. Goldberg, as groundlessee.
85 Not of record.
86 With respect to this and the following twelve (12) properties, see Item 5
under Section II.A of this Schedule 2.16(a).
-35-
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<PAGE>
5. Property: San Francisco Wharf (Arcade)
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels, Inc.
Lessee: Advance Camera Video & Electronics,
Inc.
Date of Lease: 12/9/92
6. Property: San Francisco Wharf (Arcade)
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels, Inc.
Lessee: Budget Rent-A-Car Systems, Inc.
Date of Lease: 8/89
7. Property: San Francisco Wharf (Arcade)
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels, Inc.
Lessee: The Mainland Company
Date of Lease: 2/18/92
8. Property: San Francisco Wharf (Arcade)
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels, Inc.
Lessee: Chocolate Factory, Inc.
Date of Lease: 3/20/91
9. Property: San Francisco Wharf (Arcade)
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels, Inc.
Lessee: Paper Circus West, Inc.
Date of Lease: [undated]
10. Property: San Francisco Wharf (Arcade)
250 Beach Street
San Francisco, CA 94133
Lease
Lessor: Forte Hotels, Inc.
Lessee: J.R. Bay-Wharf, Inc.
Date of Lease: 7/27/92
Sublease
Sublessor: J.R. Bay, Inc. f/k/a/ J.R. Bay-
Wharf, Inc.
Sublessee: NYSF Partners II d/b/a Ben &
Jerry's-San Francisco
Date of Sublease: 8/14/94
-36-
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<PAGE>
11. Property: San Francisco Wharf (Arcade)
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels, Inc.
Lessee: Subway Real Estate Corporation
Date of Lease: 12/15/92
12. Property: San Francisco Wharf (Arcade)
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels, Inc.
Lessee: Advance Camera, Video &
Electronics, Inc.
Date of Lease: 12/9/92
13. Property: Parking Lot at Wharf
250 Beach Street
San Francisco, CA 94133
Lessor: Forte Hotels International, Inc.,
remote predecessor-in-interest to
Forte Hotels, Inc.
Lessee: Hagen Choi
Date of Lease: 9/1/86
14. Property: San Antonio Alamo Travelodge
Hotel87
405 Broadway
San Antonio, TX 78205
Lessor: Forte Hotels, Inc.
Lessee: Claudis Minor
Date of Lease: 8/16/95
15. Property: Travelodge El Paso City Center88
409 E. Missouri Street
El Paso, TX 79901
Lessor: Forte Hotels, Inc.
Lessee: Wancar, Inc.
Date of Lease: 9/22/95
16. Property: Waukegan Thriftlodge
222 West Grand Avenue
Waukegan, IL 60085
- --------
87 Not of record.
88 Not of record.
-37-
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<PAGE>
Lessor: Forte Hotels International, Inc.,
predecessor-in-interest to Forte
Hotels, Inc.89
Lessee: Irene Silva (Irene's Cafe)90
Date of Lease: 3/1/91
17. Property: Orlando Central Park
7101 South Orange Blossom Trail
Orlando, FL 32809
Lessor: Forte Hotels, Inc.91
Lessee: Cedar River Seafood of
Orlando, Inc.92
Date of Lease: 9/2/93
(b) Identified Liens and Encumbrances
I. OWNED REAL PROPERTY
A. HOTELS
1. Property: Portland
Title No.: N9500-1374-4(58)93
2. Property: Toronto Canada
Title No.: N9500-1374-(5)
3. Property: Houston
Title No.: N9500-1374-(6)
B. MOTELS
1. Property: Monterey Fairgrounds
Title No.: N9500-1374-2(23)
2. Property: Revelstoke Lodge (Canada)
Title No.: N9500-1374-4(62)
- --------
89 Not of record.
90 Not of record.
91 Not of record.
92 Not of record.
93 All title numbers are those of Title Associates, Inc., as shown on the
face pages of the title reports made available to the Buyer.
-38-
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<PAGE>
3. Property: Omak
Title No.: N9500-1374-2(25)
4. Property: Paso Robles
Title No.: N9500-1374-4(57)
C. JOINT VENTURE PROPERTIES
1. Property: El Paso City Central
Title No.: N9500-1374-2(24)
2. Property: Santa Rosa Downtown
Title No.: N9500-1374-4(75)
3. Property: Williams
Title No.: N9500-1374-4(39)
4. Property: Santa Barbara Beach
Title No.: N9500-1374-4(82)
5. Property: San Antonio Alamo
Title No.: N9500-1374-3(1)
6. Property: Monterey
Title No.: N9500-1374-3(2)
7. Property: San Francisco Central
Title No.: N9500-1374-3(3)
8. Property: Alexandria
Title No.: N9500-1374-4(1)
9. Property: Athens Thriftlodge
Title No.: N9500-1374-4(3)
10. Property: Chambersburg
Title No.: N9500-1374-4(6)
11. Property: Lake Park
Title No.: N9500-1374-4(12)
12. Property: Lancaster
Title No.: N9500-1374-4(13)
13. Property: Boise
Title No.: N9500-1374-4(31)
14. Property: Salt Lake Downtown
Title No.: N9500-1374-4(67)
15. Property: Roseburg
-39-
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<PAGE>
Title No.: N9500-1374-4(63)
D. UNDEVELOPED PROPERTY
1. Property: Elizabethtown
Title No.: (No Report)
2. Property: Pooler, GA
Title No.: (No Report)
II. LEASED REAL PROPERTY
A. HOTELS
1. Property: Disney World
Title No.: N9500-1374-(1)
2. Property: Mt. Laurel
Title No.: N9500-1374-(3)
3. Property: San Diego Harbor Island
Title No.: N9500-1374-(4)
4. Property: J.F.K.
(No Report)
5. Property: San Francisco Wharf
Title No.: N9500-1374-(8)
6. Property: Dallas
Title No.: N9500-1374-(9)
7. Property: Long Beach
Title No.: N9500-1374-(10)
B. MOTELS
1. Property: San Francisco International
Title No.: N9500-1374-2(21)
2. Property: Las Vegas South Strip
Title No.: N9500-1374-2(22)
3. Property: Monterey Fairgrounds
Title No.: N9500-1374-2(23)
4. Property: El Cajon
Title No.: N9500-1374-2(26)
5. Property: Hayward
-40-
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<PAGE>
Title No.: N9500-1374-2(27)
6. Property: Anaheim
Title No.: N9500-1374-2(28)
7. Property: Sacramento Downtown
Title No.: N9500-1374-2(29)
8. Property: Colton Thriftlodge
Title No.: N9500-1374-2(30)
C. JOINT VENTURE PROPERTIES
1. Property: Chicago O'Hare
Title No.: N9500-1374-3(4)
2. Property: Las Vegas Strip
Title No.: N9500-1374-3(5)
3. Property: Mission Valley
Title No.: N9500-1374-3(6)
4. Property: San Francisco Downtown
Title No.: N9500-1374-3(7)
5. Property: Santa Monica
Title No.: N9500-1374-3(8)
6. Property: Seattle Downtown
Title No.: N9500-1374-3(9)
7. Property: Space Needle
Title No.: N9500-1374-3(10)
8. Property: Tahoe City
Title No.: N9500-1374-3(11)
9. Property: University (Seattle)
Title No.: N9500-1374-3(12)
10. Property: Ashtabula
Title No.: N9500-1374-4(2)
11. Property: Atlanta Central (Downtown)
Title No.: N9500-1374-4(4)
12. Property: Bedford
Title No.: N9500-1374-4(5)
13. Property: Cincinnati
Title No.: N9500-1374-4(7)
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<PAGE>
14. Property: Clearwater
Title No.: N9500-1374-4(8)
15. Property: Fort Myers
Title No.: N9500-1374-4(9)
16. Property: Gainesville
Title No.: N9500-1374-4(10)
17. Property: Lafayette Center
Title No.: N9500-1374-4(11)
18. Property: Lawrence
Title No.: N9500-1374-4(14)
19. Property: Louisville
Title No.: N9500-1374-4(15)
20. Property: Mason City Thriftlodge
Title No.: N9500-1374-4(16)
21. Property: Natick
Title No.: N9500-1374-4(17)
22. Property: Ocala
Title No.: N9500-1374-4(18)
23. Property: Quincy
Title No.: N9500-1374-4(19)
24. Property: Sarasota Thriftlodge
Title No.: N9500-1374-4(20)
25. Property: South Sioux City
Title No.: N9500-1374-4(21)
26. Property: Terre Haute Thriftlodge
Title No.: N9500-1374-4(22)
27. Property: Utica
Title No.: N9500-1374-4(23)
28. Property: Zanesville Thriftlodge
Title No.: N9500-1374-4(24)
29. Property: Balboa Park
Title No.: N9500-1374-4(25)
30. Property: Bayview Thriftlodge
Title No.: N9500-1374-2(26)
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<PAGE>
31. Property: Bellevue
Title No.: N9500-1374-4(27)
32. Property: Bellingham
Title No.: N9500-1374-4(28)
33. Property: Berkeley
Title No.: N9500-1374-4(29)
34. Property: Billings
Title No.: N9500-1374-4(30)
35. Property: Burbank
Title No.: N9500-1374-4(32)
36. Property: Cabrillo Central
Title No.: N9500-1374-4(33)
37. Property: Durango
Title No.: N9500-1374-4(34)
38. Property: Eagle Rock Welcome Inn
Title No.: N9500-1374-4(35)
39. Property: Embarcadero-Harbor
Title No.: N9500-1374-4(36)
40. Property: Ephrata
Title No.: N9500-1374-4(37)
41. Property: Eureka
Title No.: N9500-1374-4(38)
42. Property: Flagstaff
Title No.: N9500-1374-4(39)
43. Property: Golden Gate
Title No.: N9500-1374-4(40)
44. Property: Hollywood (Travel Inn)
Title No.: N9500-1374-4(41)
45. Property: Kamloops (Canada)
Title No.: N9500-1374-4(42)
46. Property: La Jolla Beach
Title No.: N9500-1374-4(43)
47. Property: La Jolla Cove
Title No.: N9500-1374-4(44)
48. Property: Las Vegas Downtown
-43-
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<PAGE>
Title No.: N9500-1374-4(45)
49. Property: Long Beach Downtown
Title No.: N9500-1374-4(46)
50. Property: Mercer Island
Title No.: N9500-1374-4(47)
51. Property: Mesa
Title No.: N9500-1374-4(48)
52. Property: Milpitas
Title No.: N9500-1374-4(49)
53. Property: Missoula
Title No.: N9500-1374-4(50)
54. Property: Moses Lake
Title No.: N9500-1374-4(51)
55. Property: Oceanside
Title No.: N9500-1374-4(52)
56. Property: Ogden
Title No.: N9500-1374-4(53)
57. Property: Ontario
Title No.: N9500-1374-4(67)
58. Property: Palm Springs
Title No.: N9500-1374-4(55)
59. Property: Palo Alto
Title No.: N9500-1374-4(56)
60. Property: Paso Robles
Title No.: N9500-1374-4(57)
61. Property: Portland Thriftlodge
Title No.: N9500-1374-(2)
62. Property: Presidio
Title No.: N9500-1374-4(59)
63. Property: Rancho Bernardo
Title No.: N9500-1374-4(60)
64. Property: Reno
Title No.: N9500-1374-4(61)
65. Property: Revelstoke Lodge (Canada)
Title No.: N9500-1374-4(62)
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<PAGE>
66. Property: Roseburg
Title No.: N9500-1374-4(63)
67. Property: San Francisco Airport South
Title No.: N9500-1374-4(64)
68. Property: Salt Lake City
Title No.: N9500-1374-4(66a)
69. Property: San Diego Airport
Title No.: N9500-1374-4(68)
70. Property: San Diego Airport/Pt. Loma
Title No.: N9500-1374-4(69)
71. Property: San Luis Obispo
Title No.: N9500-1374-4(70)
72. Property: Santa Barbara City Center
Title No.: N9500-1374-4(71)
73. Property: Santa Cruz
Title No.: N9500-1374-4(72)
74. Property: Santa Fe
Title No.: N9500-1374-4(73)
75. Property: Santa Rosa
Title No.: N9500-1374-4(74)
76. Property: Santa Rosa Downtown
Title No.: N9500-1374-4(75)
77. Property: South Tahoe
Title No.: N9500-1374-4(76)
78. Property: Visalia Thriftlodge
Title No.: N9500-1374-4(77)
79. Property: Walla Walla
Title No.: N9500-1374-4(78)
80. Property: Williams
Title No.: N9500-1374-4(39)
81. Property: Yakima
Title No.: N9500-1374-4(80)
82. Property: Yuma
Title No.: N9500-1374-4(81)
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<PAGE>
83. Property: Santa Barbara Beach
Title No.: N9500-1374-4(82)
84. Property: San Diego Uptown Welcome
Title No.: N9500-1374-4(83)
85. Property: San Diego Downtown
Title No.: N9500-1374-4(84)
86. Property: Ghiradelli Square
Title No.: N9500-1374-4(85)
87. Property: El Paso City Central
Title No.: N9500-1374-4(24)
D. HEADQUARTERS FACILITIES LEASES
1. Property: El Cajon
Title No.: N9500-1374-4(86)
2. Property: Gillespie Field
Title No.: N9500-1374-2(31)
(c) Material Violations
None.
(d) Rights of First Refusal or Options
1. Property: Naperville (Chicago)
1617 Naperville Road
Naperville, IL 60563
o Right of First Refusal: Declaration of
Restrictions for the Naperville Corporate Center
in Naperville, Illinois, dated 11/27/79 by
American National Bank and Trust Company of
Chicago.
-46-
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<PAGE>
SCHEDULE V
SUBSIDIARIES AND JOINT VENTURES
Subsidiaries
<TABLE>
<CAPTION>
Jurisdiction of
Name Ownership Incorporation
<S> <C> <C>
1. Forte Hotels, Inc. 100% Stock Delaware
2. National Gaming Mississippi, Inc. 100% Stock Delaware
3. Travel Beverages, Inc. 100% Stock Texas
4. FHI/San Diego Inc. 100% Stock California
5. Travelodge Ltd. 100% Stock Ontario, Canada
6. Hoteles Forte S.A. de C.V. 100% Stock Mexico
Joint Ventures
Name Ownership Type of Interest
San Antonio Alamo Travelodge 93.34% General Partnership
Atlanta Central Travelodge 50% General Partnership
Ashtabula Travelodge 37.5% General Partnership
Chicago O'Hare 37.5% General Partnership
Lancaster Travelodge 50% General Partnership
Athens Alabama Travelodge 50% General Partnership
Natick Travelodge 50% General Partnership
Ocala Travelodge 50% General Partnership
Cincinnati Travelodge 62.5% General Partnership
Layfayette Center Travelodge 50% General Partnership
Chambersburg Travelodge 50% General Partnership
Lake Park Travelodge 49% General Partnership
Quincy Travelodge 75% General Partnership
Zanesville Thriftlodge 50% General Partnership
Alexandria Travelodge 50% General Partnership
Mason City Thriftlodge 50% General Partnership
Louisville Travelodge 50% General Partnership
South Sioux City Travelodge 50% General Partnership
Bedford Travelodge 50% General Partnership
Gainesville Travelodge 50% General Partnership
Sarasota Thriftlodge 25% General Partnership
Fort Myers Travelodge 50% General Partnership
Clearwater Travelodge 50% General Partnership
Terre Haute Travelodge 50% General Partnership
Utica Travelodge 75% General Partnership
Seattle Downtown Travelodge 50% General Partnership
Las Vegas Strip Travelodge 48.75% General Partnership
San Francisco Central
Travelodge 50% General Partnership
375967.1
<PAGE>
Travelodge by the Space
Needle 50% General Partnership
Monterey Downtown Travelodge 50% General Partnership
San Francisco Downtown
Travelodge 50% General Partnership
Tahoe City Travelodge 50% General Partnership
Salt Lake Downtown Travelodge 50% General Partnership
La Jolla Beach Travelodge 50% General Partnership
La Jolla Travelodge 50% General Partnership
Ghiradelli Square-Fisherman's Wharf 62.5% General Partnership
San Francisco Airport South
Travelodge 50% General Partnership
Santa Fe Travelodge 50% General Partnership
Seattle University Coach House
Travelodge 50% General Partnership
Durango Lodge 50% General Partnership
Salt Lake City Travelodge 37.5% General Partnership
Long Beach Downtown
Travelodge 50% General Partnership
Berkeley Travelodge 50% General Partnership
Kamloops Travelodge 50% General Partnership
Presidio Travelodge 58.333% General Partnership
Santa Monica Travelodge 25% General Partnership
South Tahoe Travelodge 50% General Partnership
Santa Cruz Travelodge 50% General Partnership
Missoula Travelodge 50% General Partnership
Mission Valley Travelodge 25% General Partnership
Bellevue Travelodge 50% General Partnership
Milpitas Travelodge 50% General Partnership
Mesa Travelodge 50% General Partnership
Portland Travelodge 50% General Partnership
Burbank Travelodge 50% General Partnership
Williams Travelodge 45% General Partnership
Mercer Island Travelodge 50% General Partnership
San Francisco Golden Gate
Travelodge 25% General Partnership
Moses Lake Travelodge 50% General Partnership
Boise Travelodge 50% General Partnership
San Luis Obispo Travelodge 50% General Partnership
Las Vegas Downtown Travelodge 50% General Partnership
Paso Robles Travelodge 50% General Partnership
Revelstoke Travelodge 50% General Partnership
Flagstaff Travelodge 50% General Partnership
Palm Springs Travelodge 50% General Partnership
Ogden Travelodge 37.5% General Partnership
Visalia Thriftlodge 50% General Partnership
Walla Walla Travelodge 50% General Partnership
Palo Alto Travelodge 50% General Partnership
Roseburg Travelodge 25% General Partnership
Santa Barbara Travelodge
(City Center) 25% General Partnership
Yuma Travelodge 50% General Partnership
2
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<PAGE>
Hollywood Travelodge
(Travel Inn) 50% Limited Partnership
Ephrata Travelodge 50% General Partnership
Oceanside Travelodge 50% General Partnership
Yakima Travelodge 50% General Partnership
Eureka Travelodge 25% General Partnership
Reno Travelodge 59.722% General Partnership
San Diego Airport 62.5% General Partnership
Santa Rosa Downtown
Travelodge 50% General Partnership
Billings Travelodge 50% General Partnership
Ranch Bernardo Travelodge 50% General Partnership
Santa Rosa Travelodge 50% General Partnership
San Francisco Embarcadero
Harbor Travelodge 50% General Partnership
San Diego, Point Loma
Travelodge 25% General Partnership
Bayview Travelodge 57.8124% General Partnership
Bellingham Travelodge 50% General Partnership
Cabrillo Lodge 50% General Partnership
Balboa Park Travelodge 25% General Partnership
Eagle Rock Travelodge 50% General Partnership
Ontario Central Travelodge 50% General Partnership
Santa Barbara Beach
Travelodge 50% General Partnership
San Diego Uptown Welcome Inn 25% General Partnership
San Diego Downtown Travelodge 25% General Partnership
Mojave Travel Inn 10% General Partnership
</TABLE>
3
375967.1
<PAGE>
SCHEDULE VI
EXISTING INDEBTEDNESS
A. National Lodging Corp,
None.
B. Forte Hotels, Inc,
See attached
C. National Gaming Mississippi Inc.
None.
D. Joint Ventures
1. Joint Venture Long-Term Debt as of 10/31/95
($000)
Bank of America 7,957
Bank of Montreal 226
Forte Hotels, Inc. 2,916
Margaret Hurley Trust 60
Key Bank of Oregon 9
Valley Bank and Trust 23
Commonwealth National Bank 77
Campbell & Lorene 121
Kapelak 10
Bauer, CG JM 2
-------
11,401
2. Notes to certain joint ventures under the Bank of
America Credit Facility
See attached
375804.1
<PAGE>
Amended and Restated Letter Loan Agreement, dated June 17, 1994, as
amended by Letter Loan Agreement, dated December 30, 1994, as amended by Letter
Loan Agreement, dated December 11, 1995, by and between Bank of America National
Trust and Savings Association, as lender, and Forte Hotels, Inc., Forte (UK)
Limited and Forte Plc, which provides for a $10,000,000 uncommitted
discretionary facility and a guaranty in connection therewith and a $25,000,000
committed facility and the related Guaranty, dated June 17, 1994, from Forte Plc
to Bank of America.*
Facility Letter Agreement, dated July 31, 1992, as amended by Waiver
and Amendment No. 1, dated October 13, 1994, by and between Forte Hotels, Inc.,
as borrower, and Societe Generale, New York Branch, as lender, which provides
for a $22,000,000 facility.** The following standby letters of credit were
issued in accordance with the Societe Generale Facility Letter Agreement, as
amended:
(a) Standby letter of credit No. 52344, naming New
Orleans Hilton Riverside as beneficiary, effective March 31,
1995, and expiring March 15, 1996, for $150,000.
(b) Standby letter of credit No. 51898, naming Chicago Title
Insurance Company as beneficiary, effective April 19, 1993,
and expiring April 20, 1994 (automatically extended for the
year from the present or any successive expiration date
thereof)
in the amount of $99,000.
(c) Standby letter of credit No. 51850, naming David P. McAnaney,
as beneficiary, effective December 31, 1992, and expiring on
February 1, 1994 (automatically extended annually from the
present or any successive expiration date thereof) in the
amount of $150,000.
Marriott Inn Franchise Agreement, dated December 31, 1993, by and
between Marriott International, Inc. as franchisor, and Forte Hotel Inc., as
franchisee, relating to the JFK property.
Note, dated October 6, 1986, by Travelodge
International, Inc. in favor of J.E. Fischnaller, H.C. Fischnaller
& Carol F. Gilmour, for $255,000 relating to the Omak property.
Deed of Trust, dated October 6, 1986, by Travelodge
International, Inc. in favor of J.E. Fischnaller, H.C. Fischnaller
and Carol F. Gilmour, for S255,000, relating to the Omak property.
- --------
* Amended as per attached as of 1/23/96.
** Reduced to $800,000 as of 1/23/96.
375804.1
2
<PAGE>
NOTES
(1) Bank of America Notes
Notes to certain joint ventures under the Bank of America Credit Facility
Initial Principal Related to the
Amount of Loan Date of Note Following Properties
-------------- ------------ --------------------
1. 493,000.00 Feb. 4, 1992 Alexandria Travelodge
2. 283,449.00 *Dec. 20, 1989 Ashtabula Travelodge
3. 425,200.00 Aug. 8, 1991 Atlanta Downtown
Travelodge
4. 334,748.03 *Dec. 28, 1989 Bedford Travelodge
5. 200,000.00 *Oct. 15, 1993 Bellingham Travelodge
6. 22,500.00 Feb. 24, 1995 Billings Travelodge
7. 106,534.00 Sept. 21, 1990 Boise Travelodge
8. 12,000.00 July 2, 1992 Burbank Travelodge
9. 205,196.02 *June 1, 1990 Chambersburg Travelodge
10. 24,058.00 *Sept. 1, 1991 Chambersburg Travelodge
11. 412,961.24 *Dec. 10, 1989 Cincinnati Travelodge
12. 37,000.00 *Dec. 15, 1992 Cincinnati Travelodge
13. 147,372.00 *April 1, 1991 Clearwater Downtown Travelodge
14. 62,000.00 *Aug. 1, 1994 Durango Travelodge
15. 46,300.00 *Dec. 1, 1994 Durango Travelodge
16. 340,000.00 Dec. 27, 1991 El Paso City Center Travelodge
17. 36,750.00 *Sept. 15, 1994 El Paso City Center Travelodge
18. 60,000.00 Aug. 31, 1994 Ephrata Travelodge
19. 97,000.00 Sept. 18, 1994 Eureka Travelodge
20. 136,832.00 June 11, 1991 Flagstaff Travelodge
21. 15,000.00 *Oct. 1, 1993 Flagstaff Travelodge
22. 185,500.00 Sept. 20, 1994 Flagstaff Travelodge
23. 20,615.00 Feb. 17, 1995 Flagstaff Travelodge
24. 176,000.00 *May 2, 1993 La Jolla Beach Travelodge
25. 25,000.00 Nov. 18, 1992 Lafayette Center Travelodge
375827.1
<PAGE>
26. 151,100.00 Aug. 2, 1995 Lafayette Center Travelodge
27. 355,000.00 *Dec. 20, 1989 Lancaster Travelodge
28. 114,100.00 Aug. 30, 1991 Lancaster Travelodge
29. 542,100.00 July 16, 1991 Las Vegas Strip Travelodge
30. 19,000.00 Oct. 16, 1991 Las Vegas Downtown Travelodge
31. 36,750.00 *Aug. 1, 1994 Las Vegas Strip Travelodge
32. 38,000.00 May 18, 1992 Lawrence Travelodge
33. 84,838.00 *April 1, 1991 Long Beach Downtown Travelodge
34. 319,000.00 July 27, 1995 Louisville Travelodge
35. 495,909.91 April 20, 1990 Louisville Conv. Center Travelodge
36. 27,000.00 Dec. 1, 1992 Louisville Conv. Center Travelodge
37. 15,000.00 Nov. 9, 1990 Mason City Travelodge
38. 60,000.00 April 27, 1992 Mercer Island Travelodge
39. 72,000.00 *Dec. 1, 1994 Mesa Travelodge
40. 100,000.00 *Sept. 1, 1993 Milpitas Travelodge
41. 22,400.00 *Sept. 1, 1994 Milpitas Travelodge
42. 90,000.00 *Feb. 1, 1994 Missoula Travelodge
43. 102,000.00 *Aug. 31, 1994 Missoula Travelodge
44. 171,000.00 **April 27, 1995 Monterey Fairgrounds Travelodge
45. 354,000.00 Dec. 1, 1992 Monterey Fairgrounds Travelodge
46. 55,400.00 *Feb. 20, 1995 Monterey Fairgrounds Travelodge
47. 39,000.00 March 7, 1994 Monterey Downtown Travelodge
48. 55,000.00 April 18, 1995 Monterey Downtown Travelodge
49. 73,000.00 *Sept. 1, 1993 Moses Lake Travelodge
50. 166,500.00 June 15, 1991 Natick Travelodge
51. 34,600.00 *Aug. 1, 1994 Natick Travelodge
52. 60,000.00 *June 15, 1994 Ocala South Travelodge
53. 76,000.00 *Sept. 1, 1993 Ontario Central Travelodge
54. 30,000.00 *Sept. 1, 1993 Palo Alto Travelodge
55. 180,000.00 Feb. 1, 1993 Palm Springs Travelodge
375827.1
2
<PAGE>
56. 10,500.00 Dec. 20, 1990 Paso Robles Travelodge
57. 57,225.00 July 16, 1991 Portland Travelodge
58. 40,000.00 *Sept. 15, 1992 Quincy Travelodge
59. 140,000.00 *Feb. 1, 1994 Quincy Travelodge
60. 45,000.00 Aug. 25, 1995 Quincy Travelodge
61. 269,625.00 *June 1, 1990 Reno Downtown Travelodge
62. 151,311.25 Jan. 25, 1991 Reno Downtown Travelodge
63. 160,000.00 Dec. 1, 1992 Roseburg Travelodge
64. 15,000.00 Aug. 21, 1995 Roseburg Travelodge
65. 47,200.00 *Dec. 1, 1994 Roseburg Travelodge
66. 98,365.00 **Jan. 15, 1994 Salt Lake City Center Travelodge
67. 252,000.00 Oct. 11, 1990 Salt Lake City Center Travelodge
68. 26,125.00 July 17, 1991 Salt Lake City Center Travelodge
69. 37,000.00 Feb. 25, 1992 Salt Lake Downtown Travelodge
70. 280,000.00 *May 1, 1990 Salt Lake City at Temple Square
71. 538,200.00 *Dec. 3, 1988 San Antonio Alamo Travelodge
72. 39,000.00 **Aug. 14, 1992 San Antonio Alamo Travelodge
73. 18,000.00 *Sept. 15, 1994 San Diego Airport Travelodge
74. 42,700.00 Nov. 8, 1994 San Diego Airport Travelodge
75. 50,000.00 *Jan. 20, 1994 San Diego Mission Valley Travelodge
76. 142,000.00 *Jan. 20, 1994 San Diego Mission Valley Travelodge
77. 45,000.00 Nov. 18, 1992 San Francisco Airport Travelodge
78. 652,619.00 *Dec. 20, 1989 San Francisco Central Travelodge
79. 99,200.00 *March 15, 1994 San Francisco Ghirardelli Square
Travelodge
80. 49,500.00 *May 5, 1994 San Francisco Golden Gate Travelodge
81. 615,000.00 Aug. 6, 1991 San Francisco Presidio Travelodge
82. 31,625.00 *Sept. 1, 1993 Santa Barbara City Center Travelodge
83. 19,425.00 *March 1, 1994 Santa Barbara City Center Travelodge
84. 18,900.00 *Sept. 15, 1994 Santa Barbara City Center Travelodge
85. 31,800.00 *Aug. 1, 1994 Santa Barbara City Center Travelodge
375827.1
3
<PAGE>
86. 29,800.00 *Dec. 1, 1994 Santa Barbara City Center Travelodge
87. 78,134.00 *April 1, 1991 Santa Fe Travelodge
88. 75,000.00 March 4, 1992 Santa Fe Travelodge
89. 162,500.00 Nov. 28, 1990 Santa Monica Travelodge
90. 162,500.00 Dec. 20, 1990 Santa Monica Travelodge
91. 45,200.00 March 26, 1991 Santa Rosa Travelodge
92. 136,300.00 *Dec. 25, 1989 Santa Rosa Downtown Travelodge
93. 30,000.00 Nov. 14, 1994 Santa Rosa Downtown Travelodge
94. 77,000.00 *Jan. 1, 1993 Sarasota Travelodge
95. 24,000.00 *Sept. 1, 1993 South Sioux City Travelodge
96. 287,800.00 June 26, 1991 South Tahoe Travelodge
97. 225,000.00 June 28, 1991 Tahoe City Travelodge
98. 80,601.00 *Sept. 1, 1992 Tahoe City Travelodge
99. 330,000.00 June 9, 1992 Travelodge at Wharf
100. 184,000.00 *Nov. 1, 1993 Travelodge at Wharf
101. 550,000.00 *Dec. 1, 1994 Travelodge at Wharf
102. 376,317.12 *Oct. 5, 1988 Travelodge by the Space Needle
103. 37,500.00 Feb. 25, 1992 Travelodge by the Space Needle
104. 496,282.00 March 29, 1991 Travelodge by the Space Needle
105. 270,794.80 *Sept. 20, 1989 Utica Travelodge
106. 100,000.00 *Jan. 20, 1994 Visalia Travelodge
107. 130,000.00 *Sept. 5, 1994 Visalia Travelodge
108. 90,000.00 April 30, 1992 Walla Walla Travelodge
109. 119,200.00 Oct. 31, 1990 Williams Travelodge
110. 87,800.00 Aug. 16, 1995 Williams Travelodge
111. 159,000.00 *Dec. 15, 1992 Zanesville Travelodge Corporate
* Date represents date of first payment on Note.
** Date represents date on which loan was funded by bank deposit.
375827.1
4
<PAGE>
SCHEDULE VII
INSURANCE
<PAGE>
NAMED INSURED
1. NL Hotels, Inc.
2. NL San Diego, Inc.
3. National Lodging Corporation
4. Hoteles NL S.A. de C.V. (MEXICO)
5. Travel Beverages, Inc.
6. NL Hotels, Ltd.
7. Named insured includes the joint venture partners of the Named
Insured, but only as respects the locations or operations in which
both the Named Insured and the joint venture partner are included.
8. All Corporations, Joint Ventures, Partnerships and Companies and other
entities affiliated with, owned or controlled by the Named Insured and
its Subsidiaries, as now exist, or may be hereafter constituted.
It is further agreed that the Named Insured shall include New
Organizations acquired or formed by the Named Insured during the
policy period.
375895.1
<PAGE>
Page 1
10/10/95
FORTE HOTELS, INC.
<TABLE>
INSURANCE SCHEDULE
YEAR 1995-1996
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PROPERTY
<S> <C> <C> <C> <C> <C> <C>
All Risk Property Insurance on all Royal Insurance RIW730511 All Risk of Direct Physical Loss or Annual 01/31/96 $375,322.48
Real & Personal Property Company Damage
Business Interruption, Rental Income $100,000,000 Limit
Extra Expense, Boiler & Machinery; $100,000 Deductible is Excess of $250
& Electronic Equipment Retention for the First Dollar of the
Loss
$500,000 Annual Aggregate
$250 ($500 Theft) Deductible after
exhaustion of Annual Aggregate
</TABLE>
375895.1
<PAGE>
Page 2
10/10/95
<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property (cont.) Royal Insurance Sublimits:
Windstorm/Hurricane Causing Property
Damage and/or Business Interruption
$30,000,000 Limit
Unscheduled Locations
$15,000,000 Limit
Property in Course of Construction
$5,000,000 Limit
Personal Property in the Course of
Construction $1,000,000 Limit
Property in Transit
$200,000 Limit
Bailee's Liability
$500,000 Limit
Off Premises Personal Property
$1,000,000 Limit
</TABLE>
375895.1
<PAGE>
Page 3
10/10/95
<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property (cont.) Royal Insurance Coverage Extensions
Building Ordinance
Ingress/Egress
Limited to 4 weeks
Personal Property of Officers/
Employees
$5,000 Limit
Service Interruption - 4 weeks
Pairs & Sets
Fire Department Service Charges
Trees, Shrubs, Plants
$500,000 Limit
$2,000 Each Item
Business Interruption
Rental Value & Business Interruption
$500,000 Limit for each location
with
Business Interruption Values equal to or
less than $500,000
per Statement of Values on file with the
Company
Extra Expense
$200,000 Limit (see above wording)
Extended Period of Indemnity - 2 years
Contingent Business Interruption
(Plaza of the Americas Hotel only)
$10,000,000 Limit;
$100,000 Deductible
</TABLE>
375895.1
<PAGE>
Page 4
10/10/95
<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PROPERTY (cont.) Royal Insurance Boiler & Machinery Limit
$15,000,000 Subject to a
$100,000 Deductible
$400,000 Annual Aggregate Policy
Insured exceeds Aggregate
- Values equal to or less than
$5,000,000
$1,000 Property Damage
24 hr. waiting period for Business
Interruption
- Values greater than $5,000,000
$2,500 Property Damage
48 hr. waiting period for Business
Interruption
Extra Expense
$200,000 Limit
Expediting Expense
$200,000 Limit
Hazardous Materials
$50,000 Limit
Consequential/Spoilage
$200,000 Limit
</TABLE>
375895.1
<PAGE>
Page 5
10/10/95
<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
EARTHQUAKE AND FLOOD
<S> <C> <C> <C> <C> <C> <C>
Primary DIC - 1st Layer Lexington 8695190 $2,500,000 Annual 01/31/96 $175,000.00
Insurance Company
Excess DIC - 2nd Layer RLI Insurance IMF018180 $2,500,000 Part of Annual 01/31/96 $75,000.00
Company $7,500,000 Excess of
$2,500,000
Excess DIC - 3rd Layer Royal Insurance RHD01328 $2,500,000 Part of Annual 01/31/96 $75,000.00
Company $7,500,000 Excess of
$2,500,000
Excess DIC - 4th Layer Commonwealth CWMP8058 $2,500,000 Part of Annual 01/31/96 $75,000.00
Insurance Company $7,500,000 Excess of
$2,500,000
Excess DIC - 5th Layer Pacific Insurance ZG0002506 $2,500,000 Part of Annual 01/31/96 $55,000.00
Company $5,000,000 Excess of
$10,000,000
Excess DIC - 6th Layer Agricultural CPP8797795 $2,500,000 Part of Annual 01/31/96 $55,000.00
Insurance Co. $5,000,000 Excess of
$10,000,000
Excess DIC - 7th Layer Essex Insurance MSP0449 $2,500,000 Part of Annual 01/31/96 $25,000.00
Company $5,000,000 Excess of
$15,000,000
Excess DIC - 8th Layer RLI Insurance IMF018181 $2,500,000 Part of Annual 01/31/95 $25,000.00
$5,000,000 Excess of
$15,000,000
Excess DIC - 9th Layer American Empire 5MP20219 $5,000,000 Excess of Annual 01/31/95 $40,000.00
Surplus $20,000,000
</TABLE>
375895.1
<PAGE>
Page 6
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<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
EARTHQUAKE AND FLOOD Deductible:
<S> <C>
a) $100,000 Earthquake/Flood - Outside
of California -
- Per Occurrence - Per Unit of
Insurance each location subject to a
maximum of $250,000
b) 5% Earthquake - California - Per
Occurrence
- Per Unit of Insurance each location
subject to a minimum of 100,000
with maximum of $5,000,000
c) $10,000 All Other Perils
d) Business Interruption 72 hours
Unit of Insurance shall be considered
a) each separate building or structure
b) contents of each separate building or
structure
c) property in each yard
d) business income
e) extra expense
</TABLE>
375895.1
<PAGE>
Page 7
10/10/95
<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMMERCIAL GENERAL
LIABILITY
<S> <C> <C> <C> <C> <C> <C>
Royal Insurance RIW730551 General Aggregate Limit Annual 01/31/96 $419,317.00
Company $1,000,000
Products Completed Operations
$1,000,000 Aggregate Limit
Personal & Advertising Injury
$1,000,000 limit
Each Occurrence Limit
$1,000,000
Fire Damage Limit
$1,000,000
Checkroom Theft Coverage
$1,000,000 Any One Guest
$1,000,000 Per Policy Period
Foreign Coverage
Watercraft Liability
Liquor Liability Limit
$1,000,000 Each Cause
$1,000,000 Aggregate Per Location
Royal Insurance Employee Benefits Errors & Omissions
$1,000,000 Each Claim
$1,000,000 Aggregate
$1,000 Deductible Each Claim
Innkeepers Legal Liability Limit
$1,000,000 Any One Guest
$1,000,000 Policy Period
</TABLE>
375895.1
<PAGE>
Page 8
10/10/95
<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL GENERAL Royal Insurance RIW730551 Hotel Management Consultants
LIABILITY Company and Caterers Professional
Liability Limit
$1,000,000 Each Claim
$1,000,000 Aggregate
Bodily Injury & Property Damage
$250,000 Deductible Per Occurrence
Subject to an Annual Aggregate
Deductible of $1,900,000
$250,000 Deductible Also Applies to
Contractual, Personal & Advertisers
Injury, Hotel Management, Consulting &
Caterers Professional, Inn Keepers Legal
and Checkroom Theft Coverages
</TABLE>
375895.1
<PAGE>
Page 9
10/10/95
<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AUTOMOBILE COVERAGES
(OTHER THAN CANADA)
<S> <C> <C> <C> <C> <C> <C>
Commercial Automobile Liability Royal Insurance RIW730481-LB Bodily Injury & Property Damage Annual 01/31/96 $64,915.00
and Physical Damage Company RIW730591-PD $1,000,000 CSL Annual 01/31/96 $40,157.00
Auto Medical Payments
$5,000
Personal Injury Protection
Uninsured Motorists
$1,000,000
Underinsured Motorists
$1,000,000
Non-Owned Automobile Liability
$1,000,000
Personal Injury Protection-Statutory
Liability Policy Deductible:
$250,000 Per Occurrence
Subject to a
$2,000,000 deductible-annual
aggregate
Physical Damage Deductible:
$55,000 Self Insured Retention
Deductibles after exhaustion of S.I.R.
Vehicles with values at $20,000 or less
$250 Comprehensive
$500 Collision
Vehicles with values at excess of $20,000
$500 Comprehensive
$1,000 Collision
</TABLE>
375895.1
<PAGE>
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<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AUTOMOBILE COVERAGES Royal Insurance -Garagekeeper Liability
(OTHER THAN CANADA) $500 Deductible
-Employees as Insureds
-Drive Other Car Coverage
-Hired Autos Specified as covered Owned
Autos
</TABLE>
375895.1
<PAGE>
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<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AUTOMOBILE COVERAGES
CANADA
<S> <C> <C> <C> <C> <C> <C>
Canada Automobile Liability and Royal Insurance 25001553 Third Party Liability Annual 01/31/96 $1,120.00
Physical Damage Company $1,000,000
Family Protection Endorsement
1995 Blazer LTD 4DR $1,000,000
ID#IGNDT13W752193762 Payments for Death or Bodily Injury
Deductibles:
$250 Collision
$100 Comprehensive
Canada Automobile Liability Royal Insurance 25000891 Third Party Liability Annual 01/31/96 $2,140.00
and Physical Damage Company $1,000,000
Family Protection Endorsement
1989 Dodge Passenger Van $1,000,000
ID# 235 WB 3526KK373826 Accident Benefits
(Toronto, Ontario) Deductibles:
$250 Collision
$100 Comprehensive
Permission to Carry Passengers for
Compensation
Canada Automobile Liability and Royal Insurance 25000087 Third Party Liability Annual 01/31/96 $1,802.00
Physical Damage Company $1,000,000
Family Protection Endorsement
1993 Buick Regal Ltd. $1,000,000
ID#2GW4F51L6P1422265 Accident Benefits
(Toronto, Ontario, Trusthouse Forte) Mortgage Endorsement
</TABLE>
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<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AUTOMOBILE COVERAGES
CANADA
<S> <C> <C> <C> <C> <C> <C>
Canada Automobile Liability and Royal Insurance 25002314 Third Party Liability 06/09/95 01/31/96 $1,759.00
Physical Damage Company $1,000,000
Accident Benefits
King Edward, LTD. Uninsured Automobile
1995 Jeep Cherokee $1,000,000
ID#J4GZ78Y1SC606958 Loss or Damage - All Perils
Deductible: $5
Permission to Rent or Lease
Endorsement
Family Protection Endorsement
</TABLE>
375895.1
<PAGE>
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<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMMERCIAL CRIME
<S> <C> <C> <C> <C> <C> <C>
Royal Insurance RIT 730521 Employee Dishonesty Form A Annual 01/31/96 $57,038.00
Company 400,000 Limit
Forgery or Alteration
$400,000 Limit
Credit Card Forgery
$400,000 Limit
Computer Fraud
$400,000 Limit
Safe Deposit Box Legal Liability
Liability for Guest's Property
$1,000,000 Limit
Employee Dishonesty as respects all
employee welfare and pension benefit
plans sponsored by the Named Insured
$500,000 Limit
Deductible, any one loss disaster or
casualty
$100,000 Limit
</TABLE>
375895.1
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<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FIDUCIARY LIABILITY
<S> <C> <C> <C> <C> <C> <C>
Federal Insurance 8082-02-25G $7,000,000 Limit Each Loss Annual 01/31/96 $11,200.00
$7,000,000 Limit Each Policy Period
Non-Indemnifiable Loss Deductible
None
Indemnifiable Loss Deductible
$250,000
</TABLE>
375895.1
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<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MARINE OPERATORS LEGAL
LIABILITY
<S> <C> <C> <C> <C> <C> <C>
Royal Insurance POH001593 Marine Operators Annual 01/31/96 $4,500.00
Company Legal Liability
$2,000,000 Limit
$2,500 Deductible
</TABLE>
375895.1
<PAGE>
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<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
WORKERS' COMPENSATION &
EMPLOYERS LIABILITY
<S> <C> <C> <C> <C> <C>
RIC730501-All States Except CA Royal Insurance Coverage A Statutory Annual 01/03/96 $328,064.00
PIC730671-CA Deductible Program Company Annual 01/31/96 $137,278.00
RIC730681-MA,MT,NE,OR Coverage B Bodily Injury b Accident Annual 01/31/96 $158,321.00
Coverage Extensions $1,000,000 Each Accident
-Voluntary
-Compensation Bodily Injury b Disease
-USL&H $1,000,000 Policy Limit
-Stop Gap
Bodily Injury b Disease
$1,000,000 Each Employee
RIC730501 - All Other States Deductible Program:
$250,000 Deductible, Each Occurrence
$1,900,000 Annual Aggregate
PIC730671 - Deductible program in CA
$250,000 Deductible, Each Occurrence
$1,000,000 Annual Aggregate
RIC730681 - Guaranteed Cost Program
States of MA, MT, NE, OR
RIJ730491 Royal Insurance Employers Liability Only Annual 01/31/96 $250.00
Foreign Voluntary Workers' Company Coverage B: Minimum
Compensation Bodily Injury by Accident Premium
U.S. Nationals - Worldwide $1,000,000 Each Employee/Accident
Bodily Injury by Disease
$1,000,000 Each Employee
$1,000,000 Aggregate Disease by Country
</TABLE>
375895.1
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<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
WORKERS' COMPENSATION &
EMPLOYERS LIABILITY
<S> <C> <C> <C> <C> <C>
Underground Storage Tank
Liability
Pollution Liability
Mt. Laurel Travelodge, Mt.
Laurel, NJ Commerce & Third Party Bodily Injury & Property Damage Annual 09/21/96 $1,875.00
Industry Insurance $1,000,000 Each Incident
Company $2,000,000 Aggregate Limit
$500,000 Aggregate Defense Expense Limit
Claims Made Policy:
Retro Date: 09/21/94 $10,000 Deductible
Corrective Action, On and Off Premises, for
Underground Storage Tanks
Workers' Compensation Republic Indemnity Coverage A: Mandatory Annual 07/01/96 $347,039.00
California Joint Ventures Company
Coverage B:
Separate Policies for Bodily Injury Accident
Each Location - $1,000,000 Each Accident
42 Locations
Bodily Injury by Disease
$1,000,000 Each Employee
$1,000,000 Policy Limit
</TABLE>
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<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
WORKERS' COMPENSATION &
EMPLOYERS LIABILITY
<S> <C> <C> <C> <C> <C> <C>
Umbrella Coverages: Cigna Ins. Co. H5A6396 Public, Products, Advertising, Annual 01/31/96 Pounds 614,500
Excess Worldwide General of Europe H5A6390 Liquor Liability and General Liability
Liability Insurance H5A6389
H5A6378 Excess Employers Liability (Other than UK
and Eire)
Excess Automobile Liability (as per
underlying policy)
Total Coverage Limits: 100 Million Pound
Sterling
</TABLE>
375895.1
<PAGE>
Page 19
10/10/95
<TABLE>
Forte Hotels, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
WORKERS' COMPENSATION &
EMPLOYERS LIABILITY
<S> <C>
Special Conditions:
1) As per Underlying Policy
2) Claims Consultation Clause
3) Ultimate Net Loss Clause
4) Costs Clause
5) Exhaustion Clause
6) A.B.I. Pollution wording other than
USA/Canada where Absolute Pollution
applies.
7) Professional Indemnity:
USA/Canada Registered Companies
Cover provided in excess of
Underlying subject to a limit of
US$20,000 each and every loss and in
the aggregate in the period. Limit
of Indemnity is US$7,500,000 under
this Policy. UK/Rest of World -
Excluded
8) Excluding Offshore Employers Liability
- Worldwide
9) Including worldwide excess Motor
Liability (Third Party Property Damage
and Third Party Personal Injury)
10) Including residual Employers Liability
cover ex Offshore Liability
11) Excluding Motor Airside Liability in
respect of the United Kingdom
12) Cost inclusive and excluding Punitive
and Exemplary Damages for
USA/Canada
13) Excluding Asbestos for USA/Canada
</TABLE>
375895.1
<PAGE>
SCHEDULE VIII
<TABLE>
EXISTING LIENS
<CAPTION>
Filing Filing
Debtor Secured Party Jurisdiction Type Date
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Forte Hotels, Inc. Xerox Corporation CA-S/S UCC-1 12/5/91
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. Tandem Computers Incorporated CA-S/S UCC-1 7/8/92
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. Tandem Computers Incorporated/ CA-S/S UCC-3 8/26/92
General Electric Capital Corporation Assignment
(Assignee)
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. dba Forte Whirlpool Corporation CA-S/S UCC-1 7/31/92
Hotels Supply & Service
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. BFS Financial Services/GE Capital Computer CA-S/S UCC-1 8/14/92
Leasing Corp. (Assignee)
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. BFS Financial Services/GE Capital Computer CA-S/S UCC-1 9/30/92
Leasing (Assignee)
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. Tandem Computers Credit Corporation/
General Electric Capital Corporation CA-S/S UCC-1 12/14/92
(Assignee)
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. WilTel Communications Systems, Inc. / CA-S/S UCC-1 1/28/93
Northern Telecom Finance Corporation
(Assignee)
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Incorporated U.S. Leasing International CA-S/S UCC-1 7/14/93
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. U.S. Leasing International, Inc. CA-S/S UCC-1 8/18/93
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. GE Capital CA-S/S UCC-1 11/8/93
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. Eversoft Products, Inc. CA-S/S UCC-1 3/20/95
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. ORIX Credit Alliance, Inc. CA-S/S UCC-1 3/27/95
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. XL/Datacomp, Inc. CA-S/S UCC-1 5/20/93
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. XL/Datacomp, Inc. /Citicorp Leasing, Inc. CA-S/S UCC-3 10/25/93
(Assignee) Assignment
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. Citicorp Leasing, Inc./StorageTex Distributed CA-S/S UCC-3 10/13/95
Systems Division, Inc. (Assignee) Assignment
</TABLE>
CONTINUATION............
File Collateral
Debtor Number Description
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 91257791 Equipment
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 92147798 Computer equipment
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 92147798 Assignment of 92147798
- -------------------------------------------------------------------------------
Forte Hotels, Inc. dba Forte 92167259 Air Conditioners
Hotels Supply & Service
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 92175965 Computer equipment
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 92213323 Telephone equipment
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 92263103 Computer equipment
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 93019526 Computer/Telephone equipment
- -------------------------------------------------------------------------------
Forte Hotels, Incorporated 93141346 Computer reservation system
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 93166397 Telecommunications equipment
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 93226614 ADT Security system
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 9508060839 Water softener equipment
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 9508960682 Sales automation system
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 93101859 Equipment
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 93101859 Assignment of 93101859
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 95290C0357 Assignment of 93101859
375870.1
<PAGE>
<TABLE>
<CAPTION>
Filing Filing
Debtor Secured Party Jurisdiction Type Date
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Forte Hotels, Inc. StorageTex Distributed Systems Division, Inc. CA-S/S UCC-3 10/13/95
(Assignee)
- ---------------------------------------------------------------------------------------------------------------
Forte Hotels, Inc. USL Capital Corporation CA-S/S UCC-1 1/25/94
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
===============================================================================================================
</TABLE>
CONTINUATION
File Collateral
Debtor Number Description
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 95290C0361 Assignment of 93101859
- -------------------------------------------------------------------------------
Forte Hotels, Inc. 94014123 Computer equipment
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE IX
EXISTING INVESTMENTS
1. National Lodging Corp.
Specified Investments as set forth in A: Items 3, 4, 5 and 6 of Annex A to
the Pledge Agreement and all items on Annex B to the Pledge Agreement.
2. Forte Hotels, Inc.
All joint ventures as set forth on Schedule V to the Credit Agreement.
3. National Gaming Mississippi, Inc.
None.
375852.1
<PAGE>
SCHEDULE X
CERTAIN JOINT VENTURES
Ghirardelli Square-Fisherman's Wharf.
375856.1
<PAGE>
SCHEDULE XI
Certain Litigation
Excel Hospitality Services, Inc. ("Excel") v. Forte USA Inc.
("Forte"), Forte Hotels, Inc. and Morgan Stanley Real Estate
Services Inc. ("Morgan"). Excel has alleged that a written offer
made by it was better than the Borrower's offer which was
accepted by Forte and that Excel's offer was in fact orally
accepted by Morgan on Forte's behalf. The Borrower understands
that both Forte and Morgan deny these allegations and that the
auction documents specifically provided that no contract or
obligation could arise except by written documents signed by both
parties. A motion filed by Excel for a temporary restraining
order to enjoin the Transaction was denied by the New York State
Supreme Court on January 22, 1996.
375858.1
<PAGE>
EXHIBIT A
NOTICE OF BORROWING
[Date]
Bankers Trust Company, as
Administrative Agent for
the Banks party to the
Credit Agreement referred
to below
One Bankers Trust Plaza
New York, New York 10006
Attention: ____________
Gentlemen:
The undersigned, National Lodging Corp. (the "Borrower"),
refers to the Credit Agreement, dated as of January 23, 1996 (as amended from
time to time, the "Credit Agreement," the terms defined therein being used
herein as therein defined), among the Borrower, various Banks from time to time
party thereto, Chemical Bank, as Documentation Agent, and you, as Administrative
Agent for such Banks, and hereby gives you notice, irrevocably, pursuant to
Section 1.03(a) of the Credit Agreement, that the undersigned hereby requests a
Borrowing of Revolving Loans under the Credit Agreement, and in that connection
sets forth below the information relating to such Borrowing (the "Proposed
Borrowing") as required by Section 1.03(a) of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is _________,
19__.1
(ii) The aggregate principal amount of the Proposed Borrowing
is $-----------.
(iii) The Revolving Loans to be made pursuant to the Proposed
Borrowing shall be initially maintained as [Base Rate Loans] [Eurodollar
Loans].2
- --------
1 Shall be a Business Day at least three Business Days in the case of Eurodollar
Loans and at least one Business Day in the case of Base Rate Loans, in each case
after the date hereof.
2 Eurodollar Loans may not be incurred prior to the earlier of (x) the 90th day
after the Initial Borrowing Date and (y) the Syndication Date.
000092IF.W51
<PAGE>
EXHIBIT A
Page 2
(iv) The initial Interest Period for the Proposed Borrowing
is ___ month(s).3
The undersigned hereby certifies that the following statements
are true and correct on the date hereof, and will be true and correct on the
date of the Proposed Borrowing:
(A) the representations and warranties contained in the Credit
Documents are and will be true and correct in all material respects,
both before and after giving effect to the Proposed Borrowing and to
the application of the proceeds thereof, as though made on such date
(it being understood and agreed that any representation or warranty
which by its terms is made as of a specified date shall be required to
be true and correct in all material respects only as of such specified
date); [and]
(B) no Default or Event of Default has occurred and is
continuing, or would result from such Proposed Borrowing or from the
application of the proceeds thereof[.] [; and]
[(C) the proceeds of the Proposed Borrowing are to be used to
effect a Permitted Hotel Acquisition in which the total consideration
exceeds $2,000,000 and, in that connection, all of the applicable
conditions set forth in Section [9.02(ix)] [9.05(viii)] have been
satisfied.]4
Very truly yours,
NATIONAL LODGING CORP.
By________________________
Name:
Title:
- --------
3 To be included for a Proposed Borrowing of Eurodollar Loans.
4 To be included for a Proposed Borrowing the proceeds of which are to be used
to effect a Permiited Hotel Acquisition.
000092IF.W51
<PAGE>
EXHIBIT B
REVOLVING NOTE
$__________ New York, New York
______ __, 1996
FOR VALUE RECEIVED, NATIONAL LODGING CORP., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of or its
registered assigns (the "Bank"), in lawful money of the United States of America
in immediately available funds, at the office of Bankers Trust Company (the
"Administrative Agent") located at One Bankers Trust Plaza, New York, New York
10006 on the Final Maturity Date (as defined in the Agreement referred to below)
the principal sum of _______________ DOLLARS ($______________) or, if less, the
then unpaid principal amount of all Revolving Loans (as defined in the
Agreement) made by the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid
principal amount hereof in like money at said office from the date hereof until
paid at the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Revolving Notes referred to in the
Credit Agreement, dated as of January 23, 1996, among the Borrower, the lenders
from time to time party thereto (including the Bank), Chemical Bank, as
Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from
time to time in effect, the "Agreement"), and is entitled to the benefits
thereof and of the other Credit Documents (as defined in the Agreement). This
Note is secured by the Pledge Agreement (as defined in the Agreement) and is
entitled to the benefits of the Guaranties (as defined in the Agreement). As
provided in the Agreement, this Note is subject to voluntary prepayment and
mandatory repayment prior to the Final Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
000092IM.W51
<PAGE>
EXHIBIT B
Page 2
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
NATIONAL LODGING CORP.
By_________________________
Title:
000092IM.W51
<PAGE>
EXHIBIT C
LETTER OF CREDIT REQUEST
No. 1 Dated 2
-- -- ------
Bankers Trust Company, [as Issuing Bank and] as Administrative Agent under the
Credit Agreement (as amended, modified or supplemented from time to
time, the "Credit Agreement"), dated as of January 23, 1996, among
National Lodging Corp., the lenders from time to time party thereto,
Bankers Trust Company, as Administrative Agent and Chemical Bank, as
Documentation Agent
One Bankers Trust Plaza
New York, New York 10006
Attention:____________________
[Name and Address of Issuing
Bank if other than Bankers
Trust Company]
Dear Sirs:
We hereby request that _________________, as an Issuing Bank
under the Credit Agreement referred to above, issue a [standby] [trade] Letter
of Credit for the account of the undersigned on 3 (the "Date of Issuance") in
the aggregate stated amount of 4 .
For purposes of this Letter of Credit Request, unless
otherwise defined herein, all capitalized terms used herein which are defined in
the Credit Agreement shall have the respective meaning provided therein.
- --------
1 Letter of Credit Request Number.
2 Date of Letter of Credit Request.
3 Date of Issuance which shall be at least five Business Days (or such
shorter period as is acceptable to the respective Issuing Bank).
4 Aggregate initial stated amount of Letter of Credit.
000092IP.W51
<PAGE>
EXHIBIT C
Page 2
The beneficiary of the requested Letter of Credit will be 5 ,
and such Letter of Credit will be in support of 6 and will have a stated
expiration date of 7 .
We hereby certify that:
(1) the representations and warranties contained in the Credit
Documents will be true and correct in all material respects on the Date
of Issuance, both before and after giving effect to the issuance of the
Letter of Credit requested hereby (it being understood and agreed that
any representation or warranty which by its terms is made as of a
specified date shall be required to be true and correct in all material
respects only as of such specified date); and
(2) no Default or Event of Default has occurred and is
continuing nor, after giving effect to the issuance of the Letter of
Credit requested hereby, would such a Default or an Event of Default
occur.
Copies of all documentation with respect to the supported
transaction are attached hereto.
NATIONAL LODGING CORP.
By__________________________
Title:
- --------
5 Insert name and address of beneficiary.
6 Insert description of L/C Supportable Indebtedness and describe
obligation to which it relates in the case of standby Letters of Credit
and a description of the commercial transaction which is being
supported in the case of trade Letters of Credit.
7 Insert last date upon which drafts may be presented which may not be
later than (i) in the case of standby Letters of Credit, 12 months
after the Date of Issuance or, if earlier, the date which is 3 Business
Days prior to the Final Maturity Date or (ii) in the case of trade
Letters of Credit, 180 days after the Date of Issuance or, if earlier,
the date which is 30 days prior to the Final Maturity Date.
000092IP.W51
<PAGE>
EXHIBIT D
Section 4.04(b)(ii) Certificate
Reference is hereby made to the Credit Agreement, dated as of
January 23, 1996, among National Lodging Corp., various Banks, Chemical Bank, as
Documentation Agent, and Bankers Trust Company, as Administrative Agent (the
"Credit Agreement"). Pursuant to the provisions of Section 4.04(b)(ii) of the
Credit Agreement, the undersigned hereby certifies that it is not a "bank" as
such term is used in Section 881(c)(3)(A) of the Internal Revenue Code of 1986,
as amended.
[NAME OF BANK]
By_________________________
Title:
000092IR.W51
<PAGE>
EXHIBIT E
[NAME OF CREDIT PARTY]
Officers' Certificate
I, the undersigned, [President/Vice President] of [NAME OF
CREDIT PARTY], a corporation organized and existing under the laws of
___________ (the "Company"), do hereby certify that:
1. This Certificate is furnished pursuant to Section 5 of the
Credit Agreement, dated as of January 23, 1996, among National Lodging Corp.,
the lenders from time to time party thereto, Chemical Bank, as Documentation
Agent, and Bankers Trust Company, as Administrative Agent (such Credit
Agreement, as in effect on the date of this Certificate, being herein called the
"Credit Agreement"). Unless otherwise defined herein, capitalized terms used in
this Certificate shall have the meanings set forth in the Credit Agreement.
2. The following named individuals are elected officers of the
Company, each holds the office of the Company set forth opposite his name and
has held such office since __________, 19__.1 The signature written opposite the
name and title of each such officer is his correct signature.
Name2 Office Signature
- ---------------- --------------- ---------------
- ---------------- --------------- ---------------
- ---------------- --------------- ---------------
- ---------------- --------------- ---------------
3. Attached hereto as Exhibit A is a certified copy of the
certificate of incorporation of the Company as filed in the Office of __________
on ________, 19__, together with all amendments thereto adopted through the date
hereof.
- --------
1 Insert a date prior to the time of any corporate action relating to the Credit
Agreement or any other Credit Document.
2 Include name, office and signature of each officer who will sign any Credit
Document, including the officer who will sign the certification at the end of
this Certificate.
000092J1.W51
<PAGE>
EXHIBIT E
Page 2
4. Attached hereto as Exhibit B is a true and correct copy of
the By-Laws of the Company which were duly adopted, are in full force and effect
on the date hereof, and have been in effect since _____________, 19__.
5. Attached hereto as Exhibit C is a true and correct copy of
resolutions which were duly adopted on __________, 19__ [by unanimous written
consent of the Board of Directors of the Company], [by a meeting of the Board of
Directors of the Company at which a quorum was present and acting throughout],
and said resolutions have not been rescinded, amended or modified. Except as
attached hereto as Exhibit C, no resolutions have been adopted by the Board of
Directors of the Company which deal with the execution, delivery or performance
of any of the Documents to which the Company is party.
[6. True and correct copies of all Shareholders' Agreements,
Employee Benefit Plans, Employment Agreements, Collective Bargaining Agreements,
Debt Agreements, Management Agreements and Existing Investment Agreements, in
each case of the Company and its Subsidiaries, have been made available for
review by the Agents.
7. Attached hereto as Exhibit D are true and correct copies of
all Tax Sharing Agreements of the Company and its Subsidiaries.
8. Attached hereto as Exhibit E are true and correct copies
of all Acquisition Documents.
9. Attached hereto as Exhibit F are true and correct copies
of all HFS Agreements.
10. Attached hereto as Exhibit G are true and correct copies
of all Affiliate Agreements.
11. Attached hereto as Exhibit H are true and correct copies
of the Financial Statements and Projections required to be delivered pursuant to
Section 5.14 of the Credit Agreement.
12. On the date hereof, all of the conditions set forth in
Sections 5.06, 5.07, 5.08, 5.15, 5.16, 5.17, 6.01, 6.02 and 6.03 of the Credit
Agreement have been satisfied.]3
- --------
3 To be included in the Certificate delivered by National Lodging Corp.
000092J1.W51
<PAGE>
EXHIBIT E
Page 3
[6.][13.] On the date hereof, the representations and
warranties made by the Company in the Credit Documents to which the Company is a
party are true and correct in all material respects, both before and after
giving effect to each Credit Event to occur on the date hereof and the
application of the proceeds thereof (it being understood and agreed that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date).
[7.][14.] On the date hereof, no Default or Event of Default
has occurred and is continuing or would result from the Credit Events to occur
on the date hereof or from the application of the proceeds thereof.
[8.][15.] There is no proceeding for the dissolution or
liquidation of the Company or threatening its existence.
000092J1.W51
<PAGE>
EXHIBIT E
Page 4
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day
of __________, 1996.
------------------------------
Name:
Title:
000092J1.W51
<PAGE>
EXHIBIT E
Page 5
[NAME OF CREDIT PARTY]
I, the undersigned, [Secretary/Assistant Secretary] of the Company, do hereby
certify that:
1. [Name of Person making above certifications] is the duly
elected and qualified [President/Vice President] of the Company and the
signature above is [his/her] genuine signature.
2. The certifications made by [name of Person making above
certifications] in Items 2, 3, 4, 5 and [8.] [15.] above are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand this _____
day of _________, 1996.
----------------------------
Name:
Title:
000092J1.W51
<PAGE>
EXHIBIT F
PLEDGE AGREEMENT
PLEDGE AGREEMENT (as amended, modified or supplemented from
time to time, this "Agreement"), dated as of January 23, 1996, made by each of
the undersigned (each a "Pledgor" and, together with any other entity that
becomes a party hereto pursuant to Section 24 hereof, the "Pledgors"), to
BANKERS TRUST COMPANY, as Collateral Agent (the "Pledgee"), for the benefit of
the Secured Creditors (as defined below). Except as otherwise defined herein,
capitalized terms used herein and defined in the Credit Agreement (as defined
below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, National Lodging Corp. (the "Borrower"), various
lenders from time to time party thereto (the "Banks"), Chemical Bank, as
Documentation Agent (the "Documentation Agent"), and Bankers Trust Company, as
Administrative Agent (the "Administrative Agent") (together with any successor
administrative agent, the "Administrative Agent"), have entered into a Credit
Agreement, dated as of January 23, 1996, providing for the making of Revolving
Loans and the issuance of, and participation in, Letters of Credit as
contemplated therein (as used herein, the term "Credit Agreement" means the
Credit Agreement described above in this paragraph, as the same may be amended,
modified, extended, renewed, replaced, restated or supplemented from time to
time, and including any agreement extending the maturity of, or restructuring
all or any portion of the Indebtedness under such agreement or any successor
agreements) (the Banks, the Documentation Agent, the Administrative Agent and
the Pledgee are herein called the "Bank Creditors");
WHEREAS, the Borrower may at any time and from time to time
enter into one or more Interest Rate Protection Agreements or Other Hedging
Agreements with one or more Banks or any affiliate thereof (each such Bank or
affiliate, even if the respective Bank subsequently ceases to be a Bank under
the Credit Agreement for any reason, together with such Bank's or affiliate's
successors and assigns, if any, collectively, the "Other Creditors," and
together with the Bank Creditors, the "Secured Creditors");
WHEREAS, pursuant to the Subsidiaries Guaranty, each
Subsidiary Guarantor has jointly and severally guaranteed to the Secured
Creditors the payment when due of all Guaranteed Obligations as described
therein;
0000B644.W51
<PAGE>
Page 2
WHEREAS, it is a condition to the making of Revolving Loans
and the issuance of Letters of Credit under the Credit Agreement that each
Pledgor shall have executed and delivered this Agreement; and
WHEREAS, each Pledgor will obtain benefits from the incurrence
of Revolving Loans and the issuance of Letters of Credit under the Credit
Agreement and the entering into of Interest Rate Protection Agreements or Other
Hedging Agreements and, accordingly, each Pledgor desires to enter into this
Agreement in order to satisfy the conditions described in the preceding
paragraph;
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to each Pledgor, the receipt and sufficiency of which are
hereby acknowledged, each Pledgor hereby makes the following representations and
warranties to the Pledgee for the benefit of the Secured Creditors and hereby
covenants and agrees with the Pledgee for the benefit of the Secured Creditors
as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each
Pledgor for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and
indebtedness (including, without limitation, indemnities, Fees and
interest thereon) of such Pledgor to the Bank Creditors, whether now
existing or hereafter incurred under, arising out of, or in connection
with the Credit Agreement and the other Credit Documents to which such
Pledgor is a party (including, in the case of the Subsidiary
Guarantors, all such obligations and indebtedness of such Subsidiary
Guarantors under the Subsidiaries Guaranty) and the due performance and
compliance by such Pledgor with all of the terms, conditions and
agreements contained in the Credit Agreement and such other Credit
Documents (all such obligations and liabilities under this clause (i),
except to the extent consisting of obligations or indebtedness with
respect to Interest Rate Protection Agreements or Other Hedging
Agreements, being herein collectively called the "Credit Document
Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and
liabilities owing by such Pledgor to the Other Creditors under, or with
respect to, any Interest Rate Protection Agreement or Other Hedging
Agreement, whether such Interest Rate Protection Agreement or Other
Hedging Agreement is now in existence or hereafter arising, and the due
performance and compliance by such Pledgor with all of the terms,
0000B644.W51
<PAGE>
Page 3
conditions and agreements contained therein (all such obligations and
liabilities described in this clause (ii) being herein collectively
called the "Other Obligations");
(iii) any and all sums advanced by the Pledgee in order to
preserve the Collateral (as hereinafter defined) or preserve its
security interest in the Collateral;
(iv) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities of such
Pledgor referred to in clauses (i) and (ii) above, after an Event of
Default (which term to mean and include any Event of Default under, and
as defined in, the Credit Agreement or any payment default under any
Interest Rate Protection Agreement or Other Hedging Agreement) shall
have occurred and be continuing, the reasonable expenses of retaking,
holding, preparing for sale or lease, selling or otherwise disposing of
or realizing on the Collateral, or of any exercise by the Pledgee of
its rights hereunder, together with reasonable attorneys' fees and
court costs; and
(v) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of
this Agreement.
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being herein collectively called the
"Obligations," it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
2. DEFINITION OF STOCK, NOTES, SECURITIES, PARTNERSHIP
INTEREST, ETC. (a) As used herein, (i) the term "Stock" shall mean (x) with
respect to corporations incorporated under the laws of the United States or any
State or territory thereof (each a "Domestic Corporation"), all of the issued
and outstanding shares of capital stock, and all warrants and options to
purchase any such capital stock, of any Domestic Corporation at any time owned
by any Pledgor and (y) with respect to corporations not Domestic Corporations
(each a "Foreign Corporation"), all of the issued and outstanding shares of
capital stock, and all warrants and options to purchase any such capital stock,
at any time owned by any Pledgor of any Foreign Corporation, provided that, no
Pledgor shall be required to pledge hereunder, and nothing herein shall be
deemed to constitute a pledge hereunder of, more than 65% of the total combined
voting power of all classes of capital stock of any Foreign Corporation entitled
to vote, (ii) the term "Notes" shall mean in the case of each Pledgor, all
promissory notes from time to time issued to, or held by, any such Pledgor
(including all intercompany promissory notes held by any such Pledgor) and (iii)
the term "Securities" shall mean all of the Stock and Notes. Each Pledgor
represents and warrants, that on the date hereof, (a) the Stock held by such
Pledgor consists of
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the number and type of shares of the stock of the corporations as described in
Annex A hereto for such Pledgor, (b) such Stock constitutes that percentage of
the issued and outstanding capital stock of the issuing corporation as is set
forth in Annex A hereto, (c) the Notes held by such Pledgor consist of the
promissory notes described in Annex B hereto for such Pledgor, (d) such Pledgor
is the holder of record and sole beneficial owner of the Stock and the Notes
held by such Pledgor and (e) on the date hereof, such Pledgor owns no other
Securities.
(b) As used herein, the term "Partnership Interest" shall mean
the entire partnership interests (whether general and/or limited partnership
interests) at any time owned by each Pledgor in any Person (each a "Pledged
Partnership"). Each Pledgor represents and warrants that, on the date hereof,
(x) the Partnership Interests held by such Pledgor constitutes that percentage
of the entire partnership interest of the respective Pledged Partnership as is
set forth on Annex C hereto for such Pledgor and (y) such Pledgor owns no other
Partnership Interests.
(c) All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock;" all Notes at any time
pledged or required to be pledged hereunder are hereinafter called the "Pledged
Notes;" all Pledged Stock and Pledged Notes together are called the "Pledged
Securities;" all Partnership Interests at any time pledged or required to be
pledged hereunder are hereinafter called the "Pledged Partnership Interests",
and the Pledged Securities and the Pledged Partnership Interests, together with
all proceeds thereof, including any securities and moneys received and at the
time held by the Pledgee hereunder, are hereinafter called the "Collateral."
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. (a) To secure the Obligations of such Pledgor and
for the purposes set forth in Section 1 hereof, each Pledgor hereby (i) grants
to the Pledgee a security interest in all of the Collateral owned by such
Pledgor, (ii) pledges and deposits as security with the Pledgee, the Securities
owned by such Pledgor on the date hereof, and delivers to the Pledgee
certificates or instruments therefor, duly endorsed in blank by such Pledgor in
the case of Notes and accompanied by undated stock powers duly executed in blank
by such Pledgor (and accompanied by any transfer tax stamps required in
connection with the pledge of such Securities) in the case of Stock, or such
other instruments of transfer as are reasonably acceptable to the Pledgee, (iii)
assigns, transfers, hypothecates mortgages, charges and sets over to the Pledgee
all of such Pledgor's right, title and interest in and to such Securities (and
in and to the certificates or instruments evidencing such Securities), to be
held by the Pledgee upon the terms and conditions set forth in this Agreement
and (iv) transfers and assigns to the Pledgee such Pledgor's Partnership
Interests (and delivers any certificates or instruments evidencing such
partnership interests, duly
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endorsed in blank) and all of such Pledgor's right, title and interest in each
Pledged Partnership including, without limitation:
(i) all of the capital thereof and its interest in all profits,
losses, Partnership Assets (as defined below) and other distributions
to which such Pledgor shall at any time be entitled in respect of any
such Collateral;
(ii) all other payments due or to become due to such Pledgor in
respect of any such Collateral, whether under any partnership agreement
or otherwise, whether as contractual obligations, damages, insurance
proceeds or otherwise;
(iii) all of its claims, rights, powers, privileges, authority,
options, security interest, liens and remedies, if any, under any
partnership or other agreement or at law or otherwise in respect of any
such Collateral;
(iv) all present and future claims, if any, of such Pledgor
against any Pledged Partnership for moneys loaned or advanced, for
services rendered or otherwise;
(v) all of such Pledgor's rights under any partnership
agreement or at law to exercise and enforce every right, power, remedy,
authority, option and privilege of such Pledgor relating to any
Partnership Interest, including any power, if any, to terminate, cancel
or modify any general or limited partnership agreement, to execute any
instruments and to take any and all other action on behalf of and in
the name of such Pledgor in respect of such Partnership Interest and
any Pledged Partnership, to make determinations, to exercise any
election (including, but not limited to, election of remedies) or
option or to give or receive any notice, consent, amendment, waiver or
approval, together with full power and authority to demand, receive,
enforce, collect, or receipt for any of the foregoing or for any
Partnership Asset, to enforce or execute any checks, or other
instruments or orders, to file any claims and to take any action in
connection with any of the foregoing;
(vi) all other property hereafter delivered in substitution for
or in addition to any of the foregoing, all certificates and
instruments representing or evidencing such other property and all
cash, securities, interest, dividends, rights and other property at any
time and from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all thereof; and
(vii) to the extent not otherwise included, all proceeds of any
or all of the foregoing.
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(b) As used herein, the term "Partnership Assets" shall mean
all assets, whether tangible or intangible and whether real, personal or mixed
(including, without limitation, all partnership capital and interests in other
partnerships), at any time owned by any Pledged Partnership or represented by
any Partnership Interest.
3.2. Subsequently Acquired Securities and/or Partnership
Interests. (a) If any Pledgor shall acquire (by purchase, stock dividend or
otherwise) any additional Securities at any time or from time to time after the
date hereof, such Pledgor will promptly thereafter deposit such Securities (or
certificates or instruments representing Securities) as security with the
Pledgee and deliver to the Pledgee certificates or instruments therefor, duly
endorsed in blank in the case of such Notes, and accompanied by undated stock
powers duly executed in blank by such Pledgor (and accompanied by any transfer
tax stamps required in connection with the pledge of such Securities) in the
case of such Stock, or such other instruments of transfer as are reasonably
acceptable to the Pledgee, and will promptly thereafter deliver to the Pledgee a
certificate executed by a principal executive officer of such Pledgor describing
such Securities and certifying that the same has been duly pledged with the
Pledgee hereunder. No Pledgor shall be required at any time to pledge hereunder
any Stock which is more than 65% of the total combined voting power of all
classes of capital stock of any Foreign Corporation entitled to vote.
(b) If any Pledgor shall acquire (by purchase, distribution or
otherwise) any additional Partnership Interest at any time or from time to time
after the date hereof, and, to the extent such Partnership Interest is
certificated, forthwith deliver to the Pledgee certificates therefor,
accompanied by such instruments of transfer as are acceptable to the Pledgee,
and shall promptly thereafter deliver to the Pledgee a certificate executed by a
principal executive officer of such Pledgor describing such Partnership Interest
and certifying that the same has been duly pledged with the Pledgee hereunder.
3.3. Uncertificated Securities and Partnership Interests.
Notwithstanding anything to the contrary contained in Sections 3.1 and 3.2
hereof, if any Securities (whether now owned or hereafter acquired) or
Partnership Interests are uncertificated securities, the relevant Pledgor shall
promptly notify the Pledgee thereof, and shall promptly take all actions
required to perfect the security interest of the Pledgee under applicable law
(including, in any event, under Sections 8-313 and 8-321 of the New York Uniform
Commercial Code, if applicable). Each Pledgor further agrees to take such
actions as the Pledgee deems necessary or reasonably desirable to effect the
foregoing and to permit the Pledgee to exercise any of its rights and remedies
hereunder, and agrees to provide an opinion of counsel reasonably satisfactory
to the Pledgee with respect to any such pledge of uncertificated Securities
promptly upon the reasonable request of the Pledgee.
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4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee
shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the Pledged Securities or Pledged Partnership
Interests, which may be held (in the discretion of the Pledgee) in the name of
the relevant Pledgor, endorsed or assigned in blank or in favor of the Pledgee
or any nominee or nominees of the Pledgee or a sub-agent appointed by the
Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until
there shall have occurred and be continuing an Event of Default, each Pledgor
shall be entitled to exercise any and all (i) voting and other consensual rights
pertaining to the Pledged Securities owned by it, and to give consents, waivers
or ratifications in respect thereof, and (ii) voting, consent, administration,
management and other rights and remedies under any partnership agreement or
otherwise with respect to the Pledged Partnership Interests of such Pledgor;
provided, that, in each case, no vote shall be cast or any consent, waiver or
ratification given or any action taken or omitted to be taken which would
violate or be inconsistent with any of the terms of this Agreement, the Credit
Agreement, any other Credit Document or any Interest Rate Protection Agreement
or Other Hedging Agreement (collectively, the "Secured Debt Agreements"), or
which would have the effect of impairing the value of the Collateral or any part
thereof or the position or interests of the Pledgee or any other Secured
Creditor in the Collateral. All such rights of each Pledgor to vote and to give
consents, waivers and ratifications shall cease in case an Event of Default has
occurred and is continuing, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there
shall have occurred and be continuing an Event of Default, (i) all cash
dividends and distributions payable in respect of the Pledged Stock and all
payments in respect of the Pledged Notes shall be paid to the respective Pledgor
and (ii) all cash distributions in respect of the Pledged Partnership Interests
shall be paid to the respective Pledgor. The Pledgee shall be entitled to
receive directly, and to retain as part of the Collateral:
(i) all other or additional stock or other securities or
partnership interests (other than cash) paid or distributed by way of
dividend or otherwise in respect of the Collateral;
(ii) all other or additional stock or other securities or
partnership interests paid or distributed in respect of the Collateral
by way of stock-split, spin-off, split-up, reclassification,
combination of shares or similar rearrangement;
(iii) all other property (other than cash) paid or distributed by
way of dividend or distribution in respect of the Collateral; and
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(iv) all other property or additional stock or other securities
or partnership interests or property which may be paid in respect of
the Collateral by reason of any consolidation, merger, exchange of
stock, conveyance of assets, liquidation or similar reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by any Pledgor contrary to the provisions of this Section 6
and Section 7 hereof shall be received in trust for the benefit of the Pledgee,
shall be segregated from other property or funds of such Pledgor and shall be
forthwith paid over to the Pledgee as Collateral in the same form as so received
(with any necessary endorsement).
7. REMEDIES IN CASE OF DEFAULT OR EVENT OF DEFAULT. If there
shall have occurred and be continuing an Event of Default, then and in every
such case, the Pledgee shall be entitled to exercise all of the rights, powers
and remedies (whether vested in it by this Agreement, any other Secured Debt
Agreement or by law) for the protection and enforcement of its rights in respect
of the Collateral, and the Pledgee shall be entitled to exercise all the rights
and remedies of a secured party under the Uniform Commercial Code and also shall
be entitled, without limitation, to exercise the following rights, which each
Pledgor hereby agrees to be commercially reasonable:
(a) to receive all amounts payable in respect of the Collateral
otherwise payable under Section 6 hereof to the Pledgor;
(b) to transfer all or any part of the Collateral into the
Pledgee's name or the name of its nominee or nominees;
(c) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other lawful action to collect
upon any Pledged Note (including, without limitation, to make any
demand for payment thereon);
(d) to vote all or any part of the Pledged Stock or Pledged
Partnership Interests (whether or not transferred into the name of the
Pledgee) and give all consents, waivers and ratifications in respect of
the Collateral and otherwise act with respect thereto as though it were
the outright owner thereof (each Pledgor hereby irrevocably
constituting and appointing the Pledgee the proxy and attorney-in-fact
of such Pledgor, with full power of substitution to do so); and
(e) at any time and from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any
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public or private sale, without demand of performance, advertisement or
notice of intention to sell or of the time or place of sale or
adjournment thereof or to redeem or otherwise (all of which are hereby
waived by each Pledgor), for cash, on credit or for other property, for
immediate or future delivery without any assumption of credit risk, and
for such price or prices and on such terms as the Pledgee in its
absolute discretion may determine, provided that at least 10 days'
written notice of the time and place of any such sale shall be given to
such Pledgor. The Pledgee shall not be obligated to make any such sale
of Collateral regardless of whether any such notice of sale has
theretofore been given. Each Pledgor hereby waives and releases to the
fullest extent permitted by law any right or equity of redemption with
respect to the Collateral, whether before or after sale hereunder, and
all rights, if any, of marshalling the Collateral and any other
security for the Obligations or otherwise. At any such sale, unless
prohibited by applicable law, the Pledgee on behalf of the Secured
Creditors may bid for and purchase all or any part of the Collateral so
sold free from any such right or equity of redemption. Neither the
Pledgee nor any other Secured Creditor shall be liable for failure to
collect or realize upon any or all of the Collateral or for any delay
in so doing nor shall any of them be under any obligation to take any
action whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and
remedy of the Pledgee provided for in this Agreement or any other Secured Debt
Agreement, or now or hereafter existing at law or in equity or by statute shall
be cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Pledgee or any
other Secured Creditor of any one or more of the rights, powers or remedies
provided for in this Agreement or any other Secured Debt Agreement or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Pledgee or any other Secured
Creditor of all such other rights, powers or remedies, and no failure or delay
on the part of the Pledgee or any other Secured Creditor to exercise any such
right, power or remedy shall operate as a waiver thereof. No notice to or demand
on any Pledgor in any case shall entitle it to any other or further notice or
demand in similar or other circumstances or constitute a waiver of any of the
rights of the Pledgee or any other Secured Creditor to any other or further
action in any circumstances without notice or demand. The Secured Creditors
agree that this Agreement may be enforced only by the action of the
Administrative Agent or the Pledgee, in each case acting upon the instructions
of the Required Banks (or, after the date on which all Credit Document
Obligations have been paid in full, the holders of at least the majority of the
outstanding Other Obligations) and that no other Secured Creditor shall have any
right individually to seek to enforce or to enforce this Agreement or to realize
upon the security to be granted hereby, it being understood and agreed that such
rights and remedies may be exercised by the Administrative Agent or the Pledgee
or the holders of at least a majority of the outstanding
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Other Obligations, as the case may be, for the benefit of the Secured Creditors
upon the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Pledgee upon any sale or other disposition of the Collateral, together with all
other moneys received by the Pledgee hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing the Pledgee of
the type provided in clauses (iii) and (iv) of the definition of
Obligations contained in Section 1 hereof;
(ii) second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to
the outstanding Primary Obligations (as defined below) shall be paid to
the Secured Creditors as provided in Section 9(e) hereof, with each
Secured Creditor receiving an amount equal to its outstanding Primary
Obligations or, if the proceeds are insufficient to pay in full all
such Primary Obligations, its Pro Rata Share (as defined below) of the
amount remaining to be distributed;
(iii) third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an amount
equal to the outstanding Secondary Obligations (as defined below) shall
be paid to the Secured Creditors as provided in Section 9(e) hereof,
with each Secured Creditor receiving an amount equal to its outstanding
Secondary Obligations or, if the proceeds are insufficient to pay in
full all such Secondary Obligations, its Pro Rata Share of the amount
remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i), (ii) and (iii) and
following the termination of this Agreement pursuant to Section 19(a)
hereof, to the relevant Pledgor or, to the extent directed by such
Pledgor or a court of competent jurisdiction, to whomever may be
lawfully entitled to receive such surplus.
(b) For purposes of this Agreement, (x) "Pro Rata Share" shall
mean, when calculating a Secured Creditor's portion of any distribution or
amount, that amount (expressed as a percentage) equal to a fraction the
numerator of which is the then unpaid amount of such Secured Creditor's Primary
Obligations or Secondary Obligations, as the case may be, and the denominator of
which is the then outstanding amount of all Primary Obligations or Secondary
Obligations, as the case may be, (y) "Primary Obligations" shall mean (i) in the
case of the Credit Document Obligations, all principal of, and interest on, all
Revolving Loans, all Unpaid Drawings theretofore made (together with all
interest
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accrued thereon), the aggregate Stated Amounts of all Letters of Credit issued
under the Credit Agreement, and all Fees and (ii) in the case of the Other
Obligations, all amounts due under the Interest Rate Protection Agreements or
Other Hedging Agreements (other than indemnities, fees (including, without
limitation, attorneys' fees) and similar obligations and liabilities) and (z)
"Secondary Obligations" shall mean all Obligations other than Primary
Obligations.
(c) When payments to the Secured Creditors are based upon
their respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes of making determinations under this
Section 9 only) (i) first, to their Primary Obligations and (ii) second, to
their Secondary Obligations. If any payment to any Secured Creditor of its Pro
Rata Share of any distribution would result in overpayment to such Secured
Creditor, such excess amount shall instead be distributed in respect of the
unpaid Primary Obligations or Secondary Obligations, as the case may be, of the
other Secured Creditors, with each Secured Creditor whose Primary Obligations or
Secondary Obligations, as the case may be, have not been paid in full to receive
an amount equal to such excess amount multiplied by a fraction the numerator of
which is the unpaid Primary Obligations or Secondary Obligations, as the case
may be, of such Secured Creditor and the denominator of which is the unpaid
Primary Obligations or Secondary Obligations, as the case may be, of all Secured
Creditors entitled to such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that
if the Bank Creditors are to receive a distribution on account of undrawn
amounts with respect to Letters of Credit issued under the Credit Agreement
(which shall only occur after all outstanding Revolving Loans and Unpaid
Drawings with respect to such Letters of Credit have been paid in full), such
amounts shall be paid to the Administrative Agent under the Credit Agreement and
held by it, for the equal and ratable benefit of the Bank Creditors, as cash
security for the repayment of Obligations owing to the Bank Creditors as such.
If any amounts are held as cash security pursuant to the immediately preceding
sentence, then upon the termination of all outstanding Letters of Credit, and
after the application of all such cash security to the repayment of all
Obligations owing to the Bank Creditors after giving effect to the termination
of all such Letters of Credit, if there remains any excess cash, such excess
cash shall be returned by the Administrative Agent to the Pledgee for
distribution in accordance with Section 9(a) hereof.
(e) Except as set forth in Section 9(c) hereof, all payments
required to be made to the Bank Creditors hereunder shall be made to the
Administrative Agent under the Credit Agreement for the account of the Bank
Creditors and all payments required to be made to the Other Creditors hereunder
shall be made directly to the respective Other Creditor.
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(f) For purposes of applying payments received in accordance
with this Section 9, the Pledgee shall be entitled to rely upon (i) the
Administrative Agent under the Credit Agreement and (ii) the Other Creditors for
a determination (which the Administrative Agent, each Other Creditor and the
Secured Creditors agree (or shall agree) to provide upon request of the Pledgee)
of the outstanding Obligations owed to the Bank Creditors or the Other
Creditors, as the case may be. Unless it has actual knowledge (including by way
of written notice from a Bank Creditor or an Other Creditor) to the contrary,
the Administrative Agent under the Credit Agreement, in furnishing information
pursuant to the preceding sentence, and the Pledgee, in acting hereunder, shall
be entitled to assume that (x) no Secondary Obligations are owing to any Bank
Creditor or Other Creditor and (y) no Interest Rate Protection Agreement or
Other Hedging Agreement, or Other Obligations in respect thereof, are in
existence.
(g) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency between the amount
of the proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i)
to indemnify and hold harmless the Pledgee in such capacity and each other
Secured Creditor and their respective successors, assigns, employees, agents and
servants (individually an "Indemnitee," and collectively the "Indemnitees") from
and against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, and (ii) to
reimburse each Indemnitee for all costs and expenses, including reasonable
attorneys' fees, in each case growing out of or resulting from this Agreement or
the exercise by any Indemnitee of any right or remedy granted to it hereunder or
under any other Secured Debt Agreement (but excluding any claims, demands,
losses, judgments and liabilities or expenses to the extent incurred by reason
of gross negligence or willful misconduct of such Indemnitee). In no event shall
the Pledgee be liable, in the absence of gross negligence or willful misconduct
on its part, for any matter or thing in connection with this Agreement other
than to account for monies actually received by it in accordance with the terms
hereof. If and to the extent that the obligations of any Pledgor under this
Section 11 are unenforceable for any reason, such Pledgor hereby agrees to make
the max-
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imum contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
12. PLEDGEE NOT BOUND. (a) Nothing herein shall be construed
to make the Pledgee or any other Secured Creditor liable as a general partner or
limited partner of any Pledged Partnership and the Pledgee or any other Secured
Creditor by virtue of this Agreement or otherwise (except as referred to in the
following sentence) shall not have any of the duties, obligations or liabilities
of a general partner or limited partner of any Pledged Partnership. The parties
hereto expressly agree that, unless the Pledgee shall become the absolute owner
of a Pledged Partnership Interest pursuant hereto, this Agreement shall not be
construed as creating a partnership or joint venture among the Pledgee, any
other Secured Creditor and/or any Pledgor.
(b) Except as provided in the last sentence of paragraph (a)
of this Section, the Pledgee, by accepting this Agreement, did not intend to
become a general partner or limited partner of any Pledged Partnership or
otherwise be deemed to be a co-venturer with respect to any Pledgor or any
Pledged Partnership either before or after an Event of Default shall have
occurred. The Pledgee shall have only those powers set forth herein and shall
assume none of the duties, obligations or liabilities of a general partner or
limited partner of any Pledged Partnership or of any Pledgor.
(c) The Pledgee shall not be obligated to perform or discharge
any obligation of any Pledgor as a result of the collateral assignment hereby
effected.
(d) The acceptance by the Pledgee of this Agreement, with all
the rights, powers, privileges and authority so created, shall not at any time
or in any event obligate the Pledgee to appear in or defend any action or
proceeding relating to the Collateral to which it is not a party, or to take any
action hereunder or thereunder, or to expend any money or incur any expenses or
perform or discharge any obligation, duty or liability under the Collateral.
13. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each Pledgor
agrees that it will join with the Pledgee in executing and, at such Pledgor's
own expense, file and refile under the Uniform Commercial Code or other
applicable law such financing statements, continuation statements and other
documents in such offices as the Pledgee may deem necessary and wherever
required by law in order to perfect and preserve the Pledgee's security interest
in the Collateral and hereby authorizes the Pledgee to file financing statements
and amendments thereto relative to all or any part of the Collateral without the
signature of such Pledgor where permitted by law, and agrees to do such further
acts and things and to execute and deliver to the Pledgee such additional
conveyances, assignments, agreements and instruments as the Pledgee may
reasonably require or
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deem necessary to carry into effect the purposes of this Agreement or to further
assure and confirm unto the Pledgee its rights, powers and remedies hereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, to act from time to time solely after
the occurrence and during the continuance of an Event of Default in the
Pledgee's reasonable discretion to take any action and to execute any instrument
which the Pledgee may deem necessary or advisable to accomplish the purposes of
this Agreement.
14. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed by each Secured Creditor that
by accepting the benefits of this Agreement each such Secured Creditor
acknowledges and agrees that the obligations of the Pledgee as holder of the
Collateral and interests therein and with respect to the disposition thereof,
and otherwise under this Agreement, are only those expressly set forth in this
Agreement. The Pledgee shall act hereunder on the terms and conditions set forth
herein and in Section 12 of the Credit Agreement.
15. TRANSFER BY THE PLEDGORS. No Pledgor will sell or
otherwise dispose of, grant any option with respect to, or mortgage, pledge or
otherwise encumber any of the Collateral or any interest therein (except as may
be permitted in accordance with the terms of the Credit Agreement).
16. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PLEDGORS. Each Pledgor represents, warrants and covenants that (i) it is the
legal, record and beneficial owner of all Pledged Securities and Pledged
Partnership Interests pledged by it hereunder, subject to no Lien (except the
Lien created by this Agreement); (ii) it has full corporate or partnership
power, authority and legal right to pledge all the Pledged Securities and
Pledged Partnership Interests pledged by it pursuant to this Agreement; (iii)
this Agreement has been duly authorized, executed and delivered by such Pledgor
and constitutes a legal, valid and binding obligation of such Pledgor
enforceable in accordance with its terms except to the extent that the
enforceability hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting creditors'
rights and by equitable principles (regardless of whether enforcement is sought
in equity or at law); (iv) except as have been obtained by the Pledgors as of
the date hereof, no consent of any other party (including, without limitation,
any stockholder, partner or creditor of such Pledgor or any of its Subsidiaries
or any Pledged Partnership) and no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required to be obtained by such
Pledgor in connection with the
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execution, delivery or performance of this Agreement, the validity or
enforceability of this Agreement, the perfection or enforceability of the
Pledgee's security interest in the Collateral or, except for compliance with or
as may be required by applicable securities laws, the exercise by the Pledgee of
any of its rights or remedies provided herein; (v) the execution, delivery and
performance of this Agreement by such Pledgor will not violate any provision of
any applicable law or regulation or of any order, judgment, writ, award or
decree of any court, arbitrator or governmental authority, domestic or foreign,
applicable to such Pledgor, or of the certificate of incorporation or by-laws
(or equivalent organizational documents) of such Pledgor or of any securities
issued by such Pledgor or any of its Subsidiaries, or of any mortgage,
indenture, lease, deed of trust, loan agreement, credit agreement or other
material contract, agreement or instrument or undertaking to which such Pledgor
or any of its Subsidiaries is a party or which purports to be binding upon such
Pledgor or any of its Subsidiaries or upon any of their respective assets and
will not result in the creation or imposition of (or the obligation to create or
impose) any lien or encumbrance on any of the assets of such Pledgor or any of
its Subsidiaries except as contemplated by this Agreement; (vi) all the shares
of Stock have been duly and validly issued, are fully paid and non-assessable
and are subject to no options to purchase or similar rights; (vii) each of the
Pledged Notes constitutes, or when executed by the obligor thereof will
constitute, the legal, valid and binding obligation of such obligor, enforceable
in accordance with its terms except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws generally affecting creditors' rights and by
equitable principles (regardless of whether enforcement is sought in equity or
at law); (viii) the pledge, assignment and delivery to the Pledgee of the
Securities (other than uncertificated securities) pursuant to this Agreement
creates a valid and perfected first priority Lien in the Securities, and the
proceeds thereof, subject to no other Lien or to any agreement purporting to
grant to any third party a Lien on the property or assets of the Pledgor which
would include the Securities; (ix) each such Pledged Partnership Interest has
been validly acquired and is fully paid for (to the extent applicable) and is
duly and validly pledged hereunder; (x) each general or limited partnership
agreement delivered to the Pledgee is an original signed counterpart (or a copy
thereof) of the complete and entire such limited partnership agreement in effect
on the date hereof; (xi) each limited partnership agreement is the legal, valid
and binding obligation of each Pledgor, and to each Pledgor's knowledge, the
other parties thereto, enforceable in accordance with its terms and, together
with this Agreement, contains the entire agreement between the Pledgors relating
to the subject matter thereof; (xii) no Pledgor is in default in the payment of
any portion of any mandatory capital contribution, if any, required to be made
under any general or limited partnership agreement to which such Pledgor is a
party, and no Pledgor is in violation of any other material provisions of any
partnership agreement to which such Pledgor is a party, or otherwise in default
or violation thereunder; (xiii) to each Pledgor's best knowledge, no Pledged
Partnership Interest is subject to any defense, offset or counterclaim, nor have
any of the foregoing been asserted or alleged against such
0000B644.W51
<PAGE>
Page 16
Pledgor by any Person with respect thereto; (xiv) as of the Initial Borrowing
Date, there are no certificates, instruments, documents or other writings (other
than the general or limited partnership agreements and certificates delivered to
the Collateral Agent) which evidence any Partnership Interest of such Pledgor;
(xv) the pledge and assignment of the Pledged Partnership Interests pursuant to
this Agreement, together with the relevant filings or recordings (which filings
and recordings have been or will be made), creates a valid, perfected and
continuing first priority security interest in such Partnership Interests and
the proceeds thereof, subject to no prior lien or encumbrance or to any
agreement purporting to grant to any third party a lien or encumbrance on the
property or assets of such Pledgor which would include the Collateral; (xvi)
there are no currently effective financing statements under the UCC covering any
property which is now or hereafter may be included in the Collateral and such
Pledgor will not, without the prior written consent of the Pledgee, execute and,
until the Termination Date (as defined below), there will not ever be on file in
any public office any enforceable financing statement or statements covering any
or all of the Collateral, except financing statements filed or to be filed in
favor of the Pledgee as secured party; (xvii) each Pledgor shall give the
Pledgee prompt notice of any written claim it receives relating to the
Collateral; (xviii) each Pledgor shall deliver to the Pledgee a copy of each
other demand, notice or document received by it which may adversely affect the
Pledgee's interest in the Collateral promptly upon, but in any event within 10
days after, such Pledgor's receipt thereof; (xix) no Pledgor shall withdraw as a
general partner or limited partner of any Pledged Partnership, or file or pursue
or take any action which may, directly or indirectly, cause a dissolution or
liquidation of or with respect to any Pledged Partnership or seek a partition of
any property of any Pledged Partnership, except as permitted by the Credit
Agreement; (xx) a notice in the form set forth in Annex D attached hereto and by
this reference made a part hereof (such notice the "Partnership Notice"),
appropriately completed, notifying each Pledged Partnership of the existence of
this Agreement and a certified copy of this Agreement have been delivered by
each Pledgor to the relevant Pledged Partnership, and each such Pledgor has
received and delivered to the Collateral Agent an acknowledgment in the form set
forth in Annex E attached hereto (such acknowledgement, the "Partnership
Acknowledgement"), duly executed by the relevant Pledged Partnership; (xxi) the
chief executive office and principal place of business of such Pledgor and the
sole location where the records of such Pledgor with respect to the Collateral
are kept are located at the address set forth for such Pledgor on Annex F
hereto; (xxii) no Pledgor shall move its chief executive office, principal place
of business, or such location of records unless (a) it shall have given to the
Pledgee not less than 30 days' prior written notice of its intention so to do,
describing such new location and providing such other information in connection
therewith as the Pledgee may reasonably request and (b) with respect to such new
location, it shall have taken all action, reasonably satisfactory to the
Pledgee, to maintain the security interest of the Pledgee in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect; (xxiii) as of the date hereof, no Pledgor operates in any jurisdiction
under any name except its
0000B644.W51
<PAGE>
Page 17
legal name as set forth on the signature pages hereto; and (xxiv) no Pledgor
shall change its legal name or assume or operate in any jurisdiction under any
trade, fictitious or other name unless (a) it shall have given to the Pledgee
not less than 30 days' prior written notice of its intention so to do,
describing such new name and the jurisdictions in which such new name shall be
used and providing such other information in connection therewith as the Pledgee
may reasonably request and (b) with respect to such new name, it shall have
taken all action, reasonably satisfactory to the Pledgee, to maintain the
security interest of the Pledgee in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect. Each Pledgor
covenants and agrees that it will defend the Pledgee's right, title and security
interest in and to the Collateral against the claims and demands of all persons
whomsoever; and such Pledgor covenants and agrees that it will have like title
to and right to pledge any other property at any time hereafter pledged to the
Pledgee as Collateral hereunder and will likewise defend the right thereto and
security interest therein of the Pledgee and the other Secured Creditors.
17. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of
each Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever (except the indefeasible payment in full in cash of all
Obligations), including, without limitation: (i) any renewal, extension,
amendment or modification of or addition or supplement to or deletion from any
Secured Debt Agreement or any other instrument or agreement referred to therein,
or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument including, without limitation, this Agreement;
(iii) any furnishing of any additional security to the Pledgee or its assignee
or any acceptance thereof or any release of any security by the Pledgee or its
assignee; (iv) any limitation on any party's liability or obligations under any
such instrument or agreement or any invalidity or unenforceability, in whole or
in part, of any such instrument or agreement or any term thereof; or (v) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to any Pledgor or any Subsidiary
of any Pledgor, or any action taken with respect to this Agreement by any
trustee or receiver, or by any court, in any such proceeding, whether or not
such Pledgor shall have notice or knowledge of any of the foregoing.
18. REGISTRATION, ETC. (a) If there shall have occurred and
be con- tinuing an Event of Default then, and in every such case, upon receipt
by any Pledgor from the Pledgee of a written request or requests that such
Pledgor cause any registration, quali- fication or compliance under any Federal
or state securities law or laws to be effected with respect to all or any part
of the Pledged Stock (other than any Pledged Stock of Odyssey Gaming
Corporation, Century Casinos, Inc. or Alpha Hospitality Corporation), such
0000B644.W51
<PAGE>
Page 18
Pledgor as soon as practicable and at its expense will cause such registration
to be effected (and be kept effective) and will cause such qualification and
compliance to be declared effected (and be kept effective) as may be so
requested and as would permit or facilitate the sale and distribution of such
Pledged Stock, including, without limitation, registration under the Securities
Act of 1933, as then in effect (or any similar statute then in effect),
appropriate qualifications under applicable blue sky or other state securities
laws and appropriate compliance with any other government requirements,
provided, that the Pledgee shall furnish to such Pledgor such information
regarding the Pledgee as such Pledgor may reasonably request in writing and as
shall be required in connection with any such registration, qualification or
compliance. Such Pledgor will cause the Pledgee to be kept advised in writing as
to the progress of each such registration, qualification or compliance and as to
the completion thereof, will furnish to the Pledgee such number of prospectuses,
offering circulars or other documents incident thereto as the Pledgee from time
to time may reasonably request, and will indemnify the Pledgee, each other
Secured Creditor and all others participating in the distribution of such
Pledged Stock against all claims, losses, damages and liabilities caused by any
untrue statement (or alleged untrue statement) of a material fact contained
therein (or in any related registration statement, notification or the like) or
by any omission (or alleged omission) to state therein (or in any related
registration statement, notification or the like) a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same may have been caused by an untrue statement or
omission based upon information furnished in writing to such Pledgor by the
Pledgee or such other Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to
exercise its right to sell all or any part of the Pledged Securities or Pledged
Partnership Interests pursuant to Section 7 hereof, and such Pledged Securities
or Pledged Partnership Interests or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or Pledged Partnership Interests, as the case may
be, or part thereof by private sale in such manner and under such circumstances
as the Pledgee may deem necessary or advisable in order that such sale may
legally be effected without such registration. Without limiting the generality
of the foregoing, in any such event the Pledgee, in its sole and absolute
discretion (i) may proceed to make such private sale notwithstanding that a
registration statement for the purpose of registering such Pledged Securities or
Pledged Partnership Interests or part thereof shall have been filed under such
Securities Act, (ii) may approach and negotiate with a single possible purchaser
to effect such sale, and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Pledged
Securities or Pledged Partnership Interests or part thereof. In the event of any
such sale, the Pledgee shall incur no responsibility or liability for selling
all or any part of the Pledged Securities or Pledged Partnership Interests at a
0000B644.W51
<PAGE>
Page 19
price which the Pledgee, in its sole and absolute discretion, in good faith
deems reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until
after registration as aforesaid.
19. TERMINATION; RELEASE. (a) After the Termination Date, this
Agreement and the security interest created hereby shall terminate (provided
that all indemnities set forth herein including, without limitation, in Section
11 hereof shall survive any such termination), and the Pledgee, at the request
and expense of any Pledgor, will execute and deliver to such Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Pledgor (without
recourse and without any representation or warranty) such of the Collateral as
has not theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the Pledgee or any of
its subagents hereunder. As used in this Agreement, "Termination Date" shall
mean the date upon which the Total Revolving Loan Commitment and all Interest
Rate Protection Agreements or Other Hedging Agreements have been terminated, no
Revolving Note under the Credit Agreement is outstanding (and all Revolving
Loans have been repaid in full), all Letters of Credit have been terminated and
all Obligations then owing have been paid in full.
(b) In the event that any part of the Collateral is sold in
connection with a sale permitted by Section 9.02 of the Credit Agreement, or is
transferred (by way of Investment) to a Joint Venture in accordance with the
Investment limitations set forth in Section 9.05 of the Credit Agreement, or is
otherwise released at the direction of the Required Banks (or all Banks if
required by Section 13.12 of the Credit Agreement) and the proceeds of such sale
or sales or from such release are applied in accordance with the provisions of
Section 4.02(a) of the Credit Agreement, to the extent required to be so
applied, the Pledgee, at the request and expense of any Pledgor, will duly
assign, transfer and deliver to such Pledgor (without recourse and without any
representation or warranty) such of the Collateral (and releases therefor) as is
then being (or has been) so sold or released and has not theretofore been
released pursuant to this Agreement.
(c) At any time that a Pledgor desires that the Pledgee
assign, transfer and deliver Collateral (and releases therefor) as provided in
Section 19(a) or (b) hereof, it shall deliver to the Pledgee a certificate
signed by a principal executive officer of such Pledgor stating that the release
of the respective Collateral is permitted pursuant to such Section 19(a) or (b).
(d) If any Pledgor which is a Subsidiary of the Borrower is
released from the Subsidiaries Guaranty, then such Pledgor shall also be
released herefrom.
0000B644.W51
<PAGE>
Page 20
(e) The Pledgee shall have no liability whatsoever to any
other Secured Creditor as the result of any release of Collateral by it in
accordance with this Section 19.
20. NOTICES, ETC. All such notices and communications
hereunder shall be sent or delivered by mail, telegraph, telex, telecopy, cable
or overnight courier service and all such notices and communications shall, when
mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight
courier, be effective when delivered to the telegraph company, cable company or
overnight courier, as the case may be, or sent by telex or telecopier and when
mailed shall be effective three Business Days following deposit in the mail with
proper postage, except that notices and communications to the Pledgee shall not
be effective until received by the Pledgee. All notices and other communications
shall be in writing and addressed as follows:
(a) if to any Pledgor, at the address set forth opposite its
signature below:
(b) if to the Pledgee, at:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
Attention: Cindy Jay
(c) if to any Bank Creditor, either (x) to the Administrative
Agent, at the address of the Administrative Agent specified in the
Credit Agreement or (y) at such address as such Bank Creditor shall
have specified in the Credit Agreement;
(d) if to any Other Creditor at such address as such Other
Creditor shall have specified in writing to the Pledgors and the
Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
21. WAIVER; AMENDMENT. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by each Pledgor directly affected
thereby and the Pledgee (with the written consent of either (x) the Required
Banks (or all of the Banks, to the extent required by Section 13.12 of the
Credit Agreement) at all times prior to the time on which all Credit Document
Obligations have been paid in full or (y) the holders of at least a majority of
the outstanding Other Obligations at all times after the time on which all
Credit Document Obligations have been paid in full); provided, that any change,
waiver, modification or
0000B644.W51
<PAGE>
Page 21
variance affecting the rights and benefits of a single Class (as defined below)
of Secured Creditors (and not all Secured Creditors in a like or similar manner)
shall also require the written consent of the Requisite Creditors (as defined
below) of such affected Class. For the purpose of this Agreement, the term
"Class" shall mean each class of Secured Creditors, i.e., whether (i) the Bank
Creditors as holders of the Credit Document Obligations or (ii) the Other
Creditors as the holders of the Other Obligations. For the purpose of this
Agreement, the term "Requisite Creditors" of any Class shall mean each of (i)
with respect to the Credit Document Obligations, the Required Banks and (ii)
with respect to the Other Obligations, the holders of at least a majority of all
obligations outstanding from time to time under the Interest Rate Protection
Agreements or Other Hedging Agreements.
22. MISCELLANEOUS. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of and be enforceable by each of the parties hereto and its
successors and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK. The
headings in this Agreement are for purposes of reference only and shall not
limit or define the meaning hereof. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which shall
constitute one instrument. In the event that any provision of this Agreement
shall prove to be invalid or unenforceable, such provision shall be deemed to be
severable from the other provisions of this Agreement which shall remain binding
on all parties hereto.
23. RECOURSE. This Agreement is made with full recourse to
the Pledgors and pursuant to and upon all the representations, warranties,
covenants and agreements on the part of the Pledgors contained herein and in the
other Secured Debt Agreements and otherwise in writing in connection herewith or
therewith.
24. ADDITIONAL PLEDGORS. It is understood and agreed that any
Subsidiary of the Borrower that is required to execute a counterpart of this
Agreement after the date hereof pursuant to the Credit Agreement shall
automatically become a Pledgor hereunder by executing a counterpart hereof and
delivering the same to the Pledgee.
25. MISCELLANEOUS. Notwithstanding anything to the contrary
contained herein or in the Credit Agreement, each Pledgor hereby covenants and
agrees that with respect to any Pledged Partnership Interest pledged by it
hereunder on the date hereof, such Pledgor will use its reasonable best efforts
to deliver to the respective Pledged Partnerships (with copies to the Pledgee) a
Partnership Notice (appropriately completed) and such Pledgor will deliver to
the Pledgee a Partnership Acknowledgement signed by the
0000B644.W51
<PAGE>
Page 22
respective Pledged Partnerships, in each case within sixty days following the
Initial Borrowing Date.
* * *
0000B644.W51
<PAGE>
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused
this Agreement to be executed by their duly elected officers duly authorized as
of the date first above written.
Addresses
339 Jefferson Road NATIONAL LODGING CORP.,
Parsippany, New Jersey 07054 as a Pledgor
By /s/ James E. Buckman
Title: Executive Vice President
1973 Friendship Drive FORTE HOTELS, INC.
El Cajon, California 92020
By /s/ Stephen Holmes
Title: Executive Vice President
1973 Friendship Drive TRAVEL BEVERAGES, INC.
El Cajon, California 92020
By /s/ Stephen Holmes
Title: Executive Vice President
1973 Friendship Drive FHI/SAN DIEGO INC.
El Cajon, California 92020
By /s/ Stephen Holmes
Title: Executive Vice President
339 Jefferson Road NATIONAL GAMING MISSISSIPPI, INC.
Parsippany, New Jersey 07054
By /s/ Stephen Holmes
Title: Executive Vice President
0000B644.W51
<PAGE>
BANKERS TRUST COMPANY,
as Pledgee, Collateral Agent
By /s/ Cynthia A. Jay
Title: Vice President
0000B644.W51
<PAGE>
Annex A
to Pledge Agreement
LIST OF STOCK
<TABLE>
<CAPTION>
Percentage of
Outstanding
Certificate Type of Number of Shares of
Pledgor Issuing Corporation Number Shares Shares Capital Stock
- ------- ------------------- ----------- ------- --------- -------------
<S> <C> <C> <C> <C> <C>
A. National 1. Forte Hotels, Inc. 2 common 1,000 100%
Lodging Corp.
2. National Gaming 1 common 100 100%
Mississippi, Inc.
3. Century Casinos, 1315 common 200,000 *
Inc.
4. Odyssey Gaming 27 Series A Con- 455 *
Corporation vertible Pre-
ferred
5. Odyssey Gaming 4 Series B Con- 2,004 *
Corporation vertible Pre-
ferred
6. Alpha Hospitality 002 option 600,000 *
Corporation options to
acquire 1
share each of
common stock
B. Forte Hotels, 1. Travel Beverages, 5 common 1000 100%
Inc. Inc.
2. FHI/San Diego 3 common 100 100%
Inc.
3. Hoteles Forte, common 3250 65%
S.A. de C.V.
4. Travelodge Ltd. common 1950 65%
</TABLE>
* The Pledgor is not the sole shareholder and does not believe that its
percentage of the outstanding shares is material.
C/M: 11752.0003 366226.1
<PAGE>
Annex B
to Pledge Agreement
LIST OF NOTES
<TABLE>
<CAPTION>
Principal
Payee Obligor Amount Maturity Date
- ----- ------- --------- -------------
<S> <C> <C> <C>
National Lodging Corp. Rainbow Casino- $10,000,000 August 1, 2001
Vicksburg Partnership
Urban Redevelopment $9,538,560.73 September 30, 1994, as extended in
Authority of Pittsburgh accordance with the terms of the Note
National Gaming Rainbow Casino- $2,000,000 March 1, 2002
Mississippi, Inc. Vicksburgh Partnership
</TABLE>
* The Pledgor is not the sole shareholder and does not believe that its
percentage of the outstanding shares is material.
C/M: 11752.0003 366226.1
<PAGE>
Annex C
to Pledge Agreement
Partnership Interests
All of the following partnership interests are held by NL Hotels, Inc.
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
Pledged Entities Percentage Owned Type of Interest
- ---------------- ---------------- ----------------
<S> <C> <C>
San Antonio Alamo Travelodge 93.34% Partnership
Atlanta Central Travelodge 50% Partnership
Ashtabula Travelodge 37.5% Partnership
Chicago O'Hare 37.5% Partnership
Lancaster Travelodge 50% Partnership
Athens Alabama Travelodge 50% Partnership
Natick Travelodge 50% Partnership
Ocala Travelodge 50% Partnership
Cincinnati Travelodge 62.5% Partnership
Lafayette Center Travelodge 50% Partnership
Chambersburg Travelodge 50% Partnership
Lake Park Travelodge 49% Partnership
Quincy Travelodge 75% Partnership
Zanesville Thriftlodge 50% Partnership
Alexandria Travelodge 50% Partnership
Mason City Thriftlodge 50% Partnership
Louisville Travelodge 50% Partnership
South Sioux City Travelodge 50% Partnership
Bedford Travelodge 50% Partnership
Gainesville Travelodge 50% Partnership
Sarasota Thriftlodge 25% Partnership
Fort Myers Travelodge 50% Partnership
Clearwater Travelodge 50% Partnership
Terre Haute Travelodge 50% Partnership
Utica Travelodge 75% Partnership
Seattle Downtown Travelodge 50% Partnership
Las Vegas Strip Travelodge 48.75% Partnership
San Francisco Central Travelodge 50% Partnership
Travelodge by the Space Needle 50% Partnership
Monterey Downtown Travelodge 50% Partnership
San Francisco Downtown Travelodge 50% Partnership
Tahoe City Travelodge 50% Partnership
Salt Lake Downtown Travelodge 50% Partnership
La Jolla Beach Travelodge 50% Partnership
La Jolla Travelodge 50% Partnership
</TABLE>
C/M: 11752.0003 366226.1
<PAGE>
<TABLE>
<S> <C> <C>
Ghiradelli Square-Fisherman's Wharf 62.5% Partnership
San Francisco Airport South
Travelodge 50% Partnership
Santa Fe Travelodge 50% Partnership
Seattle University Coach House
Travelodge 50% Partnership
Durango Lodge 50% Partnership
Salt Lake City Travelodge 37.5% Partnership
Long Beach Downtown Travelodge 50% Partnership
Berkeley Travelodge 50% Partnership
Kamloops Travelodge 50% Partnership
Presidio Travelodge 58.333% Partnership
Santa Monica Travelodge 25% Partnership
South Tahoe Travelodge 50% Partnership
Santa Cruz Travelodge 50% Partnership
Missoula Travelodge 50% Partnership
Mission Valley Travelodge 25% Partnership
Bellevue Travelodge 50% Partnership
Milpitas Travelodge 50% Partnership
Mesa Travelodge 50% Partnership
Portland Travelodge 50% Partnership
Burbank Travelodge 50% Partnership
Williams Travelodge 45% Partnership
Mercer Island Travelodge 50% Partnership
San Francisco Golden Gate
Travelodge 25% Partnership
Moses Lake Travelodge 50% Partnership
Boise Travelodge 50% Partnership
San Luis Obispo Travelodge 50% Partnership
Las Vegas Downtown Travelodge 50% Partnership
Paso Robles Travelodge 50% Partnership
Revelstoke Travelodge 50% Partnership
Flagstaff Travelodge 50% Partnership
Palm Springs Travelodge 50% Partnership
Ogden Travelodge 37.5% Partnership
Visalia Thriftlodge 50% Partnership
Walla Walla Travelodge 50% Partnership
Palo Alto Travelodge 50% Partnership
Roseburg Travelodge 25% Partnership
Santa Barbara Travelodge
(City Center) 25% Partnership
Yuma Travelodge 50% Partnership
Hollywood Travelodge
(Travel Inn) 50% Partnership
Ephrata Travelodge 50% Partnership
Oceanside Travelodge 50% Partnership
</TABLE>
C/M: 11752.0003 366226.1
2
<PAGE>
<TABLE>
<S> <C> <C>
Yakima Travelodge 50% Partnership
Eureka Travelodge 25% Partnership
Reno Travelodge 59.722% Partnership
San Diego Airport 62.5% Partnership
Santa Rosa Downtown
Travelodge 50% Partnership
Billings Travelodge 50% Partnership
Ranch Bernardo Travelodge 50% Partnership
Santa Rosa Travelodge 50% Partnership
San Francisco Embarcadero
Harbor Travelodge 50% Partnership
San Diego, Point Loma Travelodge 25%
Bayview Travelodge 57.8124% Partnership
Bellingham Travelodge 50% Partnership
Cabrillo Lodge 50% Partnership
Balboa Park Travelodge 25% Partnership
Eagle Rock Travelodge 50% Partnership
Ontario Central Travelodge 50% Partnership
Santa Barbara Beach
Travelodge 50% Partnership
San Diego Uptown Welcome Inn 25% Partnership
San Diego Downtown Travelodge 25% Partnership
Mojave Travel Inn 10% Partnership
</TABLE>
C/M: 11752.0003 366226.1
3
<PAGE>
ANNEX D
to
PLEDGE AGREEMENT
FORM OF PARTNERSHIP NOTICE
[Letterhead of Pledgor]
[Date]
TO: [Name of Pledged Partnership]
Notice is hereby given that, pursuant to a Pledge Agreement (a
true and correct copy of which is attached hereto), dated as of January 23, 1996
(as amended, modified or supplemented from time to time in accordance with the
terms thereof, the "Pledge Agreement"), among [NAME OF PLEDGOR] (the "Pledgor"),
the other pledgors from time to time party thereto and Bankers Trust Company
(the "Pledgee") on behalf of the Secured Creditors described therein, the
Pledgor has pledged and assigned to the Pledgee for the benefit of the Secured
Creditors, and granted to the Pledgee for the benefit of the Secured Creditors a
continuing security interest in, all right, title and interest of the Pledgor,
whether now existing or hereafter arising or acquired, as a [limited] [general]
partner in [NAME OF Pledged Partnership] (the "Partnership"), and in, to and
under the [TITLE OF APPLICABLE PARTNERSHIP AGREEMENT] (the "Partnership
Agreement"), including, without limitation:
(i) the Pledgor's interest in all of the capital of the
Partnership and the Pledgor's interest in all profits, losses,
Partnership Assets (as defined in the Pledge Agreement) and other
distributions to which the Pledgor shall at any time be entitled in
respect of such partnership interest;
(ii) all other payments due or to become due to the Pledgor in
respect of such partnership interest, whether under the Partnership
Agreement or otherwise, whether as contractual obligations, damages,
insurance proceeds or otherwise;
(iii) all of the Pledgor's claims, rights, powers, privileges,
authority, options, security interest, liens and remedies, if any,
under the Partnership Agreement or at law or otherwise in respect of
such partnership interest;
(iv) all present and future claims, if any, of the Pledgor
against the Partnership for moneys loaned or advanced, for services
rendered or otherwise;
0000B644.W51
<PAGE>
ANNEX D
Page 2
(v) all of the Pledgor's rights under the Partnership
Agreement or at law to exercise and enforce every right, power, remedy,
authority, option and privilege of the Pledgor relating to the
partnership interest, including any power to terminate, cancel or
modify the Partnership Agreement, to execute any instruments and to
take any and all other action on behalf of and in the name of the
Pledgor in respect of the Partnership Interest and the Partnership, to
make determinations, to exercise any election (including, but not
limited, election of remedies) or option or to give or receive any
notice, consent, amendment, waiver or approval, together with full
power and authority to demand, receive, enforce, collect or receipt for
any of the foregoing or for any Partnership Asset, to enforce or
execute any checks, or other instruments or orders, to file any claims
and to take any action in connection with any of the foregoing;
(vi) all other property hereafter delivered to the Pledgor in
substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such other
property and all cash, securities, interest, dividends, rights and
other property at any time and from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
thereof; and
(vii) to the extent not otherwise included, all proceeds of any
or all of the foregoing.
Pursuant to the Pledge Agreement, the Partnership is hereby
authorized and directed to register the Pledgor's pledge to the Pledgee on
behalf of the Secured Creditors of the interest of the Pledgor on the
Partnership's books.
The Pledgor hereby requests the Partnership to indicate the
Partnership's acceptance of this Notice and consent to and confirmation of its
terms and provisions by signing a copy hereof where indicated on the attached
page and returning the same to the Pledgee on behalf of the Secured Creditors.
[NAME OF PLEDGOR]
By_______________________
Title:
0000B644.W51
<PAGE>
ANNEX E
to
PLEDGE AGREEMENT
FORM OF ACKNOWLEDGMENT
[NAME OF Pledged Partnership] (the "Partnership") hereby
acknowledges receipt of a copy of the assignment by [NAME OF PLEDGOR]
("Pledgor") of its interest under the [TITLE OF APPLICABLE PARTNERSHIP
AGREEMENT] (the "Partnership Agreement") pursuant to the terms of the Pledge,
dated as of January 23, 1996 (as amended, modified or supplemented from time to
time in accordance with the terms thereof, the "Pledge Agreement"), among the
Pledgor, the other pledgors from time to time party thereto, and Bankers Trust
Company (the "Pledgee") on behalf of the Secured Creditors described therein.
The undersigned hereby further confirms the registration of the Pledgor's pledge
of its interest to the Pledgee on behalf of the Secured Creditors on the
Partnership's books.
Dated: ______________ __, ____
[NAME OF PLEDGED PARTNERSHIP]
By:___________________________
Title:
0000B644.W51
<PAGE>
Annex F
to Pledge Agreement
OFFICE LOCATIONS
<TABLE>
<CAPTION>
Pledgor Office Location County
- ------- --------------- ------
<S> <C> <C>
National Lodging Corp. 339 Jefferson Road Morris
Parsippany, NJ 07054
National Gaming Mississippi, Inc. 339 Jefferson Road Morris
Parsippany, NJ 07054
Forte Hotels, Inc. 1973 Friendship Drive San Diego
El Cajon, CA 92020
Travel Beverages, Inc. 1973 Friendship Drive San Diego
El Cajon, CA 92020
FHI/San Diego Inc. 1973 Friendship Drive San Diego
El Cajon, CA 92020
</TABLE>
C/M: 11752.0003 366226.1 05/13/96 8:22PM
<PAGE>
EXHIBIT G-1
HFS GUARANTY
GUARANTY, dated as of January 23, 1996 (as amended, modified
or supplemented from time to time, this "Guaranty"), made by HFS INCORPORATED, a
Delaware corporation (the "Guarantor"). Except as otherwise defined herein,
capitalized terms used herein and defined in the Credit Agreement (as defined
below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, National Lodging Corp. (the "Borrower"), various
lenders from time to time party thereto (the "Banks"), Chemical Bank, as
Documentation Agent (the "Documentation Agent"), and Bankers Trust Company, as
Administrative Agent (together with any successor administrative agent, the
"Administrative Agent"), have entered into a Credit Agreement, dated as of
January 23, 1996, providing for the making of Revolving Loans and the issuance
of, and participation in, Letters of Credit, as contemplated therein (as used
herein, the term "Credit Agreement" means the Credit Agreement described above
in this paragraph, as the same may be amended, modified, extended, renewed,
replaced or supplemented from time to time, and including any agreement
extending the maturity of, or restructuring all or any portion of the
Indebtedness under such agreement or any successor agreement) (the Banks, the
Documentation Agent, the Administrative Agent and the Collateral Agent are
herein called the "Creditors");
WHEREAS, it is a condition to the making of Revolving Loans
and the issuance of Letters of Credit under the Credit Agreement that the
Guarantor shall have executed and delivered this Guaranty; and
WHEREAS, the Guarantor will obtain benefits from the
incurrence of Revolving Loans by the Borrower under the Credit Agreement and,
accordingly, desires to execute this Guaranty in order to satisfy the conditions
described in the preceding paragraph;
0000B641.W51
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<PAGE>
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to the Guarantor, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor hereby makes the following representations
and warranties to the Creditors and hereby covenants and agrees with each
Creditor as follows:
1. The Guarantor irrevocably and unconditionally guarantees to
the Creditors the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of (x) the principal of and interest on
the Revolving Notes issued by, and the Revolving Loans made to, the Borrower
under the Credit Agreement, and all reimbursement obligations and Unpaid
Drawings with respect to Letters of Credit issued under the Credit Agreement and
(y) all other obligations (including obligations which, but for the automatic
stay under Section 362(a) of the Bankruptcy Code, would become due) and
liabilities owing by the Borrower to the Creditors under the Credit Agreement or
any other Credit Document to which the Borrower is a party (including, without
limitation, indemnities, Fees and interest thereon), whether now existing or
hereafter incurred under, arising out of or in connection with the Credit
Agreement or any such other Credit Document and the due performance and
compliance by the Borrower with all of the terms, conditions and agreements
contained in the Credit Documents (all such principal, interest, liabilities and
obligations being herein collectively called the "Guaranteed Obligations"). The
Guarantor and each Creditor understands, agrees and confirms that (i) at any
time when there is any default or failure to pay when due any Guaranteed
Obligations, the Creditors may enforce this Guaranty up to the full amount of
the Guaranteed Obligations (subject to the limits on the aggregate liability of
the Guarantor hereunder, as provided below) against the Guarantor only after a
written demand for payment has been made on the Borrower and delivered to the
Guarantor and such demand has not been fully complied with (and all Guaranteed
Obligations have not been paid in full) within 10 days after the date such
demand for payment was made; provided that no such demand need be made (and the
Guaranteed Obligations hereunder shall immediately be paid by the Guarantor,
subject to the limits on the aggregate liability of the Guarantor hereunder, as
provided below) at any time when a Default or an Event of Default exists with
respect to the Borrower pursuant to Section 10.05 of the Credit Agreement, a
Guarantor Event of Default (or an event which, with the passage of time, would
be a Guarantor Event of Default) exists with respect to the Guarantor pursuant
to Section 14(d) hereof or the maturity of the Revolving Loans has been
accelerated pursuant to Section 10 of the Credit Agreement and (ii) except as
provided in the following sentence, the maximum liability of the Guarantor under
this Guaranty at any time shall not exceed the Maximum Guaranteed Amount as then
in effect. As used herein, the "Maximum Guaranteed Amount" shall mean (w)
$75,000,000 less each of (x) the aggregate amount of cash actually loaned by the
Guarantor to the Borrower after the Effective Date pursuant to Section 9.04(vii)
of the Credit Agreement so long as all such cash proceeds were actually used to
repay Revolving Loans pursuant to the requirements of Section 4.02(a) of the
Credit Agreement as a result of a reduction to the Total Revolving Loan
Commitment pursuant to Sections 3.03(g) and/or (h) of the Credit Agreement, (y)
the aggregate amount of cash actually invested (in return for HFS Redeemable
Capital Stock) by the Guarantor in the Borrower after the Effective Date
pursuant to Section 9.04(viii)
0000B641.W51
2
<PAGE>
of the Credit Agreement so long as all such cash proceeds were actually used to
repay Revolving Loans pursuant to the requirements of Section 4.02(a) of the
Credit Agreement as a result of a reduction to the Total Revolving Loan
Commitment pursuant to Sections 3.03(g) and/or (h) of the Credit Agreement and
(z) any amounts actually demanded by the Creditors hereunder (or payable upon a
Default or an Event of Default with respect to the Borrower as described in
Section 10.05 of the Credit Agreement, a Guarantor Event of Default (or an event
which, with the passage of time, would be a Guarantor Event of Default) with
respect to the Guarantor pursuant to Section 14(d) hereof or upon an
acceleration of Revolving Loans under the Credit Agreement) and paid (subject to
the provisions of Section 21 hereof) to the Creditors pursuant to the provisions
of this Guaranty (excluding amounts payable in accordance with the following
sentence). In addition, and notwithstanding anything to the contrary contained
above in this Guaranty, (x) from and after the date any demand is made by the
Creditors for the payment of any amount hereunder or, if sooner, from and after
the date of the occurrence of any Default or Event of Default under Section
10.05 of the Credit Agreement with respect to the Borrower, a Guarantor Event of
Default (or any event which, with the passage of time, would be a Guarantor
Event of Default) with respect to the Guarantor pursuant to Section 14(d) hereof
or any acceleration of Revolving Loans pursuant to Section 10 of the Credit
Agreement, the Guarantor shall owe to the Creditors, in addition to the Maximum
Guaranteed Amount, interest on any amounts not immediately paid hereunder at a
rate per annum equal to the rate per annum applicable to past due amounts owing
pursuant to the Credit Agreement (as in effect on the date hereof) and (y) any
amounts owing pursuant to Section 15 of this Guaranty shall be independently
owing by the Guarantor, with any amounts paid pursuant to clauses (x) and (y) of
this sentence not to be counted in determining (and same shall not reduce) the
Maximum Guaranteed Amount. The Guarantor understands, agrees and confirms that
the Creditors may, subject to the two preceding sentences, enforce this Guaranty
up to the full amount of the Guaranteed Obligations against the Guarantor
without proceeding against the Borrower, against any security for the Guaranteed
Obligations, or against any other guarantor under any other guaranty covering
the Guaranteed Obligations. This Guaranty shall constitute a guaranty of
payment, and not of collection.
2. Additionally, but subject to the limitations on the
aggregate amount guaranteed as provided in preceding Section 1, the Guarantor
unconditionally and irrevocably guarantees the payment of any and all Guaranteed
Obligations to the Creditors, whether or not due or payable by the Borrower,
upon the occurrence in respect of the Borrower of a Default or an Event of
Default specified in Section 10.05 of the Credit Agreement or the occurrence in
respect of the Guarantor of any of the events specified in Section 14(d) of this
Guaranty which constitute a Guarantor Event of Default (or would, with the
passage of time, constitute a Guarantor Event of Default), and unconditionally
and irrevocably promises to pay such Guaranteed Obligations to the Creditors, or
order, on demand, in lawful money of the United States.
3. (a) The liability of the Guarantor hereunder is exclusive
and independent of any security for or other guaranty of the Guaranteed
Obligations whether
0000B641.W51
3
<PAGE>
executed by the Guarantor, any other guarantor or by any other party, and the
liability of the Guarantor hereunder shall not be affected or impaired by any
circumstance or occurrence whatsoever, including, without limitation: (a) any
direction as to application of payment by the Borrower or by any other party,
(b) any other continuing or other guaranty, undertaking or maximum liability of
a guarantor or of any other party as to the indebtedness of the Borrower, (c)
any payment on or in reduction of any such other guaranty or undertaking except
to the extent that any such payment or reduction results in the actual permanent
reduction of the Guaranteed Obligations, (d) any dissolution, termination or
increase, decrease or change in personnel by the Borrower, (e) any payment made
to the Administrative Agent or the other Creditors on the indebtedness which the
Administrative Agent or such other Creditor repay the Borrower pursuant to court
order in any bankruptcy, reorganization, arrangement, moratorium or other debtor
relief proceeding, and the Guarantor waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding, (f)
any action or inaction by the Creditors as contemplated in Section 6 hereof, or
(g) any invalidity, irregularity or unenforceability of all or part of the
Guaranteed Obligations or of any security therefor.
(b) Without limiting the generality of the foregoing, the
Guarantor hereby agrees that notwithstanding anything to the contrary contained
in the Financing Agreement or any other HSF Agreement or any other agreement, no
occurrence of events (including a breach by the Borrower of its obligations
under the Financing Agreement or respect to any loan made by the Guarantor to
the Borrower) shall have any effect whatsoever on this Guaranty, and so long as
the Bank Termination Date has not occurred in no event shall the Borrower be
required to deliver to the Guarantor (and the Guarantor shall not accept) any
cash that the Borrower might otherwise be required to deliver to the Guarantor
pursuant to Section 2.1(b) of the Financing Agreement.
4. The obligations of the Guarantor hereunder are independent
of the obligations of any other guarantor or the Borrower, and a separate action
or actions may be brought and prosecuted against the Guarantor whether or not
action is brought against any other guarantor or the Borrower and whether or not
any other guarantor or the Borrower be joined in any such action or actions. The
Guarantor waives, to the fullest extent permitted by law, the benefit of any
statute of limitations affecting its liability hereunder or the enforcement
thereof. Any payment by the Borrower or other circumstance which operates to
toll any statute of limitations as to the Borrower shall operate to toll the
statute of limitations as to the Guarantor.
5. The Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new or
additional Guaranteed Obligations. The Guarantor assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks which
the Guarantor assumes and incurs hereunder, and agrees that the Creditors
0000B641.W51
4
<PAGE>
shall have no duty to advise the Guarantor of information known to them
regarding such circumstances or risks.
6. Any Creditor may at any time and from time to time without
the consent of, or notice to the Guarantor, without incurring responsibility to
the Guarantor, without impairing or releasing the obligations of the Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter, any of the
Guaranteed Obligations (including any increase or decrease in the rate
of interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended,
renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower, any other Credit Party or any other Person or otherwise act
or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors,
the Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations,
any security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or
hereof, and may subordinate the payment of all or any part thereof to
the payment of any liability (whether due or not) of the Borrower to
creditors of the Borrower other than the Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Creditors
regardless of what liabilities of the Borrower remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under any of the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or
supplement the Credit Documents or any of such other instruments or
agreements;
0000B641.W51
5
<PAGE>
(h) act or fail to act in any manner referred to in this
Guaranty which may deprive the Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guaranty; and/or
(i) take any other action which would, under otherwise
applicable principles of common law, give rise to a legal or equitable
discharge of the Guarantor from its liabilities under this Guaranty.
7. No invalidity, irregularity or unenforceability of all or
any part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a legal or equitable
discharge of a surety or guarantor except payment in full of the Guaranteed
Obligations.
8. This Guaranty is a continuing one and all liabilities to
which it applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. No failure or delay on the
part of any Creditor in exercising any right, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein expressly specified are cumulative and not exclusive of any
rights or remedies which any Creditor would otherwise have. No notice to or
demand on the Guarantor in any case shall entitle the Guarantor to any other
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Creditor to any other or further action in any
circumstances without notice or demand. It is not necessary for any Creditor to
inquire into the capacity or powers of the Borrower or the officers, directors,
partners or agents acting or purporting to act on its behalf, and any
indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
9. The Guarantor hereby agrees with the Creditors that it will
not exercise any right of subrogation (whether contractual, under Section 509 of
the Bankruptcy Code, or otherwise) which it may at any time otherwise have
either as a result of payments made by it under this Guaranty or otherwise,
until all Guaranteed Obligations (for purposes of this Section 9, determined
without regard to any limitations on the aggregate amount guaranteed as provided
in Section 1 hereof) have been paid in full in cash.
10. The Guarantor waives any right to require the Creditors
to: (i) proceed against the Borrower, any other guarantor, or any other party;
or (ii) proceed against or exhaust any security held from the Borrower, any
other guarantor or any other party; or (iii) pursue any other remedy in the
Creditors' power whatsoever. The Guarantor waives any defense based on or
arising out of any defense of the Borrower, any other guarantor or any other
party other than payment in full of the Guaranteed
0000B641.W51
6
<PAGE>
Obligations, including, without limitation, any defense based on or arising out
of the disability of the Borrower, any other guarantor or any other party, or
the unenforceability of the Guaranteed Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of the Borrower other
than payment in full of the Guaranteed Obligations. The Creditors may, at their
election, foreclose on any security held by the Administrative Agent, the
Collateral Agent, the Documentation Agent or the other Creditors by one or more
judicial or nonjudicial sales, or exercise any other right or remedy the
Creditors may have against the Borrower or any other party, or any security,
without affecting or impairing in any way the liability of the Guarantor
hereunder except to the extent the Guaranteed Obligations have been paid. The
Guarantor waives any defense arising out of any such election by the Creditors,
even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of the Guarantor against
the Borrower or any other party or any security.
11. The Creditors agree that this Guaranty may be enforced
only by the action of the Administrative Agent or the Collateral Agent, in each
case acting upon the instructions of the Required Banks and that no other
Creditors shall have any right individually to seek to enforce or to enforce
this Guaranty, it being understood and agreed that such rights and remedies may
be exercised by the Administrative Agent or the Collateral Agent for the benefit
of the Creditors upon the terms of this Guaranty.
12. In order to induce the Creditors to enter into the Credit
Agreement and to make the Revolving Loans and issue or participate in Letters of
Credit pursuant to the Credit Agreement, the Guarantor makes the following
representations, warranties and agreements:
(a) Corporate Existence and Power. The Guarantor and its
Subsidiaries have been duly organized and are validly existing in good
standing under the laws of their respective jurisdictions of
incorporation and are in good standing or have applied for authority to
operate as a foreign corporation in all jurisdictions where the nature
of their properties or business so requires it and where a failure to
be in good standing as a foreign corporation would have a material
adverse effect on the business, assets or condition, financial or
otherwise, of the Guarantor and its Subsidiaries taken as a whole. The
Guarantor and each of its Subsidiaries have the corporate power to own
their respective properties and carry on their respective businesses as
now being conducted, and in the case of the Guarantor, to execute,
deliver and perform its obligations under this Guaranty and the other
Credit Documents to which the Guarantor is a party.
(b) Corporate Authority and No Violation. The execution,
delivery and performance by the Guarantor of this Guaranty and the
other Credit Documents to which it is a party (a) have been duly
authorized by all necessary corporate action on the part of the
Guarantor, (b) will not violate any provision of any Applicable Law (as
defined in the HFS Credit Agreement (as hereinafter defined) as in
effect on the Effective Date) (including any laws related to
0000B641.W51
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<PAGE>
franchising) applicable to the Guarantor or any of its Subsidiaries or
any of their respective properties or assets, (c) will not violate any
provision of the Certificate of Incorporation or By-Laws of the
Guarantor or any of its Subsidiaries, or any indenture, any agreement
for borrowed money, any bond, note or other similar instrument or any
other material agreement to which the Guarantor or any of its
Subsidiaries is a party or by which the Guarantor or any of its
Subsidiaries or any of their respective properties or assets are bound,
(d) will not be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, any
material indenture, agreement, bond, note or instrument and (e) will
not result in the creation or imposition of any Lien upon any property
or assets of the Guarantor or any of its Subsidiaries other than
pursuant to this Guaranty and the other Credit Documents to which the
Guarantor is a party.
(c) Governmental and Other Approval and Consents. No action,
consent or approval of, or registration or filing with, or any other
action by, any governmental agency, bureau, commission or court is
required in connection with the execution, delivery and performance by
the Guarantor of this Guaranty and the other Credit Documents to which
the Guarantor is a party.
(d) Litigation. There are no lawsuits or other proceedings
pending (including, but not limited to, matters relating to
environmental liability), or, to the knowledge of the Guarantor,
threatened, against or affecting the Guarantor or any of its
Subsidiaries or any of their respective properties, by or before any
Governmental Authority (as defined in the HFS Credit Agreement as in
effect on the Effective Date) or arbitrator, which could reasonably be
expected to have a material adverse effect on the financial condition
or the business of the Guarantor and its Subsidiaries taken as a whole.
Neither the Guarantor nor any of its Subsidiaries is in default with
respect to any order, writ, injunction, decree, rule or regulation of
any Governmental Authority, which default would have a material adverse
effect upon the financial condition or the business of the Guarantor
and its Subsidiaries taken as a whole.
(e) Financial Statements; Financial Condition; Undisclosed
Liabilities.
(i) The consolidated statements of financial condition of the
Guarantor and its consolidated Subsidiaries at December 31, 1993 and
December 31, 1994 and the related consolidated statements of income,
cash flow and shareholders' equity of the Guarantor and its
consolidated Subsidiaries for the fiscal year ended on such date, as
the case may be, and set forth in the Guarantor's Forms 10-K for such
periods and furnished to the Creditors prior to the Effective Date,
present fairly the consolidated financial condition of the Guarantor
and its consolidated Subsidiaries at the date of such consolidated
statements of financial condition and the consolidated results of the
operations of the Guarantor and its consolidated Subsidiaries for the
respective fiscal year. The unaudited consolidated statement of
financial condition of the Guarantor and its consolidated Subsidiaries
at
0000B641.W51
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<PAGE>
September 30, 1995 and the related unaudited consolidated statements of
income, cash flow and shareholders' equity of the Guarantor and its
consolidated Subsidiaries for the nine-month period ended on such date,
and set forth in the Guarantor's Form 10-Q for such period and
furnished to the Creditors prior to the Effective Date present fairly
the consolidated financial condition of the Guarantor and its
consolidated Subsidiaries at the date of such consolidated statement of
financial condition and the consolidated results of the operations of
the Guarantor and its consolidated Subsidiaries for such nine-month
period. All such consolidated financial statements have been prepared
in accordance with generally accepted accounting principles
consistently applied, subject, in the case of the consolidated
financial statements at September 30, 1995, to normal year end audit
adjustments. Since December 31, 1994, there has been no material
adverse change in the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the
Guarantor or of the Guarantor and its Subsidiaries taken as a whole.
(ii) On and as of the Initial Borrowing Date, after giving
effect to all Indebtedness (including the Revolving Loans) being
incurred or assumed and Liens created in connection therewith, (x) the
sum of the assets, at a fair valuation, of the Guarantor will exceed
its debts, (y) the Guarantor has not incurred and does not intend to
incur, and does not believe that it will incur, debts beyond its
ability to pay such debts as such debts mature and (z) the Guarantor
has sufficient capital with which to conduct its business. For purposes
of this clause (e)(ii) "debt" means any liability on a claim, and
"claim" means (i) right to payment whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.
(f) Taxes. The Guarantor and each of its Subsidiaries have
filed or caused to be filed all federal, state and local tax returns
which are required to be filed, and have paid or have caused to be paid
all taxes as shown on said returns or on any assessment received by
them in writing, to the extent that such taxes have become due.
(g) Investment Company Act. The Guarantor is not an "investment
company" or a company "controlled" by an "investment company," within
the meaning of the Investment Company Act of 1940, as amended.
(h) Public Utility Holding Company Act. Neither the Guarantor nor
any of its Subsidiaries is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary
0000B641.W51
9
<PAGE>
company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(i) HFS Credit Agreement. The Guarantor has delivered to the
Administrative Agent and the other Creditors, true and correct copies
of the HFS Credit Agreement as in effect on the Effective Date.
(j) Incorporation by Reference. The Guarantor hereby makes
each of the representations and warranties contained in Sections 3.06
through 3.09, inclusive, 3.15, 3.16, 3.19 and 3.20 of the HFS Credit
Agreement, which Sections, together with all definitions in the HFS
Credit Agreement applicable to such Sections, are hereby incorporated
by reference as if set forth herein in their entirety, provided that,
all references to "Borrower" therein shall mean and be a reference to
"the Guarantor" herein. No amendment, modification or supplement to
such representations or warranties or definitions made to the HFS
Credit Agreement shall be effective to amend such representations and
warranties or definitions as incorporated by reference herein except as
otherwise provided in Section 13(b) of this Guaranty.
13. The Guarantor covenants and agrees that on and after the
Initial Borrowing Date and until the Total Revolving Loan Commitment has
terminated and the Revolving Loans and Revolving Notes, together with interest,
Fees and all Guaranteed Obligations are paid in full:
(a) Preservation of Existence; Compliance with Statutes, etc.
The Guarantor will preserve and maintain its corporate existence and
its material rights, licenses, permits, franchises and privileges and
comply, and cause each of its Subsidiaries to comply, with all
applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign,
in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls), except
such noncompliances as could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the
business, operations, property, assets, condition (financial or
otherwise) or prospects of the Guarantor or of the Guarantor and its
Subsidiaries taken as a whole.
(b) Incorporation by Reference. The Guarantor will comply with
each of the covenants contained in Sections 5 and 6 of the HFS Credit
Agreement, which Sections, together with all definitions in the HFS
Credit Agreement applicable to such Sections, are hereby incorporated
by reference as if set forth herein in their entirety, provided that:
(i) all references to "Borrower" therein shall mean and be
a reference to "the Guarantor" herein;
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(ii) all references to "Lender" therein shall mean and be a
reference to "Creditors" herein;
(iii)all references to the "Agent" or "Administrative
Agent" therein shall mean and be a reference to
"Administrative Agent" herein;
(iv) all references to the "Required Lenders" therein shall
mean and be a reference to "Required Banks" herein;
(v) all references to "this Agreement", "herein",
"hereunder" and words of similar import therein shall
mean and be a reference to this Guaranty;
(vi) all references to "Exhibit D hereto" therein shall
mean and be a reference to "Exhibit D to the HFS
Credit Agreement" herein;
(vii) all references to "Schedule 3.17 hereto" therein
shall mean and be a reference to "Schedule 3.17 to
the HFS Credit Agreement" herein;
(viii) all references to "Schedule 6.05 hereto" therein
shall mean and be a reference to "Schedule 6.05 to
the HFS Credit Agreement" herein;
(ix) Section 6.01 of the HFS Credit Agreement as
incorporated herein by reference shall include
Indebtedness created under the HFS Credit Agreement
or any refinancing thereof as permitted Indebtedness
hereunder, so long as the aggregate amount thereof is
not increased above the aggregate commitments under
the HFS Credit Agreement as in effect on the
Effective Date;
(x) Section 6.05 of the HFS Credit Agreement as
incorporated herein by reference shall (a) be deemed to
have the phrase "unless all obligations of HFS under
this Guaranty shall be secured equally and ratably with
the other obligations secured by any such Lien on terms
satisfactory to the Agent and the Required Banks,"
inserted in the first line thereof immediately after
the phrase "Lien on its property," appearing therein
and (b) not pursuant to clause (e) thereof, permit any
Liens securing the HFS Credit Agreement;
(xi) Section 6.12 of the HFS Credit Agreement as
incorporated herein by reference shall include the
HFS Credit Agreement and any refinancing thereof
(provided that any such refinancing shall not
prohibit a negative pledge pursuant to this
Guaranty);
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(xii)all references to "Fundamental Documents" therein
shall mean and be a reference to "Credit Documents"
herein; and
(xiii) Paragraph (a) of Section 6.12 of the HFS Credit
Agreement shall be deemed modified by inserting at
the end thereof "provided, that the obligations of
HFS under this Guaranty and the other Credit
Documents shall be secured equally and ratably with
the obligations of HFS under the HFS Credit
Agreement".
No amendment, modification or supplement to such covenants or definitions made
to the HFS Credit Agreement shall be effective to amend such covenants or
definitions as incorporated by reference herein without the prior consent of the
Agents; provided, however, that the Agents will consider in good faith suggested
amendments, modifications or supplements to such covenants or definitions to the
extent that such amendment, modification or supplement is the result of a
refinancing of the HFS Credit Agreement; provided further, that if at the time
of any such amendment, modification or supplement in connection with a
refinancing of the HFS Credit Agreement HFS' long-term senior unsecured debt
credit rating is at least BBB by S&P, then the provisions of Section 12(j)
hereof and this Section 13(b) will be deemed modified (without the consent of
any Person) to the extent necessary to incorporate by reference the respective
amendment, modification or supplement to the HFS Credit Agreement. In connection
with any amendment, modification or supplement to the HFS Credit Agreement which
will be incorporated herein by reference, the Banks hereby authorize the Agents
to enter into an appropriate amendment to this Guaranty to reflect such
amendment, modification or supplement.
As used in this Guaranty, the term "HFS Credit Agreement"
shall mean the Competitive Advance and Revolving Credit Agreement, dated as of
December 16, 1993 among HFS, the lenders named therein and Chemical Bank, as
Administrative Agent, as in effect on the Effective Date and as amended,
modified, supplemented or refinanced from time to time in accordance with the
provisions of this Guaranty.
14. The occurrence of any of the following specified events
shall constitute a "Guarantor Event of Default" hereunder:
(a) Payments. The Guarantor shall fail to pay when due any
amounts owing by it hereunder; or
(b) Representations, etc. Any representation, warranty or
statement made by the Guarantor herein or in any certificate delivered
pursuant hereto shall prove to be untrue or inaccurate in any material
respect on the date as of which made or deemed made; or
(c) Covenant. Default shall be made by the Guarantor in the due
observance or performance of any other covenant, condition or
agreement to be
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observed or performed pursuant to the terms of this Guaranty, the HFS
Credit Agreement or any other Fundamental Document (as defined in the
HFS Credit Agreement) and such default shall continue unremedied for
thirty (30) days after the Guarantor obtains knowledge of such
occurrence; or
(d) Bankruptcy, etc. The Guarantor or any of its Subsidiaries
shall commence a voluntary case concerning itself under the "Bankruptcy
Code"; or an involuntary case is commenced against the Guarantor or any
of its Subsidiaries and the petition is not controverted within 10
days, or is not dismissed within 60 days, after commencement of the
case; or a custodian (as defined in the Bankruptcy Code) is appointed
for, or takes charge of, all or substantially all of the property of
the Guarantor or any of its Subsidiaries, or the Guarantor or any of
its Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the
Guarantor or any of its Subsidiaries, or there is commenced against the
Guarantor or any of its Subsidiaries any such proceeding which remains
undismissed for a period of 60 days, or the Guarantor or any of its
Subsidiaries is adjudicated insolvent or bankrupt; or any order or
relief or other order approving any such case or proceeding is entered;
or the Guarantor or any of its Subsidiaries suffers any appointment of
any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days;
or the Guarantor or any of its Subsidiaries makes a general assignment
for the benefit of creditors; or any partnership and/or corporate
action is taken by the Guarantor or any of its Subsidiaries for the
purpose of effecting any of the foregoing; or
(e) Judgments. One or more judgments or decrees shall be
entered against the Guarantor or any of its Subsidiaries involving in
the aggregate for the Guarantor and its Subsidiaries a liability (not
paid or fully covered by a reputable and solvent insurance company) and
such judgments and decrees either shall be final and non-appealable or
shall not be vacated, discharged or stayed or bonded pending appeal for
any period of 30 consecutive days, and the aggregate amount of all such
judgments exceeds $1,000,000; or
(f) License Agreement. The License Agreement, dated as of
January 23, 1996, (the "License Agreement"), between Forte SPV L.L.C.
and HFS Acquisition Corp., relating to HSF's right to use the
trademarks "Travelodge", "Thriftlodge" and the other trademarks set
forth therein (or any material provision of the License Agreement)
shall cease to be in full force and effect or any party thereto shall
deny or disaffirm its obligations thereunder or shall default in the
due performance or observance of any term, covenant or agreement on its
part to be performed or observed pursuant thereto and any of the
foregoing shall give the other party the right to terminate the License
Agreement.
0000B641.W51
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<PAGE>
15. The Guarantor hereby agrees to pay all out-of-pocket costs
and expenses of the Administrative Agent and the Documentation Agent in
connection with any amendment, waiver or consent relating hereto, and of each
Creditor in connection with the enforcement of this Guaranty (including in each
case, without limitation, the fees and disbursements of counsel employed by any
Agent or any of the other Creditors).
16. This Guaranty shall be binding upon the Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and their
successors and assigns.
17. Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent of the
Guarantor and with the written consent of the Required Banks (or to the extent
required by Section 13.12 of the Credit Agreement, with the written consent of
each Bank).
18. The Guarantor acknowledges that an executed (or conformed)
copy of each of the Credit Documents in existence on the date hereof has been
made available to the Guarantor and the Guarantor is familiar with the contents
thereof.
19. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of any Event of Default, each Creditor
is hereby authorized at any time or from time to time, without notice to the
Guarantor or to any other Person (provided that at least 10 days' prior written
notice shall have been given to the Borrower and the Guarantor of the respective
non-payment of Guaranteed Obligations, unless a Default or an Event of Default
exists with respect to the Borrower pursuant to Section 10.05 of the Credit
Agreement or a Guarantor Event of Default (or an event which, with the passage
of time, would be a Guarantor Event of Default) exists with respect to the
Guarantor pursuant to Section 14(d) hereof or the maturity of the Revolving
Loans has been accelerated pursuant to Section 10 of the Credit Agreement), any
such notice (except to the extent required pursuant to the immediately preceding
parenthetical) being expressly waived, to set off and to appropriate and apply
any and all deposits (general or special) and any other indebtedness at any time
held or owing by such Creditor to or for the credit or the account of the
Guarantor, against and on account of the obligations and liabilities of the
Guarantor to such Creditor under this Guaranty, irrespective of whether or not
such Creditor shall have made any demand hereunder and although said
obligations, liabilities, deposits or claims, or any of them, shall be
contingent or unmatured.
20. All notices, requests, demands or other communications
pursuant hereto shall be deemed to have been duly given or made when delivered
to the Person to which such notice, request, demand or other communication is
required or permitted to be given or made under this Guaranty, addressed to such
party at (i) in the case of any Creditor, as provided in the Credit Agreement
and (ii) in the case of the Guarantor, at its address set forth opposite its
signature below.
0000B641.W51
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<PAGE>
21. If claim is ever made upon any Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower), then and in such event the
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon the Guarantor, notwithstanding any revocation hereof or
other instrument evidencing any liability of the Borrower, and the Guarantor
shall be and remain liable to the aforesaid payees hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by any such payee.
22. (A) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
CREDITORS AND THE GUARANTOR SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with
respect to this Guaranty or any other Credit Document to which the Guarantor is
a party may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by execution and
delivery of this Guaranty, the Guarantor hereby irrevocably accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts. The Guarantor hereby further irrevocably waives any
claim that any such courts lack jurisdiction over the Guarantor, and agrees not
to plead or claim, in any legal action or proceeding with respect to this
Guaranty or any other Credit Document to which the Guarantor is a party brought
in any of the aforesaid courts, that any such court lacks jurisdiction over the
Guarantor. The Guarantor further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Guarantor at its address set forth opposite its signature below, such
service to become effective 30 days after such mailing. The Guarantor hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder that service of process was in any way invalid or
ineffective. Nothing herein shall affect the right of any of the Creditors to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Guarantor in any other
jurisdiction.
(B) The Guarantor hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Guaranty brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that such action or proceeding brought in any such court has been brought in an
inconvenient forum.
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<PAGE>
(C) THE GUARANTOR AND EACH CREDITOR (BY ITS ACCEPTANCE OF THE
BENEFITS OF THIS GUARANTY) HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH GUARANTOR IS A PARTY OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
23. This Guaranty may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Guarantor and the
Administrative Agent.
24. All payments made by the Guarantor hereunder will be made
without setoff, counterclaim, deduction or other defense.
25. Notwithstanding anything to the contrary contained above
in this Guaranty, it is understood and agreed by the parties hereto that, to the
extent (and only to the extent) expressly provided in Section 2.06 of the HFS
Subordination Agreement, certain amendments to the Credit Agreement shall, to
the extent provided in said Section 2.06, require the consent of the Guarantor.
* * *
0000B641.W51
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be executed and delivered as of the date first above written.
Address: HFS INCORPORATED
339 Jefferson Road
Parsippany, NJ 07054
Telephone No.: (201) 428-9700 By /s/ Stephen Holmes
Facsimile No.: (201) 428-5269 Title: Executive Vice President
Attention: James E. Buckman
Accepted and Agreed to:
BANKERS TRUST COMPANY,
as Administrative Agent and as
Collateral Agent
By /s/ Cynthia A. Jay
Title: Vice President
0000B641.W51
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Page 1
EXHIBIT G-2
SUBSIDIARIES GUARANTY
GUARANTY, dated as of January 23, 1996 (as amended, modified
or supplemented from time to time, this "Guaranty"), made by each of the
undersigned (each a "Guarantor" and, together with any other entity that becomes
a party hereto pursuant to Section 25 hereof, the "Guarantors"). Except as
otherwise defined herein, capitalized terms used herein and defined in the
Credit Agreement (as defined below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, National Lodging Corp. (the "Borrower"), various
lenders from time to time party thereto (the "Banks"), Chemical Bank, as
Documentation Agent (the "Documentation Agent"), and Bankers Trust Company, as
Administrative Agent (together with any successor administrative agent, the
"Administrative Agent"), have entered into a Credit Agreement, dated as of
January 23, 1996, providing for the making of Revolving Loans and the issuance
of, and participation in, Letters of Credit, as contemplated therein (as used
herein, the term "Credit Agreement" means the Credit Agreement described above
in this paragraph, as the same may be amended, modified, extended, renewed,
replaced or supplemented from time to time, and including any agreement
extending the maturity of, or restructuring all or any portion of the
Indebtedness under such agreement or any successor agreement) (the Banks, the
Documentation Agent, the Administrative Agent and the Collateral Agent are
herein called the "Bank Creditors");
WHEREAS, the Borrower may at any time and from time to time
enter into one or more Interest Rate Protection Agreements or Other Hedging
Agreements with one or more Banks or any affiliate thereof (each such Bank or
affiliate, even if the respective Bank subsequently ceases to be a Bank under
the Credit Agreement for any reason, together with such Bank's or affiliate's
successors and assigns, if any, collectively, the "Other Creditors," and
together with the Bank Creditors, the "Secured Creditors");
WHEREAS, each Guarantor is a direct or indirect Subsidiary of
the Borrower;
0000B643.W51
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Page 2
WHEREAS, it is a condition to the making of Revolving Loans
and the issuance of Letters of Credit under the Credit Agreement that each
Guarantor shall have executed and delivered this Guaranty; and
WHEREAS, each Guarantor will obtain benefits from the
incurrence of Revolving Loans and the issuance of Letters of Credit under the
Credit Agreement and the entering into of Interest Rate Protection Agreements or
Other Hedging Agreements and, accordingly, desires to execute this Guaranty in
order to satisfy the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to each Guarantor, the receipt and sufficiency of which are
hereby acknowledged, each Guarantor hereby makes the following representations
and warranties to the Secured Creditors and hereby covenants and agrees with
each Secured Creditor as follows:
1. Each Guarantor, jointly and severally, irrevocably and
unconditionally guarantees: (i) to the Bank Creditors the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of (x) the principal of and interest on the Revolving Notes issued by, and the
Revolving Loans made to, the Borrower under the Credit Agreement, and all
reimbursement obligations and Unpaid Drawings with respect to Letters of Credit
issued under the Credit Agreement and (y) all other obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities owing by the Borrower to the
Bank Creditors under the Credit Agreement or any other Credit Document to which
the Borrower is a party (including, without limitation, indemnities, Fees and
interest thereon), whether now existing or hereafter incurred under, arising out
of or in connection with the Credit Agreement or any such other Credit Document
and the due performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Documents (all such principal,
interest, liabilities and obligations being herein collectively called the
"Credit Document Obligations"); and (ii) to each Other Creditor the full and
prompt payment when due (whether at the stated maturity, by acceleration or
otherwise) of all obligations (including obligations which, but for the
automatic stay under Section 362(a) of the Bankruptcy Code, would become due)
and liabilities owing by the Borrower under any Interest Rate Protection
Agreement or Other Hedging Agreement, whether now in existence or hereafter
arising, and the due performance and compliance by the Borrower with all of the
terms, conditions and agreements contained in the Interest Rate Protection
Agreements or Other Hedging Agreements (all such obligations and liabilities
being herein collectively called the "Other Obligations," and together with the
Credit Document Obligations, the "Guaranteed Obligations"). Each Guarantor
understands, agrees and confirms that the Secured Creditors may enforce this
Guaranty up to the full amount of the
0000B643.W51
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Page 3
Guaranteed Obligations against such Guarantor without proceeding against any
other Guarantor, the Borrower, against any security for the Guaranteed
Obligations, or under any other guaranty covering all or a portion of the
Guaranteed Obligations.
2. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations whether or not due or payable by the Borrower upon the
occurrence in respect of the Borrower of any of the events specified in Section
10.05 of the Credit Agreement, and unconditionally and irrevocably, jointly and
severally, promises to pay such Guaranteed Obligations to the Secured Creditors,
or order, on demand, in lawful money of the United States. This Guaranty shall
constitute a guaranty of payment, and not of collection.
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the indebtedness of the
Borrower whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder
shall not be affected or impaired by any circumstance or occurrence whatsoever,
including, without limitation: (a) any direction as to application of payment by
the Borrower or by any other party, (b) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to the
Guaranteed Obligations, (c) any payment on or in reduction of any such other
guaranty or undertaking, (d) any dissolution, termination or increase, decrease
or change in personnel by the Borrower, (e) any payment made to any Secured
Creditor on the indebtedness which any Secured Creditor repays the Borrower
pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and each Guarantor waives any
right to the deferral or modification of its obligations hereunder by reason of
any such proceeding, (f) any action or inaction by the Secured Creditors as
contemplated in Section 6 hereof, or (g) any invalidity, irregularity or
unenforceability of all or part of the Guaranteed Obligations or of any security
therefor.
4. The obligations of each Guarantor hereunder are independent
of the obligations of any other Guarantor, any other guarantor or the Borrower,
and a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrower and whether or not any other Guarantor, any
other guarantor of the Borrower or the Borrower be joined in any such action or
actions. Each Guarantor waives, to the fullest extent permitted by law, the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement thereof. Any payment by the Borrower or other circumstance which
operates to toll any statute of limitations as to the Borrower shall operate to
toll the statute of limitations as to each Guarantor.
0000B643.W51
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Page 4
5. Each Guarantor hereby waives notice of acceptance of this
Guaranty and notice of any liability to which it may apply, and waives
promptness, diligence, presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other action
by the Administrative Agent or any other Secured Creditor against, and any other
notice to, any party liable thereon (including such Guarantor, any other
Guarantor or any other guarantor or the Borrower).
6. Any Secured Creditor may at any time and from time to time
without the consent of, or notice to, any Guarantor, without incurring
responsibility to such Guarantor, without impairing or releasing the obligations
of such Guarantor hereunder, upon or without any terms or conditions and in
whole or in part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter, any of the
Guaranteed Obligations (including any increase or decrease in the rate
of interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended,
renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors,
the Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations,
any security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or
hereof, and may subordinate the payment of all or any part thereof to
the payment of any liability (whether due or not) of the Borrower to
creditors of the Borrower other than the Secured Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Secured Creditors
regardless of what liabilities of the Borrower remain unpaid;
0000B643.W51
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Page 5
(g) consent to or waive any breach of, or any act, omission or
default under, any of the Interest Rate Protection Agreements or Other
Hedging Agreements, the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or
supplement any of the Interest Rate Protection Agreements or Other
Hedging Agreements, the Credit Documents or any of such other
instruments or agreements; and/or
(h) act or fail to act in any manner referred to in this
Guaranty which may deprive such Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guaranty.
7. No invalidity, irregularity or unenforceability of all or
any part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a legal or equitable
discharge of a surety or guarantor except payment in full of the Guaranteed
Obligations.
8. This Guaranty is a continuing one and all liabilities to
which it applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. No failure or delay on the
part of any Secured Creditor in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein expressly specified are cumulative and not
exclusive of any rights or remedies which any Secured Creditor would otherwise
have. No notice to or demand on any Guarantor in any case shall entitle such
Guarantor to any other further notice or demand in similar or other
circumstances or constitute a waiver of the rights of any Secured Creditor to
any other or further action in any circumstances without notice or demand. It is
not necessary for any Secured Creditor to inquire into the capacity or powers of
the Borrower or the officers, directors, partners or agents acting or purporting
to act on its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
9. Any indebtedness of the Borrower now or hereafter held by
any Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Secured Creditors, and such indebtedness of the Borrower to any Guarantor, if
the Administrative Agent, after an Event of Default has occurred, so requests,
shall be collected, enforced and received by such Guarantor as trustee for the
Secured Creditors and be paid over to the Secured Creditors on account of the
indebtedness of the Borrower to the Secured Creditors, but without affecting or
impairing in any manner the liability of such Guarantor under the
0000B643.W51
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Page 6
other provisions of this Guaranty. Prior to the transfer by any Guarantor of any
note or negotiable instrument evidencing any indebtedness of the Borrower to
such Guarantor, such Guarantor shall mark such note or negotiable instrument
with a legend that the same is subject to this subordination. Without limiting
the generality of the foregoing, each Guarantor hereby agrees with the Secured
Creditors that it will not exercise any right of subrogation which it may at any
time otherwise have as a result of this Guaranty (whether contractual, under
Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed
Obligations have been irrevocably paid in full in cash.
10. (a) Each Guarantor waives any right (except as shall be
required by applicable statute and cannot be waived) to require the Secured
Creditors to: (i) proceed against the Borrower, any other Guarantor, any other
guarantor of the Guaranteed Obligations or any other party; (ii) proceed against
or exhaust any security held from the Borrower, any other Guarantor, any other
guarantor of the Guaranteed Obligations or any other party; or (iii) pursue any
other remedy in the Secured Creditors' power whatsoever. Each Guarantor waives
any defense based on or arising out of any defense of the Borrower, any other
Guarantor, any other guarantor of the Guaranteed Obligations or any other party
other than payment in full of the Guaranteed Obligations, including, without
limitation, any defense based on or arising out of the disability of the
Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations
or any other party, or the unenforceability of the Guaranteed Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
the Borrower other than payment in full of the Guaranteed Obligations. The
Secured Creditors may, at their election, foreclose on any security held by the
Administrative Agent, the Collateral Agent, the Documentation Agent or the other
Secured Creditors by one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable (to the extent such
sale is permitted by applicable law), or exercise any other right or remedy the
Secured Creditors may have against the Borrower or any other party, or any
security, without affecting or impairing in any way the liability of any
Guarantor hereunder except to the extent the Guaranteed Obligations have been
paid in full. Each Guarantor waives any defense arising out of any such election
by the Secured Creditors, even though such election operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy of
such Guarantor against the Borrower or any other party or any security.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new or
additional indebtedness. Each Guarantor assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which such Guarantor
0000B643.W51
<PAGE>
Page 7
assumes and incurs hereunder, and agrees that the Secured Creditors shall have
no duty to advise any Guarantor of information known to them regarding such
circumstances or risks.
11. It is the desire and intent of each Guarantor and the
Secured Creditors that this Guaranty shall be enforced against each Guarantor to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. If, however, and to the extent
that, the obligations of each Guarantor under this Guaranty shall be adjudicated
to be invalid or unenforceable for any reason (including, without limitation,
because of any applicable state or federal law relating to fraudulent
conveyances or transfers), then the amount of the Guaranteed Obligations shall
be deemed (for purposes of this Guaranty only) to be reduced and such Guarantor
shall pay the maximum amount of the Guaranteed Obligations which would be
permissible under applicable law.
12. The Secured Creditors agree that this Guaranty may be
enforced only by the action of the Administrative Agent or the Collateral Agent,
in each case acting upon the instructions of the Required Banks (or, after the
date on which all Credit Document Obligations have been paid in full, the
holders of at least a majority of the outstanding Other Obligations) and that no
other Secured Creditors shall have any right individually to seek to enforce or
to enforce this Guaranty or to realize upon the security to be granted by the
Pledge Agreement, it being understood and agreed that such rights and remedies
may be exercised by the Administrative Agent or the Collateral Agent or the
holders of at least a majority of the outstanding Other Obligations, as the case
may be, for the benefit of the Secured Creditors upon the terms of this Guaranty
and the Pledge Agreement. The Secured Creditors further agree that this Guaranty
may not be enforced against any director, officer, employee, or stockholder of
any guarantor (except to the extent such stockholder is also a Guarantor
hereunder).
13. In order to induce the Banks to make Revolving Loans and
issue or participate in Letters of Credit pursuant to the Credit Agreement, and
in order to induce the Other Creditors to execute, deliver and perform the
Interest Rate Protection Agreements or Other Hedging Agreements, each Guarantor
represents, warrants and covenants that:
(a) Such Guarantor (i) is a duly organized and validly
existing partnership or corporation, as the case may be, in good
standing (if applicable) under the laws of the jurisdiction of its
organization, (ii) has the partnership or corporate power and authority
to own its property and assets and to transact the business in which it
is engaged and presently proposes to engage and (iii) is duly qualified
and is authorized to do business and is in good standing in each
jurisdiction where the conduct of its business requires such
qualification except for failures to be so qualified which,
individually or in the aggregate, could not reasonably be expected
0000B643.W51
<PAGE>
Page 8
to have a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.
(b) Such Guarantor has the partnership or corporate power and
authority to execute, deliver and perform the terms and provisions of
this Guaranty and each other Credit Document to which it is a party and
has taken all necessary corporate action to authorize the execution,
delivery and performance by it of each such Credit Document. Such
Guarantor has duly executed and delivered this Guaranty and each other
Credit Document to which it is a party, and each such Credit Document
constitutes the legal, valid and binding obligation of such Guarantor
enforceable in accordance with its terms.
(c) Neither the execution, delivery or performance by such
Guarantor of this Guaranty or any other Credit Document to which it is
a party, nor compliance by it with the terms and provisions hereof and
thereof, (i) will contravene any provision of any applicable law,
statute, rule or regulation, or any applicable order, writ, injunction
or decree of any court or governmental instrumentality, (ii) will
conflict with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result
in the creation or imposition of (or the obligation to create or
impose) any Lien (except pursuant to the Pledge Agreement) upon any of
the property or assets of such Guarantor or any of its Subsidiaries
pursuant to the terms of any indenture, mortgage, deed of trust, loan
agreement, credit agreement, or any other material agreement or other
instrument to which such Guarantor or any of its Subsidiaries is a
party or by which it or any of its property or assets is bound or to
which it may be subject or (iii) will violate any provision of the
certificate of incorporation or by-laws (or equivalent organizational
documents) of such Guarantor or any of its Subsidiaries.
(d) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except as
have been obtained or made prior to the Initial Borrowing Date), or
exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in
connection with, (i) the execution, delivery and performance of this
Guaranty or any other Credit Document to which such Guarantor is a
party or (ii) the legality, validity, binding effect or enforceability
of this Guaranty or any other Credit Document to which such Guarantor
is a party.
(e) There are no actions, suits or proceedings (private or
governmental) pending or threatened (i) with respect to any Credit
Documents to which such Guarantor is a party or (ii) with respect to
such Guarantor that could reasonably be
0000B643.W51
<PAGE>
Page 9
expected to materially and adversely affect (a) the business,
operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a
whole or (b) the rights or remedies of the Secured Creditors or on the
ability of such Guarantor to perform its respective obligations to the
Secured Creditors hereunder and under the other Credit Documents to
which it is a party.
14. Each Guarantor covenants and agrees that, on and after the
date hereof and until the termination of the Total Revolving Loan Commitment and
all Interest Rate Protection Agreements or Other Hedging Agreements, and when no
Revolving Note or Letter of Credit remains outstanding and all Guaranteed
Obligations have been paid in full, such Guarantor will take, or will refrain
from taking, as the case may be, all actions that are necessary to be taken or
not taken so that no violation of any provision, covenant or agreement contained
in Section 8 or 9 of the Credit Agreement occurs so that no Default or Event of
Default is caused by the actions of such Guarantor or any of its Subsidiaries.
15. The Guarantors hereby jointly and severally agree to pay
all out-of-pocket costs and expenses of the Agents in connection with any
amendment, waiver or consent relating hereto, and of each Secured Creditor in
connection with any enforcement of this Guaranty (including in each case,
without limitation, the fees and disbursements of counsel employed by any Agent
or any of the other Secured Creditors).
16. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Secured Creditors
and their successors and assigns.
17. Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent of
each Guarantor directly affected thereby and with the written consent of either
(x) the Required Banks (or to the extent required by Section 13.12 of the Credit
Agreement, with the written consent of each Bank) at all times prior to the time
on which all Credit Document Obligations have been paid in full or (y) the
holders of at least a majority of the outstanding Other Obligations at all times
after the time on which all Credit Document Obligations have been paid in full;
provided, that any change, waiver, modification or variance affecting the rights
and benefits of a single Class (as defined below) of Secured Creditors (and not
all Secured Creditors in a like or similar manner) shall also require the
written consent of the Requisite Creditors (as defined below) of such Class of
Secured Creditors (it being understood that the addition or release of any
Guarantor hereunder shall not constitute a change, waiver, discharge or
termination affecting any Guarantor other than the Guarantor so added or
released). For the purpose of this Guaranty the term "Class" shall mean each
class of Secured Creditors, i.e., whether (x) the Bank Creditors as holders of
the Credit Document Obligations or (y)
0000B643.W51
<PAGE>
Page 10
the Other Creditors as the holders of the Other Obligations. For the purpose of
this Guaranty, the term "Requisite Creditors" of any Class shall mean (x) with
respect to the Credit Document Obligations, the Required Banks (or to the extent
required by Section 13.12 of the Credit Agreement, with the written consent of
each Bank) and (y) with respect to the Other Obligations, the holders of at
least a majority of all obligations outstanding from time to time under the
Interest Rate Protection or Other Hedging Agreements.
18. Each Guarantor acknowledges that an executed (or
conformed) copy of each of the Credit Documents has been made available to its
principal executive officers and such officers are familiar with the contents
thereof.
19. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Secured Creditor Law) and not by way of limitation of any such
rights, upon the occurrence and during the continuance of an Event of Default
(such term to mean and include any "Event of Default" as defined in the Credit
Agreement or any payment default under any Interest Rate Protection Agreement or
Other Hedging Agreement continuing after any applicable grace period), each
Secured Creditor is hereby authorized at any time or from time to time, without
notice to any Guarantor or to any other Person, any such notice being expressly
waived, to set off and to appropriate and apply any and all deposits (general or
special) and any other indebtedness at any time held or owing by such Secured
Creditor to or for the credit or the account of such Guarantor, against and on
account of the obligations and liabilities of such Guarantor to such Secured
Creditor under this Guaranty, irrespective of whether or not such Secured
Creditor shall have made any demand hereunder and although said obligations,
liabilities, deposits or claims, or any of them, shall be contingent or
un-matured.
20. All notices, requests, demands or other communications
pursuant hereto shall be deemed to have been duly given or made when delivered
to the Person to which such notice, request, demand or other communication is
required or permitted to be given or made under this Guaranty, addressed to such
party at (i) in the case of any Bank Creditor, as provided in the Credit
Agreement, (ii) in the case of any Guarantor, at its address set forth opposite
its signature below and (iii) in the case of any Other Creditor, at such address
as such Other Creditor shall have specified in writing to the Guarantors; or in
any case at such other address as any of the Persons listed above may hereafter
notify the others in writing.
21. If claim is ever made upon any Secured Creditor for
repayment or recovery of any amount or amounts received in payment or on account
of any of the Guaranteed Obligations and any of the aforesaid payees repays all
or part of said amount
0000B643.W51
<PAGE>
Page 11
by reason of (i) any judgment, decree or order of any court or administrative
body having jurisdiction over such payee or any of its property or (ii) any
settlement or compromise of any such claim effected by such payee with any such
claimant (including the Borrower), then and in such event each Guarantor agrees
that any such judgment, decree, order, settlement or compromise shall be binding
upon such Guarantor, notwithstanding any revocation hereof or other instrument
evidencing any liability of the Borrower, and such Guarantor shall be and remain
liable to the aforesaid payees hereunder for the amount so repaid or recovered
to the same extent as if such amount had never originally been received by any
such payee.
22. (A) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
SECURED CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action
or proceeding with respect to this Guaranty or any other Credit Document to
which any Guarantor is a party may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Guaranty, each Guarantor hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby
further irrevocably waives any claim that any such courts lack jurisdiction over
such Guarantor, and agrees not to plead or claim, in any legal action or
proceeding with respect to this Guaranty or any other Credit Document to which
such guarantor is a party brought in any of the aforesaid courts, that any such
court lacks jurisdiction over such Guarantor. Each Guarantor further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such Guarantor at its address set forth
opposite its signature below, such service to become effective 30 days after
such mailing. Each Guarantor hereby irrevocably waives any objection to such
service of process and further irrevocably waives and agrees not to plead or
claim in any action or proceeding commenced hereunder or under any other Credit
Document to which such Guarantor is a party that service of process was in any
invalid or ineffective. Nothing herein shall affect the right of any of the
Secured Creditors to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against each Guarantor in any
other jurisdiction.
(B) Each Guarantor hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Guaranty or any other Credit Document to which such Guarantor is a party brought
in the courts referred to in clause (a) above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that such action or
proceeding brought in any such court has been brought in an inconvenient forum.
0000B643.W51
<PAGE>
Page 12
(C) EACH GUARANTOR AND EACH SECURED CREDITOR (BY ITS
ACCEPTANCE OF THE BENEFITS OF THIS GUARANTY) HEREBY IRREVOCABLY WAIVES ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH
GUARANTOR IS A PARTY OR THE TRANSACTIONS CONTEMPLATED HERE- BY OR THEREBY.
23. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of or liquidated in compliance with the
requirements of Section 9.02 of the Credit Agreement (or such sale or other
disposition has been approved in writing by the Required Banks (or all Banks if
required by Section 13.12 of the Credit Agreement)) and the proceeds of such
sale, disposition or liquidation are applied in accordance with the provisions
of the Credit Agreement, to the extent applicable, such Guarantor shall be
released from this Guaranty and this Guaranty shall, as to each such Guarantor
or Guarantors, terminate, and have no further force or effect (it being
understood and agreed that the sale of one or more Persons that own, directly or
indirectly, all of the capital stock or partnership interests of any Guarantor
shall be deemed to be a sale of such Guarantor for the purposes of this Section
23).
24. This Guaranty may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Guarantors and the
Administrative Agent.
25. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense and on the same basis as payments
are made by the Borrower under Sections 4.03 and 4.04 of the Credit Agreement.
26. It is understood and agreed that any Subsidiary of the
Borrower that is required to execute a counterpart of this Guaranty after the
date hereof pursuant to the Credit Agreement shall automatically become a
Guarantor hereunder by executing a counterpart hereof and delivering the same to
the Administrative Agent.
* * *
0000B643.W51
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be executed and delivered as of the date first above written.
1973 Friendship Drive FORTE HOTELS, INC.
El Cajon, California 92020
By /s/ Stephen Holmes
Title: Executive Vice President
1973 Friendship Drive TRAVEL BEVERAGES, INC.
El Cajon, California 92020
By /s/ Stephen Holmes
Title: Executive Vice President
1973 Friendship Drive FHI/SAN DIEGO INC.
El Cajon, California 92020
By /s/ Stephen Holmes
Title: Executive Vice President
339 Jefferson Road NATIONAL GAMING MISSISSIPPI, INC.
Parsippany, New Jersey 07054
By /s/ James E. Buckman
Title: Executive Vice President
Accepted and Agreed to:
BANKERS TRUST COMPANY
as Administrative Agent
and Collateral Agent
By /s/ Cynthia A. Jay
Title: Vice President
0000B643.W51
<PAGE>
EXHIBIT H
OFFICER'S SOLVENCY CERTIFICATE
I, the undersigned, the Chief Financial Officer of NATIONAL
LODGING CORP., a Delaware corporation (the "Borrower"), do hereby certify that:
1. This Certificate is furnished pursuant to Section 5.13(i)
of the Credit Agreement, dated as of January 23, 1996 among the Borrower, the
lenders from time to time party thereto (the "Banks"), Chemical Bank, as
Documentation Agent, and Bankers Trust Company, as Administrative Agent (such
Credit Agreement, as in effect on the date of this Certificate, being herein
called the "Credit Agreement"). Unless otherwise defined herein, capitalized
terms used in this Certificate shall have the meanings set forth in the Credit
Agreement.
2. For purposes of this Certificate, the terms below shall
have the following definitions:
(a) "Fair Value"
The amount at which the assets, in their entirety, of the
Borrower and its Subsidiaries taken as a whole would change
hands between a willing buyer and a willing seller, within a
commercially reasonable period of time, each having reasonable
knowledge of the relevant facts, with neither being under any
compulsion to act.
(b) "Present Fair Salable Value"
The amount that could be obtained by an independent willing
seller from an independent willing buyer if the assets of the
Borrower and its Subsidiaries taken as a whole are sold with
reasonable promptness under normal selling conditions in a
current market.
(c) "New Financing"
The Indebtedness incurred or to be incurred by the Borrower
and the Subsidiary Guarantors under the Credit Documents
(assuming the full utilization by the Borrower of the Total
Revolving Loan Commitment under the Credit Agreement) and all
other financings contemplated by the
0000B49L.W51
<PAGE>
EXHIBIT H
Page 2
Documents, in each case after giving effect to the Transaction
and the incurrence of all financings contemplated therewith.
(d) "Stated Liabilities"
The recorded liabilities (including contingent liabilities
that would be recorded in accordance with generally accepted
accounting principles, consistently applied ("GAAP"), of the
Borrower and its Subsidiaries (taken as a whole) at the date
hereof, together with the amount of all New Financing.
(e) "Contingent Liabilities"
The maximum estimated amount, as of the date hereof, of
liability reasonably likely to result from pending litigation,
asserted claims and assessments, guaranties, uninsured risks
and other contingent liabilities of the Borrower and its
Subsidiaries taken as a whole as of the date hereof after
giving effect to the consummation of the Transaction
(including all fees and expenses related thereto but exclusive
of such Contingent Liabilities to the extent reflected in
Stated Liabilities).
(f) "Will be able to pay its Stated Liabilities, including
Contingent Liabilities, as they mature."
For the period from the date hereof through the Final Maturity
Date, the Borrower and its Subsidiaries taken as a whole will
have sufficient assets and cash flow to pay its respective
Stated Liabilities and Contingent Liabilities as those
liabilities mature or otherwise become payable.
(g) "Does not have Unreasonably Small Capital"
For the period from the date hereof through the Final Maturity
Date, the Borrower and its Subsidiaries taken as a whole,
after the consummation of the Transaction and all Indebtedness
(including the Revolving Loans) being incurred or assumed and
Liens created by the Borrower and the Subsidiary Guarantors
taken as a whole in connection therewith, are a going concern
and have sufficient capital to ensure that they will continue
to be a going concern for such period and to remain a going
concern for such period and to remain a going concern.
0000B49L.W51
<PAGE>
EXHIBIT H
Page 3
3. For purposes of this Certificate, I, or other officers of
the Borrower under my direction and supervision, have performed the following
procedures as of and for the periods set forth below.
(a) I have reviewed the financial statements of the Borrower and
its Subsidiaries and FHI and its Subsidiaries referred to in
Section 7.05(a) of the Credit Agreement.
(b) I have reviewed the unaudited pro forma financial statements
of the Borrower and its Subsidiaries referred to in Section
7.05(a) of the Credit Agreement.
(c) I have made inquiries of certain other officials of the
Borrower and its Subsidiaries who have responsibility for
financial and accounting matters regarding (i) the existence
and amount of Contingent Liabilities associated with the
business of the Borrower and its Subsidiaries and (ii) whether
the unaudited pro forma consolidated financial statements
referred to in paragraph (b) above are in conformity with
GAAP.
(d) I have knowledge of and have reviewed to my satisfaction the
Credit Documents and the other Documents, and the respective
Schedules and Exhibits thereto.
(e) With respect to Contingent Liabilities, I:
1. inquired of certain officials of the Borrower and its
Subsidiaries who have responsibility for legal,
financial and accounting matters as to the existence
and estimated liability with respect to all Contingent
Liabilities known to them;
2. confirmed with senior officers of the Borrower and
its Subsidiaries that (i) all appropriate items were
included in Stated Liabilities or Contingent
Liabilities and that (ii) the amounts relating
thereto were the maximum estimated amount of
liability reasonably likely to result therefrom as of
the date hereof; and
3. I hereby certify that all material Contingent
Liabilities that may arise from any pending litigation,
asserted claims and assessments, guar- antees,
uninsured risks and other Contingent Liabilities of the
0000B49L.W51
<PAGE>
EXHIBIT H
Page 4
Borrower and its Subsidiaries (exclusive of such
Contingent Liabilities to the extent reflected in
Stated Liabilities) have been considered in making
the certification set forth in paragraph 4 below, and
with respect to each such Contingent Liability the
estimable maximum estimated amount of liability with
respect thereto was used in making such
certification.
(f) I have had the Projections, which have been previously
delivered to the Banks, prepared under my direction and
have re-examined the Projections on the date hereof and
considered the effect thereon of any changes since the
date of the preparation thereof on the results
projected therein. After such review, I hereby certify
that the Projections are reasonable and attain- able
(it being understood that the Borrower makes no
representation or warranty that the results projected
on the Projections will actually be attained).
Furthermore, the Projections support the conclusions
contained in the last paragraph of this Certificate.
(g) I have made inquiries of certain officers of the
Borrower and its Subsidiaries who have responsibility
for financial reporting and accounting matters
regarding whether they were aware of any events or
conditions that, as of the date hereof, would cause the
Borrower and its Subsidiaries taken as a whole, after
giving effect to the consummation of the Transaction
and the related financing transactions (including the
incurrence of the New Financing), to (i) have assets
with a Fair Value or Present Fair Salable Value that
are less than the sum of Stated Liabilities and
Contingent Liabilities; (ii) have Unreasonably Small
Capital; or (iii) not be able to pay its Stated
Liabilities and Contingent Liabilities as they mature
or otherwise become payable.
4. Based on and subject to the foregoing, I hereby certify
that after giving effect to the consummation of the Transaction and the related
financing transactions (including the incurrence or maintenance of the New
Financing), it is my informed opinion that as of the date hereof (i) the Fair
Value and Present Fair Salable Value of the assets of the Borrower and its
Subsidiaries taken as a whole exceed their respective Stated Liabilities and
Contingent Liabilities; (ii) the Borrower and its Subsidiaries taken as a whole
do not have Unreasonably Small Capital; and (iii) the Borrower and its
Subsidiaries taken as a whole will be able to pay their respective Stated
Liabilities and Contingent Liabilities as they mature or otherwise become
payable. You understand and agree that this Certificate
0000B49L.W51
<PAGE>
EXHIBIT H
Page 5
is executed and delivered by me in my capacity as an officer of the Borrower and
not in my individual capacity.
IN WITNESS WHEREOF, I have hereto set my hand this 23rd day
of January, 1996.
NATIONAL LODGING CORP.
By_______________________________
Name:
Title:
0000B49L.W51
<PAGE>
EXHIBIT I
HFS SUBORDINATION AGREEMENT
HFS SUBORDINATION AGREEMENT (as amended, modified or
supplemented from time to time, this "Agreement"), dated as of January 23, 1996,
between HFS INCORPORATED, a Delaware corporation ("HFS"), and BANKERS TRUST
COMPANY, as Administrative Agent for the Banks, each as defined below. Except as
otherwise defined herein, capitalized terms used herein and defined in the
Credit Agreement referred to below are used herein as so defined.
W I T N E S S E T H :
WHEREAS, National Lodging Corp. (the "Borrower"), the lenders
(the "Banks") from time to time party thereto, Chemical Bank, as Documentation
Agent (the "Documentation Agent"), and Bankers Trust Company, as Administrative
Agent (together with any successor administrative agent, the "Administrative
Agent"), have entered into a Credit Agreement, dated as of January 23, 1996,
providing for the making of loans and the issuance of, and participation in,
letters of credit as contemplated therein (as used herein, the term "Credit
Agreement" means the Credit Agreement described above in this paragraph, as the
same may be amended, modified, extended, renewed, replaced, restated,
supplemented or refinanced from time to time, and including any agreement
extending the maturity of, or refinancing or restructuring (including, but not
limited to, the inclusion of additional borrowers or guarantors thereunder or
any increase in the amount borrowed) all or any portion of, the indebtedness
under such agreement or any successor agreements, whether or not with the same
agent, trustee, representative, lenders or holders) (the Banks, the
Administrative Agent, the Documentation Agent and the Collateral Agent are
herein called the "Bank Creditors");
WHEREAS, the Borrower may at any time and from time to time
enter into, or guarantee obligations of its Subsidiaries under, one or more
interest rate protection agreements (including, without limitation, interest
rate hedges, swaps, caps, floors, collars, and similar agreements, collectively,
the "Interest Rate Protection Agreements") with one or more Banks or any
Affiliate thereof (any such Bank or Banks or any Affiliate of any such Bank or
Banks (even if any such Banks subsequently cease to be a Bank under the Credit
Agreement for any reason) so long as any such Bank or Affiliate thereof
participates in the extension of such Interest Rate Protection Agreement and
their subsequent assigns, if any, collectively, the "Other Creditors", and
together with the Bank Creditors, the "Secured Creditors");
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WHEREAS, pursuant to the HFS Guaranty, HFS has guaranteed to
the Bank Creditors the payment when due of the Guaranteed Obligations (as
defined therein) to the extent and in the manner described therein;
WHEREAS, pursuant to the Financing Agreement, the Borrower
has agreed to pay to HFS the Guaranty Fee;
WHEREAS, HFS has entered into the Corporate Services
Agreement with the Borrower pursuant to which HFS shall receive a fee from the
Borrower for corporate services performed by HFS on behalf of the Borrower;
WHEREAS, HFS has entered into the Facility Lease with the
Borrower pursuant to which HFS shall receive $150,000 from the Borrower per year
pursuant to the terms and conditions set forth therein;
WHEREAS, HFS has entered into various HFS Franchise
Agreements with the Borrower;
WHEREAS, the Credit Agreement provides that the Borrower is
permitted, subject to the provisions of Sections 9.03 and 9.06 of the Credit
Agreement, to pay certain amounts payable to HFS under the HFS Agreements
(including amounts payable pursuant to the Facility Lease, the Corporate
Services Agreement, the Financing Agreement and the HFS Franchise Agreements) so
long as this Agreement has been executed and delivered by the parties hereto.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the parties hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES. (a) The Borrower hereby
represents and warrants that (i) each HFS Agreement is in full force and effect
and has not been amended or modified except pursuant to such amendments and
modifications as have been furnished to the Banks prior to the Initial Borrowing
Date or as may be permitted under the Credit Agreement, (ii) there is no default
by the Borrower under any HFS Agreement, (iii) the Borrower has not assigned,
transferred, pledged, or hypothecated the Borrower's interest in any HFS
Agreement and (iv) the Borrower knows of no default by HFS under any HFS
Agreement.
(b) HFS hereby represents and warrants that (i) each HFS
Agreement is in full force and effect and has not been amended or modified
except pursuant to such amendments and modifications as have been furnished to
the Banks prior to the Initial Borrowing Date or as may be permitted under the
Credit Agreement, (ii) there is no default
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<PAGE>
by HFS under any HFS Agreement, (iii) HFS has not assigned, transferred, pledged
or hypothecated HFS' interest in any HFS Agreement, (iv) HFS knows of no default
by the Borrower under any HFS Agreement and (v) there are no sums currently due
or owing to HFS under any HFS Agreement.
2. SUBORDINATION.
2.01 Subordination of Liabilities. HFS, for itself, its
successors and assigns, covenants and agrees that the payment of the
Subordinated Obligations (as defined in 2.08 hereof) is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, to the
prior payment in full in cash of all Senior Indebtedness (as defined in Section
2.07 hereof). The provisions of this Section 2 shall constitute a continuing
offer to all Persons who, in reliance upon such provisions, become holders of,
or continue to hold, Senior Indebtedness, and such provisions are made for the
benefit of the holders of Senior Indebtedness, and such holders are hereby made
obligees hereunder the same as if their names were written herein as such, and
they and/or each of them may proceed to enforce such provisions.
2.02 The Borrower Not to Make Payments with Respect to
Subordinated Obligations in Certain Circumstances. (a) Until all Senior
Indebtedness shall have been paid in full in cash and all commitments in respect
of such Senior Indebtedness have been terminated, no payment or distribution of
any kind or character (whether in cash, property, securities or otherwise) shall
be made in respect of any Subordinated Obligations other than any payments
permitted under the Credit Agreement (including, without limitation, Sections
9.03 and 9.06 thereof).
(b) In the event that notwithstanding the provisions of the
preceding subsection (a) of this Section 2.02, the Borrower or any of its
Subsidiaries or Joint Ventures shall make any payment on account of the
Subordinated Obligations which is not permitted by said subsection (a), then
promptly after HFS has actual knowledge of its receipt of such excess payment
(or promptly after it receives notice from any holder of Senior Indebtedness
thereof), HFS shall reimburse the Borrower in cash for the amount by which the
payments made to HFS and its Subsidiaries exceed the respective amounts
permitted to be paid in accordance with the requirements of this Agreement and
Sections 9.03 and 9.06 of the Credit Agreement.
2.03 Subordination to Prior Payment of all Senior
Indebtedness on Dissolution, Liquidation or Reorganization of Borrower. Upon any
distribution of assets of the Borrower upon dissolution, winding up, liquidation
or reorganization of the Borrower (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
otherwise):
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(a) the holders of all Senior Indebtedness shall first be
entitled to receive payment in full in cash of all Senior Indebtedness
(including, without limitation, post-petition interest at the rate
provided in the documentation with respect to the Senior Indebtedness,
whether or not such post-petition interest is an allowed claim against
the debtor in any bankruptcy or similar proceeding) before HFS is
entitled to receive any payment of any kind or character with respect
to any Subordinated Obligations, other than any payments permitted
under the Credit Agreement (including, without limitation, Sections
9.03 and 9.06 thereof);
(b) any payment or distribution of assets of the Borrower of
any kind or character, whether in cash, property, securities or
otherwise to which HFS would be entitled except for the provisions of
this Section 2.03, shall be paid by the liquidating trustee or agent or
other person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or other trustee or
agent, directly to the holders of Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under
any indenture under which any instruments evidencing any such Senior
Indebtedness may have been issued, to the extent necessary to make
payment in full in cash of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing
provisions of this Section 2.03, any payment or distribution of assets
of the Borrower of any kind or character, whether in cash, property,
securities or otherwise, shall be received by HFS on account of
Subordinated Obligations before all Senior Indebtedness is paid in full
in cash, which payment or distribution is not permitted by preceding
subsections (a) and (b) of this Section 2.03, such payment or
distribution shall be received and held in trust for and shall be paid
over to the holders of the Senior Indebtedness remaining unpaid or
unprovided for or their representative or representatives, or to the
trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been issued, for
application to the payment of such Senior Indebtedness until all such
Senior Indebtedness shall have been paid in full in cash, after giving
effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness.
2.04 Effect of Subordination on Obligations Pursuant to HFS
Agreements. HFS hereby agrees for the benefit of the Borrower and the Secured
Creditors that, to the extent and for so long as any payment of Subordinated
Obligations is not permitted to be made pursuant to the provisions of this
Section 2, such payment shall not be payable by the Borrower or any of its
Subsidiaries or Joint Ventures until it is permitted to be paid in accordance
with the terms of this Section 2. To the extent that any such Subordinated
Obligations are not payable by the Borrower or any of its Subsidiaries or Joint
Ventures
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<PAGE>
pursuant to this Section 2, HFS shall forbear from exercising any right to
terminate, or withhold performance of any of its obligations under, the HFS
Agreements as a result thereof so long as the Credit Agreement or this Agreement
shall continue to prohibit the Borrower or any of its Subsidiaries or Joint
Ventures from making such payments.
2.05 Subrogation. After all Senior Indebtedness has been paid
in full in cash and all commitments in respect of such Senior Indebtedness have
been terminated, HFS shall have and be entitled to all rights of subrogation
otherwise provided by law in respect of any payment it may make or be obligated
to make under this Agreement with respect to the claims of the Secured Creditors
against the Borrower or any other guarantor of the Senior Indebtedness.
2.06 Subordination Rights Not Impaired by Acts or Omissions of
the Borrower or Holders of Senior Indebtedness. No right of any present or
future holders of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Borrower or any of its Subsidiaries or Joint
Ventures or by any act or failure to act by any such holder, or by any
noncompliance by the Borrower or any of its Subsidiaries or Joint Ventures with
the terms and provisions of any HFS Agreement, regardless of any knowledge
thereof which any such holder may have or be otherwise charged with. The holders
of the Senior Indebtedness may, without in any way affecting the obligations of
HFS with respect hereto, at any time or from time to time and in their absolute
discretion, change the manner, place or terms of payment of, change or extend
the time of payment of, or renew or alter, any Senior Indebtedness or amend,
modify or supplement any agreement or instrument governing or evidencing such
Senior Indebtedness or any other document referred to therein, or exercise or
refrain from exercising any other of their rights under the Senior Indebtedness
including, without limitation, the waiver of default thereunder and the release
of any collateral securing such Senior Indebtedness, all without notice to or
assent from HFS; provided, that (i) the Banks will not, following a Change of
Control (as defined in the Credit Agreement), agree to extend the Final Maturity
Date under the Credit Agreement without the prior written consent of HFS unless
the extension of the Final Maturity Date occurs because of, or pursuant to, a
bankruptcy, work-out or similar restructuring of Indebtedness of the Borrower
under the Credit Agreement (excluding any such bankruptcy, workout or similar
restructuring of Indebtedness where the problems necessitating or giving rise to
same did not exist before the respective Change of Control or if the bankruptcy,
workout or similar restructuring occurs after the Change of Control and as a
result of increased leverage incurred to finance the respective Change of
Control); (ii) if, following a Change of Control (as defined in the Credit
Agreement), the Credit Agreement is amended, without the prior written consent
of HFS, to increase the principal amount of loans extended thereunder (other
than for accruals of interest), fees payable with respect to any HFS Agreement
shall not be subordinated to an amount equal to the increase in such principal
amount; (iii) the Banks will not, following a Change of Control and prior to the
occurrence of the Bank Termination Date
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0000B69E.W51
<PAGE>
(and so long as the Maximum Guaranteed Amount exceeds $0), release all or
substantially all of the Collateral (as defined in the Pledge Agreement) without
the prior written consent of HFS, except as expressly provided in the Credit
Documents; and (iv) the Banks will not amend, modify or supplement either of
Sections 9.03 or 9.06 of the Credit Agreement (or add any new provision which
directly restricts the ability of the Borrower to pay fees to HFS in a manner
which is more restrictive than that provided in Sections 9.03 and 9.06 as in
effect on the Effective Date) without the prior written consent of HFS if the
respective amendment, modification, supplement or additional provision would
directly restrict the ability of the Borrower to pay fees to HFS in a manner
which is more restrictive than as provided in Sections 9.03 and 9.06 of the
Credit Agreement as in effect on the Effective Date (it being understood and
agreed, however, that the Banks may amend, modify or supplement the Credit
Agreement, without the consent of HFS, to provide more restrictive financial or
other covenants or events of default (so long as the same do not directly
restrict the payment of fees to HFS) and which may make it more likely that a
Default or an Event of Default will exist, which would have the effect of
preventing the payment of fees to HFS pursuant to Sections 9.03 and 9.06 of the
Credit Agreement as in effect on the Effective Date).
2.07 Senior Indebtedness. The term "Senior Indebtedness" shall
mean all Obligations (i) of the Borrower under the Credit Agreement and the
other Credit Documents and (ii) of the Borrower in respect of any Interest Rate
Protection Agreement. As used herein, the term "Obligation" shall mean any
principal, interest, premium, penalties, fees, expenses, indemnities and other
liabilities and obligations payable under the documentation governing any Senior
Indebtedness (including interest accruing after the commencement of any
bankruptcy, insolvency, receivership or similar proceeding, at the rate provided
for in the documents governing such Senior Indebtedness) whether or not such
interest is an allowed claim against the debtor in any such proceeding).
2.08 Subordinated Obligations. The term "Subordinated
Obligations" shall mean (i) all fees, interest, indemnities, other amounts,
claims, demands, liabilities, causes of action and other obligations owing or
arising under, or with respect to, the HFS Agreements or otherwise arising or
owing by the Borrower or any of its Subsidiaries or Joint Ventures to HFS or any
of its Subsidiaries, including without limitation, any Termination Fee, the
Guaranty Fee and the Excess Corporate Services Fee and (ii) all indebtedness
owed to HFS or any of its Subsidiaries by the Borrower or any of its
Subsidiaries or Joint Ventures, including, without limitation, pursuant to any
HFS Subordinated Note; provided that the amounts specifically permitted to be
paid pursuant to clauses (iii), (iv), (v), (x)(a) and (xi) of Section 9.06 of
the Credit Agreement as originally in effect shall not constitute Subordinated
Obligations.
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<PAGE>
3. MODIFICATIONS TO HFS AGREEMENTS.
The parties hereto agree that, to the extent that any fees are
owing to HFS or any of its Subsidiaries pursuant to any HFS Agreement or
otherwise as a result of the activities, operations or revenues of any
non-Wholly-Owned Subsidiary, Joint Venture or Unrestricted Subsidiary of the
Borrower, then neither the Borrower nor any of its Wholly-Owned Subsidiaries
shall have any liability to HFS or any of its Subsidiaries in respect of the
amounts so owed, and HFS or its respective Subsidiary shall have a claim for the
respective amounts owed to it only against the respective non-Wholly-Owned
Subsidiary, Joint Venture or Unrestricted Subsidiary, as the case may be,
provided that, notwithstanding the foregoing, the Borrower may be liable for its
Allocable Share of any such fees of only a non-Wholly-Owned Subsidiary or Joint
Venture (but not of an Unrestricted Subsidiary) (as determined for the
respective non-Wholly-Owned Subsidiary or Joint Venture).
4. AGREEMENTS OF HFS. HFS covenants and agrees that on and
after the date hereof and until all Senior Indebtedness shall have been paid in
full in cash and all commitments in respect of such Senior Indebtedness have
been terminated:
4.01 Assignment by HFS. HFS will not assign, pledge, encumber
or hypothecate any right, title or interest of HFS in, to or under any HFS
Agreement without the prior written consent of the Required Banks, except that
assignments by operation of law and to any Subsidiary of HFS shall be permitted
so long as HFS is not released from any liability thereunder.
4.02 Restricted Payments. In addition to the agreements
contained in preceding Section 2, HFS hereby agrees that it shall not, and shall
not permit any of its Subsidiaries to, accept any payment or distribution of any
kind or character (whether in cash, property, securities or otherwise) which
constitutes a Restricted Payment other than any such payments permitted to be
made under the Credit Agreement (including, without limitation, Sections 9.03
and 9.06 thereof). In the event that notwithstanding the provisions of this
Section 4.02, HFS or any of its Subsidiaries shall receive any Restricted
Payment which is not permitted to be paid pursuant to the immediately preceding
sentence or pursuant to this Agreement, then promptly after HFS has actual
knowledge of the receipt of such excess payment (or promptly after it receives
notice from any holder of Senior Indebtedness thereof), HFS shall reimburse the
Borrower in cash for the amount by which the payments made to HFS and its
Subsidiaries exceed the respective amounts permitted to be paid in accordance
with the requirements of this Agreement and Sections 9.03 and 9.06 of the Credit
Agreement.
4.03 Termination of any HFS Agreement. Notwithstanding
anything to the contrary contained in any HFS Agreement, HFS will not, and will
not permit any of its Subsidiaries to, prior to the payment in full in cash of
all Senior Indebtedness and the
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0000B69E.W51
<PAGE>
termination of all commitments in respect of such Senior Indebtedness, exercise
its rights and remedies under any HFS Agreement without the consent of the
Required Banks with respect to any default under such HFS Agreement including
without limitation, its right to terminate any HFS Agreement for any reason
whatsoever, except that HFS and its Subsidiaries shall have the right to enforce
payment by the Borrower and its Subsidiaries and Joint Ventures of all amounts
due and permitted to be paid in accordance with this Agreement and the Credit
Agreement.
4.04 Amendments, Modifications and New Agreements. HFS shall
not, and shall not permit any of its Subsidiaries to, amend or modify, or permit
the amendment or modification of, any agreement between HFS or any of its
Subsidiaries with the Borrower or any of its Subsidiaries or Joint Ventures, or
enter into any new agreement with any such Person, in each case if the
respective amendment, modification or entry into a new agreement would be in
violation of Section 9.12 of the Credit Agreement.
5. PURCHASE OF LOANS. At any time after HFS has made any
payments pursuant to the HFS Guaranty (or after the Administrative Agent or the
Banks have made any demand for payment pursuant to the HFS Guaranty) or made
loans to, or investments in, the Borrower pursuant to Section 9.04(vii) or
(viii) of the Credit Agreement, or if HFS is otherwise prohibited from receiving
the full amount of fees which would otherwise be paid to it from the Borrower or
any of its Subsidiaries or Joint Ventures by virtue of the restrictions
contained in Sections 9.03 and 9.06 of the Credit Agreement or at any time
following a Change of Control, HFS at its option may purchase all the Revolving
Loans and Revolving Loan Commitments of all Banks pursuant to the Credit
Agreement by paying the Banks in cash an amount equal to all outstanding
principal, interest and other amounts pursuant to the Credit Agreement (and by
unconditionally guarantying and cash collateralizing in full all Letters of
Credit and all Facing Fees and Letter of Credit Fees payable with respect
thereto through the stated termination thereof) and the other Credit Documents;
provided that concurrently with any purchase as provided above, HFS shall have
made arrangements satisfactory to each Other Creditor (as defined in the Pledge
Agreement) to terminate each Interest Rate Protection Agreement or Other Hedging
Agreement to which such Other Creditor is a party and pay all amounts owing as a
result thereof or otherwise shall have made arrangements satisfactory to each
such Other Creditor to indemnify it against any failure of the Borrower and its
Subsidiaries to make all payments owing with respect to each such Interest Rate
Protection Agreement or Other Hedging Agreement.
6. AMENDMENT. No modification, amendment, waiver or release
of any provision of this Agreement or of any right, obligation, claim or cause
of action arising hereunder shall be valid or binding for any purpose whatsoever
unless in writing and duly executed by HFS and the Administrative Agent (with
the consent of the Required Banks).
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0000B69E.W51
<PAGE>
7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICTS OF LAW PRINCIPLES.
8. TERMINATION. This Agreement shall terminate on the date on
which all commitments under the Credit Agreement have terminated and all amounts
owing thereunder have been repaid in full.
9. THIRD PARTY BENEFICIARIES. This Agreement is entered into
for the benefit of the holders from time to time of the Senior Indebtedness, and
may not be amended or modified in any respect, or terminated, without the
consent of the Administrative Agent (with the consent of the Required Banks).
The provisions of this Agreement are continuing provisions and all Senior
Indebtedness to which they apply shall conclusively be presumed to have been
created in reliance thereon. Except to the extent provided in Section 2.04
hereof, this Agreement is not entered into for the benefit of the Borrower, and
neither the Borrower nor any creditor of the Borrower (other than the holders
from time to time of the Senior Indebtedness) shall be a third party beneficiary
of this Agreement. Except as otherwise expressly set forth herein (including by
reference to the Credit Agreement), no provision of this Agreement shall be
deemed to modify or release the Borrower from any of the Subordinated
Obligations.
10. NOTICES ETC. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been duly given or made when delivered to
the party to which notice, request, demand or other communication is required or
permitted to be given or made under this Agreement, addressed as follows:
(a) if to HFS, at:
HFS Incorporated
339 Jefferson Road
Parsippany, NJ 07054
Attention: James E. Buckman, Esq.
Telephone No.: (201) 428-9700
Facsimile No.: (201) 428-5269
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(b) if to the Borrower, at:
National Lodging Corp.
c/o HFS Incorporated
339 Jefferson Road
Parsippany, NJ 07054
Attention: Robert S. Kinglsey
Telephone No.: (201) 428-9700
Facsimile No.: (201) 428-5269
(c) if to the Administrative Agent or the Collateral Agent,
at:
Bankers Trust Company
130 Liberty Street
New York, NY 10006
Attention: Cindy Jay
Telephone No.: (212) 250-2855
Facsimile No.: (212) 250-7218
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
* * *
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<PAGE>
IN WITNESS WHEREOF, HFS and the Administrative Agent have
caused this Agreement to be duly executed and delivered as of the date first
written above.
HFS INCORPORATED
By /s/ Stephen Holmes
Title: Executive Vice President
BANKERS TRUST COMPANY,
as Administrative Agent for the Banks
By /s/ Cynthia A. Jay
Title: Vice President
Acknowledged and agreed by:
NATIONAL LODGING CORP.
By /s/ James E. Buckman
Title: Executive Vice President
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EXHIBIT J
HFS SUBORDINATED NOTE
$----------- --------------, ----
FOR VALUE RECEIVED, NATIONAL LODGING CORP., a Delaware
corporation (the "Company"), hereby promises to pay to HFS INCORPORATED (the
"Payee"), on ________________1 in lawful money of the United States of America
in immediately available funds, at , the principal sum of DOLLARS ($ ).
The Company further promises to pay interest on the unpaid
principal amount hereof in like money at said office from the date hereof until
paid at a rate per annum which shall, during each Interest Period applicable
hereto, be equal to the sum of the Applicable Margin as in effect from time to
time plus the Eurodollar Rate for such Interest Period. Successive three month
Interest Periods (beginning on the date hereof) shall be applicable for purposes
of making all interest determinations pursuant to this HFS Subordinated Note,
with accrued interest to be paid hereunder (subject to the subordination
provisions referenced below) on the last day of each such Interest Period.
Interest Periods and the Applicable Margin applicable to this HFS Subordinated
Note shall be determined on the same basis as is provided in the Credit
Agreement, and the Eurodollar Rate for each Interest Period shall also be
determined as provided in the Credit Agreement. As used herein, the term "Credit
Agreement" shall mean the Credit Agreement, dated as of January 23, 1996, among
the Company, various lenders from time to time party thereto, Chemical Bank, as
Documentation Agent, and Bankers Trust Company, as Administrative Agent, as same
may be amended, modified, extended, renewed, replaced, restated, supplemented or
refinanced from time to time, and including any agreement extending maturity of,
refinancing or restructuring all or any portion of, the indebtedness under such
agreement or any successor agreements.
The parties hereto hereby agree that all payments hereunder
shall be subordinated as provided in the HFS Subordination Agreement referred to
in the Credit Agreement. Furthermore, to the extent a payment is not permitted
to be paid by virtue of said subordination provisions, the Payee shall not
exercise any rights or remedies in respect
- --------
1 Insert date which is on or later than the first anniversary of the Final
Maturity Date as defined under the Credit Agreement, as may be modified, amended
or supplemented from time to time.
0000947Q.W51
<PAGE>
EXHIBIT J
Page 2
of any amount owing under this HFS Subordinated Note which is not permitted to
be paid at such time as a result of such subordination provisions.
The holder of this HFS Subordinated Note, by acceptance
hereof, agrees with the Company that this HFS Subordinated Note, and the
Company's obligations hereunder, shall be subordinate and junior to all
indebtedness of the Company constituting Senior Indebtedness (as defined in the
HFS Subordination Agreement) on the terms and conditions set forth in the HFS
Subordination Agreement, which HFS Subordination Agreement is herein
incorporated by reference and made a part hereof as if set forth herein in its
entirety.
This HFS Subordinated Note may not be pledged, transferred or
assigned by Payee without the prior written consent of the Company.
This HFS Subordinated Note shall be construed in accordance
with and be governed by the law of the State of New York.
NATIONAL LODGING CORP.
By___________________________
Title:
Agreed and Accepted:
HFS INCORPORATED
By_____________________________________
Title:
0000947Q.W51
<PAGE>
EXHIBIT K
ASSIGNMENT AND ASSUMPTION AGREEMENT
Date ________, ____
Reference is made to the Credit Agreement described in Item 2
of Annex I hereto (as such Credit Agreement may hereafter be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Unless defined in Annex I hereto, terms defined in the Credit Agreement are used
herein as therein defined. ___________ (the "Assignor") and __________ (the
"Assignee") hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee
without recourse and without representation or warranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and obligations
under the Credit Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I hereto (the "Assigned Share") of all of
the outstanding rights and obligations of the Assignor under the Credit
Agreement relating to the Total Revolving Loan Commitment, including all rights
and obligations with respect to the Assigned Share of the Total Revolving Loan
Commitment and the Revolving Loans and Letters of Credit.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the other Credit Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of HFS or the
Borrower or any of its Subsidiaries or the performance or observance by HFS or
the Borrower and its Subsidiaries of any of their obligations under the Credit
Agreement or the other Credit Documents to which they are a party or any other
instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement and the other Credit Documents, together with copies of the
financial statements referred to therein and such other documents and
information as it has deemed appropriate
000092JD.W51
<PAGE>
Exhibit K
page 2
to make its own credit analysis and decision to enter into this Assignment and
Assumption Agreement; (ii) agrees that it will, independently and without
reliance upon the Administrative Agent, the Documentation Agent, the Assignor or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) confirms that it is an
Eligible Transferee under the Credit Agreement; (iv) appoints and authorizes the
Administrative Agent, the Documentation Agent, and the Collateral Agent to take
such action as administrative agent, documentation agent and collateral agent,
as the case may be, on its behalf and to exercise such powers under the Credit
Agreement and the other Credit Documents as are delegated to the Administrative
Agent, the Documentation Agent, and the Collateral Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; [and] (v) agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of the Credit Agreement are required to be performed by it as a
Bank[; and (vi) to the extent legally entitled to do so, attaches the forms
described in Section 13.04(b) of the Credit Agreement.]1
4. Following the execution of this Assignment and Assumption
Agreement by the Assignor and the Assignee, an executed original hereof
(together with all attachments) will be delivered to the Administrative Agent.
The effective date of this Assignment and Assumption Agreement shall be the date
of execution hereof by the Assignor and the Assignee and the receipt of any
consent of BTCo and any other Issuing Bank to the extent required by Section
13.04(b) of the Credit Agreement, the receipt by the Administrative Agent of the
assignment fee referred to in such Section 13.04(b) and the recordation of the
assignment effected hereby on the Register by the Administrative Agent as
provided in Section 13.16 of the Credit Agreement, or such later date, if any,
which may be specified in Item 5 of Annex I hereto (the "Settlement Date").
5. Upon the delivery of a fully executed original hereof to
the Administrative Agent and the recordation of the assignment effected hereby
on the Register by the Administrative Agent as provided in Section 13.16 of the
Credit Agreement, as of the Settlement Date, (i) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this Assignment and
Assumption Agreement, have the rights and obligations of a Bank thereunder and
under the other Credit Documents and (ii) the Assignor shall, to the extent
provided in this Assignment and Assumption Agreement, relinquish its
- --------
1 If the Assignee is organized under the laws of a jurisdiction outside the
United States.
000092JD.W51
<PAGE>
Exhibit K
page 3
rights and be released from its obligations under the Credit Agreement and the
other Credit Documents.
6. It is agreed that the Assignee shall be entitled to (w) all
interest on the Assigned Share of the Revolving Loans at the rates specified in
Item 6 of Annex I hereto; (x) all Commitment Commission on the Assigned Share of
the Total Revolving Loan Commitment at the rate specified in Item 7 of Annex I
hereto; and (y) all Letter of Credit Fees on the Assignee's participation in all
Letters of Credit at the rate specified in Item 8 of Annex I hereto, which, in
each case, accrue on and after the Settlement Date, such interest, Commitment
Commission and Letter of Credit Fees, to be paid by the Administrative Agent
directly to the Assignee. It is further agreed that all payments of principal
made on the Assigned Share of the Revolving Loans which occur on and after the
Settlement Date will be paid directly by the Administrative Agent to the
Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor an
amount specified by the Assignor in writing which represents the Assigned Share
of the principal amount of the Revolving Loans made by the Assignor pursuant to
the Credit Agreement which are outstanding on the Settlement Date, net of any
closing costs, and which are being assigned hereunder. The Assignor and the
Assignee shall make all appropriate adjustments in payments under the Credit
Agreement for periods prior to the Settlement Date directly between themselves.
7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
* * *
000092JD.W51
<PAGE>
Exhibit K
page 4
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written.
Accepted this _____ day [NAME OF ASSIGNOR],
of _______, ____ as Assignor
By
Title:
[NAME OF ASSIGNEE],
as Assignee
By
Title:
Acknowledged:
BANKERS TRUST COMPANY,
as Administrative Agent
By________________________
Title:
[Acknowledged and Agreed:
BANKERS TRUST COMPANY,
as an Issuing Bank]
By________________________
Title:]
000092JD.W51
<PAGE>
Exhibit K
page 5
[NAME OF ANY OTHER ISSUING BANK]
as an Issuing Bank
By________________________2
Title:]
- --------
2 Consent of Issuing Bank is required for assignments pursuant to Section
13.04(b)(y) of the Credit Agreement.
000092JD.W51
<PAGE>
ANNEX I
ANNEX FOR BANK ASSIGNMENT AND ASSUMPTION AGREEMENT
1. Borrower: National Lodging Corp.
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of January 23, 1996, among National
Lodging Corp., the Banks from time to time party thereto,
Chemical Bank, as Documentation Agent, and Bankers Trust
Company, as Administrative Agent.
3. Date of Assignment Agreement:
----------- ----, ----.
4. Amount (as of date of item #3 above):
Revolving Loan
Commitment
a. Aggregate Amount
for all Banks $_____________
b. Assigned Share _____________%
c. Amount of
Assigned Share ______________
5. Settlement Date:
--------- ----, ----.
6. Rate of Interest As set forth in Section 1.08
to the Assignee: of the Credit Agreement
(unless otherwise agreed to
by the Assignor and the
000092JD.W51
<PAGE>
Annex I
page 2
Assignee).3
7. Commitment Commission: As set forth in Section 3.01(a)
of the Credit Agreement (unless
otherwise agreed to by the
Assignor and the Assignee).4
8. Letter of Credit As set forth in Section 3.01(c)
Fees to the Assignee: of the Credit Agreement (unless
otherwise agreed to by the
Assignor and the Assignee).5
9. Notice:
ASSIGNOR:
=====================
=====================
Attention:
Telephone No.:
Facsimile No.:
Reference:
- --------
3 The Borrower and the Administrative Agent shall direct the entire
amount of the interest to the Assignee at the rate set forth in Section
1.08 of the Credit Agreement, with the Assignor and Assignee effecting
the agreed upon sharing of the interest through payments by the
Assignee to the Assignor.
4 The Borrower and the Administrative Agent shall direct the entire amount of
the Commitment Commission to the Assignee at the rate set forth in Section
3.01(a) of the Credit Agreement, with the Assignor and the Assignee
effecting the agreed upon sharing of Commitment Commission through payment
by the Assignee to the Assignor. 5 The Borrower and the Administrative
Agent shall direct the entire amount of the Letter of Credit Fees to the
Assignee at the rate set forth in Section 3.01(b) of the Credit Agreement,
with the Assignor and the Assignee effecting the agreed upon sharing of
Letter of Credit Fees through payment by the Assignee to the Assignor.
000092JD.W51
<PAGE>
Annex I
page 3
ASSIGNEE:
=====================
=====================
Attention:
Telephone No.:
Facsimile No.:
Reference:
Payment Instructions:
ASSIGNOR:
=====================
=====================
ABA No.:
Account No.:
Reference:
Attention:
ASSIGNEE:
=====================
=====================
ABA No.:
Account No.:
Reference:
Attention:
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By_____________________________ By_____________________________
Title Title
000092JD.W51
<PAGE>
Exhibit L-1
Site No.:
Property:
LICENSE AGREEMENT
FORTE HOTELS, INC.
1973 FRIENDSHIP DRIVE, EL CAJON, CALIFORNIA 92020
THIS AGREEMENT entered into at El Cajon, California, this ________ day
of January 1996, by and between FORTE HOTELS, INC., a California corporation,
hereinafter referred to as "LICENSOR," and __________________________, a
Delaware corporation, hereinafter referred to as "LICENSEE," who is the owner,
lessee, and/or operator of the specific premises described as follows:
located at
hereinafter referred to as the "property" or the "motor hotel".
WITNESSETH:
WHEREAS, LICENSOR has developed and implemented a plan for providing,
and has provided, a network of motor hotels and related services of high
quality and of distinguishing characteristics (hereinafter referred to as the
"System"), including (but not limited to) the following:
(1) The right to use the registered service marks and trademarks,
"Travelodge(R)" and "Sleepy Bear(R)," which have been registered or applied for
in the United States Patent Office and in the appropriate trademark offices in
other countries, use of both of which is solely and exclusively granted by
LICENSOR;
(2) The words, service marks or trademarks "Travelodge(R),"
"Travelodge(R) Hotel," "Travelodge(R) Motel," "Sleepy Bear(R)," and other
combinations of said words, service marks or trademarks, either alone or in
association with the color schemes, building designs, insignia, logograms,
slogans and signs, used as part of the System, in association with a nationwide
service of motor hotels all symbolizing standardized, high quality, distinctive
motor hotel service;
(3) Style, color and other distinguishing characteristics equipment,
furnishings and appliances used in and about the motor hotel or any other
distinguishing characteristics;
(4) Methods of operation, referrals and reservation procedures and
national advertising and publicity service; and
364962.1
<PAGE>
(5) Standardized, uniform motor hotels services providing lodging,
food, beverage, and other conveniences, parking for automobiles, and motor
hotel services of a distinctive nature in accordance with fair and ethical
policies and practices and with the highest standards of efficiency, courtesy,
hospitality and cleanliness; and
WHEREAS, LICENSEE wishes to be a part of the System and to be licenses
to provide motor hotel services of the same distinctive nature and high quality
as has been established and to use the same trademarks, service marks, color
patterns and schemes, signs, designs and other distinguishing characteristics
of the System as have been established and are provided by LICENSOR. It is the
intention of the parties that the motor hotel which is the subject of the
license granted under this Agreement, together with motels and motor hotels now
or hereafter operated by LICENSOR and/or joint ventures of which LICENSOR
and/or affiliates are a party, and those operated or to be operated by other
licensees, will form parts of the System. The success of both parties to this
Agreement and of other licensees is directly affected by the business conduct
of all licensees in the System. LICENSEE, therefore, recognizes that adherence
to the terms of this Agreement, including the payment of all fees, is a matter
of mutual importance and consequence to LICENSEE, to Licensor and to all other
licensees.
THE TRAVELODGE(R) System is comprised of the LICENSOR, ITS LICENSEES,
ITS CUSTOMERS, ITS POTENTIAL CUSTOMERS AND ITS VENDORS AND SUPPLIERS. It is the
role of LICENSOR to administer the License Agreement and in so doing weigh the
needs of the entire TRAVELODGE system, and all of the licensees in it. LICENSOR
has a paramount duty to protect the Travelodge trademark for the ultimate
benefit of the TRAVELODGE franchise system. Any control TRAVELODGE LICENSOR
exerts over LICENSEE pursuant to this Agreement is limited to the amount
necessary to protect LICENSOR's trademarks and service marks.
NOW, THEREFORE, IT IS MUTUALLY COVENANTED AND AGREED AS
FOLLOWS:
1. LICENSOR grants to LICENSEE, subject to the terms and conditions
hereof, a nonexclusive license to use the System and the registered trademarks
and service marks, "Travelodge(R)" and "Sleepy Bear(R)" for and in connection
with LICENSEE'S aforesaid motor hotel, the location of which is described
above. Said motor hotel shall be operated under the name Hayward (S.F. Bay),
except as otherwise required hereunder.
2. a. This Agreement and License shall be in effect for a term
commencing on the date hereof and continuing for a period (the "Term") of
twenty (20) years. NEITHER PARTY HAS RENEWAL RIGHTS OR OPTIONS.
b. Notwithstanding the foregoing, this Agreement may be terminated
during the term hereof if LICENSEE shall:
-2-
364962.1
<PAGE>
i.) violate any covenant, condition or obligation herein
contained, or any standard in the then current
TRAVELODGE operations manual, or contained in any
other agreement between the parties hereto or their
affiliated companies, and such violation continues
after the expiration of thirty (30) days after
written notice of default from LICENSOR stating the
facts of such breach; or
ii.) make an assignment for the benefit of creditors or
become insolvent; or file a voluntary petition in
bankruptcy, or be adjudicated a bankrupt or
insolvent, or file any petition or answer seeking
any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, under any
present or future law or regulation or seek or
acquiesce in the appointment of any trustee,
receiver or liquidator for any substantial part of
the properties of LICENSEE; or if, within sixty (60)
days after the commencement of any proceeding
against LICENSEE seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or
future law or regulation, such proceeding shall not
have been dismissed; or if, within sixty (60) days
after the appointment without the consent or
acquiescence of LICENSEE of any trustee, receiver or
liquidator of any substantial part of the properties
of LICENSEE of any trustee, receiver or liquidator
of any substantial part of the properties of
LICENSEE, such appointment shall not have been
vacated; or
iii.) following substantial destruction by fire or other
cause, not rebuild and open for business to the
public within a period not exceeding twelve (12)
months, in accordance with the original plans or
such other plans and specifications as shall be
approved by LICENSOR in writing.
Then LICENSOR may, at its option, by written notice to
LICENSEE, immediately declare this Agreement and License and all rights and
privileges hereunder terminated, and LICENSEE shall pay to LICENSOR any and all
accrued amounts due to the effective date of such termination and any and all
damages suffered by LICENSOR as a result of such termination.
Both parties agree that if LICENSEE violates any covenant,
condition or obligation contained herein, LICENSOR shall be entitled to
compensation for the detriment incurred, but that it is extremely difficult and
impractical to ascertain the extent of the detriment. To avoid this problem,
the parties agree to liquidated damages as provided in Paragraph 30.
3. In consideration of the extremely valuable rights granted to
LICENSEE hereunder, Licensee shall make payments to Licensor as follows:
-3-
364962.1
<PAGE>
a. An initial license fee (hereinafter the "initial license
fee") of Dollars ($0.00), plus any applicable taxes, which has been fully
earned and is, therefore, nonrefundable.
b. In addition, LICENSEE shall, within five (5) days after
the end of each calendar month during the term of this Agreement, commencing
with the calendar month in which operations begin at the motor hotel, pay to
LICENSOR royalty fee equal to four percent (4%) of the Gross Room Revenue. This
royalty fee is in consideration of LICENSEE's use of LICENSOR's trademarks and
service marks, and is fully earned each day such trademarks and service marks
are used by LICENSEE, and is not subject to any counterclaims or setoffs of any
nature.
c. LICENSEE agrees that a percentage of the Gross Room
Revenue (as that term is defined herein) of the motor hotel shall be paid each
month to the Licensor Marketing Fund for national advertising and promotion of
motels and motor hotels operating under Licensor's Trademarks and Service Marks
within five (5) days after the end of each calendar month. The percentage of
Gross Room Revenue to be paid hereunder, currently four percent (4.0%), shall
be set by the Board of Directors of LICENSOR, from time to time, and the
percentage so set shall be effective commencing on the first day of the month
following the month in which the Board of Directors so set the said percentage.
LICENSEE may receive bills from LICENSOR for its proportionate share of the
cost of the referral reservation and directory service, for travel agents' or
airline commissions for LICENSEE's property, and for other services provided to
the LICENSEE and LICENSEE shall timely pay the amount of such bills.
d. All past due accounts incurred pursuant to this section
shall bear an interest rate not to exceed one and one-half percent (1 1/2%) of
the unpaid balance per month, or the highest rate of interest permitted by law
in the jurisdiction where the motor hotel is located, whichever is lower, and
LICENSEE authorizes LICENSOR to deduct any sums LICENSEE is in arrears to
LICENSOR from any sums payable by TRAVELODGE LICENSOR to LICENSEE.
e. It is anticipated that the LICENSOR may enter into certain
contractual obligations on behalf of LICENSEE including, but not limited to,
agreements in connection with the sites for, erection or maintenance of one or
more billboard type advertising signs. LICENSOR may expend funds at its
discretion to best support the Travelodge system. To induce LICENSOR to enter
into such contractual arrangements, LICENSEE does hereby agree to pay all costs
and expenses, and to hold LICENSOR harmless from all costs and liability,
incurred in connection therewith. LICENSOR will only enter into such property
specific agreements with LICENSEE's approval. TRAVELODGE LICENSOR does not
guarantee any minimum number of guests from the referral reservation and
directory service.
f. The term "Gross Room Revenue" as used herein shall include
all receipts derived from the renting, use or occupancy of guest rooms and
meeting rooms in the
-4-
364962.1
<PAGE>
motor hotel, excluding sales taxes or other taxes which may be required by law
to be collected from guests.
4. a. On, or before five (5) days after the end of each calendar
month, LICENSEE shall submit to LICENSOR a statement on special forms provided
to LICENSEE by LICENSOR showing the number of rooms rented and the Gross Room
Revenue obtained with respect to the motor hotel during such month, and each
such statement shall be certified by LICENSEE to be true and accurate and shall
be accompanied by the payment set forth in Paragraphs 3.b and 3.c above.
b. LICENSEE shall keep on the premises of the motor hotel
true and accurate books, records and accounts relating to Gross Room Revenues
for a period of at least two (2) years, and LICENSOR, its agents or
representatives, shall be allowed to examine and audit and make copies of
entries in said books, records and accounts at all reasonable times. If
LICENSOR, or its agents or representatives discover a discrepancy in LICENSEE
reporting to LICENSOR of greater than five percent (5%), then the LICENSEE
shall reimburse LICENSOR for all costs incurred in performing such audit,
including travel, meals and lodging for the auditors.
c. LICENSEE shall provide LICENSOR, within sixty (60) days
following the close of each fiscal year, a Statement of Operations, including
an unaudited Balance Sheet and Profit and Loss Statement for such fiscal year,
copies of occupancy tax forms submitted to governmental agencies and at other
times such reports as LICENSOR may require on forms to be prescribed by
LICENSOR, all to be true and correct and prepared in conformity with generally
accepted accounting principles on a basis consistent with that of the prior
year. LICENSEES with motor hotels of 100 rooms or more must also provide
LICENSOR with a revenue audit prepared by an independent certified public
accountant for each fiscal year. Such audit will be provided to LICENSOR within
sixty (60) days of the close of LICENSEE'S fiscal year.
5. a. LICENSEE acknowledges LICENSOR's exclusive right and title to
use and to license others to use the registered service marks and trademarks.
LICENSEE agrees not to use or imitate the said System or service marks and
trademarks except under written license from LICENSOR;
b. The License herein granted to use "Travelodge(R)," "Sleepy
Bear(R)," and any other service marks and trademarks subsequently adopted by
LICENSOR is nonexclusive and is applicable only to the specific motor hotel
described herein;
c. Exclusive title and rights to use and to license others to
use any other service marks and trademarks subsequently adopted by LICENSOR for
the System or any part thereof or addition thereto shall be the exclusive
property of LICENSOR;
-5-
364962.1
<PAGE>
d. All highway or other signs depicting the words, style and
design of "Travelodge(R)" and also the likeness "Sleepy Bear(R)" which
advertise LICENSEE's motor hotel shall first be approved by LICENSOR in writing
in all respects, including size, location, copy, color and materials, which
approval shall not be unreasonably withheld;
e. In all uses of the registered marks "Travelodge(R)" and
"Sleepy Bear(R)" by LICENSEE, an "R" in a circle shall be affixed adjacent to
such marks: (R), and in Canada the following legend included at least once in
connection with such use: "Marks used under license".
f. LICENSEE shall not use the name "Travelodge(R)" nor
"Sleepy Bear(R)" as a part of its partnership, joint venture, corporate or
other business name; and
g. Upon any termination of this Agreement this instrument
forthwith constitutes an assignment to LICENSOR of all of LICENSEE's rights in
and to said service marks and trademarks, "Travelodge(R)" and "Sleepy Bear(R),"
together with the good will of the business then symbolized thereby insofar as
LICENSEE and said motor hotels are concerned, and LICENSEE will immediately
discontinue all use of said registered service marks and trademarks and shall
immediately obliterate the words "Travelodge(R)," "Sleepy Bear(R)" and the
design of "Sleepy Bear(R)" from LICENSEE's signs and from any and all places
and materials whatsoever.
If LICENSEE shall fail to obliterate any such words within
fifteen (15) days after written demand, then LICENSOR by its duly authorized
agents may enter upon the premises of LICENSEE to accomplish said results
without being guilty of trespass or any other tort, and may make or cause to be
made such changes at the expense of LICENSEE, which LICENSEE agrees to pay on
demand. LICENSOR and LICENSEE further agree that it would be impractical or
extremely difficult to fix the actual damage sustained by LICENSOR for
LICENSEE's use of the service marks and trademarks "Travelodge(R)" or "Sleepy
Bear(R)," and LICENSEE agrees therefore to pay to LICENSOR as liquidated
damages Five Hundred Dollars ($500) a day for each day's unauthorized use
thereof. LICENSEE also agrees that LICENSOR will suffer great and irreparable
injury from any use by LICENSEE, after the termination of this Agreement of the
service marks and trademarks "Travelodge(R)" and "Sleepy Bear(R)" and that
injunctive relief will be the only fair, adequate and complete remedy available
to LICENSOR. Accordingly, LICENSEE hereby consents to the entry of an
injunction in favor of LICENSOR, permanently enjoining further use of said
service marks and trademarks subsequent to any such termination of this
Agreement.
6. LICENSEE agrees:
a. To maintain a high moral standard and atmosphere at
LICENSEE's Travelodge(R);
-6-
364962.1
<PAGE>
b. To comply with all local, State and Federal laws,
ordinances, rules and regulations pertaining thereto; to maintain its premises
and accommodations in a clean, safe and orderly manner;
c. To provide efficient, courteous and high quality
Travelodge(R) System service to the public;
d. To furnish motor hotel services and conveniences of the
same quality, type and distinguishing characteristics as are established and
maintained by LICENSOR in the System, to the end that the motor hotel operated
by LICENSEE under this Agreement shall help to create and build good will among
the public for Travelodge(R) System motels and motor hotels as a whole and so
that LICENSOR, LICENSEE, and each member of said system shall be benefitted,
and the public assured uniform, efficient, courteous, high quality service on a
standardized basis; to comply with any and all marketing manuals as are
currently used in the System, or which may hereafter be implemented for use in
the System by LICENSOR;
e. To conduct its motor hotel business and advertise the same
by use of such symbols as may be established from time to time by LICENSOR and
none other; to diligently promote and make every reasonable effort to steadily
increase said business by selling and providing accommodations and related
services at its motor hotel to all persons who inquire for them and by printed
advertisements and highway signs a reasonable distance from the location of the
motor hotel;
f. To refrain from using any items of merchandise, equipment,
stationery, supplies, furnishings or utensils bearing the service marks or
trademarks, "Travelodge(R)" or "Sleepy Bear(R)," in connection with the
operation of the motor hotel unless the same shall have been first submitted to
and approved in writing by LICENSOR, which approval shall not be unreasonably
withheld;
g. To use and distribute guidebooks and directories in
accordance with standards and requirements established by LICENSOR;
h. To repair and paint (color scheme to be approved by
LICENSOR) the exterior and interior of the motor hotel buildings and structures
at reasonable times or upon the request of LICENSOR; and at all times to
maintain the interior and exterior of the building, structures and surrounding
premises in a clean, orderly and sanitary condition satisfactory to LICENSOR.
The failure to repair and paint is to be considered a monetary default;
i. To permit inspection at all reasonable times of
accommodation and related service facilities and procedures by LICENSOR
representatives to assure full compliance with this Agreement;
-7-
364962.1
<PAGE>
j. To comply with the standards of hosting, management, food
service and preparation, and housekeeping established by the Operations
Department of LICENSOR, and to follow the procedures set forth in the
operations manual published by LICENSOR (as revised from time to time), receipt
of a copy of which is acknowledged. No variation from these standards and
procedures is permitted without the prior written consent of LICENSOR. The
Travelodge(R) operations manual shall remain the sole property of LICENSOR and
shall be returned to LICENSOR in the event of the termination of this
Agreement;
k. To abide by the operational policy decisions determined by
the representative board of the system and by the majority decisions of the
co-owner and licensees of the System. However, in the event of any conflict
between said operational policy decisions and provisions of the Travelodge(R)
operations manual, the latter shall control. LICENSEE shall cooperate with
LICENSOR, the Licensor Marketing Fund and the owners and manager of other
Travelodge(R) motels and motor hotels with regard to common problems and
policies;
l. To obtain the approval of LICENSOR for all furniture,
furnishings, fixtures, supplies, utensils and equipment which it proposes to
use in its motor hotel; to purchase or lease from LICENSOR, or from anyone
designated by LICENSOR, all furniture, furnishings, fixtures, supplies,
utensils and equipment which it proposes to use in its motor hotel. LICENSEE
shall not be obligated to purchase or lease any of said items from LICENSOR or
its designee if LICENSEE desires to purchase or lease the same from third
persons provided, however, said items must be at least equal in quality and
strength to those specified by LICENSOR for the System in its specifications in
respect thereof;
m. To give consideration to rental rates to be charged for
motor hotel rooms to be rented to the public that LICENSOR, on the basis of its
experience in respect to relevant factors including services offered, location
and area, may from time to time recommend to the end that the public and the
System will best be served and protected, particularly against excessive
charges;
n. To cause the person or person who will be directly
responsible for the management and operation of the motor hotel business
contemplated by this Agreement to attend the LICENSOR orientation school to
become familiar with the System. The cost for attending the orientation school
shall be borne by LICENSEE;
o. To participate in all LICENSOR network promotions and
programs including, but not limited to VNA, FIT, group coupons, industry
discounts, senior citizens, airline discounts, travel agent discounts, family
plans, children's-free policy, children's programs, Break Rate programs and
Frequent Traveler Program;
p. To comply with LICENSOR standards for guest supplies;
-8-
364962.1
<PAGE>
q. To participate in LICENSOR's international referral system
for guests, groups and meeting planners;
r. To comply with LICENSOR standards for reservation services
and equipment including, but not limited to, airline surcharges, general sales
agents fees and property terminal system;
s. To attend the annual Travelodge(R) Conference, area
meetings and special LICENSOR meetings;
t. To comply with all travel trade policies and procedures
including, but not limited to, travel agent commissions, group tour policies,
travel agent and group promotions and trade show support;
u. To participate in LICENSOR programs that recognize
individuals or companies responsible for booking guests into Travelodge(R); and
v. To comply with LICENSOR employee standards for uniform
appearance, and treatment of guests. LICENSOR shall have no authority to hire,
fire, or control LICENSEE's employees.
7. LICENSOR expressly reserves the right to reasonably revise, amend
and change from time to time the System or any part thereof. Such System, as so
changed, revised or amended, shall for all purposes be deemed to be the System
referred to in this Agreement. Any and all improvements in the System developed
by LICENSOR or by LICENSEE shall be and become the sole and absolute property
of LICENSOR and become part of the LICENSOR business knowledge, and LICENSEE
shall have no right to use such improvements or business knowledge except in
accordance with this Agreement. Information and data disclosed by LICENSEE in
respect to its motor hotel operations and business shall not be confidential.
8. During the term of this Agreement, LICENSEE will not discontinue
the operation of the motor hotel under the service mark and trademark
"Travelodge(R)," nor sell, transfer, assign, lease or sublet, nor offer to
sell, transfer, assign, lease or sublet any interest in the names
"Travelodge(R)" or "Sleepy Bear(R)," the motor hotel or any part thereof, or in
the business conducted in connection therewith, or in the buildings, equipment
or furnishings used in connection therewith, or any interest in LICENSEE
without the prior written consent of LICENSOR, which consent shall not be
unreasonably withheld. In approving of the proposed transferee, TRAVELODGE
LICENSOR shall take into consideration, among other factors, the financial
condition of the proposed transferee, the proposed transferee's previous
business experience and the general integrity and reputation of the proposed
transferee.
a. If LICENSEE, at any time during the term hereof, shall
receive a bona fide offer acceptable to LICENSEE to purchase, lease or sublease
the motor hotel,
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364962.1
<PAGE>
LICENSEE shall promptly inform LICENSOR in writing, setting forth the full
terms of such offer, and LICENSOR may, within thirty (30) days after receipt of
such written notice, at its option, elect, by giving written notice to
LICENSEE, to purchase, lease or sublease the motor hotel on the same terms and
conditions contained in said offer. Until the end of said thirty (30) day
option period, LICENSEE shall not accept any third-party bona fide offer;
b. If, at the expiration of the thirty (30) day period
referred to in Subparagraph 8.a. above, LICENSOR has failed to elect to
exercise said option, LICENSEE may transfer, sell, lease or sublease the motor
hotel on terms no more favorable than those submitted to LICENSOR in writing,
subject to LICENSOR's approval of the prospective purchaser or lessee, as
hereinafter provided. LICENSOR shall have sixty (60) days from and after the
expiration of the aforementioned thirty (30) day period to approve or
disapprove of the prospective successor in writing. In the event the
prospective successor is not acceptable, LICENSOR shall notify the LICENSEE of
this fact in writing. In such event, LICENSEE shall not be permitted to
transfer its interest in this Agreement and in the License granted hereby to
any other party without first obtaining LICENSOR's approval. In the event of a
transfer without LICENSOR's prior approval, LICENSOR shall have the right to
immediately terminate this Agreement;
c. In the event the prospective successor is acceptable to
LICENSOR, such acceptance shall be conditioned upon the fact that the
prospective successor agrees to enter into the then current standard form of
License Agreement being offered by LICENSOR to prospective licensees with the
royalty provision stated in such form of agreement, but the requirement of
initial franchise fee or its equivalent shall be waived by LICENSOR; and
d. Upon any transfer of LICENSEE's interest in the motor
hotel, the successor or successors to LICENSEE, as a condition of their right
to the continued enjoyment of the benefits of this Agreement, and to reimburse
LICENSOR for its expenses in respect to reviewing the qualifications of the
prospective transferee, will be required at LICENSOR's option, to pay to
LICENSOR a nonrefundable license transfer fee of Ten Thousand Dollars
($10,000).
9. LICENSOR shall have the privilege, if LICENSEE desires to sell,
lease, sublease or otherwise transfer its rights to the motor hotel described
in this Agreement, to participate with real estate brokers in the listing of
the said property and in said transaction and to receive usual reasonable
brokerage commissions, fees and costs relating thereto, if LICENSOR procures a
buyer or lessee.
10. LICENSEE warrants that its execution of this AGREEMENT and use of
the marks "Travelodge(R)" and "Sleepy Bear(R)," as provided herein, are not a
breach of any agreement or covenant with any other person, firm or company. If
any person, firm or company shall claim that LICENSEE's execution of this
Agreement or use of the marks, "Travelodge(R)" or "Sleepy Bear(R)" is a breach
of any such agreement or covenant then LICENSEE will, at its cost and expense,
defend such against claim and pay, indemnify and
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save LICENSOR harmless from all liability and damages including costs and
attorney's fees which LICENSOR may incur or sustain in defending against any
such claims asserted by such other person, firm or company.
11. If LICENSEE is to occupy the described premises under a lease,
sublease or other written contract from the owner thereof, LICENSEE shall,
prior to the execution thereof, obtain LICENSOR's written approval of such
lease, sublease or other contract, and such instrument shall contain the
express covenant that throughout its term the premises shall be used solely and
exclusively as and for a motor hotel under all of the terms and conditions of
this Agreement, and that no assignment, transfer, change, modification or other
amendment of such instrument shall be entered into between the owner and
LICENSEE without the express consent in writing of LICENSOR, which consent
shall not be unreasonably withheld. This provision, however, shall be subject
to the right of LICENSOR to cancel this Agreement, as set forth in Subparagraph
8.b. of this Agreement. If LICENSEE occupies said premises under a lease,
sublease or other contract with the owner as aforesaid, it is agreed that
LICENSEE will cause an "Owner's Consent" to the foregoing, in a form prescribed
by LICENSOR, to be executed and acknowledged by the owner of said premises
within fifteen (15) days after the day hereof, and if such Owner's Consent
shall not be obtained, LICENSOR shall have the option to terminate this
Agreement.
12. LICENSOR agrees:
a. To make available consultation with LICENSOR's officials
and staff on matters relating hereto;
b. To make available, upon LICENSEE's request, information
that LICENSOR may have with respect to equipment, furniture, furnishings and
supplies, including prices thereof, necessary or convenient to operating
LICENSEE's motor hotel;
c. To assist LICENSEE in installing methods of motor hotel
operations found by LICENSOR to be sound and effective, and to provide
orientation in LICENSOR methods to personnel responsible for the management and
operation of the motor hotel (not to exceed three persons), selected by
LICENSEE. Such orientation shall be provided at such place as LICENSOR may
designate, and LICENSEE shall be responsible for the trainee's wages, board,
room and transportation expenses during the orientation period;
d. To encourage use by the traveling public of those motels
and motor hotels operating under licenses from LICENSOR or operated by joint
ventures in which LICENSOR or its affiliates are a party;
e. To furnish to LICENSEE lease terms or prices on signs,
entrance signs, decalcomania, forms, stationery and other items of a kind which
are then being made available to other licensees of LICENSOR. It is agreed that
LICENSEE need not lease or purchase any of the foregoing items from LICENSOR;
however LICENSOR shall have the
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right of prior approval of any such items to be leased or purchased by LICENSEE,
which approval shall not be unreasonably withheld; and
f. To make available to LICENSEE, at LICENSEE's request and
at a price to be agreed upon, any or all of the following:
i.) Formulation and implementation of an
accounting/control system;
ii.) complete motor hotel accounting service, including
preparation of balance sheets, profit and loss
statements, depreciation and other schedules and
income tax data; and
iii.) Advertising and promotional programs for use at
local level.
13. No additional construction or substantial alteration shall be made
with respect to the motor hotel, unless working drawings and specifications and
color schemes are first approved in writing by LICENSOR, which approval shall
not be unreasonably withheld. Upon completion of an addition, LICENSEE agrees
to pay to LICENSOR Three Hundred Dollars ($300) per room for Travelodge and
Three Hundred Fifty Dollars ($350) per room for Travelodge Hotel for each
additional rental room added.
14. During the term of this Agreement, LICENSEE shall procure, carry
and pay for windstorm, fire and extended coverage insurance. The proceeds of
any such insurance, in the event of damage or destruction, shall be used to
repair or restore the buildings as nearly as possible to their original
condition and value.
15. LICENSEE agrees to indemnify and hold harmless LICENSOR, its
officers, agents and employees from loss, cost, damage, expense and liability,
including attorney's fees and court costs, by reason of damage or loss,
including personal injury, of whatsoever nature or kind, arising in connection
with the business of the motor hotel or out of, or as a result of, any
negligent or intentional act or failure to act on the part of LICENSEE, its
agents, employees, tenants or sub-tenants. LICENSEE agrees to place with an
insurance company rated A - or higher by Best's Key Rating Guide and reasonably
approved by LICENSOR and keep in effect during this Agreement, insurance for
the benefit of LICENSOR (as well as for LICENSEE) covering public liability, on
a broad form basis with limits not less than Five Million Dollars ($5,000,000)
combined single limits for bodily injury and property damage and include
personal injury, products, liquor legal liability and non-owned automobile
coverage. LICENSOR is to be named as an additional insured and in case of
modification or cancellation of the contract, LICENSOR is to be given 30 days
notice. Insurance provisions are to be approved by LICENSOR. In addition,
LICENSEE agrees to provide proper Worker's Compensation insurance covering all
of its employees. LICENSEE further agrees to deliver to LICENSOR the
certificates naming LICENSOR as an additional insured and to promptly pay all
premiums on said policies as and when the same become due.
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16. This Agreement contains the entire agreement of the parties, and
no representation, inducement, promise or agreement, oral or otherwise, not
embodied herein, shall be of any force or effect. No failure of LICENSOR to
exercise any power hereunder, or insist upon strict compliance by LICENSEE and
any obligation hereunder, and no custom or practice at variance with the terms
hereof shall constitute a waiver of LICENSOR's right to demand exact compliance
with the terms hereof. Waiver by LICENSOR of any default by LICENSEE shall not
affect or impair LICENSOR's rights in respect to any subsequent default of the
same or a different kind, or any delay or omission of LICENSOR to exercise any
right arising from any default shall affect or impair LICENSOR's right to the
same or any future default. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing.
17. LICENSEE is an independent contractor, and LICENSOR and LICENSEE
are not and shall not be considered as joint venturers, partners, employees or
agents of each other, and neither shall have the power to bind or obligate the
other, except as set forth in this Agreement. LICENSEE shall hold itself out to
the public, and all those with whom it does business, as being independently
owned and operated, and to prominently display notice of its independent status
on all printed material associated with the subject property. LICENSOR and
LICENSEE have entered into this agreement for the pursuit of profit and
professional fulfillment. Each represents that it has substantial experience in
its prospective business and will not rely upon the expertise of the other in
the operation of its respective businesses.
18. LICENSEE hereby acknowledges that the License granted by this
Agreement is nonexclusive and that LICENSOR may own or operate, alone or in
conjunction with others through a joint venture or otherwise, motels or motor
hotels; and further may license others, on the same or different terms as the
within Agreement, to operate TRAVELODGE(R) and/or other motels or motor hotels
within the near vicinity of the subject motor hotel.
19. LICENSOR shall not be liable to any person or company for any
debts incurred with respect to the motor hotel and business or related business
thereof unless LICENSOR specifically agrees in writing to pay such debts.
LICENSEE agrees to indemnify and hold LICENSOR harmless from such debts,
including reasonable attorney's fees and court costs.
20. In any suit or action brought under the terms of this Agreement, a
reasonable attorney's fee of the prevailing party shall be fixed by the court
and shall be taxed as a part of the costs in favor of the prevailing party in
such suit or action.
21. Any action to enforce this Agreement shall be filed in, and shall
be governed by and construed in accordance with the laws of, the State of
California. The parties waive and will waive all right to jury trial of any
dispute either arising from the LICENSOR/LICENSEE relationship, or with respect
to this Agreement. The parties waive and will
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waive all right to seek punitive and/or exemplary damages in any action that
arises from the LICENSOR/LICENSEE relationship with respect to this Agreement.
The place of performance for this Contract shall be in San
Diego County, California. LICENSEE shall make the payments required by
Paragraph 3 of this Agreement and submit the statements required by Paragraph 4
of this Agreement to LICENSOR at its principal place of business in El Cajon,
California.
22. All terms and words used in this Agreement, regardless of the
number and gender in which they are used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context or sense of this Agreement or any paragraph
or clause herein may require, as if such words had been fully and properly
written in the appropriate number and gender.
23. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original, but such
counterparts together shall constitute but one and the same instrument.
24. Should any part of this Agreement, for any reason, be declared or
held invalid, such invalidity shall not affect the validity of any remaining
portion, which remaining portion shall remain in force and effect as if this
Agreement had been executed with the invalid portion thereof eliminated; and it
is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part, parts or portion which may, for any reason, be hereafter declared
invalid.
25. All notices pertaining to this Agreement by one party to the other
shall be sent by registered or certified mail: If to LICENSOR, addressed to it
at 1973 Friendship Drive, El Cajon, California 92020, and if to LICENSEE
addressed to it at 339 Jefferson Road, Parsippany, New Jersey 07054 or at such
other address as either of the parties shall designate by written notice to the
other from time to time. Service of any notice made by mail, or reliable
overnight delivery service in the manner herein provided shall be conclusively
deemed complete on the day of actual delivery as shown by the addressee's
registry or certification receipt, or at the expiration of the second day after
the date of mailing, whichever is earlier in time.
26. All rights under this Agreement shall inure to the benefit of the
successors and assigns of LICENSOR. This Agreement is not intended to benefit
any other person or entity except the named parties hereto and no other person
or entity shall be entitled to any rights hereunder by virtue of so-called
'third party beneficiary rights' or otherwise.
27. In the event LICENSEE or any successor of LICENSEE herein is a
corporation, partnership, joint venture or other entity other than named
individuals doing business under their own names, it agrees as follows:
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a. To furnish LICENSOR at the time of execution of this
Agreement, or if a successor, as a condition of obtaining LICENSOR's approval
of such transfer, a stockholders' agreement executed by all of its stockholders
stating that no such stockholder will sell, assign or transfer any of his stock
to any person or company other than his immediate family or persons who also
are stockholders, without the written consent of LICENSOR, which consent will
not be unreasonably withheld;
b. That no unissued stock will be issued to any person or
company other than its stockholders without the written consent of LICENSOR,
which consent will not be unreasonably withheld, and that it will furnish
LICENSOR, at the time of execution of this Agreement, or, if a successor, as a
condition of obtaining LICENSOR's approval of such transfer, a resolution of
its Board of Directors which has been ratified by the stockholders to such
effect;
c. To furnish to LICENSOR, at the time of execution of this
Agreement, the name of a designated individual to act as representative of
LICENSEE in connection with all matters pertaining to this Agreement, which
designated individual will be conclusively presumed to have full authority to
act for LICENSEE in all matters, and in no event shall LICENSOR be responsible
for any action taken by such individual on behalf of LICENSEE; provided,
however, that the designated individual may be changed from time to time by
notice in writing to LICENSOR and, in the event of such notice, the previously
designated individual shall be deemed to have been replaced by the individual
named in such notice as of the date of receipt of such notice by LICENSOR; and
d. That in the event of a violation of the provisions of
Subparagraphs a., b. or c. above, or in the event stock is sold, assigned,
transferred or issued in violation of said stockholder's agreement or
resolution, LICENSOR shall have the option and right, after giving LICENSEE
thirty (30) days written notice in which to cure said violations, to forthwith
cancel and terminate this Agreement, and thereupon the rights and obligations
hereunder shall cease, but such termination shall not affect the obligations
hereunder of LICENSEE to take action or abstain from taking action after the
termination hereof as provided elsewhere in this Agreement, nor shall it affect
the responsibility of LICENSEE for damages or sums due as provided in Paragraph
2.a. above.
28. LICENSOR may accept any check or payment in any amount without
prejudice to LICENSOR's right to recover the balance of the amount due or to
pursue any other right or remedy. No endorsement or statement on any check or
payment or in any letter accompanying any check or payment or elsewhere shall
constitute or be construed as an accord or satisfaction.
29. The expiration or termination of this Agreement shall be without
prejudice to any rights of LICENSOR against LICENSEE and such expiration or
termination shall not relieve LICENSEE of any of its obligations to LICENSOR
existing at the time of expiration or termination or terminate those
obligations of LICENSEE which, by their nature, survive
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<PAGE>
the expiration or termination of this Agreement. LICENSEE is obligated to
return, at no expense to the LICENSOR, any and all copies of the operations
manual, other manuals and any other communications media and material provided
for LICENSEE's use without additional charge in connection with the operation
of the Franchised Business.
30. Notwithstanding anything contained herein to the contrary, the
following special stipulations shall be controlling:
a. Paragraph 2.b.(i) hereof is modified by inserting the word
"material" between the words "any" and "covenant" and between the words "any"
and "standard" in the first line thereof.
b. Paragraph 2.b.(iii) hereof is modified by adding at the
end thereof the words "which approval shall not be unreasonably withheld or
delayed".
c. The percentage of Gross Room Revenue to be paid to the
Licensor Marketing Fund pursuant to Paragraph 3.c. shall be four percent (4%)
which percent may be changed by the Board of Directors of LICENSOR in its
discretion, provided that any increases therein shall be limited to increases
reasonably required to cover the cost of providing the services funded by the
Licensor Marketing Fund.
d. In calculating Gross Room Revenue under Paragraph 3.f.
hereof, there shall also be excluded from the receipts described therein
separate charges to guests for food and beverage, room service, telephone
charges, key forfeitures and entertainment, and vending machine receipts.
e. Paragraphs 8.a., 8.b., 8.c. and 8.d. are deleted.
f. Paragraph 9 is deleted.
g. Paragraph 10 is modified by deleting the second sentence
thereof and inserting in lieu thereof the following:
Licensor will indemnify, defend and hold harmless
LICENSEE, to the fullest extent permitted by law,
from and against all losses, liability and expenses
(including reasonable attorney's fees) incurred by
LICENSEE in any action or claim arising from
LICENSEE's proper use of the System and the marks
licensed hereunder alleging that LICENSEE's use of
the System and such marks is an infringement of a
third party's rights to any trade secret, patent,
copyright, trademark, servicemark or trade name.
LICENSEE shall promptly notify LICENSOR in writing
when any such infringement claim or action is
commenced or threatened and LICENSEE shall cooperate
in the defense and resolution of such action or
claim. Any such claim or action may be resolved by
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<PAGE>
LICENSOR requiring that LICENSEE modify its use of
the infringing or allegedly infringing property to
avoid said infringement, so long as such
modification does not materially adversely affect
LICENSEE's operation of the motor hotel which is
licensed hereunder.
h. Paragraph 11 hereof is deleted.
i. Paragraph 27 is deleted. LICENSEE agrees that the transfer
of more than 20% of the currently outstanding equity of LICENSEE, or the
issuance of more than 20% of additional equity in, LICENSEE in either case
without the written consent of LICENSOR, shall be a breach of this Agreement by
LICENSEE permitting the LICENSOR to terminate this Agreement for cause.
j. Paragraph 12.e. hereof is modified by deleting the word
"decalcomania" therefrom.
k. The parties establish the following schedule of liquidated
damages payable by LICENSEE to LICENSOR within 15 days after termination of
this Agreement prior to expiration of the Term by LICENSOR with cause or by
LICENSEE without cause, insofar as actual damages are difficult to predict and
this formula is a reasonable pre-estimate of the actual damages to be suffered
by LICENSOR as a result of premature termination of this Agreement. LICENSEE
shall pay to LICENSOR the product of the aggregate payments due from LICENSEE
pursuant to Paragraph 3.b. (whether or not paid by LICENSEE) during the last
twelve (12) months the LICENSEE was part of the TRAVELODGE System under this
Agreement, multiplied by the "Factor." If the LICENSEE has not been a part of
the TRAVELODGE System under this Agreement for at least twelve (12) months, the
parties agree that liquidated damages shall be calculated by taking the average
of monthly payments due from LICENSEE pursuant to Paragraph 3.b. (whether or
not paid by LICENSEE) under this Agreement times twelve (12), then multiplying
by the Factor. If the termination occurs before the end of the fourth year of
the Term, then the Factor will be five (5). If the termination occurs during
the fifth year of the Term, the Factor will be four (4). If the termination
occurs during the sixth year of the Term, the Factor will be three (3). If the
termination occurs after the sixth year of the Term, the Factor will be two
(2).
l. LICENSEE and any assignee or successor of the original
LICENSEE may assign this Agreement to, the lessee or transferee of fee simple
title to the motor hotel upon thirty (30) days prior written notice to LICENSOR
at any time during the Term when LICENSEE is not in default under this
Agreement without payment of an application, initial or transfer fee by
LICENSEE or the assignee provided that (1) the assignee completes and returns
to LICENSOR at least fifteen (15) days before the transfer of possession or
title, whichever comes first, LICENSOR's standard license applications, (2) the
assignee is reasonably acceptable to LICENSOR, (3) for a period ending on the
seventh anniversary of the date of execution of this Agreement, LICENSEE
remains primarily liable for the timely and full payment of the Licensee's
obligations under this Agreement for the payment of
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<PAGE>
liquidated damages in accordance with Paragraph 30.k., and (4) the assignee
assumes this Agreement by writing acceptable to and directly enforceable by
LICENSOR. From and after said seventh anniversary, LICENSEE shall have no
further liability under this subparagraph 1.
m. LICENSEE may terminate this Agreement at any time without
incurring the damages provided in Paragraph 30.k., provided that LICENSEE shall
have entered into a license or franchise agreement with another subsidiary of
HFS Incorporated ("HFS") providing for the operation of the Property as part of
the franchise system owned by said subsidiary, which agreement shall be in the
then current standard form of license or franchise agreement being offered to
prospective licensees or franchisees by said subsidiary in its then current
Uniform Franchise Offering Circular for the state in which the Property is
located. Such agreement shall be modified to include liquidated damages and
assignment provisions substantially the same as Paragraphs 30.k. and 30.1.
hereof, after giving effect to the expiration of the period prior to such
termination of this Agreement, and a term at least equal to the unexpired
portion of the original term of this Agreement. LICENSEE acknowledges that
neither HFS nor any subsidiary of HFS shall be obligated to enter into any
license or franchise agreement with LICENSEE with respect to the Property.
{SIGNATURE PAGE TO FOLLOW}
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IN WITNESS WHEREOF, the undersigned have set their hands and seals as
of the day and year first above written.
FORTE HOTELS, INC.
a California corporation a Delaware corporation
by__________________________ _____________________________
by__________________________ _____________________________
"LICENSOR" "LICENSEE"
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EXHIBIT L-2
Location: Jamaica, New York
Entity No.
Unit No.:
RAMADA FRANCHISE SYSTEMS, INC.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement"), dated _______________, 19___, is
between RAMADA FRANCHISE SYSTEMS, INC., a Delaware corporation ("we", "our" or
"us"), and Forte Hotels, Inc., a Delaware corporation ("you"). The definitions
of capitalized terms are found in Appendix A. In consideration of the
following mutual promises, the parties agree as follows:
1. License. We acquired from Franchise Systems Holdings, Inc. ("FSH") pursuant
to the Master License Agreements the right to use and to sublicense certain
trade names, trademarks and service marks including the Marks and the
distinctive Ramada System for providing transient guest lodging services to
the public under the "RAMADA" name and certain services to its licensees,
including the Reservation System, advertising, marketing and training
services. We have the exclusive right to license and franchise to you the
distinctive "Ramada" System for providing transient guest lodging services. We
grant to you and you accept the License, effective and commencing on the
Opening Date and ending on the earliest to occur of the Term's expiration, a
Transfer or a Termination. You will call the Facility a "Ramada Plaza Hotel."
You may adopt additional or secondary designations for the Facility with our
prior written consent, which we may withhold, condition, or withdraw on
written notice in our sole discretion.
2. Ramada Inns National Association.
2.1 Membership. You automatically become a member of the Ramada Inns National
Association ("RINA"), an unincorporated association. Other Chain licensees are
also members of RINA. RINA may consider and discuss common issues relating to
advertising and operation of facilities in the System and, through its
Executive Committee, make recommendations to us regarding such issues and
other matters.
2.2 Annual Conference. A RINA conference is held each year. The conference
date and location will be determined by the RINA Executive Committee after
consultation with us. You will pay not less than one "Conference Registration
Fee" for each Facility you own. When you pay the Conference Registration Fee,
you may send your representative to the conference. Additional Facility
representatives may attend subject to conference policies and after payment of
an additional Conference Registration Fee for each such additional attendee.
You will pay the costs of
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<PAGE>
transportation, lodging and meals (except those we provide as part of the
Conference) for your attendees.
3. Your Improvement and Operating Obligations. Your obligations
to improve, operate and maintain the Facility are:
3.1 Improvements. You must select and acquire the Location and acquire, equip
and supply the Facility in accordance with System Standards. You must provide
us with proof that you own or lease the Facility before or within 30 days
after the Effective Date. You must begin renovation of the Facility no later
than thirty (30) days after the Effective Date. The deadline for completing
the pre-opening phase of conversion and renovation, when the Facility must
score at least 450 points (or equivalent) under our quality assurance
inspection system and be ready to open for business under the System, is
ninety (90) days after the Effective Date. All renovations will comply with
System Standards, any Approved Plans, Schedule B and any Punch List attached
to this Agreement. Your general contractor or you must carry the insurance
required under this Agreement during renovation. You must complete the
pre-opening renovation specified on the Punch List and the Facility must pass
its pre-opening quality assurance inspection with a score of at least 450
points (or equivalent) before we consider the Facility to be ready to open
under the System. You must continue renovation and improvement of the Facility
after the Opening Date as the Punch List requires and pass a post-opening
quality assurance inspection within nine (9) months after the Opening Date. We
may, in our sole discretion, terminate this Agreement by giving written notice
to you (subject to applicable law) if (1) you do not commence or complete the
pre-opening or post-opening improvements of the Facility by the dates
specified in this Section, or (2) you prematurely identify the Facility as a
Chain Facility or begin operation under the System name described in Schedule
B in violation of Section 3.3 and you fail to either complete the pre-opening
Improvement Obligation or cease operating and/or identifying the Facility
under the Marks and System within five days after we send you written notice
of default. Time is of the essence for the Improvement Obligation. We may,
however, in our sole discretion, grant one or more extensions of time to
perform any phase of the Improvement Obligation. You will pay us a
non-refundable extension fee of $2.00 per room for each day of any extension
of the deadline for completing pre-opening improvements. This fee will be
payable to us after each 30 days of the extension. You will pay us the balance
of the extension fee outstanding when the Facility opens under the System 10
days after the Opening Date. The grant of an extension will not waive any
other default existing at the time the extension is granted.
3.2 Improvement Plans. You will create plans and specifications
for the work described in Section 3.1 (based upon the System
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<PAGE>
Standards and this Agreement) if we so request and submit them for our
approval before starting improvement of the Location. We will not unreasonably
withhold or delay our approval, which is intended only to test compliance with
System Standards, and not to detect errors or omissions in the work of your
architects, engineers, contractors or the like. Our review does not cover
technical, architectural or engineering factors, or compliance with federal,
state or local laws, regulations or code requirements. We will not be liable
to your lenders, contractors, employees, guests, others or you on account of
our review or approval of your plans, drawings or specifications, or our
inspection of the Facility before, during or after renovation or construction.
Any material variation from the Approved Plans requires our prior written
approval. You will promptly provide us with copies of permits, job progress
reports, and other information as we may reasonably request. We may inspect
the work while in progress without prior notice.
3.3 Pre-Opening. You may identify the Facility as a Chain Facility prior to
the Opening Date, or commence operation of the Facility under a Mark and using
the System, only after first obtaining our approval or as permitted under and
strictly in accordance with the System Standards Manual. If you identify the
Facility as a Chain Facility or operate the Facility under a Mark before the
Opening Date without our express written consent, then in addition to our
remedies under Sections 3.1 and 11.2, you will begin paying the Royalty to us,
as specified in Section 7.1, from the date you identify or operate the
Facility using the Mark. We may delay the Opening Date until you pay the
Royalty accruing under this Section.
3.4 Operation. You will operate and maintain the Facility continuously after
the Opening Date on a year-round basis as required by System Standards and
offer transient guest lodging and other related services of the Facility
(including those specified on Schedule B) to the public in compliance with the
law and System Standards. You will keep the Facility in a clean, neat, and
sanitary condition. You will clean, repair, replace, renovate, refurbish,
paint, and redecorate the Facility and its FF&E as and when needed to comply
with System Standards. The Facility will be managed by either a management
company or an individual manager with significant training and experience in
general management of similar lodging facilities. The Facility will accept
payment from guests by all credit and debit cards we designate in the System
Standards Manual. You may add to or discontinue the amenities, services and
facilities described in Schedule B, or lease or subcontract any service or
portion of the Facility, only with our prior written consent which we will not
unreasonably withhold or delay. Your front desk operation, telephone system,
parking lot, swimming pool and other guest service facilities may not be
shared with or used by guests of another lodging or housing facility.
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3.5 Training. You (or a person with executive authority if you are an entity)
and the Facility's general manager will attend the training programs described
in Section 4.1 we designate as mandatory for licensees or general managers,
respectively. You will train or cause the training of all Facility personnel
as and when required by System Standards and this Agreement. You will pay for
all travel, lodging, meals and compensation expenses of the people you send
for training programs, the cost of training materials and other reasonable
charges we may impose for training under Section 4.1, and all travel, lodging,
meal and facility and equipment rental expenses of our representatives if
training is provided at the Facility.
3.6 Marketing. You will participate in System marketing programs, including
the Directory and the Reservation System. You will obtain and maintain the
computer and communications service and equipment we specify to participate in
the Reservation System. You will comply with our rules and standards for
participation, and will honor reservations and commitments to guests and
travel industry participants. You may implement, at your option and expense,
your own local advertising. Your advertising materials must use the Marks
correctly, and must comply with System Standards or be approved in writing by
us prior to publication. You will stop using any non-conforming, out-dated or
misleading advertising materials if we so request.
3.6.1 You will participate in any regional marketing, training or management
alliance or cooperative of Chain licensees formed to serve the Chain
Facilities in your area. We may assist the cooperative collect contributions.
You may be excluded from cooperative programs and benefits if you don't
participate in all cooperative programs according to their terms, including
making payments and contributions when due.
3.7 Governmental Matters. You will obtain as and when needed all governmental
permits, licenses and consents required by law to construct, acquire,
renovate, operate and maintain the Facility and to offer all services you
advertise or promote. You will pay when due or properly contest all federal,
state and local payroll, withholding, unemployment, beverage, permit, license,
property, ad valorem and other taxes, assessments, fees, charges, penalties
and interest, and will file when due all governmental returns, notices and
other filings.
3.8 Inspections and Audits. You will permit our representatives to perform
quality assurance inspections of the Facility and audit your financial and
operating books and records (including tax returns) relating to the Facility
and any related business, with or without prior notice of the inspection or
audit. The inspections and audits will commence during normal business hours,
although we may observe Facility operation and accounting
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activity at any time. You, the Facility staff and your other agents and
employees will cooperate with our inspectors and auditors in the performance
of their duties. You will pay us any underpayment of, and we will pay you or
credit your Recurring Fee account for any overpayment of, Recurring Fees
discovered by an audit. You will pay the reasonable travel, lodging and meal
expenses of our reinspection or audit and any reinspection fee we may impose
if the Facility does not pass an inspection, you refuse to cooperate with our
auditors or inspectors, or the audit reveals that you paid us less than 97% of
the correct amount of Recurring Fees. We may publish or disclose the results
of quality assurance inspections.
3.9 Reports and Accounting. You will prepare and submit timely monthly reports
containing the information we require about the Facility's performance during
the preceding month. You will prepare and submit other reports and information
about the Facility as we may reasonably request from time to time or in the
System Standards Manual. You will maintain accounting books and records in
accordance with generally accepted accounting principles and the American
Hotel & Motel Association Uniform System of Accounts for Hotels, as amended,
subject to this Agreement and other reasonable accounting standards we may
specify from time to time. You will prepare and submit to us if we so request
your annual and semiannual financial statements. We do not require that your
financial statements be independently audited, but you will send us a copy of
your audited statements if you have them audited and we ask for them.
3.10 Insurance. You will obtain and maintain during the Term of this Agreement
the insurance coverage required under the System Standards Manual from
insurers meeting the standards established in the Manual. Unless we instruct
you otherwise, your liability insurance policies will name Ramada Franchise
Systems, Inc. and HFS Incorporated as additional insureds.
3.11 Conferences. You or your representative will attend each annual RINA
conference and pay the Conference Registration Fee described in Section 2.2.
Mandatory recurrent training for licensees and general managers described in
Section 4.1.3 may be held at a RINA conference. The Fee will be the same for
all Chain Facilities that we license in the United States. You will receive
reasonable notice of a Chain conference.
3.12 Purchasing. You will purchase or obtain certain items we designate as
proprietary or that bear Marks from suppliers we approve. You may purchase any
other items for the Facility from any competent source you select, so long as
the items meet or exceed System Standards.
3.13 Good Will. You will use reasonable efforts to protect,
maintain and promote the name "Ramada" and its distinguishing
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characteristics, and the other Marks. You will not permit or allow your
officers, directors, principals, employees, representatives, or guests of the
Facility to engage in conduct which is unlawful or damaging to the good will
or public image of the Chain or System. You will participate in Chain-wide
guest service and satisfaction guaranty programs we require in good faith for
all Chain Facilities. You will follow System Standards for identification of
the Facility and for you to avoid confusion on the part of guests, creditors,
lenders, investors and the public as to your ownership and operation of the
Facility, and the identity of your owners.
3.14 Facility Modifications. You may materially modify, diminish or expand the
Facility (or change its interior design, layout, FF&E, or facilities) only
after you receive our prior written consent, which we will not unreasonably
withhold or delay. You will pay our Rooms Addition Fee then in effect for each
guest room you add to the Facility. If we so request, you will obtain our
prior written approval of the plans and specifications for any material
modification, which we will not unreasonably withhold or delay. You will not
open to the public any material modification until we inspect it for
compliance with the Approved Plans and System Standards.
3.15 Courtesy Lodging. You will provide lodging at the "Employee Rate"
established in the System Standards Manual from time to time (but only to the
extent that adequate room vacancies exist) to our representatives traveling on
business, but not more than three standard guest rooms at the same time.
3.16 Minor Renovations. Beginning three years after the Opening Date, we may
issue a "Minor Renovation Notice" to you that will specify reasonable Facility
upgrading and renovation requirements (a "Minor Renovation") to be commenced
no sooner than 60 days after the notice is issued, having an aggregate cost
for labor, FF&E and materials estimated by us to be not more than the Minor
Renovation Ceiling Amount. You will perform the Minor Renovations as and when
the Minor Renovation Notice requires. We will not issue a Minor Renovation
Notice within three years after the date of a prior Minor Renovation Notice,
or if the three most recent quality assurance inspection scores of the
Facility averaged at least 450 points or equivalent and the most recent
quality assurance inspection score for the Facility was at least 425 points or
equivalent when the Facility is otherwise eligible for a Minor Renovation.
4. Our Operating and Service Obligations. We will provide you
with the following services and assistance:
4.1 Training. We will offer general manager training, property opening,
recurrent training and supplemental training.
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4.1.1 Management Training. Between 60 days before and six months after the
projected Opening Date, we will offer at a location in the United States we
designate, and the Facility general manager must complete a training program
to our satisfaction. The training program will not exceed two weeks in
duration and will cover such topics as System Standards, services available
from us, and operating a Chain Facility. We may charge you a reasonable fee
for materials for each manager trainee. Each manager's training program may
vary depending on his or her prior training and experience. Any replacement
general manager of the Facility must complete the training program within the
time specified in the System Standards Manual. No tuition will be charged for
your first participation in this training but you must pay for your
representative's travel, lodging, meals, incidental expenses, compensation and
benefits. We may charge you reasonable tuition for training for replacement
managers.
4.1.2 Property Opening Training. We will provide at the Facility or another
agreed location, a "Property Training Program" (at our discretion as to length
and scheduling) to assist you in opening the Facility. There is no charge for
the Property Training Program other than for the reasonable expenses for
travel, room, board and other out-of-pocket costs of our representatives.
4.1.3 Recurrent Training. We will provide training for you and the Facility's
managers if we determine that additional training for licensees and managers
is necessary from time to time. Training will be held in our U.S. training
center or other locations, or in conjunction with regional workshops or
conferences. You will pay for your representative's travel, lodging, meals,
incidental expenses, compensation and benefits for this training. We may
charge reasonable tuition for refresher courses and regional workshops. This
training may be held in conjunction with a Chain conference.
4.1.4 Supplemental Training. We may offer optional training programs without
charge or for tuition. We may offer or sell to you video tapes, computer discs
or other on-site training aids and materials, or require you to buy them at
reasonable prices.
4.1.5 We may charge you a reasonable cancellation fee if you cancel your
training program commitments or reservations within 30 days (or such shorter
period as we may specify) before the start of any training program at which
you or your representative has a reservation. We may charge you tuition for
your representatives to attend mandatory sessions other than those people we
require to attend the training and fees for instructional materials.
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4.2 Reservation System. We will operate and maintain (directly or by
subcontracting with an affiliate or one or more third parties), with funds
allocated from the collections of the RINA Services Assessment Fee, a
computerized Reservation System or such technological substitute(s) as we
determine, in our discretion. We will use the allocated RINA Services
Assessment Fees for the acquisition, development, support, equipping,
maintenance, improvement and operation of the Reservation System. We will
provide software maintenance for the software we license to you to connect to
the Reservation System if your Recurring Fee payments are up to date. The
Facility will participate in the Reservation System, commencing with the
Opening Date for the balance of the Term. We have the right to provide
reservation services to lodging facilities other than Chain Facilities or to
other parties. We will not offer callers to our general consumer toll free
reservation telephone number in the United States the opportunity to make
reservations for other lodging chains.
4.3 Marketing.
4.3.1 We will promote public awareness and usage of Chain Facilities with
funds allocated from collections of the RINA Services Assessment Fees by
implementing advertising, promotion, publicity, market research and other
marketing programs, training programs and related activities, and the
production and distribution of Chain publications and directories of hotels.
We will determine in our discretion: (i) The nature and type of media
placement; (ii) The allocation (if any) among international, national,
regional and local markets; and (iii) The nature and type of advertising copy,
other materials and programs. We or an affiliate may be reimbursed for the
reasonable direct and indirect costs, overhead or other expenses of providing
marketing services. We are not obligated to supplement or advance funds
available from collections of the RINA Services Assessment Fees to pay for
marketing activities. We do not promise that the Facility or you will benefit
directly or proportionately from marketing activities.
4.3.2 We may, at our discretion, implement special international, national,
regional or local promotional programs (which may or may not include the
Facility) and may make available to you (to use at your option) media
advertising copy and other marketing materials for prices which reasonably
cover the materials' direct and indirect costs.
4.3.3 We will publish the Chain Directory. We will include the Facility in the
Chain Directory after it opens if you submit the information we request on
time, and you are not in default under this Agreement at the time we must
arrange for publication. We will supply Directories to you for display at
locations specified in the System Standards Manual or policy statements. We
may assess you a reasonable charge for the direct and indirect
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expenses (including overhead) of producing and delivering the
Directories.
4.4 Purchasing. We may offer optional assistance to you with purchasing items
used at or in the Facility. Our affiliates may offer this service on our
behalf. We may restrict the vendors authorized to sell proprietary or
Mark-bearing items in order to control quality, provide for consistent service
or obtain volume discounts. We will maintain and provide to you lists of
suppliers approved to furnish Mark-bearing items, or whose products conform to
System Standards.
4.5 The System. We will control and establish requirements for all aspects of
the System. We may, in our discretion, change, delete from or add to the
System, including any of the Marks or System Standards, in response to
changing market conditions. We may, in our discretion, permit deviations from
System Standards, based on local conditions and our assessment of the
circumstances.
4.6 Consultations and Standards Compliance. We will assist you to understand
your obligations under System Standards by telephone, mail, during quality
assurance inspections, through the System Standards Manual, at training
sessions and during conferences and meetings we conduct. We will provide
telephone and mail consultation on Facility operation and marketing through
our representatives.
4.7 System Standards Manual and Other Publications. We will specify System
Standards in the System Standards Manual, policy statements or other
publications. We will lend you one copy of the System Standards Manual
promptly after we sign this Agreement. We will send you any System Standards
Manual revisions and/or supplements as and when issued. We will send you all
other publications for Chain licensees and all separate policy statements in
effect from time to time.
4.8 Inspections and Audits. We have the unlimited right to conduct unannounced
quality assurance inspections of the Facility and its operations, records and
Mark usage to test the Facility's compliance with System Standards and this
Agreement, and the audits described in Section 3.8. We have the unlimited
right to reinspect if the Facility does not achieve the score required on an
inspection. We may impose a reinspection fee and will charge you for our
reasonable costs of travel, lodging and meals for any reinspection, or for an
audit if you pay less than 97% of the correct amount of Recurring Fees. Our
inspections are solely for the purposes of checking compliance with System
Standards.
5. Term. The Term begins on the Effective Date and expires on
the day prior to the fifteenth anniversary of the Opening Date.
Some of your duties and obligations will survive termination or
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expiration of this Agreement. You will execute and deliver to us with this
Agreement a notarized Declaration of License Agreement in recordable form. We
will countersign and return one copy of the Declaration to you. We may, at our
option, record the Declaration in the real property records of the county
where the Facility is located. The Declaration will be released at your
request and expense when this Agreement terminates or expires and you perform
your post-termination obligations. NEITHER PARTY HAS RENEWAL RIGHTS OR
OPTIONS.
6. Application and Initial Fees. The application fee and
initial fee shall be waived.
7. Recurring Fees, Taxes and Interest.
7.1 You will pay us certain "Recurring Fees" in U.S. dollars (or such other
currency as we may direct if the Facility is outside the United States)
fifteen days after the month in which they accrue, without billing or demand.
Recurring Fees include the following:
7.1.1 A "Royalty" equal to four percent (4.0%) of Gross Room Revenues of the
Facility accruing during the calendar month, accrues from the earlier of the
Opening Date or the date you identify the Facility as a Chain Facility or
operate it under a Mark until the end of the Term.
7.1.2 A "RINA Services Assessment Fee" as set forth in Schedule C for
advertising, marketing, training, the Reservation System and other related
services and programs, accrues from the Opening Date until the end of the
Term. On behalf of RINA, we collect and deposit the Fees from licensees, then
disburse and administer the funds collected by means of a separate account or
accounts. The RINA Services Assessment Fee is subject to change for all Chain
Facilities, and new fees and charges may be assessed for new services, by
substituting a new Schedule C or otherwise, but only upon the recommendation
of the RINA Executive Committee and after our approval. You will also pay or
reimburse us for travel agent commissions paid for reservations at the
Facility and other fees levied to pay for reservations for the Facility
originated or processed through other reservation systems and networks. We may
charge a reasonable service fee for this service. We may charge Facilities
using the Reservation System outside the United States for reservation service
using a different formula. We may use the RINA Services Assessment Fees we
collect, in whole or in part, to reimburse our reasonable direct and indirect
costs, overhead or other expenses of providing marketing, training and
reservation services.
7.2 You will pay to us "Taxes" equal to any federal, state or local sales,
gross receipts, use, value added, excise or similar taxes assessed against us
on the Recurring Fees by the
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jurisdictions where the Facility is located, but not including any income tax,
franchise or other tax for the privilege of doing business by us in your
State. You will pay Taxes to us when due.
7.3 "Interest" is payable when you receive our invoice on any past due amount
payable to us under this Agreement at the rate of 1.5% per month or the
maximum rate permitted by applicable law, whichever is less, accruing from the
due date until the amount is paid.
7.4 If a transfer occurs, your transferee or you will pay us our then current
Application Fee and a "Relicense Fee" equal to the Initial Fee we would then
charge a new licensee for the Facility.
8. Indemnifications.
8.1 Independent of your obligation to procure and maintain insurance, you will
indemnify, defend and hold the Indemnitees harmless, to the fullest extent
permitted by law, from and against all Losses and Expenses, incurred by any
Indemnitee for any investigation, claim, action, suit, demand, administrative
or alternative dispute resolution proceeding, relating to or arising out of
any transaction, occurrence or service at, or involving the operation of the
Facility, any breach or violation of any contract or any law, regulation or
ruling by, or any act, error or omission (active or passive) of, you, any
party associated or affiliated with you or any of the owners, officers,
directors, employees, agents or contractors of you or your affiliates,
including when the active or passive negligence of any Indemnitee is alleged
or proven. You have no obligation to indemnify an Indemnitee for damages to
compensate for property damage or personal injury if a court of competent
jurisdiction makes a final decision not subject to further appeal that the
Indemnitee engaged in wilful misconduct or intentionally caused such property
damage or bodily injury. This exclusion from the obligation to indemnify shall
not, however, apply if the property damage or bodily injury resulted from the
use of reasonable force by the Indemnitee to protect persons or property.
8.2 You will respond promptly to any matter described in the preceding
paragraph, and defend the Indemnitee. You will reimburse the Indemnitee for
all costs of defending the matter, including attorneys' fees, incurred by the
Indemnitee if your insurer or you do not assume defense of the Indemnitee
promptly when requested. We must approve any resolution or course of action in
a matter that could directly or indirectly have any adverse effect on us or
the Chain, or could serve as a precedent for other matters.
8.3 We will indemnify, defend and hold you harmless, to the fullest extent
permitted by law, from and against all Losses and Expenses incurred by you in
any action or claim arising from your
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proper use of the System alleging that your use of the System and any property
we license to you is an infringement of a third party's rights to any trade
secret, patent, copyright, trademark, service mark or trade name. You will
promptly notify us in writing when you become aware of any alleged
infringement or an action is filed against you. You will cooperate with our
defense and resolution of the claim. We may resolve the matter by obtaining a
license of the property for you at our expense, or by requiring that you
discontinue using the infringing property or modify your use to avoid
infringing the rights of others.
9. Your Assignments, Transfers and Conveyances.
9.1 Transfer of the Facility. This Agreement is personal to you (and your
owners if you are an entity). We are relying on your experience, skill and
financial resources (and that of your owners and the guarantors, if any) to
sign this Agreement with you. You may finance the Facility and grant a lien,
security interest or encumbrance on it without notice to us or our consent. If
a Transfer is to occur, the transferee or you must comply with Section 9.3.
Your License terminates when the Transfer occurs. If the transferee does not
sign a replacement license agreement with us before you give the transferee
ownership or possession of the Facility, then the License terminates when you
transfer ownership or possession of the Facility. The transferee may not
operate the Facility under the System, and you are responsible for performing
the post-termination obligations in Section 13. You and your owners may, only
with our prior written consent and after you comply with Sections 9.3 and 9.6,
assign, pledge, transfer, delegate or grant a security interest in all or any
of your rights, benefits and obligations under this Agreement, as security or
otherwise. Transactions involving Equity Interests that are not Equity
Transfers do not require our consent and are not Transfers.
9.2 Public Offerings and Registered Securities. You may engage the first
registered public offering of your Equity Interests only after you pay us a
public offering fee equal to $15,000. Your Equity Interests (or those of a
person, parent, subsidiary, sibling or affiliate entity, directly or
indirectly effectively controlling you), are freely transferable without the
application of this Section if they are, on the Effective Date, or after the
public offering fee is paid, they become, registered under the federal
Securities Act of 1933, as amended, or a class of securities registered under
the Securities Exchange Act of 1934, as amended, or listed for trading on a
national securities exchange or the automated quotation system of the National
Association of Securities Dealers, Inc. (or any successor system), provided
that any tender offer for at least a majority of your Equity Interests will be
an Equity Transfer subject to Section 9.1.
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9.3 Conditions. We may, to the extent permitted by applicable law, condition
and withhold our consent to a Transfer when required under this Section 9
until the transferee and you meet certain conditions. If a Transfer is to
occur, the transferee (or you, if an Equity Transfer is involved) must first
complete and submit our Application, qualify to be a licensee in our sole
discretion, given the circumstances of the proposed Transfer, provide the same
supporting documents as a new license applicant, pay the Application and
Relicense Fees then in effect, sign the form of License Agreement we then
offer in conversion transactions and agree to renovate the Facility as if it
were an existing facility of similar age and condition converting to the
System, as we reasonably determine. We will provide a Punch List of
improvements we will require after the transferee's Application is submitted
to us. We must also receive general releases from you and each of your owners,
and payment of all amounts then owed to us and our affiliates by you, your
owners, your affiliates, the transferee, its owners and affiliates, under this
Agreement or otherwise. Our consent to the transaction will not be effective
until these conditions are satisfied.
9.4 Permitted Transferee Transactions. You may transfer an Equity Interest or
effect an Equity Transfer to a Permitted Transferee without obtaining our
consent, renovating the Facility or paying a Relicense Fee or Application Fee.
No Transfer will be deemed to occur. You also must not be in default and you
must comply with the application and notice procedures specified in Sections
9.3 and 9.6. Each Permitted Transferee must first agree in writing to be bound
by this Agreement, or at our option, execute the License Agreement form then
offered prospective licensees. No transfer to a Permitted Transferee shall
release a living transferor from liability under this Agreement or any
guarantor under any Guaranty of this Agreement. You must comply with this
Section if you transfer the Facility to a Permitted Transferee. A transfer
resulting from a death may occur even if you are in default under this
Agreement.
9.5 Attempted Transfers. Any transaction requiring our consent under this
Section 9 in which our consent is not first obtained shall be void, as between
you and us. You will continue to be liable for payment and performance of your
obligations under this Agreement until we terminate this Agreement, all your
financial obligations to us are paid and all System identification is removed
from the Facility.
9.6 Notice of Transfers. You will give us at least 30 days
prior written notice of any proposed Transfer or Permitted
Transferee transaction. You will notify us when you sign a
contract to Transfer the Facility and 10 days before you intend
to close on the transfer of the Facility. We will respond to all
requests for our consent and notices of Permitted Transferee
transactions within a reasonable time not to exceed 30 days. You
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will notify us in writing within 30 days after a change in ownership of 25% or
more of your Equity Interests that are not publicly held or that is not an
Equity Transfer, or a change in the ownership of the Facility if you are not
its owner. You will provide us with lists of the names, addresses, and
ownership percentages of your owner(s) at our request.
10. Our Assignments. We may assign, delegate or subcontract all or any part of
our rights and duties under this Agreement, including by operation of law,
without notice and without your consent. We will have no obligations to you
after you are notified that our transferee has assumed our obligations under
this Agreement except those that arose before we assign this Agreement.
11. Default and Termination.
11.1 Default. In addition to the matters identified in Section 3.1, you will
be in default under this Agreement if (a) you do not pay us when a payment is
due, (b) you do not perform any of your other obligations when this Agreement
and the System Standards Manual require, or (c) if you otherwise breach this
Agreement. If your default is not cured within ten days after you receive
written notice from us that you have not filed your monthly report, paid us
any amount that is due or breached your obligations regarding Confidential
Information, or within 30 days after you receive written notice from us of any
other default (except as noted below), then we may terminate this Agreement by
written notice by you, under Section 11.2. We will not exercise our right to
terminate if you have completely cured your default, or until any waiting
period required by law has elapsed. In the case of quality assurance default,
if you have acted diligently to cure the default but cannot do so and have
entered into a written improvement agreement with us within 30 days after the
failing inspection, you may cure the default within 90 days after the failing
inspection. We may terminate the License if you do not perform that
improvement agreement.
11.2 Termination. We may terminate the License, or this Agreement if the
Opening Date has not occurred, effective when we send written notice to you or
such later date as required by law or as stated in the default notice, when
(1) you do not cure a default as provided in Section 11.1 or we are authorized
to terminate under Section 3.1. (2) you discontinue operating the Facility as
a "Ramada", (3) a guarantor on whom we are relying to enter into this
Agreement dies or becomes incapacitated, (4) you lose possession or the right
to possession of the Facility, (5) you (or any guarantor) suffer the
termination of another license or franchise agreement with us or one of our
affiliates, (6) you intentionally maintain false books and records or submit a
materially false report to us, (7) you (or any guarantor) generally fail to
pay debts as they come due in the ordinary
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course of business, (8) you, any guarantor or any of your owners or agents
misstated to us or omitted to tell us a material fact to obtain or maintain
this Agreement with us, (9) you receive two or more notices of default from us
in any one year period (whether or not you cure the defaults), (10) a
violation of Section 9 occurs, or a Transfer occurs before the relicensing
process is completed, (11) you contest in court the ownership or right to
franchise or license all or any part of the System or the validity of any of
the Marks, (12) you, any guarantor or the Facility is subject to any voluntary
or involuntary bankruptcy, liquidation, dissolution, receivership, assignment,
reorganization, moratorium, composition or a similar action or proceeding that
is not dismissed within 60 days after its filing, or (13) you maintain or
operate the Facility in a manner that endangers the health or safety of the
Facility's guests.
11.3 Casualty and Condemnation.
11.3.1 You will notify us promptly after the Facility suffers a Casualty that
prevents you from operating in the normal course of business, with less than
75% of guest rooms available. You will give us information on the availability
of guest rooms and the Facility's ability to honor advance reservations. You
will tell us in writing within 60 days after the Casualty whether or not you
will restore, rebuild and refurbish the Facility to conform to System
Standards and its condition prior to the Casualty. This restoration will be
completed within 180 days after the Casualty. You may decide within the 60
days after the Casualty, and if we do not hear from you, we will assume that
you have decided, to terminate this Agreement, effective as of the date of
your notice or 60 days after the Casualty, whichever comes first. If this
Agreement so terminates, you will pay all amounts accrued prior to termination
and follow the post-termination requirements in Section 13. You will not be
obligated to pay Liquidated Damages if the Facility will no longer be used as
an extended stay or transient lodging facility after the Casualty.
11.3.2 You will notify us in writing within 10 days after you receive notice
of any proposed Condemnation of the Facility, and within 10 days after
receiving notice of the Condemnation date. This Agreement will terminate on
the date the Facility or a substantial portion is conveyed to or taken over by
the condemning authority.
11.4 Our Other Remedies. We may suspend the Facility from the Reservation
System for any default or failure to pay or perform under this Agreement,
discontinue Reservation System referrals to the Facility for the duration of
such suspension, and may divert previously made reservations to other Chain
Facilities after giving notice of non-performance, non-payment or default. We
may deduct points under our quality assurance inspection program for your
failure to comply with this Agreement or System Standards.
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Reservation service will be restored after you have fully cured any and all
defaults and failures to pay and perform. We may omit the Facility from the
Directory if you are in default on the date we must determine which Chain
Facilities are included in the Directory. You recognize that any use of the
System not in accord with this Agreement will cause us irreparable harm for
which there is no adequate remedy at law, entitling us to injunctive and other
relief. We may litigate to collect amounts due under this Agreement without
first issuing a default or termination notice. Our consent or approval may be
withheld if needed while you are in default under this Agreement or may be
conditioned on the cure of all your defaults.
11.5 Your Remedies. If we fail to issue our approval or consent as and when
required under this Agreement within a reasonable time of not less than 30
days after we receive all of the information we request, and you believe our
refusal to approve or consent is wrongful, you may bring a legal action
against us to compel us to issue our approval or consent to the obligation. To
the extent permitted by applicable law, this action shall be your exclusive
remedy. We shall not be responsible for direct, indirect, special,
consequential or exemplary damages, including, but not limited to, lost
profits or revenues.
12. Liquidated Damages.
12.1 Generally. If we terminate the License under Section 11.2, or you
terminate this Agreement (except under Section 11.3 or as a result of our
default which we do not cure within a reasonable time after written notice),
you will pay us within 30 days following the date of termination, as
Liquidated Damages, an amount equal to the sum of accrued Royalties and RINA
Services Assessment Fees during the immediately preceding 24 full calendar
months (or the number of months remaining in the unexpired Term at the date of
termination, whichever is less). If the Facility has been open for less than
24 months, then the amount shall be the average monthly Royalties and RINA
Services Assessment Fees since the Opening Date multiplied by 24. You will
also pay any applicable Taxes assessed on such payment. Liquidated Damages
will not be less than the product of $2,000.00 multiplied by the number of
guest rooms in the Facility. If we terminate this Agreement under Section 3
before the Opening Date, you will pay us within 10 days after you receive our
notice of termination Liquidated Damages equal to one-half the amount payable
for termination under Section 11.2. Liquidated Damages are paid in place of
our claims for lost future Recurring Fees under this Agreement. Our right to
receive other amounts due under this Agreement is not affected.
12.2 Condemnation Payments. In the event a Condemnation is to
occur, you will pay us the fees set forth in Section 7 for a
period of one year after we receive the initial notice of
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condemnation described in Section 11.3.2, or until the Condemnation occurs,
whichever is longer. You will pay us Liquidated Damages equal to the average
daily Royalties and RINA Services Assessment Fees for the one year period
preceding the date of your condemnation notice to us multiplied by the number
of days remaining in the one year notice period if the Condemnation is
completed before the one year notice period expires. This payment will be made
within 30 days after Condemnation is completed (when you close the Facility or
you deliver it to the condemning authority). You will pay no Liquidated
Damages if the Condemnation is completed after the one year notice period
expires, but the fees set forth in Section 7 must be paid when due until
Condemnation is completed.
13. Your Duties At and After Termination. When the License or
this Agreement terminates for any reason whatsoever:
13.1 System Usage Ceases. You will immediately stop using the System to
operate and identify the Facility. You will remove all signage and other items
bearing any Marks and follow the other steps detailed in the System Standards
Manual for changing the identification of the Facility. You will promptly
paint over or remove the Facility's distinctive System trade dress, color
schemes and architectural features.
13.2 Other Duties. You will pay all amounts owed to us under this Agreement
within 10 days after termination. You will owe us Recurring Fees on Gross Room
Revenues accruing while the Facility is identified as a "Ramada", including
the RINA Services Assessment Fees for so long as the Facility receives service
from the Reservation System. We may immediately remove the Facility from the
Reservation System and divert reservations as authorized in Section 11.4. We
may also, to the extent permitted by applicable law, and without prior notice
enter the Facility and any other parcels, remove software (including archive
and back-up copies) for accessing the Reservation System, all copies of the
System Standards Manual, Confidential Information, equipment and all other
personal property of ours, and paint over or remove and purchase for $10.00,
all or part of any interior or exterior Mark-bearing signage (or signage face
plates), including billboards, whether or not located at the Facility, that
you have not removed or obliterated within five days after termination. You
will promptly pay or reimburse us for our cost of removing such items, net of
the $10.00 purchase price for signage. We will exercise reasonable care in
removing or painting over signage. We will have no obligation or liability to
restore the Facility to its condition prior to removing the signage. We shall
have the right, but not the obligation, to purchase some or all of the
Facility's Mark-bearing FF&E and supplies at the lower of their cost or net
book value, with the right to set off their aggregate purchase price against
any sums then owed us by you.
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13.3 Advance Reservations. The Facility will honor any advance reservations,
including group bookings, made for the Facility prior to termination at the
rates and on the terms established when the reservations are made and pay when
due all related travel agent commissions.
13.4 Survival of Certain Provisions. Sections 3.8, 3.9, 3.13, 7, 8, 11.4, 12,
13, 15, 16 and 17 survive termination of the License and this Agreement,
whether termination is initiated by you or us, even if termination is
wrongful.
14. Your Representations and Warranties. You expressly
represent and warrant to us as follows:
14.1 Quiet Enjoyment and Financing. You own, or will own prior to commencing
improvement, or lease, the Location and the Facility. You will be entitled to
possession of the Location and the Facility during the entire Term without
restrictions that would interfere with your performance under this Agreement,
subject to the reasonable requirements of any financing secured by the
Facility. You have, when you sign this Agreement, and will maintain during the
Term, adequate financial liquidity and financial resources to perform your
obligations under this Agreement.
14.2 This Transaction. You have received, at least 10 business days prior to
execution of this Agreement and making any payment to us, our current Uniform
Franchise Offering Circular for prospective licensees. Neither we nor any
person acting on our behalf has made any oral or written representation or
promise to you that is not written in this Agreement on which you are relying
to enter into this Agreement. You release any claim against us or our agents
based on any oral or written representation or promise not stated in this
Agreement. You and the persons signing this Agreement for you have full power
and authority and have been duly authorized, to enter into and perform or
cause performance of your obligations under this Agreement. You have obtained
all necessary approvals of your owners, Board of Directors and lenders. Your
execution, delivery and performance of this Agreement will not violate, create
a default under or breach of any charter, bylaws, agreement or other contract,
license, permit, indebtedness, certificate, order, decree or security
instrument to which you or any of your principal owners is a party or is
subject or to which the Facility is subject. Neither you nor the Facility is
the subject of any current or pending merger, sale, dissolution, receivership,
bankruptcy, foreclosure, reorganization, insolvency, or similar action or
proceeding on the date you execute this Agreement and was not within the three
years preceding such date, except as disclosed in the Application. You will
submit to us the documents about the Facility, you, your owners and your
finances that we request in the License
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Application (or after our review of your initial submissions) before or within
30 days after you sign this Agreement.
14.3 No Misrepresentations or Implied Covenants. All written information you
submit to us about the Facility, you, your owners, any guarantor, or the
finances of any such person or entity, was or will be at the time delivered
and when you sign this Agreement, true, accurate and complete, and such
information contains no misrepresentation of a material fact, and does not
omit any material fact necessary to make the information disclosed not
misleading under the circumstances. There are no express or implied covenants
or warranties, oral or written, between we and you except as expressly stated
in this Agreement.
15. Proprietary Rights.
15.1 Marks and System. You will not acquire any interest in or right to use
the System or Marks except under this Agreement. You will not apply for
governmental registration of the Marks, or use the Marks or our corporate name
in your legal name, but you may use a Mark for an assumed business or trade
name filing.
15.2 Inurements. All present and future distinguishing characteristics,
improvements and additions to or associated with the System by us, you or
others, and all present and future service marks, trademarks, copyrights,
service mark and trademark registrations used and to be used as part of the
System, and the associated good will, shall be our property and will inure to
our benefit. No good will shall attach to any secondary designator that you
use.
15.3 Other Locations and Systems. We and our affiliates each reserve the right
to own, in whole or in part, and manage, operate, use, lease, finance,
sublease, franchise, license (as licensor or licensee), provide services to or
joint venture (i) distinctive separate lodging or food and beverage marks and
other intellectual property which are not part of the System, and to enter
into separate agreements with you or others (for separate charges) for use of
any such other marks or proprietary rights, (ii) other lodging, food and
beverage facilities, or businesses, under the System utilizing modified System
Standards, and (iii) a Chain Facility at or for any location other than the
Location. There are no territorial rights or agreements between the parties.
You acknowledge that we are affiliated with or in the future may become
affiliated with other lodging providers or franchise systems that operate
under names or marks other than the Marks. We and our affiliates may use or
benefit from common hardware, software, communications equipment and services
and administrative systems for reservations, franchise application procedures
or committees, marketing and advertising programs, personnel, central
purchasing, approved supplier lists, franchise
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sales personnel (or independent franchise sales representatives),
etc.
15.4 Confidential Information. You will take all appropriate actions to
preserve the confidentiality of all Confidential Information. Access to
Confidential Information should be limited to persons who need the
Confidential Information to perform their jobs and are subject to your general
policy on maintaining confidentiality as a condition of employment or who have
first signed a confidentiality agreement. You will not permit copying of
Confidential Information (including, as to computer software, any translation,
decompiling, decoding, modification or other alteration of the source code of
such software). You will use Confidential Information only for the Facility
and to perform under this Agreement. Upon termination (or earlier, as we may
request), you shall return to us all originals and copies of the System
Standards Manual, policy statements and Confidential Information "fixed in any
tangible medium of expression," within the meaning of the U.S. Copyright Act,
as amended. Your obligations under this subsection commence when you sign this
Agreement and continue for trade secrets (including computer software we
license to you) as long as they remain secret and for other Confidential
Information, for as long as we continue to use the information in confidence,
even if edited or revised, plus three years. We will respond promptly and in
good faith to your inquiry about continued protection of any Confidential
Information.
15.5 Litigation. You will promptly notify us of (i) any adverse or infringing
uses of the Marks (or names or symbols confusingly similar), Confidential
Information or other System intellectual property, and (ii) or any threatened
or pending litigation related to the System against (or naming as a party) you
or us of which you become aware. We alone handle disputes with third parties
concerning use of all or any part of the System. You will cooperate with our
efforts to resolve these disputes. We need not initiate suit against imitators
or infringers who do not have a material adverse impact on the Facility, or
any other suit or proceeding to enforce or protect the System in a matter we
do not believe to be material.
16. Relationship of Parties.
16.1 Independence. You are an independent contractor. You are not our legal
representative or agent, and you have no power to obligate us for any purpose
whatsoever. We and you have a business relationship based entirely on and
circumscribed by this Agreement. No partnership, joint venture, agency,
fiduciary or employment relationship is intended or created by reason of this
Agreement. You will exercise full and complete control over and have full
responsibility for your contracts, daily operations, labor relations,
employment practices and policies, including,
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but not limited to, the recruitment, selection, hiring, disciplining, firing,
compensation, work rules and schedules of your employees.
16.2 Joint Status. If you comprise two or more persons or entities
(notwithstanding any agreement, arrangement or understanding between or among
such persons or entities) the rights, privileges and benefits of this
Agreement may only be exercised and enjoyed jointly. The liabilities and
responsibilities under this Agreement will be the joint and several
obligations of all such persons or entities.
16.3 FSH Rights. In the event our rights to (i) any of the Marks or the Ramada
System shall be terminated pursuant to the Master License Agreements (other
than as a result of a purchase option we exercise as set forth therein), or
(ii) we liquidate, dissolve or otherwise cease to do business, then FSH or its
assignee shall have the right to succeed to all of our rights in, to and under
this Agreement and any other agreements between you and us entered into
pursuant to this Agreement, and in such event FSH or its assignee shall be
obligated to perform our duties and assume all of our obligations under any
such agreements.
17. Legal Matters.
17.1 Partial Invalidity. If all or any part of a provision of this Agreement
violates the law of your state (if it applies), such provision or part will
not be given effect. If all or any part of a provision of this Agreement is
declared invalid or unenforceable, for any reason, or is not given effect by
reason of the prior sentence, the remainder of the Agreement shall not be
affected. However, if in our judgment the invalidity or ineffectiveness of
such provision or part substantially impairs the value of this Agreement to
us, then we may at any time terminate this Agreement by written notice to you
without penalty or compensation owed by either party.
17.2 Waivers, Modifications and Approvals. If we allow you to deviate from
this Agreement, we may insist on strict compliance at any time after written
notice. Our silence or inaction will not be or establish a waiver, consent,
course of dealing, implied modification or estoppel. All modifications,
waivers, approvals and consents of or under this Agreement by us must be in
writing and signed by our authorized representative to be effective.
17.3 Notices. Notices will be effective if in writing and delivered by
facsimile transmission with confirmation original sent by first class mail,
postage prepaid, by delivery service, with proof of delivery, or by first
class, prepaid certified or registered mail, return receipt requested, to the
appropriate party at its address stated below or as may be otherwise
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designated by notice. Notices shall be deemed given on the date
delivered or date of attempted delivery, if refused.
Ramada Franchise Systems, Inc.:
Our address: 339 Jefferson Road, P.O. Box 278,
Parsippany, New Jersey 07054-0278,
Attention: Vice President-Franchise Compliance:
Fax No. (201) 428-9579
Forty Hotels, Inc.:
Your address: 339 Jefferson Road,
Parsippany, New Jersey 07054,
Attention:
Your fax No.:
17.4 Remedies. Remedies specified in this Agreement are cumulative and do not
exclude any remedies available at law or in equity. The non-prevailing party
will pay all costs and expenses, including reasonable attorneys' fees,
incurred by the prevailing party to enforce this Agreement or collect amounts
owed under this Agreement. You consent and waive your objection to the
non-exclusive personal jurisdiction of and venue in the New Jersey state
courts situated in Morris County, New Jersey and the United States District
Court for the District of New Jersey for all cases and controversies under
this Agreement or between we and you.
17.5 Miscellaneous. The Agreement will be governed by and construed under the
laws of the State of New Jersey. The New Jersey Franchise Practices Act will
not apply to any Facility located outside the State of New Jersey. This
Agreement is exclusively for the benefit of the parties. There are no third
party beneficiaries. No agreement between us and anyone else is for your
benefit. The section headings in this Agreement are for convenience of
reference only. We may unilaterally revise Schedule C under this Agreement.
This Agreement, together with the exhibits and schedules attached, is the
entire agreement (superseding all prior representations, agreements and
understandings, oral or written) of the parties about the Facility.
17.6 Waiver of Jury Trial. The parties waive the right to a jury trial in any
action related to this Agreement or the relationship between the licensor, the
licensee, any guarantor, and their respective successors and assigns.
18. Special Stipulations. The following special stipulations
apply to this Agreement and supersede any inconsistent or
conflicting provisions. These are personal to you and are not
transferable or assignable except to a Permitted Transferee.
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18.1 Liquidated Damages. Your Liquidated Damages payable within 15 days after
termination of the License prior to expiration of the Term by Us with cause or
by You without cause by either party shall be the product of the aggregate
Royalties and RINA Services Assessment Fees accruing under Section 7.1
(whether or not paid and excluding travel agent commissions and GDS Fees)
during the last twelve (12) months before termination, multiplied by the
"Factor." If termination occurs during the first License Year, Liquidated
Damages shall be calculated by taking the average of monthly payments of
Royalties and RINA Services Assessment Fees, (whether or not paid and
excluding travel agent commissions and GDS Fees) under this Agreement times
twelve (12), then multiplying by the Factor. If the termination occurs before
the end of the fourth License Year, then the Factor will be five (5). If the
termination occurs during the fifth License Year, the Factor will be four (4).
If the termination occurs during the sixth License Year, the Factor will be
three (3). If the termination occurs after the sixth License Year, the Factor
will be two (2).
18.2 Additional Transfer Rights. You and any assignee or successor of the
original Licensee may assign this Agreement to, the lessee or transferee of
fee simple title to the Facility upon thirty (30) days prior written notice to
us at any time during the Term when you are not in default under this
Agreement without payment of an application, initial or transfer fee by either
you or the assignee provided that (1) the assignee completes and returns to us
at least fifteen (15) days before the transfer of possession or title,
whichever comes first, our standard license application, (2) the assignee is
reasonably acceptable to us, (3) for a period ending on the seventh
anniversary of the date of execution of this Agreement, the original Licensee
remains primarily liable for the timely and full payment of the Licensee's
obligations under this Agreement for the payment of liquidated damages in
accordance with Section 12, and (4) the assignee assumes this Agreement by
writing acceptable to and directly enforceable by us. From and after said
seventh anniversary you shall have no further liability under this
subparagraph.
18.3 Conversion Rights. You may terminate the License at any time without
incurring Liquidated Damages or any termination fees, provided that you shall
have entered into a license or franchise agreement with another subsidiary of
HFS Incorporated ("HFS") providing for the operation of the Facility as part
of the franchise system owned by the subsidiary, which agreement shall be in
the then current standard form of license or franchise agreement being offered
to prospective licensees or franchisees by the subsidiary in its then current
Uniform Franchise Offering Circular for New York. Such agreement shall be
modified to include liquidated damages and assignment provisions substantially
the same as Sections 18.1 and 18.2
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above, after giving effect to the expiration of the period prior to such
termination of this Agreement, and a Term at least equal to the unexpired
portion of the original term of this Agreement. You acknowledge that neither
HFS nor any subsidiary of HFS shall be obligated to enter into any license or
franchise agreement with you with respect to the Facility.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first stated above.
WE:
Ramada Franchise Systems, Inc.:
By:__________________________ Attest:__________________________
Vice President Assistant Secretary
YOU, as licensee:
Forte Hotels, Inc.
By:__________________________ Attest:__________________________
(Vice) President
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APPENDIX A
DEFINITIONS
Agreement means this License Agreement.
Application Fee means the fee you pay when you submit your Application under
Section 6.
Approved Plans means your plans and specifications for constructing or
improving the Facility initially or after opening, as approved by us under
Section 3.
Casualty means destruction or significant damage to the Facility by act of God
or other event beyond your reasonable anticipation and control.
Chain means the network of Chain Facilities.
Chain Facility means a lodging facility we own, lease, manage, operate or
authorize another party to operate using the System and identified by the
Marks.
Condemnation means the taking of the Facility for public use by a government
or public agency legally authorized to do so, permanently or temporarily, or
the taking of such a substantial portion of the Facility that continued
operation in accordance with the System Standards, or with adequate parking
facilities, is commercially impractical, or if the Facility or a substantial
portion is sold to the condemning authority in lieu of condemnation.
Conference Registration Fee means the fee charged for attendance at the annual
RINA conference.
Confidential Information means any trade secrets we own or protect and other
proprietary information not generally known to the lodging industry including
confidential portions of the System Standards Manual or information we
otherwise impart to you and your representatives in confidence. Confidential
Information includes the "Standards of Operation and Design Manual" and all
other System Standards manuals and documentation, including those on the
subjects of employee relations, finance and administration, field operation,
purchasing and marketing, the Reservation System software and applications
software.
Declaration means the Declaration of License Agreement you and we sign under
Section 5.
Design Standards mean standards specified in the System Standards Manual from
time to time for design, construction, renovation, modification and
improvement of new or existing Chain Facilities,
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including all aspects of facility design, number of rooms, rooms mix and
configuration, construction materials, workmanship, finishes, electrical,
mechanical, structural, plumbing, HVAC, utilities, access, life safety,
parking, systems, landscaping, amenities, interior design and decor and the
like for a Chain Facility.
Directory means the general purpose directory we publish listing the names and
addresses of Chain Facilities, and at our discretion, other Ramada facilities
located outside the United States, Canada and Mexico.
Effective Date means the date on which we and you have executed of this
Agreement, or the date we insert in the Preamble of this Agreement.
Equity Interests shall include, without limitation, all forms of equity
ownership of you, including voting stock interests, partnership interests,
limited liability company membership or ownership interests, joint and tenancy
interests, the proprietorship interest, trust beneficiary interests and all
options, warrants, and instruments convertible into such other equity
interests.
Equity Transfer means any transaction in which your owners or you sell,
assign, transfer, convey, pledge, or suffer or permit the transfer or
assignment of, any percentage of your Equity Interests that will result in a
change in control of you to persons other than those disclosed on Schedule B,
as in effect prior to the transaction. Unless there are contractual
modifications to your owners' rights, an Equity Transfer of a corporation or
limited liability company occurs when either majority voting rights or
beneficial ownership of more than 50% of the Equity Interests changes. An
Equity Transfer of a partnership occurs when a newly admitted partner will be
the managing, sole or controlling general partner, directly or indirectly
through a change in control of the Equity Interests of an entity general
partner. An Equity Transfer of a trust occurs when either a new trustee with
sole investment power is substituted for an existing trustee, or a majority of
the beneficiaries convey their beneficial interests to persons other than the
beneficiaries existing on the Effective Date. An Equity Transfer does not
occur when the Equity Interest ownership among the owners of Equity Interests
on the Effective Date changes without the admission of new Equity Interest
owners. An Equity Transfer occurs when you merge, consolidate or issue
additional Equity Interests in a transaction which would have the effect of
diluting the voting rights or beneficial ownership of your owners' combined
Equity Interests in the surviving entity to less than a majority.
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Facility means the Location, together with all improvements, buildings, common
areas, structures, appurtenances, facilities, entry/exit rights, parking,
amenities, FF&E and related rights, privileges and properties existing at the
Location on the Effective Date or afterwards.
FF&E means furniture, fixtures and equipment.
FF&E Standards means standards specified in the System Standards Manual for
FF&E and supplies to be utilized in a Chain Facility.
Food and Beverage means any restaurant, catering, bar/lounge, entertainment,
room service, retail food or beverage operation, continental breakfast, food
or beverage concessions and similar services offered at the Facility.
Gross Room Revenues means gross revenues attributable to or payable for
rentals of guest rooms at the Facility, including all credit transactions,
whether or not collected, but excluding separate charges to guests for Food
and Beverage, room service, telephone charges, key forfeitures and
entertainment; vending machine receipts; and federal, state and local sales,
occupancy and use taxes.
Improvement Obligation means your obligation to either (i) renovate and
upgrade the Facility, or (ii) construct and complete the Facility, in
accordance with the Approved Plans and System Standards, as described in
Section 3.
Indemnitees means us, our direct and indirect parent, subsidiary and sister
corporations, and the respective officers, directors, shareholders, employees,
agents and contractors, and the successors, assigns, personal representatives,
heirs and legatees of all such persons or entities.
Initial Fee means the fee you are to pay for signing this Agreement as stated
in Section 6.
License means the non-exclusive license to operate the type of Chain Facility
described in Schedule B only at the Location, using the System and the Mark we
designate in Section 1.
License Year means the one-year period beginning on the Opening Date and each
subsequent anniversary of the Opening Date and ending on the day preceding the
next anniversary of the Opening Date.
Liquidated Damages means the amounts payable under Section 12, set by the
parties because actual damages will be difficult or impossible to ascertain on
the Effective Date and the amount is a reasonable pre-estimate of the damages
that will be incurred and is not a penalty.
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Location means the parcel of land situated at J.F.K.
International Airport, Van Wyck Expressway, Jamaica, New York, as more fully
described in Schedule A.
Losses and Expenses means all payments or obligations to make payments either
(i) to or for third party claimants by any and all Indemnitees, including
guest refunds, or (ii) incurred by any and all Indemnitees to investigate,
respond to or defend a matter, including without limitation investigation and
trial charges, costs and expenses, attorneys' fees, experts' fees, court
costs, settlement amounts, judgments and costs of collection.
Maintenance Standards means the standards specified from time to time in the
System Standards Manual for repair, refurbishment and replacement of FF&E,
finishes, decor, and other capital items and design materials in Chain
Facilities.
Marks means, collectively (i) the service marks associated with the System
published in the System Standards Manual from time to time including, but not
limited to, the name, design and logo for "Ramada" and other marks (U.S. Reg.
Nos. 849,591 and 1,191,422) and (ii) trademarks, trade names, trade dress,
logos and derivations, and associated good will and related intellectual
property interests.
Marks Standards means standards specified in the System Standards Manual for
interior and exterior Mark-bearing signage, advertising materials, china,
linens, utensils, glassware, uniforms, stationery, supplies, and other items,
and the use of such items at the Facility or elsewhere.
Minor Renovation means the repairs, refurbishing, repainting, and other
redecorating of the interior, exterior, guest rooms, public areas and grounds
of the Facility and replacements of FF&E we may require you to perform under
Section 3.16.
Minor Renovation Ceiling Amount means $3,000.00 per guest room.
Minor Renovation Notice means the written notice from us to you specifying the
Minor Renovation to be performed and the dates for commencement and completion
given under Section 3.16.
Opening Date means the date on which we authorize you to open the Facility for
business identified by the Marks and using the System.
Operations Standards means standards specified in the System Standards Manual
for cleanliness, housekeeping, general maintenance, repairs, concession types,
food and beverage service, vending machines, uniforms, staffing, employee
training,
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guest services, guest comfort and other aspects of lodging
operations.
Permitted Transferee means (i) any entity, natural person(s) or trust
receiving from the personal representative of an owner any or all of the
owner's Equity Interests upon the death of the owner, if no consideration is
paid by the transferee or (ii) the spouse or adult issue of the transferor, if
the Equity Interest transfer is accomplished without consideration or payment,
or (iii) any natural person or trust receiving an Equity Interest if the
transfer is from a guardian or conservator appointed for an incapacitated or
incompetent transferor.
Punch List means the list of upgrades and improvements attached as part of
Schedule B, which you are required to complete under Section 3.
Recurring Fees means fees paid to us on a periodic basis, including without
limitation, Royalties, RINA Services Assessment Fees, and other reservation
fees and charges as stated in Section 7.
Relicense Fee means the fee your transferee or you pay to us under Section 7
when a Transfer occurs.
Reservation System or "Central Reservation System" means the system for
offering to interested parties, booking and communicating guest room
reservations for Chain Facilities described in Section 4.2.
RINA means the Ramada Inns National Association.
RINA Services Assessment Fees means the assessments charged as set forth in
Section 7.1.2.
Rooms Addition Fee means the fee we charge you for adding guest rooms to the
Facility.
Royalty means the monthly fee you pay to us for use of the System
under Section 7(a). "Royalties" means the aggregate of all
amounts owed as a Royalty.
System means the comprehensive system for providing guest lodging facility
services under the Marks as we specify which at present includes only the
following: (a) the Marks; (b) other intellectual property, including
Confidential Information, System Standards Manual and know-how; (c) marketing,
advertising, publicity, and other promotional materials and programs; (d)
System Standards; (e) training programs and materials; (f) quality assurance
inspection and scoring programs; and (g) the Reservation System.
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System Standards means the standards for the participating in the System
published in the System Standards Manual, including but not limited to Design
Standards, FF&E Standards, Marks Standards, Operations Standards, Technology
Standards and Maintenance Standards and any other standards, policies, rules
and procedures we promulgate about System operation and usage.
System Standards Manual means the Standards of Operation and Design Manual and
any other manual we publish or distribute specifying the System Standards.
Taxes means the amounts payable under Section 7.2 of this Agreement.
Technology Standards means standards specified in the System Standards Manual
for local and long distance telephone communications services, telephone,
telecopy and other communications systems, point of sale terminals and
computer hardware and software for various applications, including, but not
limited to, front desk, rooms management, records maintenance, marketing data,
accounting, budgeting and interfaces with the Reservation System to be
maintained at the Chain Facilities.
Term means the period of time during which this Agreement shall be in effect,
as stated in Section 5.
Termination means a termination of the License under Sections 11.1 or 11.2 or
your termination of the License or this Agreement.
Transfer means (1) an Equity Transfer, (2) you assign, pledge, transfer,
delegate or grant a security interest in all or any of your rights, benefits
and obligations under this Agreement, as security or otherwise without our
consent as specified in Section 9, (3) you assign (other than as collateral
security for financing the Facility) your leasehold interest in (if any),
lease or sublease all or any part of the Facility to any third party, (4) you
engage in the sale, conveyance, transfer, or donation of your right, title and
interest in and to the Facility, (5) your lender or secured party forecloses
on or takes possession of your interest in the Facility, directly or
indirectly, or (6) a receiver or trustee is appointed for the Facility or your
assets, including the Facility. A Transfer does not occur when you pledge or
encumber the Facility to finance its acquisition or improvement, you refinance
it, or you engage in a Permitted Transferee transaction.
"You" and "Your" means and refers to the party named as licensee identified in
the first paragraph of this Agreement and its Permitted Transferees.
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"We", "Our" and "Us" means and refers to Ramada Franchise Systems, Inc., a
Delaware corporation, its successors and assigns.
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SCHEDULE A
(Legal Description of Facility)
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SCHEDULE B
PART I: YOUR OWNERS:
Name Ownership Percentage Type of Equity Interest
PART II: THE FACILITY:
Primary designation of Facility: Ramada Plaza Hotel
Number of approved guest rooms: 475
Parking facilities (number of spaces, description): 475
Other amenities, services and facilities: gift shop, meeting
rooms, exercise room
PART III: DESCRIPTION AND SCHEDULE OF RENOVATIONS TO BE
COMPLETED AS THE IMPROVEMENT OBLIGATION:
[Punch List to be attached.]
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SCHEDULE C
September 1995
The RINA Services Assessment Fee is equal to 4.5% of Gross Room
Revenues.
The airline reservation system charge described in Section 7 is $3.50
per gross reservation. The travel agent commission described in Section 7 is
10% of the Gross Room Revenues generated by each reservation originated by the
agent plus our service fee of $0.35 per reservation.
The RINA Services Assessment Fee is subject to change for all Chain
facilities, and new fees and charges may be assessed for new services, but
only upon the recommendation of the Executive Committee of RINA and Our
approval.
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