-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NdtDaGZgxOcvpjSwgsp15OLXuThiEG4VeLoRbxeKn1lj6HMnvr+hSGGbUB2ctGNd n63ub/ZOYCffyNCgVUMnCg== /in/edgar/work/20000814/0000950131-00-004927/0000950131-00-004927.txt : 20000921 0000950131-00-004927.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950131-00-004927 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXTENDED STAY AMERICA INC CENTRAL INDEX KEY: 0001002579 STANDARD INDUSTRIAL CLASSIFICATION: [7011 ] IRS NUMBER: 363996573 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13125 FILM NUMBER: 700299 BUSINESS ADDRESS: STREET 1: 450 E LAS OLAS BLVD STREET 2: STE 1100 CITY: FORT LAUDERDALE STATE: FL ZIP: 33301 BUSINESS PHONE: 9547131600 MAIL ADDRESS: STREET 1: 450 E LAS OLAS BLVD STREET 2: STE 1100 CITY: FORT LAUDERDALE STATE: FL ZIP: 33301 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from __________ to __________ Commission File Number 0-27360 _____________ EXTENDED STAY AMERICA, INC. (Exact name of Registrant as specified in its charter) Delaware 36-3996573 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 450 EAST LAS OLAS BOULEVARD, FORT LAUDERDALE, FL 33301 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (954) 713-1600 _____________ Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- At August 8, 2000, the registrant had issued and outstanding an aggregate of 95,210,619 shares of Common Stock. PART I FINANCIAL INFORMATION Item 1. Financial Statements EXTENDED STAY AMERICA, INC. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share data)
ASSETS ------ June 30, December 31, 2000 1999(1) ----------- ------------ Current assets: Cash and cash equivalents.......................... $ 10,066 $ 6,449 Accounts receivable................................ 7,443 6,094 Prepaid expenses................................... 8,955 2,810 Deferred income taxes.............................. 37,004 39,053 Other current assets............................... 27 27 ---------- ---------- Total current assets......................... 63,495 54,433 Property and equipment, net.......................... 1,945,194 1,856,517 Deferred loan costs, net............................. 19,506 15,746 Other assets......................................... 868 553 ---------- ---------- $2,029,063 $1,927,249 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable................................... $ 31,686 $ 34,020 Income taxes payable............................... 2,888 Accrued retainage.................................. 7,284 8,834 Accrued property taxes............................. 14,579 8,871 Accrued salaries and related expenses.............. 3,229 2,633 Accrued interest................................... 7,046 7,059 Other accrued expenses............................. 15,830 14,187 Current portion of long-term debt.................. 3,000 3,000 ---------- ---------- Total current liabilities..................... 82,654 81,492 ---------- ---------- Deferred income taxes................................ 89,713 77,167 ---------- ---------- Long-term debt....................................... 917,000 853,000 ---------- ---------- Commitments Stockholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized; no shares issued and outstanding...... Common stock, $.01 par value, 500,000,000 shares authorized; 94,933,974 and 95,996,884 shares issued and outstanding, respectively.............. 950 960 Additional paid-in capital......................... 820,310 828,724 Retained earnings.................................. 118,436 85,906 ---------- ---------- Total stockholders' equity.................... 939,696 915,590 ---------- ---------- $2,029,063 $1,927,249 ========== ==========
- --------------------- (1) Derived from audited financial statements See notes to the unaudited condensed consolidated financial statements 1 EXTENDED STAY AMERICA, INC. Condensed Consolidated Statements of Income (Unaudited) (In thousands, except per share data)
Three Months Ended Six Months Ended ------------------- ------------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 -------- -------- -------- -------- Revenue.................................................... $133,236 $106,487 $247,176 $195,906 Property operating expenses................................ 51,972 44,053 102,903 85,046 Corporate operating and property management expenses........................................ 11,070 10,448 21,983 20,746 Reduction in valuation allowance........................... (1,079) (1,079) Depreciation and amortization.............................. 16,357 14,903 32,507 28,827 -------- -------- -------- -------- Total costs and expenses.............................. 79,399 68,325 157,393 133,540 -------- -------- -------- -------- Income from operations before interest, income taxes and cumulative effect of accounting change................... 53,837 38,162 89,783 62,366 Interest expense, net...................................... 18,420 13,817 35,564 25,268 -------- -------- -------- -------- Income before income taxes and cumulative effect of accounting change....................................... 35,417 24,345 54,219 37,098 Provision for income taxes................................. 14,168 9,739 21,689 14,840 -------- -------- -------- -------- Net income before cumulative effect of accounting change... 21,249 14,606 32,530 22,258 Cumulative effect of change in accounting for start-up activities, net of income tax benefit of $520............ 779 -------- -------- -------- -------- Net income................................................. $ 21,249 $ 14,606 $ 32,530 $ 21,479 ======== ======== ======== ======== Net income per common share - Basic and Diluted: Net income before cumulative effect of accounting change. $ 0.22 $ 0.15 $ 0.34 $ 0.23 Cumulative effect of accounting change................... (0.01) -------- -------- -------- -------- Net income............................................... $ 0.22 $ 0.15 $ 0.34 $ 0.22 ======== ======== ======== ======== Weighted average shares: Basic.................................................... 95,232 96,278 95,432 96,127 Effect of dilutive options............................... 677 1,005 502 811 -------- -------- -------- -------- Diluted.................................................. 95,909 97,283 95,934 96,938 ======== ======== ======== ========
See notes to the unaudited condensed consolidated financial statements 2 EXTENDED STAY AMERICA, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Six Months Ended ---------------------- June 30, June 30, 2000 1999 --------- --------- Cash flows from operating activities: Net income.......................................................... $ 32,530 $ 21,479 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization..................................... 32,507 28,827 Amortization of deferred loan costs included in interest expense.. 2,033 1,930 Deferred income taxes............................................. 14,595 8,877 Cumulative effect of accounting change, net....................... 779 Changes in operating assets and liabilities....................... 195 (14,105) --------- --------- Net cash provided by operating activities.................... 81,860 47,787 --------- --------- Cash flows from investing activities: Additions to property and equipment................................. (127,652) (181,091) Other assets........................................................ (315) 85 --------- --------- Net cash used in investing activities........................ (127,967) (181,006) --------- --------- Cash flows from financing activities: Proceeds from long-term debt........................................ 283,000 285,000 Repayments of revolving credit facility............................. (219,000) (150,000) Proceeds from issuance of common stock.............................. 70 5,410 Repurchases of Company common stock................................. (8,574) Additions to deferred loan costs.................................... (5,772) (21) --------- --------- Net cash provided by financing activities.................... 49,724 140,389 --------- --------- Increase in cash and cash equivalents................................ 3,617 7,170 Cash and cash equivalents at beginning of period..................... 6,449 623 --------- --------- Cash and cash equivalents at end of period........................... $ 10,066 $ 7,793 ========= ========= Noncash investing and financing transactions: Capitalized or deferred items included in accounts payable and accrued liabilities............................................ $ 22,485 $ 29,491 ========= ========= Supplemental cash flow disclosures: Cash paid for: Income taxes....................................................... $ 14,661 $ 12,414 ========= ========= Interest expense, net of amounts capitalized....................... $ 33,881 $ 23,598 ========= =========
See notes to the unaudited condensed consolidated financial statements 3 EXTENDED STAY AMERICA, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2000 NOTE 1 -- BASIS OF PRESENTATION The accompanying condensed consolidated financial statements are unaudited and include the accounts of Extended Stay America, Inc. and subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated balance sheet data at December 31, 1999 was derived from audited financial statements of the Company but does not include all disclosures required by generally accepted accounting principles. Operating results for the three-month and six-month periods ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Derivative Financial Instruments: The Company does not enter into financial instruments for trading or speculative purposes. The Company uses interest rate cap contracts to hedge its exposure on variable rate debt. The cost of the caps is included in prepaid expenses and is amortized to interest expense over the life of the cap contract. The interest differential to be received under the related cap is recognized as a reduction in interest expense in the period earned. Changes in the fair value of cap contracts that do not qualify as hedges are recognized in income when they occur. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 was amended in June 2000 by SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment to FASB Statement No. 133." SFAS No. 133, as amended, requires all derivatives to be carried on the balance sheet at fair value. SFAS No. 133, as amended, is effective for financial statements issued for periods beginning after December 15, 2000. Upon adoption of SFAS No. 133, as amended, all hedging relationships must be designated and documented pursuant to the provisions of the statement. The Company intends to designate its interest cap contracts as cash-flow hedges. Accordingly, the difference, net of taxes, between the fair value of the caps and their carrying value on the balance sheet under previous hedge-accounting rules will be charged to other comprehensive income in stockholders' equity. The Company is in the process of evaluating the impact of SFAS No. 133 on the financial statements; however, it is not anticipated that adoption will have a material impact or that it will create a violation of the Company's debt covenant agreements. At June 30, 2000, the fair value of the caps was $535,000 and their carrying value was $1.3 million. Pursuant to the Statement of Position 98-5, "Reporting on the Costs of Start-up Activities" issued by the Accounting Standards Executive Committee, effective January 1, 1999, the Company changed its method of accounting for start-up activities, including pre-opening and organizational costs, to expense them as they are incurred. Accordingly, the Company recorded an expense of $779,000, net of income tax benefit of $520,000, as the cumulative effect of this change in accounting. 4 In the quarter ended September 30, 1998, unfavorable capital market conditions resulted in a reduction in the Company's development plans for 1999 and 2000. As a result, a valuation allowance of $12.0 million was established for the write- off of costs related to sites that would not be developed. This valuation allowance was reduced by $1.1 million in the quarter ended June 30, 1999 due to the renegotiation of the terms of a number of the optioned sites. For the six months ended June 30, 2000 and 1999, the computation of diluted earnings per share does not include approximately 12,805,000 and 8,098,000 weighted average shares, respectively, of common stock represented by outstanding options because the exercise price of the options was greater than the average market price of common stock during the period. Certain previously reported amounts have been reclassified to conform with the current period's presentation. NOTE 2--PROPERTY AND EQUIPMENT Property and equipment consist of the following:
(000's Omitted) June 30, December 31, 2000 1999 --------------- ------------ Operating Facilities: Land and improvements......................................... $ 456,591 $ 425,098 Buildings and improvements.................................... 1,266,117 1,194,789 Furniture, fixtures, equipment and supplies................... 247,952 237,218 ---------- ---------- Total Operating Facilities................................... 1,970,660 1,857,105 Office furniture, fixtures and equipment....................... 8,169 8,270 Facilities under development, including land and improvements.. 130,285 122,611 ---------- ---------- 2,109,114 1,987,986 Less: Accumulated depreciation................................ (163,920) (131,469) ---------- ---------- Total property and equipment.................................... $1,945,194 $1,856,517 ========== ==========
NOTE 3--LONG-TERM DEBT AND DERIVATIVE FINANCIAL INSTRUMENTS In June 2000, the Company increased availability under it's bank credit facility from $800 million to $1 billion with the addition of a $200 million Tranche D term loan that matures on June 30, 2007. The proceeds from the new term loan were used to reduce amounts outstanding under the Company's revolving loan facility. In addition to increasing aggregate borrowings and availability under the credit facility from $800 million to $1 billion, certain other terms of the credit facility were modified in connection with an amendment and restatement of the credit facility. The credit facility was amended to allow the Company to purchase up to an additional $75 million of its common stock and/or subordinated notes, with a sub-limit of $25 million for the subordinated notes. The credit facility was also amended to expand the Company's ability to issue its common stock to effect certain investments. In addition, certain conditions to each borrowing of revolving loans were eliminated and the permitted ratio of senior debt to earnings before interest, taxes, depreciation and amortization was increased to 4.25:1.00 through September 2001 and to 4.00:1.00 thereafter. Interest on the new Tranche D term loan will be calculated, at the Company's option, using either the prime rate plus 2.5% or the LIBOR rate plus 3.5%. In connection with the issuance of the new Tranche D term loan and the amendments discussed above, the interest rate on the revolving loans and the Tranche A term loan, which previously varied based on the amount of loans outstanding relative to earnings before interest, taxes, depreciation and amortization, are now calculated, at the Company's option, using either the prime rate plus 1.0% or the LIBOR rate plus 2.0%. The commitment fee on the unused revolving loan capacity is 0.5% per annum on the unused amount. In connection with these revisions to the credit facility, the Company has also acquired interest rate cap contracts with a financial institution that limit the Company's exposure to future increases in the LIBOR rate. These contracts relate to a total of $800 million and limit the Company's exposure to a maximum LIBOR rate of 7.88% 5 from June 16, 2000 through June 16, 2001 and to a maximum LIBOR rate of 8.88% from June 17, 2001 through June 16, 2002. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General We own and operate three brands in the extended stay lodging market-- StudioPLUS/TM/ Deluxe Studios ("StudioPLUS"), EXTENDED STAYAMERICA Efficiency Studios ("EXTENDED STAY"), and Crossland Economy Studios/SM/ ("Crossland"). Each brand is designed to appeal to different price points below $500 per week. All three brands offer the same core components: a living/sleeping area; a fully- equipped kitchen or kitchenette; and a bathroom. StudioPLUS facilities serve the mid-price category and generally feature guest rooms that are larger than those in our other brands, an exercise facility, and a swimming pool. EXTENDED STAY rooms are designed to compete in the economy category. Crossland rooms are typically smaller than EXTENDED STAY rooms and are targeted for the budget category. In this Quarterly Report on Form 10-Q, the words "Extended Stay America", "Company", "we", "our", "ours", and "us" refer to Extended Stay America, Inc. and its subsidiaries unless the context suggests otherwise. During the quarter ended June 30, 1999, we repositioned 14 StudioPLUS properties as EXTENDED STAY properties. All operating statistics reflect the repositioning of these properties as EXTENDED STAY properties for the entire periods presented. The table below provides a summary of our selected development and operational results for the three months and six months ended June 30, 2000 and 1999.
Three Months Six Months Ended June 30, Ended June 30, -------------- -------------- 2000 1999 2000 1999 ---- ---- ---- ---- Total Facilities Open (at period end)..... 378 347 378 347 Total Facilities Opened................... 6 13 16 42 Average Occupancy Rate.................... 83% 76% 78% 73% Average Weekly Room Rate.................. $302 $294 $301 $289
Average occupancy rates are determined by dividing the rooms occupied on a daily basis by the total number of rooms. Due to our rapid expansion, our overall average occupancy rate has been negatively impacted by the lower occupancy typically experienced during the pre-stabilization period for newly-opened facilities. We expect the negative impact on overall average occupancy to decline as the ratio of newly-opened properties to total properties in operation declines. Average weekly room rates are determined by dividing room revenue by the number of rooms occupied on a daily basis for the applicable period and multiplying by seven. The average weekly room rates generally will be greater than standard room rates because of (i) stays of less than one week, which are charged at a higher nightly rate, (ii) higher weekly rates for rooms that are larger than the standard rooms, and (iii) additional charges for more than one person per room. We expect that our future occupancy and room rates will be impacted by a number of factors, including the number and geographic location of our new facilities as well as the season in which we open those facilities. We also cannot assure you that we can maintain our occupancy and room rates. At June 30, 2000, we had 378 operating facilities (39 Crossland, 248 EXTENDED STAY, and 91 StudioPLUS) and had 23 facilities under construction (20 EXTENDED STAY and 3 StudioPLUS). We expect to complete the construction of the facilities currently under construction generally within the next twelve months, however, we cannot assure you that we will complete construction within the time periods we have historically experienced. Our ability to complete construction may be materially impacted by various factors including final permitting and obtaining certificates of occupancy, as well as weather-induced construction delays. 6 Results of Operations For the Three Months Ended June 30, 2000 and 1999 Property Operations The following is a summary of the number of properties in operation at the end of each period along with the related average occupancy rates and average weekly room rates during each period:
For the Three Months Ended -------------------------------------------------------------------------------- June 30, 2000 June 30, 1999 -------------------------------------- -------------------------------------- Average Average Average Average Facilities Occupancy Weekly Room Facilities Occupancy Weekly Room Open Rate Rate Open Rate Rate ---------- --------- ----------- ---------- --------- ----------- Crossland............ 39 82% $213 39 68% $213 EXTENDED STAY........ 248 84 308 222 78 297 StudioPLUS........... 91 82 342 86 74 339 --- -- ---- --- -- ---- Total.............. 378 83% $302 347 76% $294 === == ==== === == ====
Because newly opened properties typically experience lower occupancies during their pre-stabilization period, average occupancy rates are impacted by the ratio of newly opened properties to total properties. Each of our brands experienced a decline in the ratio of newly opened properties to total properties for the second quarter of 2000 as compared to the second quarter of 1999. The impact of this decline in the ratio of newly opened properties, along with increases in occupancy at our mature properties, resulted in an increase in our overall average occupancy rate to 83% for the second quarter of 2000 compared to 76% for the second quarter of 1999. The average occupancy rate in the second quarter of 2000 for the 334 properties we owned and operated as of March 31, 1999 was 84%. Similarly, the average occupancy rate in the second quarter of 1999 for the 218 properties we owned and operated as of March 31, 1998 was 80%. We believe that the increase in the average occupancy rate for properties open for at least one year at the beginning of the quarter of each year reflects, primarily, increases in the overall demand for lodging products in the various markets in which we operate. In addition, we believe that our occupancies benefited from a strategy implemented at the beginning of 2000 to establish a more competitive pricing structure for our products. The increase in overall average weekly room rates for the second quarter of 2000 compared to the second quarter of 1999 reflects primarily the geographic dispersion of properties opened since June 30, 1999 and the higher standard weekly room rates in certain of those markets. The increase also is due in part to increases in rates charged in previously opened properties. The average weekly room rate for the 334 properties that we owned and operated throughout both periods increased by less than 1% in the second quarter of 2000. We believe that the average weekly room rate for these properties was impacted by a strategy implemented at the beginning of 2000 to establish a more competitive pricing structure. We believe that this pricing strategy contributed to an increase in the occupancy at these properties. We recognized total revenue of $133.2 million for the second quarter of 2000 and $106.5 million for the second quarter of 1999. This is an increase of $26.7 million, or 25%. Approximately $15.7 million of the increased revenue was attributable to properties opened subsequent to March 31, 1999 and approximately $11.0 million was attributable to an increase in revenue for the 334 properties that we owned and operated throughout both periods. Property operating expenses, consisting of all expenses directly allocable to the operation of the facilities but excluding any allocation of corporate operating and property management expenses, depreciation, or interest were $52.0 million (39% of total revenue) for the second quarter of 2000, compared to $44.1 million (41% of total revenue) for the second quarter of 1999. We expect the ratio of property operating expenses to total revenue to generally fluctuate inversely relative to occupancy rate increases or decreases because the majority of these expenses do not vary based on occupancy. Our overall occupancy rates were 83% for the second quarter of 2000 and 76% for the second quarter of 1999 and our property operating margins were 61% for the second quarter of 2000 and 59% for the second quarter of 1999. 7 The provisions for depreciation and amortization for our lodging facilities were $16.0 million for the second quarter of 2000 and $14.6 million for the second quarter of 1999. These provisions were computed using the straight-line method over the estimated useful lives of the assets. These provisions reflect a pro rata allocation of the annual depreciation and amortization charge for the periods for which the facilities were in operation. Depreciation and amortization for the second quarter of 2000 increased as compared to the second quarter of 1999 because we operated 31 additional facilities in 2000 and we operated for a full quarter the 13 properties that were opened in the second quarter of 1999. Corporate Operations Corporate operating and property management expenses include all expenses not directly related to the development or operation of lodging facilities. These expenses consist primarily of personnel and certain marketing costs, as well as development costs that are not directly related to a site that we will develop. We incurred corporate operating and property management expenses of $11.1 million (8% of total revenue) in the second quarter of 2000 and $10.4 million (10% of total revenue) in the second quarter of 1999. The increase in the amount of these expenses for the second quarter of 2000 as compared to the same period in 1999 reflects the impact of additional personnel and related expenses in connection with the increased number of facilities we operated. We expect these expenses will continue to increase in total amount but decline moderately as a percentage of revenue as we develop and operate additional facilities in the future. Depreciation and amortization was $316,000 for the quarter ended June 30, 2000 and $337,000 for the comparable period in 1999. These provisions were computed using the straight-line method over the estimated useful lives of the assets for assets not directly related to the operation of our facilities. These assets were primarily office furniture and equipment. We realized $139,000 of interest income in the second quarter of 2000 and $222,000 in the second quarter of 1999. This interest income was primarily attributable to the temporary investment of funds drawn under our credit facilities. We incurred interest charges of $20.9 million during the second quarter of 2000 and $16.4 million in the second quarter of 1999. Of these amounts, $2.3 million in the second quarter of 2000 and $2.4 million in the second quarter of 1999 were capitalized and included in the cost of buildings and improvements. We recognized income tax expense of $14.2 million and $9.7 million (40% of income before income taxes and the cumulative effect of an accounting change, in both periods) for the second quarter of 2000 and 1999, respectively. Our income tax expense differs from the federal income tax rate of 35% primarily due to state and local income taxes. We expect our annualized effective income tax rate for 2000 will be approximately 40%. Reduction in Valuation Allowance In the quarter ended September 30, 1998, unfavorable capital market conditions resulted in a reduction in our development plans for 1999 and 2000. As a result, a valuation allowance of $12.0 million was established for the write-off of costs related to sites that would not be developed. The operating results for the quarter ended June 30, 1999 reflect the reversal of $1.1 million of this valuation allowance resulting from the renegotiation of the terms of a number of the optioned sites. 8 For the Six Months Ended June 30, 2000 and 1999 Property Operations The following is a summary of the properties in operation at the end of each period along with the related average occupancy rates and average weekly room rates during each period:
For the Six Months Ended -------------------------------------------------------------------------------- June 30, 2000 June 30, 1999 -------------------------------------- -------------------------------------- Average Average Average Average Facilities Occupancy Weekly Room Facilities Occupancy Weekly Room Open Rate Rate Open Rate Rate ---------- --------- ----------- ---------- --------- ----------- Crossland............ 39 78% $213 39 65% $209 EXTENDED STAY........ 248 79 307 222 75 293 StudioPLUS........... 91 78 341 86 72 332 --- -- ---- --- -- ---- Total.............. 378 78% $301 347 73% $289 === == ==== === == ====
Average occupancy rates for each of the brands increased for the six-month period ended June 30, 2000 as compared to the same period in 1999 primarily due to a decrease in the ratio of newly opened properties to total properties for those brands. In addition, we believe that our occupancies have benefited from a strategy implemented at the beginning of 2000 to establish a more competitive pricing structure for our products. The average occupancy rate in the six months ended June 30, 2000 for the 305 properties that we owned and operated as of December 31, 1998 was 79%. The increase in average weekly room rates for the six months ended June 30, 2000 as compared to the same period of 1999 reflects primarily the geographic dispersion of properties opened since June 30, 1999 and the higher standard weekly room rates in certain of those markets. The increase also is due in part to increases in rates charged at previously opened properties. The average weekly room rate for the 305 properties that we owned and operated throughout both periods increased 1% in the first six months of 2000. We believe that the average weekly room rate for these properties was impacted by a strategy implemented at the beginning of 2000 to establish a more competitive pricing structure. We believe that this pricing strategy contributed to an increase in the occupancy at these properties. We recognized total revenue of $247.2 million for the six months ended June 30, 2000 and $195.9 million for the six months ended June 30, 1999. This is an increase of $51.3 million, or 26%. Approximately $37.6 million of the increased revenue was attributable to properties opened subsequent to December 31, 1998 and approximately $13.7 million was attributable to an increase in revenue for the 305 properties that we owned and operated throughout both periods. Property operating expenses for the six months ended June 30, 2000 were $102.9 million (42% of total revenue) compared to $85.0 million (43% of total revenue) for the six months ended June 30, 1999. The decrease in property operating expenses as a percentage of total revenue for the six months ended June 30, 2000 as compared to the same period of 1999 was primarily a result of improved occupancies and revenues for the facilities that were in their pre-stabilization periods during the first six months of 1999. Operating expenses as a percentage of revenue generally decline as a newly-opened property increases its occupancy and revenue because the majority of these expenses do not vary based on occupancy. As a result of the foregoing, we realized property operating margins of 58% for the six months ended June 30, 2000 and 57% for the six months ended June 30, 1999. The provisions for depreciation and amortization for our lodging facilities were $31.9 million for the six months ended June 30, 2000 and $28.2 million for the six months ended June 30, 1999. The increase in depreciation and amortization for the six months ended June 30, 2000 as compared to the same period in 1999 is due to the operation of 31 additional facilities in 2000 and we operated for a full six months the 42 properties that were opened in the first six months of 1999. 9 Corporate Operations We incurred corporate operating and property management expenses of $22.0 million (9% of total revenue) in the six months ended June 30, 2000 and $20.7 million (11% of total revenue) in the six months ended June 30, 1999. The increase in the amount of these expenses for the six-month period ended June 30, 2000 as compared to the same period in 1999 reflects the impact of additional personnel and related expenses in connection with the increased number of facilities we operated. We expect these expenses will continue to increase in total amount but decline moderately as a percentage of revenue as we develop and operate additional facilities in the future. Depreciation and amortization for assets not directly related to operation of our facilities was $641,000 for the six months ended June 30, 2000 and $642,000 for the six months ended June 30, 1999. We realized $336,000 of interest income in the six months ended June 30, 2000 and $400,000 in the six months ended June 30, 1999. This interest income was attributable to the temporary investment of funds drawn under our credit facilities. We incurred interest charges of $40.4 million in the six months ended June 30, 2000 and $31.5 million in the six months ended June 30, 1999. Of these amounts, $4.5 million in the six months ended June 30, 2000 and $5.9 million in the six months ended June 30, 1999 were capitalized and included in the cost of buildings and improvements. We recognized income tax expense of $21.7 million for the six-month period ended June 30, 2000 and $14.8 million for the six-month period ended June 30, 1999 (40% of income before income taxes and the cumulative effect of an accounting change, in both periods). Income tax expense differs from the federal income tax rate of 35% primarily due to state and local income taxes. Cumulative Effect of a Change in Accounting Pursuant to the Statement of Position 98-5, "Reporting on the Costs of Start-up Activities" issued by the Accounting Standards Executive Committee, effective January 1, 1999, we changed our method of accounting for start-up activities, including pre-opening and organizational costs to expense them as they are incurred. Accordingly, we recorded an expense of $779,000, net of income tax benefit of $520,000, as the cumulative effect of this change in accounting. Liquidity and Capital Resources We had net cash and cash equivalents of $10.1 million as of June 30, 2000 and $6.4 million as of December 31, 1999. At June 30, 2000 we had approximately $10.1 million, and at December 31, 1999 we had approximately $45,000, invested in short-term demand notes having credit ratings of A1/P1 or the equivalent using domestic commercial banks and other financial institutions. We also deposited excess funds during these periods in an overnight sweep account with a commercial bank which in turn invested these funds in short-term, interest- bearing reverse repurchase agreements. Due to the short-term nature of these investments, we did not take possession of the securities, which were instead held by the financial institutions. The market value of the securities held pursuant to these arrangements approximates the carrying amount. Deposits in excess of $100,000 are not insured by the Federal Deposit Insurance Corporation. Our operating activities generated cash of $81.9 million during the six months ended June 30, 2000 and $47.8 million during the six months ended June 30, 1999. We used $127.7 million to acquire land, develop, or furnish a total of 39 sites opened or under construction in the six months ended June 30, 2000 and $181.1 million for 65 sites in the six months ended June 30, 1999. Our cost to develop a property varies significantly by brand and by geographic location due to differences in land and labor costs. Similarly, the average weekly rate charged and the resultant cash flow from these properties will vary significantly but generally are expected to be in proportion to the development costs. For the 329 properties we opened from January 1, 1996 through December 31, 1999, the average development cost was approximately $5.3 million with an average of 107 rooms. In 2000, we expect to open a number of properties in the 10 Northeast and West where average development costs are higher. Accordingly, we expect our average development cost for 2000 to increase to approximately $8.4 million per property. We made open market repurchases of 1,092,400 shares of common stock for approximately $8.6 million in the six months ended June 30, 2000. We received net proceeds from the exercise of options to purchase common stock totaling $70,000 in the six months ended June 30, 2000 and $5.4 million in the six months ended June 30, 1999. We have $200 million of 9.15% Senior Subordinated Notes due 2008 (the "Notes"). In June 2000, we increased availability under our bank credit facility from $800 million to $1.0 billion with the addition of a $200 million Tranche D term loan that matures on June 30, 2007. The amended $1.0 billion credit facility (the "Credit Facility") provides for a $350 million revolving loan facility (the "Revolving Facility"), a $150 million term loan facility (the "Tranche A Facility"), a $198 million (net of scheduled principal repayments of $2 million in 1999) term loan facility (the "Tranche B Facility"), a $100 million term loan facility (the "Tranche C Facility"), and a $200 million term loan facility (the "Tranche D Facility"). The proceeds from the Tranche D Facility were used to reduce amounts outstanding under the Revolving Facility. As of June 30, 2000, we had outstanding loans of $72 million under the Revolving Facility and $648 million under the term loans, leaving $278 million available and committed under the Credit Facility. In addition to increasing aggregate borrowings and availability under the Credit Facility from $800 million to $1.0 billion, certain other terms of the Credit Facility were modified in connection with an amendment and restatement of the Credit Facility. The Credit Facility was amended to allow us to purchase up to an additional $75 million of our common stock and/or subordinated notes, with a sub-limit of $25 million for the subordinated notes. The Credit Facility also was amended to expand our ability to issue common stock to effect certain investments. In addition, certain conditions to borrowings of revolving loans were eliminated and the permitted ratio of senior debt to earnings before interest, taxes, depreciation, and amortization was increased to 4.25:1.00 through September 2001 and to 4.00:1.00 thereafter. Loans under the Credit Facility bear interest, at our option, at either a variable prime-based rate or a variable LIBOR-based rate, plus an applicable margin. Interest rates on the Tranche B Facility and Tranche C Facility were not affected by the amendment. Interest on the Tranche D Facility is calculated, at our option, using either the prime rate plus 2.5% or the LIBOR rate plus 3.5%. In connection with the issuance of the new Tranche D Facility and the amendments discussed above, the interest rate on loans under the Revolving Facility and the Tranche A Facility, which previously varied based on the amount of loans outstanding relative to earnings before interest, taxes, depreciation, and amortization, are now calculated, at our option, using either the prime rate plus 1.0% or the LIBOR rate plus 2.0%. The commitment fee on the unused revolving loan capacity is 0.5% per annum on the unused amount. Our primary market risk exposures result from the variable nature of the interest rates on borrowings under the Credit Facility. We entered into the Credit Facility for purposes other than trading. Based on the levels of borrowings under the Credit Facility at June 30, 2000, if interest rates changed by 1.0%, our annual cash flow and net income would change by $4.3 million. We manage our market risk exposures by periodic evaluation of such exposures relative to the costs of reducing the exposures by entering into interest rate swap or cap agreements or by refinancing the underlying obligations with longer term fixed rate debt obligations. We do not own derivative financial instruments or derivative commodity instruments other than interest rate cap contracts on a total of $800 million that limit our exposure to LIBOR increases to a maximum LIBOR rate of 7.88% from June 16, 2000 through June 16, 2001 and to a maximum LIBOR rate of 8.88% from June 17, 2001 through June 16, 2002. At June 30, 2000 the fair value of the interest cap contracts was $535,000 and their carrying value was $1.3 million. We plan to develop approximately 30 properties with total costs of approximately $250 million in 2000. We had commitments not reflected in our financial statements at June 30, 2000 totaling approximately $125 million to complete construction of extended stay properties. We believe that the remaining availability under the Credit Facility, together with cash on hand and cash flows from operations, will provide sufficient funds to continue our expansion as presently planned and to fund our operating expenses through 2001. We may need additional capital depending on a number of factors, including the number of properties we construct or acquire, the timing of that development, and the cash flow generated by our properties. Also, if capital markets provide favorable opportunities, our plans or assumptions change or prove to be inaccurate, our existing sources of funds prove to be 11 insufficient to fund our growth and operations, or if we consummate acquisitions, we may seek additional capital sooner than currently anticipated. In the event we obtain additional capital, we may seek to increase property openings in future years. Sources of capital may include public or private debt or equity financing. We cannot assure you that we will be able to obtain additional financing on acceptable terms, if at all. Our failure to raise additional capital could result in the delay or abandonment of some or all of our development and expansion plans, and could have a material adverse effect on us. New Accounting Releases In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 was amended in June 2000 by SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment to FASB Statement No. 133." SFAS No. 133, as amended, requires all derivatives to be carried on our balance sheet at fair value. SFAS No. 133, as amended, is effective for financial statements issued for periods beginning after December 15, 2000. Upon adoption of SFAS No. 133, as amended, all hedging relationships must be designated and documented pursuant to the provisions of the statement. We intend to designate our interest cap contracts as cash-flow hedges. Accordingly, the difference, net of taxes, between the fair value of the caps and their carrying value on our balance sheet under previous hedge-accounting rules will be charged to other comprehensive income in stockholders' equity. We are in the process of evaluating the impact of SFAS No. 133 on our financial statements; however, we do not anticipate that adoption will have a material impact or that it will create a violation of our debt covenant agreements. At June 30, 2000, the fair value of the interest cap contracts was $535,000 and their carrying value was $1.3 million. Seasonality and Inflation Based upon the operating history of our facilities, we believe that extended stay lodging facilities are not as seasonal in nature as the overall lodging industry. We do expect, however, that our occupancy rates and revenues will be lower than average during the first and fourth quarters of each calendar year. Because many of our expenses do not fluctuate with changes in occupancy rates, declines in occupancy rates may cause fluctuations or decreases in our quarterly earnings. The rate of inflation as measured by changes in the average consumer price index has not had a material effect on our revenue or operating results during any of the periods presented. We cannot assure you, however, that inflation will not affect our future operating or construction costs. Special Note on Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements. Words such as "expects", "intends", "plans", "projects", "believes", "estimates", and similar expressions are used to identify these forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. However, these forward-looking statements are subject to risks, uncertainties, assumptions, and other factors which may cause our actual results, performance, or achievements to be materially different. These factors include, among other things: . our limited operating history and uncertainty as to our future profitability; . our ability to meet construction and development schedules and budgets; . our ability to develop and implement the operational and financial systems needed to manage rapidly growing operations; . uncertainty as to the consumer demand for extended stay lodging; . increasing competition in the extended stay lodging market; . our ability to integrate and successfully operate acquired properties and the risks associated with such properties; 12 . our ability to obtain financing on acceptable terms to finance our growth; and . our ability to operate within the limitations imposed by financing arrangements. Other matters set forth in this Quarterly Report may also cause our actual future results to differ materially from these forward-looking statements. We cannot assure you that our expectations will prove to be correct. In addition, all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements mentioned above. You should not place undue reliance on these forward-looking statements. All of these forward-looking statements are based on our expectations as of the date of this Quarterly Report. We do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." 13 PART II OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The following summarizes the votes of the Annual Meeting of the Company's stockholders held on May 2, 2000:
Matter For Against Abstain Non-Vote Shares Voted ------ --- ------- ------- -------- ------------ Election of Directors: H. Wayne Huizenga............................ 87,065,941 -- 370,076 -- 87,436,017 George D. Johnson, Jr........................ 82,898,238 -- 4,537,779 -- 87,436,017 Donald F. Flynn.............................. 86,620,803 -- 815,214 -- 87,436,017 Stewart H. Johnson........................... 87,049,015 -- 387,002 -- 87,436,017 John J. Melk................................. 86,613,953 -- 822,064 -- 87,436,017 Peer Pedersen................................ 87,233,673 -- 202,344 -- 87,436,017 Ratification of the appointment of PricewaterhouseCoopers LLP as Independent Auditors for the Company for 2000............................. 87,396,656 13,890 25,471 -- 87,436,017 Approve the Extended Stay America, Inc. Amended and Restated 1995 Stock Option Plan for Non-Employee Directors................... 84,318,746 3,058,721 58,550 -- 87,436,017
Item 6. Exhibits and Reports on Form 8-k (a) Exhibits Exhibit Number Description of Exhibit ------- ---------------------- 10.1 Aircraft Dry Lease dated April 1, 2000 by and between Wyoming Associates, Inc. and ESA Services, Inc. for the Learjet 55; (Serial No. 132) N122SU 10.2 Aircraft Dry Lease dated April 1, 2000 by and between Wyoming Associates, Inc. and ESA Services, Inc. for the Challenger; (Serial No. 3042) N333GJ 10.3 Sublease between Wyoming Associates, Inc. and ESA Services, Inc. for hangar space for the Challenger in Spartanburg, South Carolina 10.4 Time Sharing Agreement, dated as of April 2, 2000, by and between ESA Services, Inc. and George Dean Johnson, Jr. for the Learjet 55; (Serial No. 132) N122SU 10.5 Time Sharing Agreement, dated as of April 2, 2000, by and between ESA Services, Inc. and Advance America Cash Advance Centers, Inc. for the Challenger; (Serial No. 3042) N333GJ 10.6 Time Sharing Agreement, dated as of March 29, 2000, by and between Advance America Cash Advance Centers, Inc. and ESA Services, Inc. for the Learjet 31; (Serial No. 99) N1932K 14 10.7 Time Sharing Agreement, dated as of March 29, 2000, by and between Advance America Cash Advance Centers, Inc. and ESA Services, Inc. for the Learjet 35; (Serial No. 332) N543WW 10.8 Time Sharing Agreement, dated as of April 1, 2000, by and between ESA Services, Inc. and George Dean Johnson, Jr. for the Challenger; (Serial No. 3042) N333GJ 10.9 Extended Stay America, Inc. Amended and Restated 1995 Stock Option Plan for Non-Employee Directors 10.10 Amended and Restated Credit Agreement, dated as of June 7, 2000, by and between Extended Stay America, Inc., various banks, Morgan Stanley Senior Funding, Inc., and The Industrial Bank of Japan, Limited. 27 Financial Data Schedule (for EDGAR filings only) (b) Reports on Form 8-K None 15 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, thereunto duly authorized, on August 14, 2000. EXTENDED STAY AMERICA, INC. /s/ Gregory R. Moxley --------------------- Gregory R. Moxley Chief Financial Officer (Principal Financial Officer) /s/ Patricia K. Tatham ------------------------ Patricia K. Tatham Vice President--Corporate Controller (Principal Accounting Officer) 16 EX-10.1 2 0002.txt AIRCRAFT DRY LEASE WITH WYOMING ASSO., INC. EXHIBIT 10.1 AIRCRAFT DRY LEASE This Lease of aircraft is made, effective as of April 1, 2000, by and ------------- between Wyoming Associates, Inc., a corporation incorporated under the laws of ------------------------ the State of South Carolina, with principal offices at 961 East Main Street, -------------- -------------------- Spartanburg, SC 29302 (hereinafter referred to as "Lessor") and ESA Services, - --------------------- ------------ Inc., a corporation incorporated under the laws of the State of Delaware, with principal offices at 450 East Las Olas Blvd, Ft. Lauderdale, FL 33301 ------------------------------------------------ (hereinafter referred to as "Lessee"). RECITALS The parties recite that: A. Lessor owns a 1987 Gates Learjet Model 55B aircraft, Serial No. 132, ---------------------------- --- and currently registered as N122SU (hereinafter referred to as the "Aircraft"). ------ The Aircraft is available for use by a qualified Lessee; and B. Lessee desires to lease the Aircraft under such terms and conditions as are mutually satisfactory to the parties. The parties agree as follows: SECTION ONE LEASE OF AIRCRAFT For Fifty-Seven Thousand Dollars and No/100 ($57,000.00) monthly, Lessor agrees to lease the Aircraft to Lessee. The Aircraft shall be delivered to Lessee at Ft. Lauderdale Hollywood International Airport in Ft. Lauderdale, ---------------------------------------------- -------------- Florida on April 1, 2000, at which time Lessee shall inspect the Aircraft to the - ------- ------------- extent deemed necessary. Lessee shall have ten (10) flight hours following --- delivery of the Aircraft in which to notify Lessor in writing of any defects in the Aircraft or its equipment or accessories. If, at the end of such period, Lessor has not received such notification, it shall be conclusively presumed between the parties that Lessee has 1 fully inspected the Aircraft having knowledge that it is in good condition and repair and that Lessee is satisfied with and has accepted the Aircraft in such condition and repair. SECTION TWO TERM This Lease shall commence on April 1, 2000 and continue for one year after ------------- said date. Thereafter, this Lease shall be automatically renewed on a month to month basis, unless sooner terminated by either party as hereinafter provided. Either party may at any time terminate this Lease upon thirty (30) days written notice to the other party, delivered personally or by certified mail, return receipt requested, at the address for said other party as set forth above. SECTION THREE COMMERCIAL OPERATION RESTRICUTION Neither Lessee nor Lessor will make the Aircraft available for hire within the meaning of the Federal Aviation Regulations. The Aircraft is to be operated strictly in accordance with 14 C.F. R. Part 91. SECTION FOUR INSURANCE At all times during the term of this Lease, Lessee shall cause to be carried and maintained, at Lessee's cost and expense, physical damage insurance with respect to the Aircraft in the amount set forth below: Aircraft Physical Damage $5,650,000.00 (No Deductible While In Motion or Not in Motion) At all times during the term of this Lease, Lessee shall also cause to be carried and maintained, at Lessee's cost and expense, third party aircraft liability insurance, passenger legal liability insurance, property damage liability insurance, and medical expense insurance in the amounts set forth below: 2 Combined Liability Coverage for Bodily Injury and Property Damage Including Passengers - Each Occurrence $100,000,000.00 Medical Expense Coverage - Each Person $ 5,000.00 Lessee shall also bear the cost of paying any deductible amount on any policy of insurance in the event of a claim or loss. Any policies of insurance carried in accordance with this Lease: (i) shall name Lessor and its assignee as an additional insured; and (ii) shall contain a waiver by the underwriter thereof of any right of subrogation against Lessor; and (iii) shall provide that in respect of the interests of Lessor and its assignee, such policies of insurance shall not be invalidated by any action or inaction of Lessee or any other person and shall insure Lessor and its assignee (subject to the limits of liability and war risk exclusion set forth in such policies) regardless of any breach or any violation of any warranty, declarations or conditions contained in such policies by Lessee or any other person; and (iv) shall provide that if the insurers cancel insurance for any reason whatsoever, or the same is allowed to lapse for non-payment of premium, or if there is any material change in policy terms and conditions, such a cancellation, lapse or change shall not be effective as to Lessor. Each liability policy shall be primary without right of contribution from any other insurance which is carried by Lessee or Lessor and shall expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured. Lessee shall submit this Lease for approval to the insurance carrier for each policy of insurance on the Aircraft. Lessee shall arrange for a Certificate of Insurance evidencing appropriate coverage as to the Aircraft and the satisfaction of the requirements set forth above to be given by its insurance carriers to Lessor. 3 SECTION FIVE RESTRICTIONS ON USE Lessee may operate the Aircraft only for the purposes and within the geographical limits set forth in the insurance policy or policies obtained in compliance with Section Four of this Lease. The Aircraft shall be operated at all times in accordance with the flight manual and all manufacturer's suggested operating procedures. Furthermore, Lessee shall not use the Aircraft in violation of any foreign, federal, state, territorial, or municipal law or regulation and shall be solely responsible for any fines, penalties, or forfeitures occasioned by any violation by Lessee. If such fines or penalties are imposed on Lessor and paid by Lessor, Lessee shall reimburse Lessor for the amount thereof within thirty (30) days of receipt by Lessee of written demand from Lessor. Lessee will not base the Aircraft, or permit it to be based, outside the limits of the United States of America, without the written consent of Lessor and its assignee. The Aircraft shall be flown only by certificated and qualified pilots and shall be maintained only by certificated and qualified mechanics. In the event the insurance on the Aircraft would be invalidated because lessee is unable to obtain certificated and qualified pilots and mechanics, Lessee shall not operate the Aircraft until such time as certificated and qualified pilots and mechanics are obtained and insurance on the Aircraft is made valid. Lessee will not directly or indirectly create, incur, assume or suffer to exist any lien on or with respect to the Aircraft. Lessee will promptly, at is own expense, take such action as may be necessary to discharge any lien not excepted above if the same shall arise at any time. SECTION SIX INSPECTION BY LESSOR Lessee agrees to permit Lessor or any authorized agent to inspect the Aircraft at any reasonable time and to furnish any information in respect to the Aircraft and its use that Lessor may reasonably request. 4 SECTION SEVEN ALTERATIONS Except in accordance with other written agreements entered into subsequent to the date of this Lease between Lessee and Lessor regarding maintenance of the Aircraft, Lessee shall not have the right to alter, modify, or make additions or improvements to the Aircraft without the written permission of Lessor. All such alterations, modifications, additions, and improvements as are so made shall become the property of Lessor and shall be subject to all of the terms of this Lease. SECTION EIGHT MAINTENANCE AND REPAIR Lessee, at Lessee's own cost and expense, shall repair and maintain the Aircraft during the term of this Lease so as to keep it in as good and safe operating condition as when delivered by Lessor to Lessee, ordinary wear and tear from use and ordinary deterioration excepted. Lessee shall pay all costs and expenses of new parts and accessories for replacement, including transportation charges thereon. Lessee shall be entitled to any and all salvage from broken or worn out parts. The workmen who inspect, maintain, and repair the Aircraft on Lessee's behalf shall not be employees of Lessor, but shall at all times be employees of Lessee or independent contractors, and Lessor shall have no control or authority to direct, employ, discharge or pay compensation to such employees. Subject to the foregoing limitations, Lessee agrees to indemnify Lessor against any liability arising from the negligent repair and maintenance of the Aircraft, as well as from failure to repair and maintain the Aircraft, and also against any claim or liability arising out of the repair work, and the delivery of material to and from the place where such repair and maintenance work is performed. All inspections, repairs, modifications, maintenance, and overhaul work to be accomplished by Lessee shall be performed by personnel certificated to perform such work and 5 shall be performed in accordance with the standards set by the Federal Aviation Regulations. Lessee shall maintain all log books and records pertaining to the Aircraft during the term of this Lease in accordance with the Federal Aviation Regulations. Such records shall be made available for examination by Lessor, and Lessee, at the termination of this Lease, shall deliver such records to Lessor. SECTION NINE TITLE The registration of and title to the Aircraft shall be in the name of the Lessor, and the Aircraft, at all times during the term of this Lease or any extension, shall bear United States registration markings. All responsibility and obligations in regard to the operation of the Aircraft as above owned, registered, and marked shall be borne by Lessee during the term of this Lease. SECTION TEN PAYMENT OF TAXES Lessee shall pay or cause to be paid all taxes incurred by reason of ownership of the Aircraft during the term of this Lease, including personal property taxes. Lessee shall pay all taxes associated with Lessee's use of the Aircraft on Lessee's own business, including landing fees, fuel taxes, and any other taxes or fees which may be assessed against a specific flight by Lessee. SECTION ELEVEN ASSIGNMENT Lessee shall not assign this Lease or any interest in the Aircraft, or sublet the Aircraft, without prior written consent of Lessor. Subject to the foregoing, this Lease inures to the benefit of, and is binding on, the heirs, legal representatives, successors, and assigns of the parties. 6 SECTION TWELVE ACCIDENT AND CLAIM Lessee shall immediately notify Lessor of each accident involving the Aircraft, which notification shall specify the time, place, and nature of the accident or damage, the names and addresses of parties involved, persons injured, witnesses, and owners of properties damaged, and such other information as may be known. Lessee shall advise Lessor of all correspondence, papers, notices, and documents whatsoever received by Lessee in connection with any claim or demand involving or relating to the Aircraft or its operation, and shall aid in any investigation instituted by Lessor and in the recovery of damages from third persons liable therefor. SECTION THIRTEEN RETURN OF AIRCRAFT TO LESSOR On the termination of this Lease by expiration or otherwise, Lessee shall return the Aircraft to Lessor at Spartanburg Downtown Airport in Spartanburg, ---------------------------- ----------- South Carolina, in as good operating condition and appearance as when received, - -------------- ordinary wear, tear and deterioration excepted, and shall indemnify Lessor against any claim for loss or damage occurring prior to the actual physical delivery of the Aircraft to Lessor. SECTION FOURTEEN MODIFICATION OF AGREEMENT This Lease constitutes the entire understanding between the parties, and any change or modification must be in writing and signed by both parties. SECTION FIFTEEN GOVERNING LAW This Lease is entered into under, and is to be construed in accordance with, the laws of the State of South Carolina. -------------- 7 SECTION SIXTEEN TRUTH IN LEASING STATEMENT THE AIRCRAFT, A 1987 GATES LEARJET 55B, MANUFACTURER'S SERIAL NO. 132, ---------------------- --- CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS N122SU, HAS ------ BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS LEASE. THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. DURING THE DURATION OF THIS LEASE, ESA SERVICES, INC., 450 EAST LAS OLAS BOULEVARD, FT. LAUDERDALE, FORIDA 33301, - ----------------------------------------------------------------------------- IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE. AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE. THE "INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING RQUIREMENTS" ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE. I, THE UNDERSIGNED GEORGE D. JOHNSON, JR. AS PRESIDENT OF ESA SERVICES, ------------ INC., 450 EAST LAS OLAS BOULEVARD, FT. LAUDERDALE, FLORIDA 33301, CERTIFY THAT I - ---------------------------------------------------------------- AM RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT AND THAT I UNDERSTAND MY RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS. IN WITNESS WHEREOF, the parties have executed this Lease. WYOMING ASSOCIATES, INC. /s/ Dan C. Breeden, Jr. 4/1/00 - ------------------------------- -------------------------- DAN C. BREEDEN, JR. Date and Time of Execution Vice President ESA SERVICES, INC. - ------------------ /s/ George D. Johnson, Jr. 4/1/00 - ------------------------------- -------------------------- GEORGE D. JOHNSON, JR. Date and Time of Execution President 8 INSTRUCTIONS FOR COMPLIANCE WITH "TRUTH IN LEASING" REQUIREMENTS 1. Mail a copy of the lease agreement to the following address via certified mail, return receipt requested, immediately upon execution of the agreement (14 C.F.R. requires that the copy be sent within twenty-four hours after it is signed): Federal Aviation Administration Aircraft Registration Branch ATTN: Technical Section P.O. Box 25724 Oklahoma City, Oklahoma 73125 2. Telephone the nearest Flight Standards District Office at least forty-eight hours prior to the first flight under this lease agreement. 3. Carry a copy of the lease agreement in the aircraft at all times. 9 EX-10.2 3 0003.txt AIRCRAFT DRY LEASE WITH WYOMING EXHIBIT 10.2 AIRCRAFT DRY LEASE This Lease of aircraft is made, effective as of April 1, 2000, by and ------------- between Wyoming Associates, Inc., a corporation incorporated under the laws of ------------------------ the State of South Carolina, with principal offices at 961 East Main Street, -------------- --------------------- Spartanburg, SC 29302 (hereinafter referred to as "Lessor") and ESA Services, - ---------------------- Inc., a corporation incorporated under the laws of the State of Delaware, with principal offices at 450 East Las Olas Blvd, Ft. Lauderdale, FL 33301 ------------------------------------------------- (hereinafter referred to as "Lessee"). RECITALS The parties recite that: A. Lessor owns a 1985 Canadair Challenger Model CL-600-2A-12 aircraft, ------------------------------------------- Series No. 3042, and currently registered as N333GJ (hereinafter referred to as ---- ------ the "Aircraft"). The Aircraft is available for use by a qualified Lessee; and B. Lessee desires to lease the Aircraft under such terms and conditions as are mutually satisfactory to the parties. The parties agree as follows: SECTION ONE LEASE OF AIRCRAFT For One Hundred Forty-Seven Thousand Dollars and No/100 ($147,000.00) monthly, Lessor agrees to lease the Aircraft to Lessee. The Aircraft shall be delivered to Lessee at Ft. Lauderdale Hollywood International Airport in Ft. ---------------------------------------------- --- Lauderdale, Florida on April 1, 2000, at which time Lessee shall inspect the - ------------------- ------------- Aircraft to the extent deemed necessary. Lessee shall have ten (10) flight hours following delivery of the Aircraft in which to notify Lessor in writing of any defects in the Aircraft or its equipment or accessories. If, at the end of such period, Lessor has not received such notification, it shall be conclusively presumed between the parties that Lessee 1 has fully inspected the Aircraft having knowledge that it is in good condition and repair and that Lessee is satisfied with and has accepted the Aircraft in such condition and repair. SECTION TWO TERM This Lease shall commence on April 1, 2000 and continue for one year after ------------- said date. Thereafter, this Lease shall be automatically renewed on a month to month basis, unless sooner terminated by either party as hereinafter provided. Either party may at any time terminate this Lease upon thirty (30) days written notice to the other party, delivered personally or by certified mail, return receipt requested, at the address for said other party as set forth above. SECTION THREE COMMERCIAL OPERATION RESTRICTION Neither Lessee nor Lessor will make the Aircraft available for hire within the meaning of the Federal Aviation Regulations. The Aircraft is to be operated strictly in accordance with 14 C.F.R. Part 91. SECTION FOUR INSURANCE At all times during the term of this Lease, Lessee shall cause to be carried and maintained, at Lessee's cost and expense, physical damage insurance with respect to the Aircraft in the amount set forth below: Aircraft Physical Damage $12,900,000.00 (No Deductible While In Motion or Not In Motion) At all times during the term of this Lease, Lessee shall also cause to be carried and maintained, at Lessee's cost and expense, third party aircraft liability insurance, passenger legal liability insurance, property damage liability insurance, and medical expense insurance in the amounts set forth below: 2 Combined Liability Coverage for Bodily Injury and Property Damage Including Passengers - Each Occurrence $100,000,000.00 Medical Expense Coverage - Each Person $5,000.00 Lessee shall also bear the cost of paying any deductible amount on any policy of insurance in the event of a claim or loss. Any policies of insurance carried in accordance with this Lease: (i) shall name Lessor and its assignee as an additional insured; and (ii) shall contain a waiver by the underwriter thereof of any right of subrogation against Lessor; and (iii) shall provide that in respect of the interests of Lessor and its assignee, such policies of insurance shall not be invalidated by any action or inaction of Lessee or any other person and shall insure Lessor and its assignee (subject to the limits of liability and war risk exclusion set forth in such policies) regardless of any breach or any violation of any warranty, declarations or conditions contained in such policies by Lessee or any other person; and (iv) shall provide that if the insurers cancel insurance for any reason whatsoever, or the same is allowed to lapse for non-payment of premium, or if there is any material change in policy terms and conditions, such a cancellation, lapse or change shall not be effective as to Lessor. Each liability policy shall be primary without right of contribution from any other insurance which is carried by Lessee or Lessor and shall expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured. Lessee shall submit this Lease for approval to the insurance carrier for each policy of insurance on the Aircraft. Lessee shall arrange for a Certificate of Insurance evidencing appropriate coverage as to the Aircraft and the satisfaction of the requirements set forth above to be given by its insurance carriers to Lessor. 3 SECTION FIVE RESTRICTIONS ON USE Lessee may operate the Aircraft only for the purposes and within the geographical limits set forth in the insurance policy or policies obtained in compliance with Section Four of this Lease. The Aircraft shall be operated at all times in accordance with the flight manual and all manufacturer's suggested operating procedures. Furthermore, Lessee shall not use the Aircraft in violation of any foreign, federal, state, territorial, or municipal law or regulation and shall be solely responsible for any fines, penalties, or forfeitures occasioned by any violation by Lessee. If such fines or penalties are imposed on Lessor and are paid by Lessor, Lessee shall reimburse Lessor for the amount thereof within thirty (30) days of receipt by Lessee of written demand from Lessor. Lessee will not base the Aircraft, or permit it to be based, outside the limits of the United States of America, without the written consent of Lessor and its assignee. The Aircraft shall be flown only by certificated and qualified pilots and shall be maintained only by certificated and qualified mechanics. In the event the insurance on the Aircraft would be invalidated because Lessee is unable to obtain certificated and qualified pilots and mechanics, Lessee shall not operate the Aircraft until such time as certificated and qualified pilots and mechanics are obtained and insurance on the Aircraft is made valid. Lessee will not directly or indirectly create, incur, assume or suffer to exist any lien on or with respect to the Aircraft. Lessee will promptly, at its own expense, take such action as may be necessary to discharge any lien not excepted above if the same shall arise at any time. SECTION SIX INSPECTION BY LESSOR Lessee agrees to permit Lessor or any authorized agent to inspect the Aircraft at any reasonable time and to furnish any information in respect to the Aircraft and its use that Lessor may reasonably request. 4 SECTION SEVEN ALTERATIONS Except in accordance with other written agreements entered into subsequent to the date of this Lease between Lessee and Lessor regarding maintenance of the Aircraft, Lessee shall not have the right to alter, modify, or make additions or improvements to the Aircraft without the written permission of Lessor. All such alterations, modifications, additions, and improvements as are so made shall become the property of Lessor and shall be subject to all of the terms of this Lease. SECTION EIGHT MAINTENANCE AND REPAIR Lessee, at Lessee's own cost and expense, shall repair and maintain the Aircraft during the term of this Lease so as to keep it in as good and safe operating condition as when delivered by Lessor to Lessee, ordinary wear and tear from use and ordinary deterioration excepted. Lessee shall pay all costs and expenses of new parts and accessories for replacement, including transportation charges thereon. Lessee shall be entitled to any and all salvage from broken or worn out parts. The workmen who inspect, maintain, and repair the Aircraft on Lessee's behalf shall not be employees of Lessor, but shall at all times be employees of Lessee or independent contractors, and Lessor shall have no control or authority to direct, employ, discharge or pay compensation to such employees. Subject to the foregoing limitations, Lessee agrees to indemnify Lessor against any liability arising from the negligent repair and maintenance of the Aircraft, and also against any claim or liability arising out of the repair work, and the delivery of material to and from the place where such repair and maintenance work is performed. All inspections, repairs, modifications, maintenance, and overhaul work to be accomplished by Lessee shall be performed by personnel certificated to perform such work and shall be performed in accordance with the standards set by the Federal Aviation Regulations. 5 Lessee shall maintain all log books and records pertaining to the Aircraft during the term of this Lease in accordance with the Federal Aviation Regulations. Such records shall be made available for examination by Lessor, and Lessee, at the termination of this Lease, shall deliver such records to Lessor. SECTION NINE TITLE The registration of and title to the Aircraft shall be in the name of the Lessor, and the Aircraft, at all times during the term of this Lease or any extension, shall bear United States registration markings. All responsibility and obligations in regard to the operation of the Aircraft as above owned, registered, and marked shall be borne by Lessee during the term of this Lease. SECTION TEN PAYMENT OF TAXES Lessee shall pay or cause to be paid all taxes incurred by reason of ownership of the Aircraft during the term of this Lease, including personal property taxes. Lessee shall pay all taxes associated with Lessee's use of the Aircraft on Lessee's own business, including landing fees, fuel taxes, and any other taxes or fees which may be assessed against a specific flight by Lessee. SECTION ELEVEN ASSIGNMENT Lessee shall not assign this Lease or any interest in the Aircraft, or sublet the Aircraft, without prior written consent of Lessor. Subject to the foregoing, this Lease inures to the benefit of, and is binding on, the heirs, legal representatives, successors, and assigns of the parties. SECTION TWELVE ACCIDENT AND CLAIM Lessee shall immediately notify Lessor of each accident involving the Aircraft, which notification shall specify the time, place, and nature of the accident or damage, the names and 6 addresses of parties involved, persons injured, witnesses, and owners of properties damaged, and such other information as may be known. Lessee shall advise Lessor of all correspondence, papers, notices, and documents whatsoever received by Lessee in connection with any claim or demand involving or relating to the Aircraft or its operation, and shall aid in any investigation instituted by Lessor and in the recovery of damages from third persons liable therefor. SECTION THIRTEEN RETURN OF AIRCRAFT TO LESSOR On the termination of this Lease by expiration or otherwise, Lessee shall return the Aircraft to Lessor at Spartanburg Downtown Airport in Spartanburg, ---------------------------- ----------- South Carolina, in as good operating condition and appearance as when received, - -------------- ordinary wear, tear and deterioration excepted, and shall indemnify Lessor against any claim for loss or damage occurring prior to the actual physical delivery of the Aircraft to Lessor. SECTION FOURTEEN MODIFICATION OF AGREEMENT This Lease constitutes the entire understanding between the parties, and any change or modification must be in writing and signed by both parties. SECTION FIFTEEN GOVERNING LAW This Lease is entered into under, and is to be construed in accordance with, the laws of the State of South Carolina. -------------- SECTION SIXTEEN TRUTH IN LEASING STATEMENT THE AIRCRAFT, A 1985 CANADAIR CHALLENGER, MODEL CO-600-2A-12, -------------------------------------------- MANUFACTURER'S SERIAL NO. 3042, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ---- ADMINISTRATION AS N333GJ, HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 ------ DURING THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS LEASE. 7 THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. DURING THE DURATION OF THIS LEASE, ESA SERVICES, INC., 450 EAST LAS OLAS BOULEVARD, FT. LAUDERDALE, FLORIDA 33301, - ------------------------------------------------------------------------------ IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE. AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE. THE "INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING REQUIREMENTS" ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE. I, THE UNDERSIGNED GEORGE D. JOHNSON, JR. AS PRESIDENT OF ESA SERVICES, ------------- INC., 450 EAST LAS OLAS BOULEVARD, FT. LAUDERDALE, FLORIDA 33301, CERTIFY THAT I - ---------------------------------------------------------------- AM RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT AND THAT I UNDERSTAND MY RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS. IN WITNESS WHEREOF, the parties have executed this Lease. WYOMING ASSOCIATES, INC. /s/ Dan C. Breeden, Jr. 4/1/2000 - ----------------------------------- -------------------------- DAN C. BREEDEN, JR., Vice President Date and Time of Execution ESA SERVICES, INC. - ------------------ /s/ George D. Johnson, Jr. 4/1/2000 - ----------------------------------- -------------------------- GEORGE D. JOHNSON, JR. Date and Time of Execution President 8 INSTRUTIONS FOR COMPLIANCE WITH "TRUTH IN LEASING" REQUIREMENTS 1. Mail a copy of the lease agreement to the following address via certified mail, return receipt requested, immediately upon execution of the agreement (14 C.F.R. requires that the copy be sent within twenty-four hours after it is signed): Federal Aviation Administration Aircraft Registration Branch ATTN: Technical Section P.O. Box 25724 Oklahoma City, Oklahoma 73125 2. Telephone the nearest Flight Standards District Office at least forty-eight hours prior to the first flight under this lease agreement. 3. Carry a copy of the lease agreement in the aircraft at all times. 9 EX-10.3 4 0004.txt SUBLEASE BETWEEN WYOMING AND ESA EXHIBIT 10.3 SUBLEASE THIS SUBLEASE is made this ________ of _____________________, 2000, between WYOMING ASSOCIATES, INC., a South Carolina corporation, ("Tenant"), and ESA SERVICES, INC. ("Subtenant"). RECITALS 1. Tenant is the Tenant of the property commonly known as Kensington Drive, Spartanburg, South Carolina (the "Building" or the "Premises"). Tenant is the assignee of the interest of Johnson Development Associates, Inc., as tenant under an Agreement from The City of Spartanburg ("Landlord") ("Underlying Lease"), a copy of which is attached hereto as "Exhibit A". 2. Subtenant desires a sublease for the use of sufficient space (the "Sublease Premises") to park one Challenger (N333GJ) aircraft (the "Aircraft") within the Premises at a location reasonably designated by Tenant from time to time (the "Sublease Premises") pursuant to the terms and conditions contained in this Sublease ("Sublease"). In addition, Subtenant shall be entitled to nonexclusive reasonable use of the restroom facilities, crew accommodations, office space, kitchen and conference room by its employees, pilots and mechanic as provided herein and provided such use does not unreasonably interfere with Tenant's use thereof. Other subtenants shall share space in and on the Premises with Subtenant. Its interests shall not be exclusive. 3. Tenant for itself and/or its other subtenants shall use the balance of the Premises. In consideration of the mutual covenants, conditions and agreements contained herein, the parties agree as follows: SECTION ONE DESCRIPTION OF SUBLEASE PREMISES Tenant shall demise to Subtenant the Sublease Premises, as described in Paragraph 2 above. Subtenant agrees to lease the Sublease Premises in an "as is" condition, except as otherwise expressly set forth herein, provided that Tenant, and not Subtenant, shall have complete responsibility for the condition of, and any repair cost related to, the Sublease Premises and the Premises, except for damage caused by Subtenant, its agents, servants, visitors, invitees, guests or licensees and in the event of any and all violations of any local, state and/or federal environmental hazardous waste laws, rules and regulations that exist as of the date of this Sublease and/or are not introduced to the Premises by the Subtenant, its agents, servants, visitors, invitees, guests or licensees. SECTION TWO PURPOSE OF SUBLEASE The Sublease Premises demised under this Sublease shall be used by Subtenant for aircraft hanger purposes for the storage of the Aircraft, for conducting maintenance on the Aircraft and uses related thereto and for no other purposes. Subject to Section 25, Subtenant may hire outside vendors for aircraft and hanger maintenance services other than those required to be provided by Tenant hereunder and shall not be obligated to use Tenant or vendors provided by Tenant for such maintenance services. SECTION THREE TERM OF SUBLEASE; RENEWAL TERM The term of this Sublease shall be ten (10) years commencing upon completion of the Premises Improvements and terminating on December 31, 2009. Subject to the provisions below, Subtenant shall have the option of extending this Sublease for two (2) successive five year periods (each an "Extension Term") upon written notice delivered to Tenant not less than 180 days prior to the end of the current term or Extension Term unless terminated sooner as provided herein or under the Underlying Lease. Termination or expiration of the term of the Underlying Lease shall also extinguish this Sublease, provided that in the event of a monetary breach of the Underlying Lease by Tenant or its assignor, Subtenant shall have the right to cure such breach within thirty (30) days of notice thereof, and further provided that the amounts paid to Landlord to cure any such breach may be deducted from the rent payable hereunder. If the Term of the Underlying Lease expires, any applicable Extension Term shall terminate concurrently. SECTION FOUR RENT During the initial term and any Extension Term of this Sublease, Subtenant shall pay to Tenant Two Thousand Nine Hundred and no/100 ($2,900.00) Dollars per month (subject to adjustments as provided below) payable on the first day of the term of the Sublease and on the first day of each subsequent month as complete and full rent for the Sublease Premises. Any other sums due as additional rental under the provisions of this Sublease if any shall constitute rent and be due on the basic rental payment due date first occurring after notice and invoice from Tenant. All such payments shall be paid to Landlord without set off except as provided in Section 3. The monthly rental payments shall increase on the same dates as the rent increases go into effect under their underlying Agreement with the City of Spartanburg. The increase paid by each Subtenant shall be in proportion to the percentage increase of the underlying Agreement. Each Subtenant shall pay its proportionate share of the cost of operating the Premises (as defined in Section 5 below) as "Additional Rent". SECTION FIVE ADDITIONAL RENT Tenant shall pay and maintain records of payment of public liability and property damage insurance, and the costs of common area maintenance on the Premises and shall on an annual basis present statements of account on the same expenses and collect from Subtenant, as Additional Rent, as then existing. Subtenant's share of common area maintenance expenses shall be proportional based on the number of pilots and personnel associated with the aircraft fleet of Subtenant. The proportion may change based on changes in the type, size and 2 requirements of the aircraft fleet and the number of personnel associated with the aircraft fleet. TENANT SHALL CONTRIBUTE $950.00 PER MONTH AS ADDITIONAL RENT. Additional Rent shall be made with each monthly Rent payment. Adjustment in the monthly Additional Rent payment shall be made by March 1, based on the actual expenditures of the preceding twelve month period. If the amount collected does not equal the actual expenditures, adjustment shall be made annually as required within thirty (30) days of Tenant's rendering of account. For purposes of this paragraph, "Common Area Maintenance Expense" shall include all costs and expenditures incurred by Tenant in maintaining and operating refuse collection facilities and removal; parking lot and tarmac sweeping and snow removal; parking lot and tarmac repairs and maintenance including patching, resurfacing and repainting; common area lighting maintenance, security; sidewalk cleaning; landscaping maintenance and repair, including replacing and renovation of plant material; irritation associated expenses; personnel expenses associated with the above functions. Tenant may enter into reasonable contracts for the execution of these common area maintenance functions. The Premises are owned by the City of Spartanburg. As they are publicly owned, they should be exempt from ad valorem taxation. However, should the Premises become subject to ad valorem taxation, the amount of such taxes shall, for purposes of this Section, be included as a common area expense and shall be collected proportionately from Subtenant as Additional Rent. SECTION SIX CASUALTY DAMAGE OR INJURY INSURANCE AND WAIVER OF SUBROGATION 1. If the Sublease Premises shall be destroyed or damaged by any acts of war, the elements, including earthquake, fire damage or other casualty, to such extent as to render the Sublease Premises untenantable in whole or in substantial part, either the Tenant or the Subtenant shall have the right to declare this Sublease terminated upon written notice to the other. Subtenant shall not have the option of terminating this Sublease if Subtenant's storage of the Aircraft with the Building is not interrupted for more than forth-five (45) days. In the event any such destruction or damage occurs and this Sublease is not terminated as permitted herein, Subtenant's rental obligations in this Sublease shall be abated pro rata during the time that such destruction or damage occurs and thereafter until the repair thereof is substantially completed. 2. At all times during the term of this Sublease, Subtenant shall maintain in full force and effect, at its sole cost, one or more policies of insurance, including but not limited to, the following coverages: (a) all Risk Aircraft Hull and Spare Parts coverage including "All Risk-Ground and Flight", "All Risk-Not in Motion" and "All Risk- Not in Flight", in an amount not less than the full insurable value of the Aircraft(s) located at the Sublease Premises, including a waiver of subrogation in favor of the Tenant and Tenant's insurer; with deductible being the sole responsibility of Subtenant. 3 (b) Comprehensive Aviation Liability Insurance including (i) Airport Premises and Operations, and (ii) Contractual and Fire Legal Liability, including coverage for bodily injury, death and property damage, in amounts not less than $5,000,000 combined single limit per occurrence (except $50,000 limit of coverage with respect to Fire Legal Liability) and endorsed to be primary insurance with respect to Subtenant's negligence. (c) Aircraft Liability Insurance affording coverage for Subtenant's owned and non-owned aircraft; in an amount not less than $5,000,000 combined single limit per occurrence; including coverage for bodily injury, death and property damage. (d) Personal Property Insurance covering "All Risk" of direct physical loss or damage to Subtenant's own property and contents including improvements and betterments to the Sublease Premises. The coverage is to include a waiver of subrogation in favor of the Tenant. (e) Auto Liability Insurance affording coverage or owned, non-owned, and hired autos, including physical damage coverage; in an amount not less than $1,000,000. (f) Worker's Compensation Insurance including Employers' Liability Insurance, covering all of the Subtenant's employees, providing statutory workers' compensation benefits and employers' liability limits of not less than $1,000,000 per accident/disease. All insurance maintained by the Subtenant in Section 6(2)(a) or (b) shall name Tenant, its Manager, officers, directors, members, employees, and agents as additional insured; including appropriate clauses acceptable to Tenant insuring a severability of interest, insuring contractual liability; and providing the interest of the additional insured shall not be invalidated by any action or inaction or breach of warranty on the part of the insured. Subtenant shall furnish a certificate of insurance evidencing the above insurance as outlined in this Section 6(2). Such certificates shall also evidence sixty (60) days notice of cancellation or non-renewal to the Tenant. Subtenant shall provide certificates of replacement insurance not less than sixty (60) days prior to the expiration of any required insurance. 3. Except with respect to claims governed by Section 6(4) below and to the extent such indemnity is waived under their respective liability insurance, Subtenant and Tenant agree to exonerate, save harmless, protect and indemnify the other and their employees, officers, directors, manager, members and agents, successors and assigns from and against any and all losses, damages, claims, suits or actions, judgments, and costs, including reasonable attorneys' fees, for any injury to or death of persons or damage to property proximately caused by the negligence or wrongful act or omission of Subtenant or Tenant, as the case may be, their agents, servants, employees, invitees or visitors in or on the Premises. 4. Tenant and Subtenant each hereby waive any and every claim for recovery from the other for any and all loss or damage to the Aircraft, the building, the Premises or the Sublease 4 Premises or to the contents thereof which loss or damage is covered by valid and collectable fire and extended coverage insurance policies or other property damage policies to the extent that such loss or damage is recovered under such policies. SECTION SEVEN COMPLIANCE WITH UNDERLYING LEASE Subtenant shall not cause or allow any undue waste or other deterioration on the Sublease Premises or Premises and shall comply with all applicable laws and ordinances respecting the use and occupancy of the Sublease Premises or Premises relating to matters not covered elsewhere in this Sublease. This Sublease and Subtenant's rights under this Sublease shall at all times be subject and subordinate to the Underlying Lease, and Subtenant shall otherwise abide by all of the terms of the Underlying Lease, with respect to the Sublease Premises and its use of the Premises. The Subtenant covenants and agrees to use the Sublease Premises in accordance with the terms and conditions of the Underlying Lease and further covenants not to do any act which will result in violation of the terms of the Underlying Lease. In furtherance of the foregoing, the parties hereby confirm each to the other, that it is not practical in this Sublease agreement to enumerate all of the rights and obligations of the various parties under the Underlying Lease and specifically to allocate those rights and obligations in this Sublease. Accordingly, in order to afford to Subtenant the benefits of this Sublease and of those provisions of the Underlying Lease which, by their nature are intended to benefit the party in possession of the Premises, and in order to protect Tenant against a default by Subtenant which might cause a default or event of default by Sublandlord under the Underlying Lease, the following privileges shall apply. Notwithstanding the above, any terms in this Sublease that are inconsistent with the Underlying Lease shall govern and control the rights and obligations of and between Tenant and Subtenant. Provided Subtenant shall timely pay all rent when and as due under this Sublease, Tenant shall pay when and as due all base rent, additional rent and other charges payable by Tenant to Landlord under the Underlying Lease, Tenant shall perform its covenants and obligations under the Underlying Lease which do not require for their performance possession of the Sublease Premises and which are not otherwise to be performed hereunder by Subtenant on behalf of Tenant. For example, but not in limitation, Tenant shall at all times keep in full force and effect all insurance required of Tenant as tenant under the Underlying Lease. Tenant hereby grants to Subtenant the right to receive all of the services and benefits with respect to the Sublease Premises which are provided by Landlord under the Underlying Lease. Tenant shall have no duty to perform any obligations of Landlord which are, by their nature, the obligation of an owner or manager of real property. Tenant shall have no responsibility for or be liable to Subtenant for any default, failure or delay on the part of Landlord in the performance or observance by Landlord of any of its obligations under the Underlying Lease, nor shall such default by Landlord affect his Sublease or waive or defer the performance of any of Subtenant's obligations hereunder except to the extent that such default by Landlord excuses performance by Tenant, under the Underlying Lease. Subtenant's sole recourse for a violation of the Underlying Lease by Tenant, except for payment permitted under Section 3, is termination of this Sublease 5 in the event the Underlying Lease is terminated or the use of the Sublease Premises is interrupted by the Landlord as a result thereof. As they apply to the Sublease Premises or Subtenant's use, Subtenant shall perform all affirmative covenants and shall refrain from performing any act which is prohibited by the negative covenants of the Underlying Lease, where the obligation to perform or refrain from performing is by its nature imposed upon the party in possession of the Sublease Premises. If practicable, Subtenant shall perform affirmative covenants which are also covenants of Tenant under the Underlying Lease at least three (3) days prior to the date when Tenant's performance is required under the Underlying Lease. Notwithstanding anything to the contrary contained in this Sublease, but without limitation of Subtenant's obligation to pay rent hereunder, Subtenant shall have no obligation to pay Total Rent due from Tenant under the Underlying Lease. Tenant shall have the right to enter the Sublease Premises to cure any default by Subtenant under this Section. Without limitation of the foregoing, Subtenant shall not violate the Underlying Lease, nor shall Subtenant knowingly permit any act or omission to occur upon the Sublease Premises which violates the Prime Lease. Notwithstanding anything to the contrary contained herein, Subtenant and Tenant agree to indemnify the other for and to hold the other harmless from all costs and expenses of any nature whatsoever (including without limitation reasonable attorneys' fees) related to any violation of this Section 7, unless the same arises due to the acts or omissions of the other. Subtenant acknowledges that any termination of the Underlying Lease shall extinguish this Sublease. Landlord's consent to this Sublease (i) shall not make Landlord a party to this Sublease, (ii) shall not create any privity of contract between Landlord and Subtenant or other contractual liability or duty on the part of the Landlord to the Subtenant, (iii) shall not constitute Landlord's consent or waiver of consent to any subsequent sublease or sub- sublease, and (iv) shall not in any manner increase, decrease or otherwise affect the rights and obligations of Landlord and Tenant under the Underlying Lease, in respect to the Sublease Premises. Any term of this Sublease that in any way conflict with or alters the provisions of the Underlying Lease shall be of no effect as to Landlord, and Landlord shall not assume any obligations as landlord under the Sublease, and Subtenant shall not acquire any rights under the Sublease directly assertable against Landlord under the Underlying Lease. Subtenant hereby expressly agrees to be bound by the following provisions of the Agreement: (a) Paragraph 4(c) -- That, in the interest of public health, the use -------------- of lighted tobacco products will not be permitted in buildings upon the leased premises. (b) Paragraph 4(g) -- Johnson assures that it will undertake an -------------- Affirmative Action program as required by CFR Part 152, Sub-part E, to insure that no person shall on the grounds of race, creed, color, national origin, handicap or sex be excluded from participating in any employment activities on the leased premises covered in 14 CFR, Part 152, Sub-part E. Johnson assures that no person shall be excluded on these grounds from participating in, or 6 receiving the services or benefits of, any program or activity on the leased premises covered by this sub-part. Johnson assures that it will require that its covered sub-organizations provide assurance that they similarly will undertake Affirmative Action programs, and that they will require assurance from their sub- organizations, as required by 14 CFR, part 152, Sub-part E, to the same effect for their respective operations on the leased premises. SECTION EIGHT REPAIRS Subject to the obligations of Landlord, if any, in the Underlying Lease, Tenant, unless herein specified to the contrary, shall maintain the Sublease Premises in good repair and tenantable condition to the extent required by the Underlying Lease during the continuance of this Sublease, except in case of damage arising from wilful or negligent acts or omissions of Subtenant or the agents, servants, employees, invitees or visitors of Subtenant which shall be repaired by Subtenant. SECTION NINE ALTERATIONS, ADDITIONS OR IMPROVEMENTS Subtenant shall not make any alterations, additions, or improvements on or to the Premises or Sublease Premises without first obtaining the written consent of Tenant and Landlord. At the request of Tenant or Landlord, which request must be received by Subtenant at least ten (10) days prior to the expiration or five (5) days prior to any earlier termination of this Sublease, Subtenant shall remove at the end of the term, all personal property, all alterations, additions or improvements made by Subtenant. To the extent not so requested, all alterations, additions, and improvements shall remain on and be surrendered with the Premises as a part thereof at the termination of this Sublease without disturbance, molestation or injury. SECTION TEN LIENS Subtenant shall keep the Sublease Premises free and clear of all liens arising out of any work performed, materials furnished, or obligations incurred by Subtenant. SECTION ELEVEN SALES, ASSIGNMENTS AND SUBLEASES Subtenant shall not assign this Sublease, or sublet or otherwise encumber the Sublease Premises, or any part thereof or interest therein. SECTION TWELVE QUIET ENJOYMENT If Subtenant performs the terms of this Sublease, Tenant will warrant and defend Subtenant in the enjoyment and peaceful possession of, and shall not disturb Subtenant's tenancy 7 in the Sublease Premises during the term hereof without any interruption by Tenant or any person rightfully claiming under Tenant. SECTION THIRTEEN CONDEMNATION If the Sublease Premises or any parts thereof are appropriated or taken for any public use by virtue of eminent domain or condemnation proceedings, or if by reason of law, ordinance, or by court decree, whether by consent or otherwise, the use of the Sublease Premises by Subtenant for any of the specific purposes referred to herein shall be prohibited, Tenant or Subtenant shall have the right to terminate this Sublease as of the date of surrender of possession of the Premises or a portion thereof to the condemning authority on at least ten (10) days written notice to the other party, and rental shall be paid only to the time when Subtenant surrenders possession of the Sublease Premises. This Sublease shall terminate if the Underlying Lease is terminated. Any rental paid in advance beyond the time that the Property has been taken from Subtenant and this Sublease terminates shall be returned promptly by Tenant to Subtenant on demand. Subtenant waives any right to recover from the condemning authority for any damage that may be suffered by Subtenant by reason of any condemnation. SECTION FOURTEEN TENANT'S REPRESENTATIONS AND WARRANTIES Tenant hereby represents and warrants to Subtenant that: (1) There are not defaults in any manner in the performance of any of the terms, covenants or provisions of the Underlying Lease. (2) The Underlying Lease has not been altered, amended or modified except as contained in Exhibit "A". For any breach of the above covenants, Subtenant's sole resource shall be termination of the Sublease within thirty (30) days after Subtenant's discovery thereof. SECTION FIFTEEN SUPPORT USES Tenant will have nonexclusive use of the Sublease Premises during Subtenant's aircraft flights and use of the conference room and restrooms, subject to Tenant's standard safety and security procedures and provided such use does not unreasonably interfere with Tenant's or any other subtenant's use thereof. SECTION SIXTEEN DEFAULT If either party fails or neglects to perform the Sublease or the provisions of the Underlying Lease, then the other party may terminate this Sublease upon written notice to the other. The Tenant and Subtenant agree to provide Landlord copies of all default notices issued by either party to the other party under this Sublease. 8 SECTION SEVENTEEN WAIVER OF BREACH The waiving of any of the provisions of this Sublease by any party shall be limited to the particular instance involved and shall not be deemed to waive any other rights in the same or any other terms of this Sublease. SECTION EIGHTEEN TERMINATION AND SURRENDER Subtenant shall surrender the Premises on the last day of the term of the Sublease. Subtenant shall at the expiration of this Sublease surrender the keys to the Sublease Premises to Tenant. SECTION NINETEEN REMOVAL OF PERSONAL PROPERTY Subtenant shall have the right to remove all Subtenant's personal property whether attached to the Premises or not, provided that these items can be removed without serious damage to the Premises. All holes or damages to the Premises caused by removal of any items shall be restored or repaired by Subtenant promptly, reasonable wear and tear excepted. Subtenant shall be entitled to remove any electrical service connections installed by Subtenant that were designed specifically for Subtenant. At the request of Tenant or Landlord, at the termination of the Sublease, Subtenant shall remove all or any portion of such property requested and upon the expiration or termination of this Sublease, Subtenant shall surrender the Premises. SECTION TWENTY HOLDING OVER Any holding over at the expiration of this Sublease with the consent of Tenant shall be on a month-to-month basis, which tenancy may thereafter be terminated by either party upon giving thirty (30) days prior written notice to the other party. During the holdover tenancy, Subtenant shall pay One Twenty- Five Percent (125%) of the rate of rental on a monthly basis as in effect at the time of the termination of this Sublease, plus any additional amounts payable under the Underlying Lease occasioned by such hold over and shall be bound by all the terms and conditions of this Sublease. SECTION TWENTY-ONE INTEREST OF SUCCESSOR The covenants and agreements of this Sublease shall be binding upon the successors and assigns of Tenant and on the successors and assigns of Subtenant, but this Section shall not be deemed consent to any Assignment or Sublease. 9 SECTION TWENTY-TWO NOTICES Except where otherwise required by statute, all notices given pursuant to the provisions hereof may be sent by first class or certified U.S. mail, postage prepaid, for Tenant to Wyoming Associates, Inc. c/o Johnson Development Associates, Inc., P.O. Box 3524, Spartanburg, South Carolina 29304, and for Subtenant to 450 East Las Olas Boulevard, Suite 1100, Ft. Lauderdale, Florida 33301, or such other mailing address of the party for whom the notice is intended as designated by such party by written notice to the other party. SECTION TWENTY-THREE COSTS OF LITIGATION If any legal action is instituted to enforce this Sublease or any part hereof, the prevailing party shall be entitled to recover reasonable attorneys' fees and court costs from the other party. SECTION TWENTY-FOUR FEES AND EXPENSES Each party shall pay its own costs, charges and expenses, incurred in connection with this Sublease. SECTION TWENTY-FIVE SERVICES OR SUPPLIES PROVIDED BY TENANT If Tenant elects to make available to the sub-tenants in the Building any services or supplies or arranges a Master Contract therefore related to the Building only and not to Subtenant's Aircraft, Subtenant agrees to obtain its requirements therefore, if any, from Landlord or under any such Contract, provided the rates therefore are reasonable. Subtenant shall pay for all such charges when billed and hold Tenant harmless from any loss or damage that may result from failure to pay therefore in a timely manner. SECTION TWENTY-SIX PARKING Through the term of this Sublease, and any renewals and extensions thereto, Tenant shall make available to Subtenant unreserved parking spaces at locations designated by Tenant from time to time from Subtenant's vehicles, at no cost to Subtenant. For purposes of this Section 26, the term "vehicles" shall mean passenger automobiles (including small trucks, small vans and the like) and all other motor vehicles which customarily are parked at airport hangers. SECTION TWENTY-SEVEN 24-HOUR ACCESS BY SUBTENANT Subtenant shall be entitled to, and shall have uninterrupted access to, the Sublease Premises on a twenty-four (24) hour per day, seven days per week basis. 10 SECTION TWENTY-EIGHT TENANT'S COMPLIANCE WITH LAWS AND REGULATIONS As between Subtenant and Tenant, it shall be the Tenant's responsibility at its sole cost, and not the responsibility of the Subtenant, that the Premises and the Sublease Premises, when delivered to Subtenant, and thereafter, are in compliance with all applicable federal, state and local laws, rules, codes and regulations for its intended use, including without limitation, those laws, rules, codes and regulations relating to the American with Disabilities Act, except to the extent the use of Subtenant, its agents, servants, visitors, invitees, guests or licensees increases the compliance requirements over those required by Tenant's use thereof, in which case the cost thereof shall be paid by Subtenant. Subtenant shall in no event use the Premises or any portion thereof in any manner to cause it to be a public accommodation. IN WITNESS WHEREOF, the parties have executed this Sublease at the day and year first above written. TENANT: SUBTENANT: WYOMING ASSOCIATES, INC. ESA SERVICES, INC. By: /s/ Dan C. Breeden, Jr. (SEAL) By: /s/ Gregory R. Moxley (SEAL) --------------------------- -------------------------- Name: Dan C. Breeden, Jr. Name: Gregory R. Moxley --------------------------- -------------------------- Title: Vice President Title: Chief Financial Officer --------------------------- -------------------------- 11 STATE OF SOUTH CAROLINA ) ) AGREEMENT COUNTY OF SPARTANBURG ) KNOW ALL BY THESE PRESENTS, that we, the CITY OF SPARTANBURG, a municipal corporation existing under the laws of South Carolina, hereinafter referred to as "CITY" and JOHNSON DEVELOPMENT ASSOCIATES, INC., a South Carolina corporation, hereinafter referred to as "JOHNSON", in consideration of their mutual covenants and agreements herein set forth, do hereby covenant and agree with each other as follows: 1. The Leased Property. CITY demises and leases to JOHNSON the real ------------------- property with improvements to be constructed, located at Spartanburg Downtown Memorial Airport, hereinafter described in Exhibit A, which is attached hereto --------- and, by reference, made a part of this Agreement together with such privileges and appurtenances as are set forth in this Agreement. JOHNSON intends to construct a hangar of approximately Eighteen Thousand (18,000) square feet at an estimated cost of Nine Hundred Thousand and No/100 Dollars ($900,000.00) for use by JOHNSON. 2. The Term. The Lease and Agreement shall continue for a term of -------- twenty (20) years with four (4) five-year (5-yr.) options. The lease term shall commence on _____________________, 1999. 3. Lease Rate. JOHNSON will pay to City as consideration for this ---------- Agreement Lease payments of $0.20 per square foot of leased property which is initially Twenty One Thousand One Hundred Eighty Seven and 58/100 ($21,187.58) per year during years one through ten (1-10). The lease rate will increase to $0.25 per square foot per lease year for years eleven through fifteen (11-15). The lease rate for years sixteen through twenty (16-20) will be $0.30 per square foot per lease year. The lease rate for years twenty-one through twenty-five (21-25) will be at $0.35 per square foot per lease year. The lease rate for years twenty-six through thirty (26-30) will be at $0.40 per square foot per lease year. The lease rate for years thirty-one through thirty-five (31-35) will be at $0.45 per square foot per lease year. The lease rate for years thirty-six through forty (36-40) will be at $0.50 per square foot per lease year. 4. Airport Rules and Regulations. JOHNSON agrees: ----------------------------- (A) To conduct its operation in accordance with the Airport Rules and Regulations and Minimum Standards for Fixed Base Operators at Spartanburg Downtown Memorial Airport and the Standards For Corporate Aircraft Hangars on the Spartanburg Downtown Memorial Airport which are attached as Exhibit B, and --------- by reference, made a part of this Agreement. This Agreement shall be subordinate to the Airport Rules and Regulations and Minimum Standards for Fixed Base Operators. In the event of any conflict between the provisions of this lease and the Standards For Corporate Hangars on the Spartanburg Downtown Memorial Airport, Standards for Corporate Aircraft Hangars shall control. (B) That the leased space shall be used for the purpose of providing for aircraft storage and other non-commercial activities of the JOHNSON flight department and for no other purpose. (C) That, in the interest of the public health, the use of lighted tobacco products will not be permitted in buildings upon the leased premises. (D) That nothing herein contained shall be construed to grant or authorize the granting of exclusive rights within the meaning of Section 308(a) of the Federal Aviation Act of 1958, as amended; and CITY shall have the right to enter into agreements with other businesses and fixed base operators as well as the United States Army, United States Air Force, United States Navy or other federal agency relating to the governmental use of said airport. 2 (E) That, in the operation and use of any facilities hereby leased, JOHNSON will not, on the grounds of race, sex, color, national origin, or handicap discriminate or permit discrimination against any person or group of persons in a manner prohibited by 49 CFT Part 21. CITY is hereby granted the right to take action as the federal government may direct to enforce such covenant of non-discrimination. (F) That in the event the United States Government or any other duly authorized governmental agency acquires possession of the premises leased hereby by virtue of any legal process and the result thereof is to substantially deny JOHNSON the use of the leased premises for the purpose herein intended, then this Agreement may be terminated or suspended for the period of time JOHNSON is deprived of the leased premises; and, in the event this Lease is suspended, JOHNSON may resume its tenancy at the end of such suspension and this Lease shall continue for the full term thereof plus the length of time this Lease was suspended. Rent shall be refunded for any period during which JOHNSON is denied the benefits of this Lease. (G) JOHNSON assures that it will undertake an Affirmative Action program as required by CFR Part 152, Sub-part E, to insure that no person shall on the grounds of race, creed, color, national origin, handicap or sex be excluded from participating in any employment activities on the leased premises covered in 14 CFR, Part 152, Sub-part E. JOHNSON assures that no person shall be excluded on these grounds from participating in, or receiving the services or benefits of any program or activity on the leased premises covered by this sub- part. JOHNSON assumes that it will require that its covered sub-organizations provide assurance that they similarly will undertake Affirmative Action programs and that they will require assurance from their sub-organizations, as required by 14 CFR, part 152, Sub-part E, to the same effect for their respective operations on the leased premises. 3 5. Maintenance, Good Condition and Repair. During the continuance of -------------------------------------- this lease and agreement, JOHNSON will, at its own expense, maintain and keep the premises in good condition and make all repairs, both interior and exterior, necessary to keep and maintain the leased property in good condition. CITY agrees to maintain all runways and taxiways serving the leased premises in good condition throughout the term of this Lease so as to allow JOHNSON use of the airport in accordance with this Lease, airport rules and regulations and federal law. 6. Insurance. JOHNSON agrees and obligates itself to carry public --------- liability insurance in an amount of not less than One Million and No/100 Dollars ($1,000,000.00) primary liability coverage and a Ten Million and No/100 Dollars ($10,000,000.00) umbrella naming CITY OF SPARTANBURG as loss payee providing protection for invitees and other persons on the property. JOHNSON shall also maintain workers' compensation insurance for protection of its employees. JOHNSON agrees to protect, indemnify and hold harmless the CITY against any and all injuries or damages to JOHNSON's agents, employees, customers or other persons entering, leaving or on the premises excepting injuries or damages caused by the negligence of CITY. JOHNSON shall also provide and keep in full force at its own expense during the term of this lease and agreement, property damage insurance coverage in the amount of the replacement value of the hangar building not less than One Million and No/100 Dollars ($1,000,000.00) with respect to the leased property, including also those portions of said premises used for driveways, walkways and parking area. Any policy or policies of insurance required by this lease and agreement shall be issued by one or more insurance companies authorized to do business in Spartanburg, South Carolina. CITY shall be named as an insured under this policy or policies and, at least ten (10) days prior to the expiration term of any such 4 policy or policies, JOHNSON shall supply CITY with a substitute policy with evidence of the payment of the premiums thereon. In the event the building and/or other improvements erected on the premises are destroyed or damaged by fire or other casualty during the term of the lease, JOHNSON agrees that it will cause said building and/or other improvements to be replaced or said damage to be repaired as rapidly as practical and CITY shall have no claim against any insurance proceeds paid to JOHNSON on account of such damage and/or destruction. CITY shall not have any responsibility or obligation to make any expenditure toward the repair and/or replacement or the building and other improvements on the leased premises. JOHNSON shall be solely responsible for the total costs of repair and/or replacement of the improvements so damaged and, if the insurance proceeds payable on account of such loss are insufficient, JOHNSON will be solely responsible for the difference between insurance proceeds and the cost of repair and/or replacement. 7. Surrender of Leased Premises. JOHNSON agrees to make all payments ---------------------------- required herein promptly as they fall due and, at the expiration of the term hereby created, or, by forfeiture or otherwise, to surrender unto CITY the peaceable and quiet possession of the leased premises in good condition, ordinary wear and tear excepted. 8. Improvements and Termination. All permanent improvements made to ---------------------------- the leased premises by JOHNSON will become the property of CITY upon completion of said improvements and JOHNSON will have such obligations relating thereto and such rights therein as are set forth in this Agreement. All improvements shall be constructed in good and workmanlike manner, using new materials, and shall comply with all applicable fire, building and zoning ordinances. All site grading including compliance to CITY's requirements for storm 5 water retention is the responsibility of JOHNSON. All costs associated with the construction and development of the corporate storage hangar, including clearing, grading and pavement in compliance to with storm water discharge management, shall be at the expense of JOHNSON. All furniture, fixtures and equipment (besides HVAC) may be removed by JOHNSON and shall remain its sole property. Title to the improvements will be transferred to CITY on completion subject to this Agreement. At conclusion of the lease term, the improvements shall be returned to CITY free and clear of any liens or encumbrances. CITY may direct the necessary instruments of transfer or deeds. 9. Taxation. The parties envision that the property will be exempt -------- from ad valorem property tax. In the event that the property is subject to ad valorem property tax, the portion of ad valorem taxes paid to CITY will be reimbursed back to JOHNSON. JOHNSON agrees to site at the airport aircraft equal in personal property tax value to its two present aircraft as established by the 1998 property tax reassessment. At a minimum, the value of sited aircraft must equal the current assessed value of One Hundred Sixty-eight Thousand, Five Hundred Eighty and No/100 Dollars ($168,580.00). The assessed value will be adjusted annually by the Consumer Price Index ("CPI"). 10. Exclusivity. JOHNSON agrees that the hangar facilities are to be ----------- used exclusively to support the corporate aircraft fleet (owned or leased) of companies that are controlled by George Dean Johnson or Stewart H. Johnson or companies in which they hold a significant and meaningful management or ownership position. Under this agreement, no chartered, third party or any other commercial aircraft is to be stored from the facility. JOHNSON may on rare occasions and under exceptional circumstances hangar third party planes on a temporary basis but only if no compensation is received and CITY cannot accommodate the 6 third-party plane. Moreover, the third party must have some business relationship with JOHNSON. JOHNSON is to provide an updated list of all eligible aircraft to the Airport Director. This list is to be updated by JOHNSON and submitted to the Airport Director as changes to the corporate aircraft fleet occur. 11. Fueling Facility. JOHNSON will be permitted to install and ---------------- operate a fueling facility on the leased property. All fuel storage and dispensing equipment shall be of fixed design and must contain a total tank farm of at least Twelve Thousand (12,000) gallons. No mobile equipment will be permitted. Fuel storage tanks and associated systems shall be owned by JOHNSON and installed and maintained to meet or exceed federal, state and local requirements for such equipment including, but not limited to, NFPA 407, NFPA 30 and 30A, FAA Advisory Circular 150/5230 and EPA40CFR Part 112. All fuel storage tanks should meet UL-142 requirements. Fuel storage and dispensing equipment shall be covered under an approved spill prevention counter measures and control plan (SPCC Plan). JOHNSON will provide third party indemnification in a form and amount acceptable to CITY for any site contamination caused by the activities of JOHNSON at the property. JOHNSON to provide CITY with notice within twenty-four (24) hours of any leaks or spills of aviation fuel from the fueling facility. JOHNSON agrees to a minimum annual pumping fee of Twenty Thousand and No/100 Dollars ($20,000.00), such minimal fee to be paid on or before January 10 of each year. Additional pumping fees of $0.10 per gallon will be paid by JOHNSON to CITY for fuel pumping in excess of Two Hundred Thousand (200,000) gallons annually. Both the minimum annual fee and per gallon fee will be adjusted by the CPI every five years of the lease. JOHNSON shall provide to the Airport Manager a list of all eligible aircraft for fueling. To be 7 on the eligible list, the aircraft must be owned or under a written lease agreement with JOHNSON. All fuel dispensed by JOHNSON shall be done by employees of JOHNSON who shall have initial and annual recurrent training in fuel management, fuel spill recovery, and other related activities. Specific safety requirements and procedures will be jointly developed by CITY and JOHNSON with assistance from the State Fire Marshall's office. 12. Option. JOHNSON is granted an option on an adjacent 1.2 acre ------ tract for additional corporate hangar development. The property is described in Exhibit C. The option shall extend for a period of five (5) years from date to acquire the property. There will be no charge for the first option. The second option for an additional five years for the property described in Exhibit C shall be at a cost of $0.10 per square foot for the option property for each year. After the second option expires, JOHNSON shall have no further option. In the event that the options expire and CITY desires to dispose of the property, it shall solicit proposals for bids in accordance with the CITY's policy. In the event that the property is leased to JOHNSON during a lease term or extension thereof, the lease payments shall be based upon the same calculations as lease payments for the property described in Exhibit A and as provided for in Paragraph 3. 13. Notice to Parties. Any notice, demand or other communication ----------------- between CITY and JOHNSON shall be sufficiently given or delivered if mailed, postage paid, or delivered personally to: CITY OF SPARTANBURG Attention: Roy Lane, City Manager Post Office Drawer 1749 Spartanburg, SC 29304 8 JOHNSON DEVELOPMENT ASSOCIATES, INC. Attention: Foster Chapman, President Post Office Box 3524 Spartanburg, SC 29304 14. Favored Tenant Status. Should CITY enter into any transaction or --------------------- agreement with a third party after the date of execution of this Agreement or should CITY pass any regulation or ordinance that does not apply retroactively to this Agreement and JOHNSON in its discretion determines that it will be favorable affected by application of the term(s) of the third party agreement or the ordinance/regulation, the JOHNSON may elect to amend this Agreement to include such favorable term(s) and CITY will be bound by and shall execute such documents as required to evidence such new terms. 15. Consumer Price Index. Any references to "CPI" herein shall mean -------------------- the Consumer Price Index but shall have a capitalization rate not to exceed twelve and one-half percent (12.5%) over any five-year (5-yr.) period or two and one-half percent (2.5%) on any annual adjustment. 16. Waiver of Strict Performance. The failure of either party to ---------------------------- insist upon strict performance of any of the terms, conditions or covenants herein set forth shall not be deemed a waiver of any rights or remedies that such party may have and shall not be deemed a waiver of any subsequent breach or default in the terms, conditions and covenants herein contained. 17. No Subletting or Assignment. This Agreement may not be assigned --------------------------- nor may the premises be sublet by JOHNSON without the prior written approval and consent of CITY. Transfers to affiliates shall not require consent, and consent for all other transfers shall not be unreasonably withheld or delayed. 9 18. Default. In the event JOHNSON or CITY violates any material term ------- or provision of this Agreement and fails to remedy the same after thirty (30) days written notice delivered by certified or registered mail, the party not in default may terminate the Agreement by the giving of written notice to the defaulting party by registered mail or certified mail. In the event JOHNSON is in default for the same material reason on more than one occasion or in the event JOHNSON files a petition in bankruptcy or receivership or makes a transfer or assignment for the benefit of creditors; then CITY may terminate this Agreement at is option; provided, however, that in the event of default for material reason on more than one occasion, JOHNSON shall be given a written notice to cure and an opportunity to cure the default within ten (10) days after written notice. In the event of the termination of this Agreement, JOHNSON will vacate the premises promptly but in no event will such period of time exceed thirty (30) days after written notice of termination. During such period, JOHNSON will not be relieved of any obligations to pay rent or any other fees required by this Agreement. After JOHNSON vacates the premises, any property or other trade fixtures not a part of the real estate left on the premises shall be deemed abandoned to CITY. 19. South Carolina Law Controls. JOHNSON agrees that it will conform --------------------------- to and comply with all applicable laws ore regulations of the United States or the State of South Carolina and rules, regulations and directives promulgated by CITY for the regulation of the airport in general. 20. FAA Approval. This Agreement is contingent upon approval by the ------------ Federal Aviation Administration. 10 IN WITNESS WHEREOF, the parties to this Agreement have hereunto set their hands and seals and executed this Agreement the day and year first-above written. IN THE PRESENCE OF: CITY OF SPARTANBURG --------------------------------------- Roy Lane, City Manager - ------------------------------------ Attest: - ------------------------------------- ------------------------------ Norma Dunham, City Clerk JOHNSON DEVELOPMENT ASSOCIATES, INC. By: ----------------------------------- - ------------------------------------ Its: - ------------------------------------ ---------------------------------- 11 EX-10.4 5 0005.txt TIME SHARING AGREEMENT GEORGE DEAN JOHNSON EXHIBIT 10.4 TIME SHARING AGREEMENT This Agreement is made, effective as of April 2, 2000, by and between ESA Services, Inc., a corporation organized under the laws of the State of Delaware, with principal offices at 450 East Las Olas Blvd., Ft. Lauderdale, FL 33301 (hereinafter referred to as "Lessor"), and GEORGE DEAN JOHNSON, JR., with principal offices at 961 East Main Street, Spartanburg, SC 29302 (hereinafter referred to as "Lessee"); RECITALS WHEREAS, Lessor is the owner of that certain civil Aircraft bearing the United States Registration Number N122SU ("the Aircraft" or "Aircraft"), a LearJet, Model 55B, Manufacturer's Serial Number 132; WHEREAS, Lessor employs a fully qualified flight crew to operate the Aircraft; and WHEREAS, Lessor and Lessee desire to lease said Aircraft with flight crew on a non-exclusive time sharing basis as defined in Section 91.501 (c) (1) of the Federal Aviation Regulations ("FAR"); The parties agree as follows: 1. Lessor agrees to lease the Aircraft to Lessee pursuant to the provisions of FAR 91.501 (c) (1) and to provide a fully qualified flight crew for all operations. This Agreement shall commence on the date that it is signed and continue for one year after said date. Thereafter, this Agreement shall be automatically renewed on a month to month basis, unless sooner terminated by either party as hereinafter provided. Either party may at any time terminate this Agreement upon thirty (30) days written notice to the other party, delivered personally or by certified mail, return receipt requested, at the address for said other party as set forth above. 1 2. Lessee shall pay Lessor for each flight conducted under this Agreement the actual expenses of each specific flight as authorized by FAR Part 91.501 (d). These expenses include: (a) Fuel, oil, lubricants, and other additives; (b) Travel expenses of the crew, including food, lodging and ground transportation; (c) Hangar and tie down costs away from the Aircraft's base of operation; (d) Insurance obtained for the specific flight; (e) Landing fees, airport taxes and similar assessments including, but not limited to IRC Section 4261 and related excise taxes; (f) Customs, foreign permit, and similar fees directly related to the flight; (g) In-flight food and beverages; (h) Passenger ground transportation; (i) Flight planning and weather contract services; and (j) An additional charge not to exceed 100% of the expenses listed in subparagraph (a) of this paragraph. 3. Lessor will pay all expenses related to the operation of the Aircraft when incurred, and will provide an invoice and bill Lessee for the expenses enumerated in paragraph 2 above on the last day of the month in which any flight or flights for the account of Lessee occur. Lessee shall pay Lessor for said expenses within fifteen (15) days of receipt of the invoice and bill therefor. 4. Lessee will provide Lessor with requests for flight time and proposed flight schedules as far in advance of any given flight as possible, and in any case, at 2 least twenty-four (24) hours in advance of Lessee's planned departure. Requests for flight time shall be in a form whether written or oral, mutually convenient to, and agreed upon by the parties. In addition to the proposed schedules and flight times Lessee shall provide at least the following information for each proposed flight at some time prior to scheduled departure as required by the Lessor or Lessor's flight crew: (a) proposed departure point; (b) destination; (c) date and time of flight; (d) the number of anticipated passengers; (e) the nature and extent of luggage and/or cargo to be carried; (f) the date and time of return flight, if any; and (g) any other information concerning the proposed flight that may be pertinent or required by Lessor or Lessor's flight crew. 5. Lessor shall have final authority over the scheduling of the Aircraft, provided, however, that Lessor will use its best efforts to accommodate Lessee's needs and to avoid conflicts in scheduling. 6. Lessor shall be solely responsible for securing maintenance, preventive maintenance and required or otherwise necessary inspections on the Aircraft, and shall take such requirements into account in scheduling the Aircraft. No period of maintenance, preventative maintenance or inspection shall be delayed or postponed for the purpose of scheduling the Aircraft, unless said maintenance or inspection can be safely conducted at a later time in compliance with all 3 applicable laws and regulations, and within the sound discretion of the pilot in command. The pilot in command shall have final and complete authority to cancel any flight for any reason or condition which in his judgment would compromise the safety of the flight. 7. Lessor shall employ, pay for and provide to Lessee a qualified flight crew for each flight undertaken under this Agreement. 8. In accordance with applicable Federal Aviation Regulations, the qualified flight crew provided by Lessor will exercise all of its duties and responsibilities in regard to the safety of each flight conducted hereunder. Lessee specifically agrees that the flight crew, in its sole discretion, may terminate any flight, refuse to commence any flight, or take other action which in the considered judgement of the pilot in command is necessitated by considerations of safety. No such action of the pilot in command shall create or support any liability for loss, injury, damage or delay to Lessee or any other person. The parties further agree that Lessor shall not be liable for delay or failure to furnish the Aircraft and crew pursuant to this Agreement when such failure is caused by government regulation or authority, mechanical difficulty, war, civil commotion, strikes or labor disputes, weather conditions, or acts of God. 9. At all times during the term of this Lease, Lessor shall cause to be carried and maintained, at Lessor's cost and expense, physical damage insurance with respect to the Aircraft in the amount set forth below: Aircraft Physical Damage $5,650,000.00 (No Deductible While In Motion or Not in Motion) 4 At all times during the term of this Lease, Lessor shall also cause to be carried and maintained, at lessor's cost and expense, third party aircraft liability insurance, passenger legal liability insurance, property damage liability insurance, and medical expense insurance in the amounts set forth below: Combined Liability Coverage for Bodily Injury and Property Damage Including Passenger - Each Occurrence $100,000,000.00 Medical Expense Coverage - Each Person $5,000.00 Lessor shall also bear the cost of paying any deductible amount on any policy of insurance in the event of a claim or loss. Any policies of insurance carried in accordance with this Lease: (i) shall name lessee as an additional insured; and (ii) shall contain a waiver by the underwriter thereof of any right of subrogation against Lessee; and (iii) shall provide that in respect of the interests of Lessee, such policies of insurance shall not be invalidated by any action or inaction of Lessor or any other person and shall insure Lessee (subject to the limits of liability and war risk exclusion set forth in such policies) regardless of any breach or any violation of any warranty, declarations or conditions contained in such policies by Lessor or any other person; and (iv) shall provide that if the insurers cancel insurance for any reason whatsoever, or the same is allowed to lapse for non- payment of premium, or if there is any material change in policy terms and conditions, such a cancellation, lapse or change shall not be effective as to Lessee. Each liability policy shall be primary without right of contribution from any other insurance which is carried by Lessee or Lessor and shall expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured. Lessor shall submit this Lease for approval to the insurance carrier for each policy of insurance on the aircraft. Lessor shall arrange for a Certificate of Insurance evidencing 5 appropriate coverage as to the Aircraft and the satisfaction of the requirements set forth above to be given by its insurance carriers to Lessor. 10. Lessee warrants that: (a) It will use the Aircraft for and on account of its own business only, and will not use the Aircraft for the purpose of providing transportation of passengers or cargo in air commerce for compensation or hire; (b) It shall refrain from incurring any mechanics or other lien in connection with inspection, preventative maintenance, maintenance or storage of the Aircraft, whether permissible or impermissible under this Agreement, nor shall there be any attempt by any party hereto to convey, mortgage, assign, lease or any way alienate the Aircraft or create any kind of lien or security interest involving the Aircraft or do anything or take any action that might mature into such a lien; and (c) During the term of this Agreement, it will abide by and conform to all such laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of the Aircraft by a timesharing Lessee. 11. For purposes of this Agreement, the permanent base of operation of the aircraft shall be Spartanburg, SC. 12. Neither this Agreement nor any party's interest herein shall be assignable to any other party whatsoever. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives and successors. 13. TRUTH IN LEASING STATEMENT 6 THE AIRCRAFT, A LEARJET 55B MODEL, MANUFACTURER'S SERIAL NO. 132, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS N122SU HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS LEASE. THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. DURING THE DURATION OF THIS LEASE, GEORGE DEAN JOHNSON, JR., 961 East Main Street, Spartanburg, SC 29302, IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE. AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE. THE "INSTRUCTIONS FORCOMPLIANCE WITH TRUTH IN LEASING REQUIREMENTS" ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE. I, THE UNDERSIGNED, GEORGE DEAN JOHNSON, JR., 961 East Main Street, Spartanburg, SC 29302 CERTIFY THAT IT IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT AND THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS. IN WITNESS WHEREOF, the parties have executed this Agreement. ESA Services, Inc. By: /s/ Gregory R. Moxley ------------------------------------ Gregory R. Moxley, Vice-President By: /s/ George Dean Johnson, Jr. ------------------------------------- George Dean Johnson, Jr. 7 EX-10.5 6 0006.txt TIME SHARING AGREEMENT ADVANCE AM CASH ADVANCE EXHIBIT 10.5 TIME SHARING AGREEMENT This Agreement is made, effective as of April 2, 2000, by and between ESA Services, Inc., a corporation organized under the laws of the State of Delaware, with principal offices at 450 East Las Olas Blvd., Ft. Lauderdale, FL 33301 (hereinafter referred to as "Lessor"), and Advance America, Cash Advance Centers, Inc., with principal offices at 961 East Main Street, Spartanburg, SC 29302 (hereinafter referred to as "Lessee"); RECITALS WHEREAS, Lessor is the owner of that certain civil aircraft bearing the United States Registration Number N333GJ ("the Aircraft" or "Aircraft"), a 1985 Canadair Challenger Model CL-600-2A12, Manufacturer's Serial Number 3042; WHEREAS, Lessor employs a fully qualified flight crew to operate the Aircraft; and WHEREAS, Lessor and Lessee desire to lease said Aircraft with flight crew on a non-exclusive time sharing basis as defined in Section 91.501 (c) (1) of the Federal Aviation Regulations ("FAR"); The parties agree as follows: 1. Lessor agrees to lease the Aircraft to Lessee pursuant to the provisions of FAR 91.501 (c) (1) and to provide a fully qualified flight crew for all operations. This Agreement shall commence on the date that it is signed and continue for one year after said date. Thereafter, this Agreement shall be automatically renewed on a month to month basis, unless sooner terminated by either party as hereinafter provided. Either party may at any time terminate this Agreement upon thirty (30) days written notice to the other party, delivered personally or by certified mail, return receipt requested, at the address for said other party as set forth above. 1 2. Lessee shall pay Lessor for each flight conducted under this Agreement the actual expenses of each specific flight as authorized by FAR Part 91.501 (d). These expenses include: (a) Fuel, oil, lubricants, and other additives; (b) Travel expenses of the crew, including food, lodging and ground transportation; (c) Hangar and tie down costs away from the Aircraft's base of operation; (d) Insurance obtained for the specific flight; (e) Landing fees, airport taxes and similar assessments including, but not limited to IRC Section 4261 and related excise taxes; (f) Customs, foreign permit, and similar fees directly related to the flight; (g) In-flight food and beverages; (h) Passenger ground transportation; (i) Flight planning and weather contract services; and (j) An additional charge not to exceed 100% of the expenses listed in subparagraph (a) of this paragraph. 3. Lessor will pay all expenses related to the operation of the Aircraft when incurred, and will provide an invoice and bill Lessee for the expenses enumerated in paragraph 2 above on the last day of the month in which any flight or flights for the account of Lessee occur. Lessee shall pay Lessor for said expenses within fifteen (15) days of receipt of the invoice and bill therefor. 4. Lessee will provide Lessor with requests for flight time and proposed flight schedules as far in advance of any given flight as possible, and in any case, at 2 least twenty-four (24) hours in advance of Lessee's planned departure. Requests for flight time shall be in a form whether written or oral, mutually convenient to, and agreed upon by the parties. In addition to the proposed schedules and flight times Lessee shall provide at least the following information for each proposed flight at some time prior to scheduled departure as required by the Lessor or Lessor's flight crew: (a) proposed departure point; (b) destination; (c) date and time of flight; (d) the number of anticipated passengers; (e) the nature and extent of luggage and/or cargo to be carried; (f) the date and time of return flight, if any; and (g) any other information concerning the proposed flight that may be pertinent or required by Lessor or Lessor's flight crew. 5. Lessor shall have final authority over the scheduling of the Aircraft, provided, however, that Lessor will use its best efforts to accommodate Lessee's needs and to avoid conflicts in scheduling. 6. Lessor shall be solely responsible for securing maintenance, preventive maintenance and required or otherwise necessary inspections on the Aircraft, and shall take such requirements into account in scheduling the Aircraft. No period of maintenance, preventative maintenance or inspection shall be delayed or postponed for the purpose of scheduling the Aircraft, unless said maintenance or inspection can be safely conducted at a later time in compliance with all 3 applicable laws and regulations, and within the sound discretion of the pilot in command. The pilot in command shall have final and complete authority to cancel any flight for any reason or condition which in his judgment would compromise the safety of the flight. 7. Lessor shall employ, pay for and provide to Lessee a qualified flight crew for each flight undertaken under this Agreement. 8. In accordance with applicable Federal Aviation Regulations, the qualified flight crew provided by Lessor will exercise all of its duties and responsibilities in regard to the safety of each flight conducted hereunder. Lessee specifically agrees that the flight crew, in its sole discretion, may terminate any flight, refuse to commence any flight, or take other action which in the considered judgement of the pilot in command is necessitated by considerations of safety. No such action of the pilot in command shall create or support any liability for loss, injury, damage or delay to Lessee or any other person. The parties further agree that Lessor shall not be liable for delay or failure to furnish the Aircraft and crew pursuant to this Agreement when such failure is caused by government regulation or authority, mechanical difficulty, war, civil commotion, strikes or labor disputes, weather conditions, or acts of God. 9. At all times during the term of this Lease, Lessor shall cause to be carried and maintained, at Lessor's cost and expense, physical damage insurance with respect to the Aircraft in the amount set forth below: Aircraft Physical Damage $12,900,000.00 (No Deductible While In Motion or Not in Motion) 4 At all times during the term of this Lease, Lessor shall also cause to be carried and maintained, at lessor's cost and expense, third party aircraft liability insurance, passenger legal liability insurance, property damage liability insurance, and medical expense insurance in the amounts set forth below: Combined Liability Coverage for Bodily Injury and Property Damage Including Passenger - Each Occurrence $100,000,000.00 Medical Expense Coverage - Each Person $5,000.00 Lessor shall also bear the cost of paying any deductible amount on any policy of insurance in the event of a claim or loss. Any policies of insurance carried in accordance with this Lease: (i) shall name lessee as an additional insured; and (ii) shall contain a waiver by the underwriter thereof of any right of subrogation against Lessee; and (iii) shall provide that in respect of the interests of Lessee, such policies of insurance shall not be invalidated by any action or inaction of Lessor or any other person and shall insure Lessee (subject to the limits of liability and war risk exclusion set forth in such policies) regardless of any breach or any violation of any warranty, declarations or conditions contained in such policies by Lessor or any other person; and (iv) shall provide that if the insurers cancel insurance for any reason whatsoever, or the same is allowed to lapse for non- payment of premium, or if there is any material change in policy terms and conditions, such a cancellation, lapse or change shall not be effective as to Lessee. Each liability policy shall be primary without right of contribution from any other insurance which is carried by Lessee or Lessor and shall expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured. Lessor shall submit this Lease for approval to the insurance carrier for each policy of insurance on the aircraft. Lessor shall arrange for a Certificate of Insurance evidencing 5 appropriate coverage as to the Aircraft and the satisfaction of the requirements set forth above to be given by its insurance carriers to Lessor. 10. Lessee warrants that: (a) It will use the Aircraft for and on account of its own business only, and will not use the Aircraft for the purpose of providing transportation of passengers or cargo in air commerce for compensation or hire; (b) It shall refrain from incurring any mechanics or other lien in connection with inspection, preventative maintenance, maintenance or storage of the Aircraft, whether permissible or impermissible under this Agreement, nor shall there be any attempt by any party hereto to convey, mortgage, assign, lease or any way alienate the Aircraft or create any kind of lien or security interest involving the Aircraft or do anything or take any action that might mature into such a lien; and (c) During the term of this Agreement, it will abide by and conform to all such laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of the Aircraft by a timesharing Lessee. 11. For purposes of this Agreement, the permanent base of operation of the aircraft shall be Spartanburg, SC. 12. Neither this Agreement nor any party's interest herein shall be assignable to any other party whatsoever. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives and successors. 6 13. TRUTH IN LEASING STATEMENT THE AIRCRAFT, A 1985 Canadair Challenger Model CL-600-2A12, MANUFACTURER'S SERIAL NO. 3042, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS N333GJ, HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS LEASE. THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. DURING THE DURATION OF THIS LEASE, Advance America, Cash Advance Centers, Inc., 961 East Main Street, Spartanburg, SC 29302, IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE. AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE. THE "INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING REQUIREMENTS" ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE. I, THE UNDERSIGNED, WILLIAM M. WEBSTER, IV., OF ADVANCE AMERICA, -------------------------------------------- CASH ADVANCE CENTERS, INC., 961 EAST MAIN STREET, SPARTANBURG, SC 29302 ----------------------------------------------------------------------- CERTIFIY THAT IT IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT AND THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS. IN WITNESS WHEREOF, the parties have executed this Agreement. ESA Services, Inc. By: /s/ Gregory R. Moxley ---------------------------------------- Gregory R. Moxley, Vice President By: /s/ William M. Webster, IV ---------------------------------------- William M. Webster, IV 7 EX-10.6 7 0007.txt TIME SHARING AGREEMENT ADVANCE AM, CASH ADVANCE EXHIBIT 10.6 TIME SHARING AGREEMENT This Agreement is made, effective as of March 29, 2000, by and between Advance America Cash Advance Centers, Inc., a corporation organized under the laws of the State of Delaware, with principal offices at 961 East Main Street, Spartanburg, SC 29302 (hereinafter referred to as "Lessor"), and ESA Services, Inc., with principal offices at 405 East Las Olas Blvd., Suite 11, Ft. Lauderdale, FL 33301 (hereinafter referred to as "Lessee"); RECITALS WHEREAS, Lessor is the owner of that certain civil Aircraft bearing the United States Registration Number N1932K ("the Aircraft" or "Aircraft"), a 1994 Gates Learjet Model 31A, Manufacturer's Serial Number 99; WHEREAS, Lessor employs a fully qualified flight crew to operate the Aircraft; and WHEREAS, Lessor and Lessee desire to lease said Aircraft with flight crew on a non-exclusive time sharing basis as defined in Section 91.501 (c) (1) of the Federal Aviation Regulations ("FAR"); The parties agree as follows: 1. Lessor agrees to lease the Aircraft to Lessee pursuant to the provisions of FAR 91.501 (c) (1) and to provide a fully qualified flight crew for all operations. This Agreement shall commence on the date that it is signed and continue for one year after said date. Thereafter, this Agreement shall be automatically renewed on a month to month basis, unless sooner terminated by either party as hereinafter provided. Either party may at any time terminate this Agreement upon thirty (30) days written notice to the other party, delivered personally or by certified mail, return receipt requested, at the address for said other party as set forth above. 2. Lessee shall pay Lessor for each flight conducted under this Agreement the actual expenses of each specific flight as authorized by FAR Part 91.501 (d). These expenses include: (a) Fuel, oil, lubricants, and other additives; (b) Travel expenses of the crew, including food, lodging and ground transportation; (c) Hangar and tie down costs away from the Aircraft's base of operation; (d) Insurance obtained for the specific flight; (e) Landing fees, airport taxes and similar assessments including, but not limited to IRC Section 4261 and related excise taxes; (f) Customs, foreign permit, and similar fees directly related to the flight; (g) In-flight food and beverages; (h) Passenger ground transportation; (i) Flight planning and weather contract services; and (j) An additional charge equal to 100% of the expenses listed in subparagraph (a) of this paragraph. 3. Lessor will pay all expenses related to the operation of the Aircraft when incurred, and will provide an invoice and bill Lessee for the expenses enumerated in paragraph 2 above on the last day of the month in which any flight or flights for the account of Lessee occur. Lessee shall pay Lessor for said expenses within fifteen (15) days of receipt of the invoice and bill therefor. 4. Lessee will provide Lessor with requests for flight time and proposed flight schedules as far in advance of any given flight as possible, and in any case, at least twenty-four (24) hours in advance of Lessee's planned departure. Requests for flight time shall be in a form, whether written or oral, mutually convenient to, and agreed upon by the parties. In addition to the proposed schedules and flight times Lessee shall provide at least the following information 2 for each proposed flight at some time prior to scheduled departure as required by the Lessor or Lessor's flight crew: (a) proposed departure point; (b) destination; (c) date and time of flight; (d) the number of anticipated passengers; (e) the nature and extent of luggage and/or cargo to be carried; (f) the date and time of return flight, if any; and (f) any other information concerning the proposed flight that may be pertinent or required by Lessor or Lessor's flight crew. 5. Lessor shall have final authority over the scheduling of the Aircraft, provided, however, that Lessor will use its best efforts to accommodate Lessee's needs and to avoid conflicts in scheduling. 6. Lessor shall be solely responsible for securing maintenance, preventive maintenance and required or otherwise necessary inspections on the Aircraft, and shall take such requirements into account in scheduling the Aircraft. No period of maintenance, preventative maintenance or inspection shall be delayed or postponed for the purpose of scheduling the Aircraft, unless said maintenance or inspection can be safely conducted at a later time in compliance with all applicable laws and regulations, and within the sound discretion of the pilot in command. The pilot in command shall have final and complete authority to cancel any flight for any reason or condition which in his judgement would compromise the safety of the flight. 7. Lessor shall employ, pay for and provide to Lessee a qualified flight crew for each flight undertaken under this Agreement. 3 8. In accordance with applicable Federal Aviation Regulations, the qualified flight crew provided by Lessor will exercise all of its duties and responsibilities in regard to the safety of each flight conducted hereunder. Lessee specifically agrees that the flight crew, in its sole discretion, may terminate any flight, refuse to commence any flight, or take other action which in the considered judgement of the pilot in command in necessitated by considerations of safety. No such action of the pilot in command shall create or support any liability for loss, injury, damage or delay to Lessee or any other person. The parties further agree that Lessor shall not be liable for delay or failure to furnish the Aircraft and crew pursuant to this Agreement when such failure is caused by government regulation or authority, mechanical difficulty, war, civil commotion, strikes or labor disputes, weather conditions, or acts of God. 9. At all times during the term of this Lease, Lessor shall cause to be carried and maintained, at Lessor's cost and expense, physical damage insurance with respect to the Aircraft in the amount set forth below: Aircraft Physical Damage $2,900,000.00 (No Deductible While In Motion or Not In Motion) At all times during the term of this Lease, Lessor shall also cause to be carried and maintained, at Lessor's cost and expense, third party aircraft liability insurance, passenger legal liability insurance, property damage liability insurance, and medical expense insurance in the amounts set forth below: Combined Liability Coverage for Bodily Injury and Property Damage Including Passengers - Each Occurrence $100,000,000.00 Medical Expense Coverage - Each Person $5,000.00 4 Lessor shall also bear the cost of paying any deductible amount on any policy of insurance in the event of a claim or loss. Any policies of insurance carried in accordance with this Lease: (i) shall name Lessee as an additional insured; and (ii) shall contain a waiver by the underwriter thereof of any right of subrogation against Lessee; and (iii) shall provide that in respect of the interests of Lessee, such policies of insurance shall not be invalidated by any action or inaction of Lessor or any other person and shall insure Lessee (subject to the limits of liability and war risk exclusion set forth in such policies) regardless of any breach or any violation of any warranty, declarations or conditions contained in such policies by Lessor or any other person; and (iv) shall provide that if the insurers cancel insurance for any reason whatsoever, or the same is allowed to lapse for non- payment of premium, of if there is any material change in policy terms and conditions, such a cancellation, lapse or change shall not be effective as to Lessee. Each liability policy shall be primary without right of contribution from any other insurance which is carried by Lessee or Lessor and shall expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured. Lessor shall submit this Lease for approval to the insurance carrier for each policy of insurance on the Aircraft. Lessor shall arrange for a Certificate of Insurance evidencing appropriate coverage as to the Aircraft and the satisfaction of the requirements set forth above to be given by its insurance carriers to Lessor. 10. Lessee warrants that: (a) It will use the Aircraft for and on account of its own business only, and will not use the Aircraft for the purpose of providing transportation of passengers or cargo in air commerce for compensation or hire; 5 (b) it shall refrain from incurring any mechanics or other lien in connection with inspection, preventative maintenance, maintenance or storage of the Aircraft, whether permissible or impermissible under this Agreement, nor shall there be any attempt by any party hereto to convey, mortgage, assign, lease or any way alienate the Aircraft or create any kind of lien or security interest involving the Aircraft or do anything or take any action that might mature into such a lien; and (c) during the term of this Agreement, it will abide by and conform to all such laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of the Aircraft by a timesharing Lessee. 11. For purposes of this Agreement, the permanent base of operation of the Aircraft shall be Spartanburg, SC. 12. Neither this Agreement nor any party's interest herein shall be assignable to any other party whatsoever. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives and successors. 6 13. TRUTH IN LEASING STATEMENT THE AIRCRAFT, A 1980 GATES LEARJET MODEL 31A, MANUFACTURER'S SERIAL NO. 99, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS N1932K, HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS LEASE. THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. DURING THE DURATION OF THIS LEASE, ESA SERVICES, INC., 450 EAST LAS OLAS BLVD., SUITE 1100, FT. LAUDERDALE, FL 33301, IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE. AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE. THE "INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING REQUIREMENTS" ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE. I, THE UNDERSIGNED, GEORGE D. JOHNSON, JR. OF ESA SERVICES, INC., 450 EAST LAS OLAS BLVD., FT. LAUDERDALE, FL 33301 CERTIFY THAT I AM RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT AND THAT I UNDERSTAND MY RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS. IN WITNESS WHEREOF, the parties have executed this Agreement. ADVANCE AMERICA, CASH ADVANCE CENTERS, INC. By: /s/ William M. Webster, IV 3/29/00 4:30 p.m. ---------------------------------- ------------------------------------ William M. Webster, IV, CEO Date and Time of Execution ESA SERVICES, INC. By: /s/ George D. Johnson, Jr. 3/29/00 4:35 p.m. ---------------------------------- ------------------------------------ George D. Johnson, Jr., President Date and Time of Execution 7 EX-10.7 8 0008.txt TIME SHARING AGREEMENT - LEARJET 35A EXHIBIT 10.7 TIME SHARING AGREEMENT This Agreement is made, effective as of March 29, 2000, by and between Advance America Cash Advance Centers, Inc., a corporation organized under the laws of the State of Delaware, with principal offices at 961 East Main Street, Spartanburg, SC 29302 (hereinafter referred to as "Lessor"), and ESA Services, Inc., with principal offices at 405 East Las Olas Blvd., Suite 11, Ft. Lauderdale, FL 33301 (hereinafter referred to as "Lessee"); RECITALS WHEREAS, Lessor is the owner of that certain civil Aircraft bearing the United States Registration Number N543WW ("the Aircraft" or "Aircraft"), a 1980 Gates Learjet Model 35A, Manufacturer's Serial Number 332; WHEREAS, Lessor employs a fully qualified flight crew to operate the Aircraft; and WHEREAS, Lessor and Lessee desire to lease said Aircraft with flight crew on a non-exclusive time sharing basis as defined in Section 91.501 (c) (1) of the Federal Aviation Regulations ("FAR"); The parties agree as follows: 1. Lessor agrees to lease the Aircraft to Lessee pursuant to the provisions of FAR 91.501 (c) (1) and to provide a fully qualified flight crew for all operations. This Agreement shall commence on the date that it is signed and continue for one year after said date. Thereafter, this Agreement shall be automatically renewed on a month to month basis, unless sooner terminated by either party as hereinafter provided. Either party may at any time terminate this Agreement upon thirty (30) days written notice to the other party, delivered personally or by certified mail, return receipt requested, at the address for said other party as set forth above. 2. Lessee shall pay Lessor for each flight conducted under this Agreement the actual expenses of each specific flight as authorized by FAR Part 91.501 (d). These expenses include: (a) Fuel, oil, lubricants, and other additives; (b) Travel expenses of the crew, including food, lodging and ground transportation; (c) Hangar and tie down costs away from the Aircraft's base of operation; (d) Insurance obtained for the specific flight; (e) Landing fees, airport taxes and similar assessments including, but not limited to IRC Section 4261 and related excise taxes; (f) Customs, foreign permit, and similar fees directly related to the flight; (g) In-flight food and beverages; (h) Passenger ground transportation; (i) Flight planning and weather contract services; and (j) An additional charge equal to 100% of the expenses listed in subparagraph (a) of this paragraph. 3. Lessor will pay all expenses related to the operation of the Aircraft when incurred, and will provide an invoice and bill Lessee for the expenses enumerated in paragraph 2 above on the last day of the month in which any flight or flights for the account of Lessee occur. Lessee shall pay Lessor for said expenses within fifteen (15) days of receipt of the invoice and bill therefor. 4. Lessee will provide Lessor with requests for flight time and proposed flight schedules as far in advance of any given flight as possible, and in any case, at least twenty-four (24) hours in advance of Lessee's planned departure. Requests for flight time shall be in a form, whether written or oral, mutually convenient to, and agreed upon by the parties. In addition to the proposed schedules and flight times Lessee shall provide at least the following information 2 for each proposed flight at some time prior to scheduled departure as required by the Lessor or Lessor's flight crew: (a) proposed departure point; (b) destination; (c) date and time of flight; (d) the number of anticipated passengers; (e) the nature and extent of luggage and/or cargo to be carried; (f) the date and time of return flight, if any; and (f) any other information concerning the proposed flight that may be pertinent or required by Lessor or Lessor's flight crew. 5. Lessor shall have final authority over the scheduling of the Aircraft, provided, however, that Lessor will use its best efforts to accommodate Lessee's needs and to avoid conflicts in scheduling. 6. Lessor shall be solely responsible for securing maintenance, preventive maintenance and required or otherwise necessary inspections on the Aircraft, and shall take such requirements into account in scheduling the Aircraft. No period of maintenance, preventative maintenance or inspection shall be delayed or postponed for the purpose of scheduling the Aircraft, unless said maintenance or inspection can be safely conducted at a later time in compliance with all applicable laws and regulations, and within the sound discretion of the pilot in command. The pilot in command shall have final and complete authority to cancel any flight for any reason or condition which in his judgement would compromise the safety of the flight. 7. Lessor shall employ, pay for and provide to Lessee a qualified flight crew for each flight undertaken under this Agreement. 3 8. In accordance with applicable Federal Aviation Regulations, the qualified flight crew provided by Lessor will exercise all of its duties and responsibilities in regard to the safety of each flight conducted hereunder. Lessee specifically agrees that the flight crew, in its sole discretion, may terminate any flight, refuse to commence any flight, or take other action which in the considered judgement of the pilot in command in necessitated by considerations of safety. No such action of the pilot in command shall create or support any liability for loss, injury, damage or delay to Lessee or any other person. The parties further agree that Lessor shall not be liable for delay or failure to furnish the Aircraft and crew pursuant to this Agreement when such failure is caused by government regulation or authority, mechanical difficulty, war, civil commotion, strikes or labor disputes, weather conditions, or acts of God. 9. At all times during the term of this Lease, Lessor shall cause to be carried and maintained, at Lessor's cost and expense, physical damage insurance with respect to the Aircraft in the amount set forth below: Aircraft Physical Damage $2,900,000.00 (No Deductible While In Motion or Not In Motion) At all times during the term of this Lease, Lessor shall also cause to be carried and maintained, at Lessor's cost and expense, third party aircraft liability insurance, passenger legal liability insurance, property damage liability insurance, and medical expense insurance in the amounts set forth below: Combined Liability Coverage for Bodily Injury and Property Damage Including Passengers - Each Occurrence $100,000,000.00 Medical Expense Coverage - Each Person $5,000.00 4 Lessor shall also bear the cost of paying any deductible amount on any policy of insurance in the event of a claim or loss. Any policies of insurance carried in accordance with this Lease: (i) shall name Lessee as an additional insured; and (ii) shall contain a waiver by the underwriter thereof of any right of subrogation against Lessee; and (iii) shall provide that in respect of the interests of Lessee, such policies of insurance shall not be invalidated by any action or inaction of Lessor or any other person and shall insure Lessee (subject to the limits of liability and war risk exclusion set forth in such policies) regardless of any breach or any violation of any warranty, declarations or conditions contained in such policies by Lessor or any other person; and (iv) shall provide that if the insurers cancel insurance for any reason whatsoever, or the same is allowed to lapse for non- payment of premium, of if there is any material change in policy terms and conditions, such a cancellation, lapse or change shall not be effective as to Lessee. Each liability policy shall be primary without right of contribution from any other insurance which is carried by Lessee or Lessor and shall expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured. Lessor shall submit this Lease for approval to the insurance carrier for each policy of insurance on the Aircraft. Lessor shall arrange for a Certificate of Insurance evidencing appropriate coverage as to the Aircraft and the satisfaction of the requirements set forth above to be given by its insurance carriers to Lessor. 10. Lessee warrants that: (a) It will use the Aircraft for and on account of its own business only, and will not use the Aircraft for the purpose of providing transportation of passengers or cargo in air commerce for compensation or hire; 5 (b) it shall refrain from incurring any mechanics or other lien in connection with inspection, preventative maintenance, maintenance or storage of the Aircraft, whether permissible or impermissible under this Agreement, nor shall there be any attempt by any party hereto to convey, mortgage, assign, lease or any way alienate the Aircraft or create any kind of lien or security interest involving the Aircraft or do anything or take any action that might mature into such a lien; and (c) during the term of this Agreement, it will abide by and conform to all such laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of the Aircraft by a timesharing Lessee. 11. For purposes of this Agreement, the permanent base of operation of the Aircraft shall be Spartanburg, SC. 12. Neither this Agreement nor any party's interest herein shall be assignable to any other party whatsoever. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives and successors. 6 13. TRUTH IN LEASING STATEMENT THE AIRCRAFT, A 1980 GATES LEARJET MODEL 35A, MANUFACTURER'S SERIAL NO. 332, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS N543WW, HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS LEASE. THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. DURING THE DURATION OF THIS LEASE, ESA SERVICES, INC., 450 EAST LAS OLAS BLVD., SUITE 1100, FT. LAUDERDALE, FL 33301, IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE. AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE. THE "INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING REQUIREMENTS" ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE. I, THE UNDERSIGNED, GEORGE D. JOHNSON, JR. OF ESA SERVICES, INC., 450 EAST LAS OLAS BLVD., FT. LAUDERDALE, FL 33301 CERTIFY THAT I AM RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT AND THAT I UNDERSTAND MY RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS. IN WITNESS WHEREOF, the parties have executed this Agreement. ADVANCE AMERICA, CASH ADVANCE CENTERS, INC. By: /s/ William M. Webster, IV 3/29/00 4:30 p.m. -------------------------------- ------------------------------------ William M. Webster, IV, CEO Date and Time of Execution ESA SERVICES, INC. By: /s/ George D. Johnson, Jr. 3/29/00 4:35 p.m. -------------------------------- ------------------------------------ George D. Johnson, Jr., President Date and Time of Execution 7 EX-10.8 9 0009.txt TIME SHARING AGREEMENT - CANADAIR CHALLENGER EXHIBIT 10.8 TIME SHARING AGREEMENT This Agreement is made, effective as of April 1, 2000, by and between ESA Services, Inc., a corporation organized under the laws of the State of Delaware, with principal offices at 450 East Las Olas Blvd., Ft. Lauderdale, FL 33301 (hereinafter referred to as "Lessor"), and GEORGE DEAN JOHNSON, JR., with principal offices at 961 East Main Street, Spartanburg, SC 29302 (hereinafter referred to as "Lessee"); RECITALS WHEREAS, Lessor is the owner of that certain civil Aircraft bearing the United States Registration Number N333GJ ("the Aircraft" or "Aircraft"), a 1985 Canadair Challenger Model CL-600-2A12, Manufacturer's Serial Number 3042; WHEREAS, Lessor employs a fully qualified flight crew to operate the Aircraft; and WHEREAS, Lessor and Lessee desire to lease said Aircraft with flight crew on a non-exclusive time sharing basis as defined in Section 91.501(c)(1) of the Federal Aviation Regulations ("FAR"); The parties agree as follows: 1. Lessor agrees to lease the Aircraft to Lessee pursuant to the provisions of FAR 91.501(c)(1) and to provide a fully qualified flight crew for all operations. This Agreement shall commence on the date that it is signed and continue for one year after said date. Thereafter, this Agreement shall be automatically renewed on a month to month basis, unless sooner terminated by either party as hereinafter provided. Either party may at any time terminate this Agreement upon thirty (30) days written notice to the other party, delivered personally or by certified mail, return receipt requested, at the address for said other party as set forth above. 1 2. Lessee shall pay Lessor for each flight conducted under this Agreement the actual expenses of each specific flight as authorized by FAR Part 91.501(d). These expenses include: (a) Fuel, oil, lubricants, and other additives; (b) Travel expenses of the crew, including food, lodging and ground transportation; (c) Hangar and tie down costs away from the Aircraft's base of operation; (d) Insurance obtained for the specific flight; (e) Landing fees, airport taxes and similar assessments including, but not limited to IRC Section 4261 and related excise taxes; (f) Customs, foreign permit, and similar fees directly related to the flight; (g) In-flight food and beverages; (h) Passenger ground transportation; (i) Flight planning and weather contract services; and (j) An additional charge not to exceed 100% of the expenses listed in subparagraph (a) of this paragraph. 3. Lessor will pay all expenses related to the operation of the Aircraft when incurred, and will provide an invoice and bill Lessee for the expenses enumerated in paragraph 2 above on the last day of the month in which any flight or flights for the account of Lessee occur. Lessee shall pay Lessor for said expenses within fifteen (15) days of receipt of the invoice and bill therefor. 4. Lessee will provide Lessor with requests for flight time and proposed flight schedules as far in advance of any given flight as possible, and in any case, at 2 least twenty-four (24) hours in advance of Lessee's planned departure. Requests for flight time shall be in a form whether written or oral, mutually convenient to, and agreed upon by the parties. In addition to the proposed schedules and flight times Lessee shall provide at least the following information for each proposed flight at some time prior to scheduled departure as required by the Lessor or Lessor's flight crew: (a) proposed departure point; (b) destination; (c) date and time of flight; (d) the number of anticipated passengers; (e) the nature and extent of luggage and/or cargo to be carried; (f) the date and time of return flight, if any; and (g) any other information concerning the proposed flight that may be pertinent or required by Lessor or Lessor's flight crew. 5. Lessor shall have final authority over the scheduling of the Aircraft, provided, however, that Lessor will use its best efforts to accommodate Lessee's needs and to avoid conflicts in scheduling. 6. Lessor shall be solely responsible for securing maintenance, preventive maintenance and required or otherwise necessary inspections on the Aircraft, and shall take such requirements into account in scheduling the Aircraft. No period of maintenance, preventative maintenance or inspection shall be delayed or postponed for the purpose of scheduling the Aircraft, unless said maintenance or inspection can be safely conducted at a later time in compliance with all 3 applicable laws and regulations, and within the sound discretion of the pilot in command. The pilot in command shall have final and complete authority to cancel any flight for any reason or condition which in his judgment would compromise the safety of the flight. 7. Lessor shall employ, pay for and provide to Lessee a qualified flight crew for each flight undertaken under this Agreement. 8. In accordance with applicable Federal Aviation Regulations, the qualified flight crew provided by Lessor will exercise all of its duties and responsibilities in regard to the safety of each flight conducted hereunder. Lessee specifically agrees that the flight crew, in its sole discretion, may terminate any flight, refuse to commence any flight, or take other action which in the considered judgment of the pilot in command is necessitated by considerations of safety. No such action of the pilot in command shall create or support any liability for loss, injury, damage or delay to Lessee or any other person. The parties further agree that Lessor shall not be liable for delay or failure to furnish the Aircraft and crew pursuant to this Agreement when such failure is caused by government regulation or authority, mechanical difficulty, war, civil commotion, strikes or labor disputes, weather conditions, or acts of God. 9. At all times during the term of this Lease, Lessor shall cause to be carried and maintained, at Lessor's cost and expense, physical damage insurance with respect to the Aircraft in the amount set forth below: Aircraft Physical Damage $12,900,000.00 (No Deductible While In Motion or Not in Motion) 4 At all times during the term of this Lease, Lessor shall also cause to be carried and maintained, at lessor's cost and expense, third party aircraft liability insurance, passenger legal liability insurance, property damage liability insurance, and medical expense insurance in the amounts set forth below: Combined Liability Coverage for Bodily Injury and Property Damage Including Passengers - Each Occurrence $100,000,000.00 Medical Expense Coverage - Each Person $5,000.00 Lessor shall also bear the cost of paying any deductible amount on any policy of insurance in the event of a claim or loss. Any policies of insurance carried in accordance with this Lease: (I) shall name lessee as an additional insured; and (ii) shall contain a waiver by the underwriter thereof of any right of subrogation against Lessee; and (iii) shall provide that in respect of the interests of Lessee, such policies of insurance shall not be invalidated by any action or inaction of Lessor or any other person and shall insure Lessee (subject to the limits of liability and war risk exclusion set forth in such policies) regardless of any breach or any violation of any warranty, declarations or conditions contained in such policies by Lessor or any other person; and (iv) shall provide that if the insurers cancel insurance for any reason whatsoever, or the same is allowed to lapse for non- payment of premium, or if there is any material change in policy terms and conditions, such a cancellation, lapse or change shall not be effective as to Lessee. Each liability policy shall be primary without right of contribution from any other insurance which is carried by Lessee or Lessor and shall expressly provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured. Lessor shall submit this Lease for approval to the insurance carrier for each policy of insurance on the aircraft. Lessor shall arrange for a Certificate of Insurance evidencing 5 appropriate coverage as to the Aircraft and the satisfaction of the requirements set forth above to be given by its insurance carriers to Lessor. 10. Lessee warrants that: (a) It will use the Aircraft for and on account of its own business only, and will not use the Aircraft for the purpose of providing transportation of passengers or cargo in air commerce for compensation or hire; (b) It shall refrain from incurring any mechanics or other lien in connection with inspection, preventative maintenance, maintenance or storage of the Aircraft, whether permissible or impermissible under this Agreement, nor shall there be any attempt by any party hereto to convey, mortgage, assign, lease or any way alienate the Aircraft or create any kind of lien or security interest involving the Aircraft or do anything or take any action that might mature into such a lien; and (c) During the term of this Agreement, it will abide by and conform to all such laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of the Aircraft by a timesharing Lessee. 11. For purposes of this Agreement, the permanent base of operation of the aircraft shall be Spartanburg, SC. 12. Neither this Agreement nor any party's interest herein shall be assignable to any other party whatsoever. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives and successors. 6 13. TRUTH IN LEASING STATEMENT THE AIRCRAFT, A 1985 Canadair Challenger Model CL-600-2A12, MANUFACTURER'S SERIAL NO. 3042, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS N333GJ, HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS LEASE. THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. DURING THE DURATION OF THIS LEASE, GEORGE DEAN JOHNSON, JR., 961 EAST MAIN STREET, SPARTANBURG, SC 29302, IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE. AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE. THE "INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING REQUIREMENTS" ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE. I, THE UNDERSIGNED, GEORGE DEAN JOHNSON, JR., 961 EAST MAIN STREET, ----------------------------------------------- SPARTANBURG, SC 29302 CERTIFY THAT IT IS RESPONSIBLE FOR OPERATIONAL ---------------------- CONTROL OF THE AIRCRAFT AND THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS. IN WITNESS WHEREOF, the parties have executed this Agreement. ESA Services, Inc. By: /s/ Gregory R. Moxley ------------------------------------ Gregory R. Moxley, Vice-President By: /s/ George Dean Johnson, Jr. ------------------------------------- George Dean Johnson, Jr. 7 EX-10.9 10 0010.txt AMENDED & RESTATED STOCK OPTION PLAN EXHIBIT 10.9 EXTENDED STAY AMERICA, INC. AMENDED AND RESTATED 1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS 1. Statement of Purpose. The purpose of this Extended Stay America, Inc. Amended and Restated 1995 Stock Option Plan for Non-Employee Directors (the "Plan") is to benefit Extended Stay America, Inc. (the "Company") by offering its non-employee directors a favorable opportunity to become holders of stock in the Company over a period of years, thereby giving them a stake in the growth and prosperity of the Company and encouraging the continuance of their services with the Company. 2. Administration. The Plan shall be administered by the board of directors of the Company (the "Board of Directors"), whose interpretation of the terms and provisions of the Plan and whose determination of matters pertaining to options granted under the Plan shall be final and conclusive. 3. Eligibility. Options shall be granted only to current directors of the Company who are not officers or employees of the Company (each such individual receiving options granted under the Plan and each other person entitled to exercise an option granted under the Plan is referred to herein as an "Optionee"). 4. Granting of Options. (a) (1) A one-time option, under which a total of 40,000 shares of the Common Stock may be purchased from the Company, shall be automatically granted to each director of the Company upon his or her initial election or appointment as a director of the Company, provided such director is eligible at that time under the terms of Paragraph 3 hereof and provided further that the Plan contains enough shares of Common Stock to support such grant. (2) With respect to each director of the Company, an additional option under which a total of 10,000 shares of Common Stock may be purchased from the Company shall be granted to such director each year, on the anniversary of the granting of the initial option to such director described in Paragraph 4(a)(1) hereof, provided that such director continues to be eligible at that time under the terms of Paragraph 3 of this Plan and provided further that the Plan contains enough shares of Common Stock to support such grant. The aggregate number of shares that shall be available to be so optioned under the Plan shall be 680,000 shares. Such number of shares, and the number of shares subject to options outstanding under the Plan, shall be subject in all cases to adjustment as provided in Paragraph 10 hereof. Options granted under the Plan are intended not be treated as incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). (b) No options shall be granted under the Plan subsequent to the tenth anniversary of the adoption of the Plan. In the event that an option expires or is terminated or cancelled unexercised as to any shares, such released shares may again be optioned (including a grant in substitution for a cancelled option). Shares subject to options may be made available from unissued or reacquired shares of Common Stock. (c) Nothing contained in the Plan or in any option granted pursuant thereto shall confer upon any Optionee any right to continue serving as a director of the Company or interfere in any way with the right of the Board of Directors or stockholders of the Company to remove such director pursuant to the certificate or articles of incorporation or bylaws of the Company or pursuant to applicable law. 5. Option Price. Subject to the adjustment in Paragraph 10 hereof, the option price for all options granted under this Plan shall be the fair market value of the shares of Common Stock subject to the option on the date of the grant of such option. For purposes of this Paragraph 5, "fair market value" shall be the average of the highest and lowest sales prices of the Common Stock reported on the New York Stock Exchange (or on the principal national stock exchange on which it is listed or quotation service on which it is listed) (as reported in The Wall Street Journal) on the date the option is granted (or, if the date of grant is not a trading date, on the first trading date immediately preceding the date of grant). In the event that the Common Stock is not listed on the New York Stock Exchange or any other national stock exchange or quoted on the Nasdaq National Market, the fair market value of the shares of Common Stock for all purposes of this Plan shall be reasonably determined by the Board of Directors. 6. Duration of Options and Increments. Subject to the provisions of Paragraph 8 hereof, each option shall be for a term of ten years. Each option shall become exercisable with respect to all of the shares subject to the option 6 months after the date of its grant. 7. Exercise of Option. (a) An option may be exercised by giving written notice to the Secretary of the Company, specifying the number of shares to be purchased. The option price for the number of shares of Common Stock for which the option is exercised shall become immediately due and payable; provided, however, that in lieu of cash an Optionee may, with the approval of the Board of Directors, exercise his or her option by (i) delivering a promissory note in accordance with the terms of the Plan and in a form specified by the Company; (ii) tendering to the Company shares of Common Stock owned by him or her and with the certificates therefor registered in his or her name, having a fair market value equal to the cash exercise price of the shares being purchased; or (iii) delivery of an irrevocable written notice instructing the Company to deliver the shares of Common Stock being purchased to a broker selected by the Company, subject to the broker's written guarantee to deliver the cash to the Company, in each case equal to the full consideration of the exercise price of the shares being purchased. For this purpose, the per share value of Common Stock shall be the fair market value on the date of exercise (or, if the date of exercise is not a trading date, on the first trading date immediately preceding the date of exercise), which shall be the average of the highest and lowest sales prices of the Common Stock reported on the New York Stock Exchange (or on the principal national stock exchange on which it is listed or quotation service on which it is listed) (as reported in The Wall Street Journal) on such date. 2 (b) In connection with the exercise of options granted under the Plan, the Company may make loans to such Optionees as the Board of Directors, in its discretion, may determine. Such loans shall be subject to the following terms and conditions and such other terms and conditions as the Board of Directors shall determine to be not inconsistent with the Plan. Such loans shall bear interest at such rates as the Board of Directors shall determine from time to time, which rates may be below then current market rates or may be made without interest. In no event may any such loan exceed the fair market value, at the date of exercise, of the shares covered by the option, or portion thereof, exercised by the Optionee. No loan shall have an initial term exceeding two years, but any such loan may be renewable at the discretion of the Board of Directors. When a loan shall have been made, shares of Common Stock having a fair market value at least equal to 150 percent of the principal amount of the loan shall be pledged by the Optionee to the Company as security for payment of the unpaid balance of the loan. (c) If at any time an Optionee is required to pay an amount required to be withheld under applicable income tax or other laws in connection with the exercise of an option in order for the Company to obtain a deduction for federal and state income tax purposes, the Company shall withhold shares of Common Stock having a value equal to the amount required to be withheld. The value of the shares to be withheld or delivered shall be based on the fair market value of the shares of Common Stock on the date of exercise, which shall be the average of the highest and lowest sales prices of the Common Stock reported on the New York Stock Exchange (or on the principal stock exchange on which it is listed or quotation service on which it is listed) (as reported in The Wall Street Journal) on the date of exercise. (d) At the time of any exercise of any option, the Company may, if the Company shall determine it necessary or desirable for any reason, require the Optionee (or his or her heirs, legatees, or legal representative, as the case may be) as a condition upon the exercise thereof, to deliver to the Company a written representation of present intention to purchase the shares for investment and not for distribution. In the event such representation is required to be delivered, an appropriate legend may be placed upon each certificate delivered to the Optionee upon his or her exercise of part or all of the option and a stop order may be placed with the transfer agent for the Common Stock. Each option shall also be subject to the requirement that, if at any time the Company determines, in its discretion, that the listing, registration or qualification of the shares subject to the option upon any securities exchange or under any state, federal or foreign law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issue or purchase of shares thereunder, the option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. 8. Cessation of Board Membership - Exercise Thereafter. (a) In the event that an Optionee ceases to be a director of the Company for any reason other than for cause, such Optionee shall have 360 days from the date such Optionee ceased to be a director of the Company to exercise those options owned by such Optionee which were exercisable as of the date of such cessation. 3 (b) In the event that an Optionee is removed from the Board of Directors of the Company for cause (as hereinafter defined), such Optionee's option shall expire and all rights to purchase shares of Common Stock pursuant thereto shall terminate immediately. For purposes of the Plan, removal for "cause" shall mean (a) the Optionee's gross negligence, dishonesty, incompetency, willful breach of any employment or consulting agreement with the Company, or the violation of any reasonable rule or regulation of the Company, a violation of which results in significant damage to the Company and with respect to which, except in the case of dishonesty or incompetency, the Optionee fails to make reasonable efforts to correct in a reasonable time; (b) the Optionee's engaging in other conduct which materially adversely reflects on the Company or which is damaging to the Company upon written notice of such violation; or (c) continued failure by the Optionee to substantially perform his or her duties (other than any such failure resulting from his or her incapacity due to physical or mental disability), following the delivery of a demand for substantial performance by the Company. 9. Non-Transferability of Options. No option shall be transferable by the Optionee otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order and each option shall be exercisable during an Optionee's lifetime only by the Optionee or by the Optionee's legal representative. 10. Adjustment. The number of shares subject to the Plan and to options granted under the Plan shall be adjusted as follows: (a) in the event that the number of outstanding shares of Common Stock is changed by any stock dividend, stock split or combination of shares, the number of shares subject to the Plan and to options granted thereunder shall be proportionately adjusted; (b) in the event of any merger, consolidation or reorganization of the Company with any other corporation or legal entity there shall be substituted, on an equitable basis as determined by the Board of Directors, for each share of Common Stock then subject to the Plan and for each share of Common Stock then subject to an option granted under the Plan, the number and kind of shares of stock or other securities to which the holders of shares of Common Stock will be entitled pursuant to the transaction; and (c) in the event of any other relevant change in the capitalization of the Company, the Board of Directors shall provide for an equitable adjustment in the number of shares of Common Stock then subject to the Plan and to each share of Common Stock then subject to an option granted under the Plan. In the event of any such adjustment, the option price per share of Common Stock shall be proportionately adjusted. 11. Amendment of the Plan. The Board of Directors of the Company or any authorized committee thereof may amend or discontinue the Plan at any time, provided, however, that the Plan may not be amended more than once every six months except to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules and regulations under each, and provided further, that no such amendment or discontinuance shall (a) without the consent of the Optionee change or impair any option previously granted, or (b) without the approval of the holders of a majority of the shares of Common Stock which vote in person or by proxy at a duly held stockholders' meeting, (i) increase the maximum number of shares which may be purchased by all eligible directors pursuant to the Plan, (ii) change the purchase price of any option, or (iii) change the option period or increase the time limitations on the grant of options. 4 12. Effective Date. The Plan as amended is effective as of January 27, 2000. However, the Plan as originally authorized and approved was effective from November 17, 1995 through January 27, 2000, and nothing contained herein shall alter the effectiveness or operation of the Plan as it existed prior to January 27, 2000. 5 EX-10.10 11 0011.txt AMENDED & RESTATED CREDIT AGREEMENT EXHIBIT 10.10 ================================================================================ CREDIT AGREEMENT among EXTENDED STAY AMERICA, INC., VARIOUS BANKS, MORGAN STANLEY SENIOR FUNDING, INC., as SOLE BOOK RUNNER AND SOLE LEAD ARRANGER and THE INDUSTRIAL BANK OF JAPAN, LIMITED as ADMINISTRATIVE AGENT __________________________________ Dated as of September 26, 1997 and Amended and Restated as of March 10, 1998 and Further Amended and Restated as of June 7, 2000 __________________________________ ================================================================================ TABLE OF CONTENTS -----------------
Page ---- SECTION 1. Amount and Terms of Credit........................................................ 1 1.01 The Commitments.................................................................... 1 1.02 Minimum Amount of Each Borrowing................................................... 4 1.03 Notice of Borrowing................................................................ 4 1.04 Disbursement of Funds.............................................................. 5 1.05 Notes.............................................................................. 6 1.06 Conversions........................................................................ 8 1.07 Pro Rata Borrowings................................................................ 8 1.08 Interest........................................................................... 8 1.09 Interest Periods................................................................... 9 1.10 Increased Costs, Illegality, etc................................................... 10 1.11 Compensation....................................................................... 13 1.12 Change of Lending Office........................................................... 13 1.13 Replacement of Banks.............................................................. 13 SECTION 2. Letters of Credit................................................................. 14 2.01 Letters of Credit.................................................................. 14 2.02 Maximum Letter of Credit Outstandings; Final Maturities............................ 15 2.03 Letter of Credit Requests; Minimum Stated Amount................................... 15 2.04 Letter of Credit Participation..................................................... 16 2.05 Agreement to Repay Letter of Credit Drawings....................................... 18 2.06 Increased Costs.................................................................... 18 SECTION 3. Fees; Reductions of Commitment.................................................... 19 3.01 Fees............................................................................... 19 3.02 Voluntary Termination of Unutilized Commitments.................................... 20 3.03 Mandatory Reduction of Commitments................................................. 20 SECTION 4. Prepayments; Payments; Taxes...................................................... 21 4.01 Voluntary Prepayments.............................................................. 21 4.02 Mandatory Repayments............................................................... 22 4.03 Method and Place of Payment........................................................ 26 4.04 Net Payments; Taxes................................................................ 26 SECTION 5. Conditions Precedent to Restatement Effective Date................................ 29 5.01. Execution of Agreement; Notes..................................................... 29 5.02 Fees, etc.......................................................................... 29
Page ---- 5.03 Opinion of Counsel................................................................. 29 5.04 Corporate Documents; Proceedings; etc.............................................. 29 5.05 Employee Benefit Plans; Shareholders' Agreements; Management Agreements; Collective Bargaining Agreements; Existing Indebtedness Agreements; Tax Sharing Agreements; Material Leases....................................................... 30 5.06 Pledge Agreement................................................................... 31 5.07 Security Agreement................................................................. 32 5.08 Subsidiary Credit Parties; etc..................................................... 32 5.09 Adverse Change, etc................................................................ 32 5.10 Litigation......................................................................... 33 5.11 Solvency Certificate; Environmental Assessments; Insurance Certificates............ 33 5.12 Projections........................................................................ 33 5.13 Subordinated Debt Compliance....................................................... 33 SECTION 6. Conditions Precedent to All Credit Events......................................... 33 6.01 No Default; Representations and Warranties......................................... 34 6.02 Notice of Borrowing; Letter of Credit Request...................................... 34 SECTION 7. Representations and Warranties..................................................... 34 7.01 Corporate and Other Status......................................................... 35 7.02 Corporate or Partnership Power and Authority....................................... 35 7.03 No Violation....................................................................... 35 7.04 Governmental Approvals............................................................. 35 7.05 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc............................................................................... 35 7.06 Litigation......................................................................... 37 7.07 True and Complete Disclosure....................................................... 37 7.08 Use of Proceeds; Margin Regulations................................................ 37 7.09 Tax Returns and Payments........................................................... 37 7.10 Compliance with ERISA.............................................................. 38 7.11 The Security Documents............................................................. 39 7.12 Manager Subordination Agreements................................................... 39 7.13 Properties......................................................................... 40 7.14 Capitalization..................................................................... 40 7.15 Subsidiaries....................................................................... 40 7.16 Compliance with Statutes, etc...................................................... 40 7.17 Investment Company Act............................................................. 40 7.18 Public Utility Holding Company Act................................................. 40 7.19 Environmental Matters.............................................................. 40 7.20 Labor Relations.................................................................... 41 7.21 Patents, Licenses, Franchises and Formulas......................................... 41 7.22 Indebtedness....................................................................... 42 7.23 Hotel Properties................................................................... 42 7.24 Updated Security Agreement and Pledge Agreement Schedules.......................... 42
(ii)
Page ---- SECTION 8. Affirmative Covenants............................................................. 42 8.01 Information Covenants.............................................................. 42 8.02 Books, Records and Inspections..................................................... 45 8.03 Maintenance of Property; Insurance................................................. 45 8.04 Corporate Franchises............................................................... 46 8.05 Compliance with Statutes, etc...................................................... 47 8.06 Compliance with Environmental Laws................................................. 47 8.07 ERISA.............................................................................. 48 8.08 End of Fiscal Years; Fiscal Quarters............................................... 49 8.09 Performance of Obligations......................................................... 49 8.10 Payment of Taxes................................................................... 49 8.11 [INTENTIONALLY OMITTED]............................................................ 49 8.12 Additional Security; Further Assurances............................................ 49 8.13 Foreign Subsidiaries Security...................................................... 50 8.14 Hotel Property Management.......................................................... 51 8.15 Maintenance of Corporate Separateness.............................................. 51 SECTION 9. Negative Covenants................................................................ 51 9.01 Liens.............................................................................. 52 9.02 Consolidation, Merger, Purchase or Sale of Assets, etc............................. 54 9.03 Dividends.......................................................................... 56 9.04 Indebtedness....................................................................... 56 9.05 Advances, Investments and Loans.................................................... 58 9.06 Transactions with Affiliates....................................................... 59 9.07 Capital Expenditures............................................................... 59 9.08 Consolidated Interest Coverage Ratio............................................... 60 9.09 Maximum Run Rate Leverage Ratio.................................................... 60 9.10 Maximum Senior Debt Leverage Ratio................................................. 60 9.11 Maximum Debt to Capitalization Ratio............................................... 60 9.12 Limitation on Payments of Certain Indebtedness; Modifications of Certain Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Agreements; etc.................................................................. 61 9.13 Limitation on Certain Restrictions on Subsidiaries................................. 61 9.14 Limitation on Issuance of Capital Stock............................................ 61 9.15 Business........................................................................... 62 9.16 Limitation on Creation of Subsidiaries............................................. 62 9.17 Representative..................................................................... 62 SECTION 10. Events of Default................................................................ 63 10.01 Payments.......................................................................... 63 10.02 Representations, etc.............................................................. 63 10.03 Covenants......................................................................... 63 10.04 Default Under Other Agreements.................................................... 63 10.05 Bankruptcy, etc................................................................... 63
(iii)
Page ---- 10.06 ERISA............................................................................. 64 10.07 Security Documents................................................................ 65 10.08 Subsidiaries Guaranty............................................................. 65 10.09 Judgments......................................................................... 65 10.10 Manager Subordination Agreements ................................................ 65 10.11 Change of Control................................................................. 65 SECTION 11. Definitions and Accounting Terms................................................. 66 11.01 Defined Terms..................................................................... 66 SECTION 12. The Agents....................................................................... 89 12.01 Appointment....................................................................... 89 12.02 Nature of Duties.................................................................. 90 12.03 Lack of Reliance on the Agents.................................................... 90 12.04 Certain Rights of the Agents...................................................... 90 12.05 Reliance.......................................................................... 91 12.06 Indemnification................................................................... 91 12.07 Each Agent in Its Individual Capacity............................................. 91 12.08 Holders........................................................................... 91 12.09 Resignation by the Administrative Agent and the Sole Lead Arranger................ 92 SECTION 13. Miscellaneous.................................................................... 92 13.01 Payment of Expenses, etc.......................................................... 92 13.02 Right of Setoff................................................................... 93 13.03 Notices........................................................................... 94 13.04 Benefit of Agreement.............................................................. 94 13.05 No Waiver; Remedies Cumulative.................................................... 96 13.06 Payments Pro Rata................................................................. 96 13.07 Calculations; Computations........................................................ 96 13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL............ 97 13.09 Counterparts...................................................................... 98 13.10 Effectiveness..................................................................... 98 13.11 Headings Descriptive.............................................................. 99 13.12 Amendment or Waiver; etc.......................................................... 99 13.13 Survival.......................................................................... 100 13.14 Domicile of Loans................................................................. 100 13.15 Confidentiality................................................................... 100 13.16 Register.......................................................................... 101 13.17 Limitation on Increased Costs..................................................... 101 13.18 Acknowledgement and Agreement of Credit Parties................................... 102
(iv) Page ---- SCHEDULE I Commitments SCHEDULE II Term Loans Outstanding on the Restatement Effective Date SCHEDULE III Bank Addresses SCHEDULE IV ERISA Matters SCHEDULE V Subsidiaries SCHEDULE VI Existing Indebtedness SCHEDULE VII Insurance SCHEDULE VIII Existing Liens EXHIBIT A Notice of Borrowing EXHIBIT B-1 Tranche A Term Note EXHIBIT B-2 Tranche B Term Note EXHIBIT B-3 Tranche C Term Note EXHIBIT B-4 Tranche D Term Note EXHIBIT B-5 Revolving Note EXHIBIT B-6 Swingline Note EXHIBIT C Letter of Credit Request EXHIBIT D Section 4.04(b)(ii) Certificate EXHIBIT E Opinion of Bell, Boyd & Lloyd EXHIBIT F Officers' Certificate EXHIBIT G Officer's Solvency Certificate EXHIBIT H Assignment and Assumption Agreement (v) CREDIT AGREEMENT, dated as of September 26, 1997, and amended and restated as of March 10, 1998, and further amended and restated as of June 7, 2000 among EXTENDED STAY AMERICA, INC., a Delaware corporation, (the "Borrower"), the Banks party hereto from time to time, MORGAN STANLEY SENIOR FUNDING, INC., as Sole Book Runner and Sole Lead Arranger, and THE INDUSTRIAL BANK OF JAPAN, LIMITED, as Administrative Agent (all capitalized terms used herein and defined in Section 11 are used herein as therein defined). WITNESSETH: ---------- WHEREAS, the Borrower, the Original Banks, Morgan Stanley Senior Funding, Inc., as Syndication Agent and Arranger, and The Industrial Bank of Japan, Limited, as Administrative Agent, are parties to a Credit Agreement, dated as of September 26, 1997 and amended and restated as of March 10, 1998 (as the same has been amended, modified or supplemented to, but not including, the Restatement Effective Date, the "Original Credit Agreement"); and WHEREAS, the parties hereto wish to amend and restate the Original Credit Agreement in the form of this Agreement to make available to the Borrower the respective facilities provided for herein; NOW, THEREFORE, the parties hereto agree that the Original Credit Agreement shall be and is hereby amended and restated in its entirety as follows: SECTION 1. Amount and Terms of Credit. 1.01 The Commitments. (a) Each Bank that holds a "Tranche A Term --------------- Loan" under the Original Credit Agreement agrees that such Tranche A Term Loan shall be continued as a Tranche A Term Loan under this Agreement (each a "Tranche A Term Loan"), which Tranche A Term Loan, except as hereafter provided, shall, at the option of the Borrower, be continued and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that except as otherwise specifically provided in Section 1.10(b), all Tranche A Term Loans made as part of the same Borrowing shall at all times consist of Tranche A Term Loans of the same Type. Once repaid, Tranche A Term Loans may not be reborrowed. The aggregate principal amount of Tranche A Term Loans held by each Bank on the Restatement Effective Date is set forth in Schedule II attached hereto. (b) Each Bank that holds a "Tranche B Term Loan" under the Original Credit Agreement agrees that such Tranche B Term Loan shall be continued as a Tranche B Term Loan under this Agreement (each a "Tranche B Term Loan"), which Tranche B Term Loan, except as hereafter provided, shall, at the option of the Borrower, be continued and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that except as otherwise specifically provided in Section 1.10(b), all Tranche B Term Loans made as part of the same Borrowing shall at all times consist of Tranche B Term Loans of the same Type. Once repaid, Tranche B Term Loans may not be reborrowed. The aggregate principal amount of Tranche B Term Loans held by each Bank on the Restatement Effective Date is set forth in Schedule II attached hereto. (c) Each Bank that holds a "Tranche C Term Loan" under the Original Credit Agreement agrees that such Tranche C Term Loan shall be continued as a Tranche C Term Loan under this Agreement (each a "Tranche C Term Loan"), which Tranche C Term Loan, except as hereafter provided, shall, at the option of the Borrower, be continued and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that except as otherwise specifically provided in Section 1.10(b), all Tranche C Term Loans made as part of the same Borrowing shall at all times consist of Tranche C Term Loans of the same Type. Once repaid, Tranche C Term Loans may not be reborrowed. The aggregate principal amount of Tranche C Term Loans held by each Bank on the Restatement Effective Date is set forth in Schedule II attached hereto. (d) Subject to the terms and conditions set forth herein, each Bank having a Tranche D Term Loan Commitment severally agrees to make on any Business Day occurring on or after the Restatement Effective Date and prior to the fifth Business Day following the Restatement Effective Date a term loan or term loans (each, a "Tranche D Term Loan" and, collectively, the "Tranche D Terms Loans") to the Borrower, which Tranche D Term Loans (i) shall be Base Rate Loans or Eurodollar Loans, provided that, (A) except as otherwise specifically provided -------- in Section 1.10(b), all Tranche D Term Loans comprising the same Borrowing shall at all times be of the same Type and (ii) shall not exceed for any Bank that amount which equals the Tranche D Term Loan Commitment of such Bank on the date of borrowing. Once repaid, Tranche D Term Loans incurred hereunder may not be reborrowed. (e) Subject to and upon the terms and conditions set forth herein, each Bank with a Revolving Loan Commitment severally agrees, at any time and from time to time on and after the Restatement Effective Date and prior to the A/RF Maturity Date, to make a revolving loan or revolving 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 Eurodollar Loans, provided that, 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, (ii) may be repaid and reborrowed at any time in accordance with the provisions hereof, (iii) shall not exceed for any such Bank at any time outstanding that aggregate principal amount which, when added to the product of (A) such Bank's Percentage and (B) the sum of (I) the aggregate 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 and (II) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) then outstanding, equals the Revolving Loan Commitment of such Bank at such time and (iv) shall not exceed for all Banks at any time outstanding that aggregate principal amount which, when added to (I) the aggregate 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 -2- Loans) at such time and (II) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) then outstanding, equals the Total Revolving Loan Commitment at such time. On the Restatement Effective Date, all Original Revolving Loans shall for all purposes constitute "Revolving Loans" hereunder. (f) Subject to and upon the terms and conditions set forth herein, the Swingline Bank agrees to make, at any time and from time to time on and after the Restatement Effective Date and prior to the Swingline Expiry Date, a revolving loan or revolving loans (each a "Swingline Loan" and, collectively, the "Swingline Loans") to the Borrower, which Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed in aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all Revolving Loans then outstanding and the 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 Swingline Loans) at such time, an amount equal to the Total Revolving Loan Commitment at such time, and (iv) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount. The Swingline Bank shall not be obligated to make any Swingline Loans at a time when a Bank Default exists unless the Swingline Bank has entered into an arrangement satisfactory to it and the Borrower, to eliminate the Swingline Bank's risk with respect to the Bank which is the subject of such Bank Default, including by cash collateralizing the Bank's Percentage of the outstanding Swingline Loans. Notwithstanding anything to the contrary contained in this Section 1.01(f), the Swingline Bank shall not make any Swingline Loan after it has received written notice from the Borrower or the Required Banks stating that a Default or an Event of Default exists and is continuing until such time as the Swingline Bank shall have received written notice (i) of rescission of all such notices from the party or parties originally delivering such notice, (ii) of the waiver of such Default or Event of Default by the Required Banks or (iii) that the Agents in good faith believe that such Default or Event of Default has ceased to exist. (g) On any Business Day, the Swingline Bank may, in its sole discretion, give notice to the Banks that its outstanding Swingline Loans shall be funded with one or more Borrowings of Revolving Loans (provided that such -------- notice shall be deemed to have been automatically given upon the occurrence of a Default or an Event of Default under Section 10.05 or upon the exercise of any of the remedies provided in the last paragraph of Section 10), in which case one or more Borrowings of Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding Business Day by all Banks pro rata based on each such Bank's Percentage --- ---- (determined before giving effect to any termination of the Revolving Loan Commitments pursuant to the last paragraph of Section 10) and the proceeds thereof shall be applied directly by the Swingline Bank to repay the Swingline Bank for such outstanding Swingline Loans. Each such Bank hereby irrevocably agrees to make Revolving Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by the Swingline Bank notwithstanding (i) the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise -3- required hereunder, (ii) whether any conditions specified in Section 6 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) the date of such Mandatory Borrowing and (v) the amount of the Total Revolving Loan Commitment at such time. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each such Bank hereby agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Bank such participations in the outstanding Swingline Loans as shall be necessary to cause such Banks to share in such Swingline Loans ratably based upon their respective Percentages (determined before giving effect to any termination of the Total Revolving Loan Commitment pursuant to the last paragraph of Section 10), provided that (x) all interest payable on the Swingline Loans shall be for the - -------- account of the Swingline Bank until the date as of which the respective participation is required to be purchased and, to the extent attributable to the purchased participation, shall be payable to the participant from and after such date, (y) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Bank shall be required to pay the Swingline Bank interest on the principal amount of participation purchased for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the overnight Federal Funds Rate for the first three days and at the rate otherwise applicable to Revolving Loans maintained as Base Rate Loans hereunder for each day thereafter and (z) whenever the Swingline Bank receives a payment in respect of a Swingline Loan in which such a participation has been purchased, the Swingline Bank shall pay to the Banks which acquired such participation an amount equal to such Banks' share in such Swingline Loan. On the Restatement Effective Date, all Original Swingline Loans shall for all purposes constitute "Swingline Loans" hereunder. 1.02 Minimum Amount of Each Borrowing. The aggregate principal -------------------------------- amount of each Borrowing of Loans shall not be less than the Minimum Borrowing Amount applicable thereto. More than one Borrowing may occur on the same date, and at no time shall there be outstanding as Eurodollar Loans more than (a) twenty Borrowings of Tranche A Term Loans and Revolving Loans, (b) four Borrowings of Tranche B Term Loans, (c) four Borrowings of Tranche C Term Loans and (d) four Borrowings of Tranche D Term Loans. 1.03 Notice of Borrowing. (a) Whenever the Borrower desires to ------------------- incur a Borrowing of Loans (excluding Revolving Loans incurred pursuant to a Mandatory Borrowing), the Borrower 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 1:00 P.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 (i) the aggregate principal amount of the Loans to be incurred pursuant to such Borrowing, (ii) the -4- date of such Borrowing (which shall be a Business Day) and (iii) whether the Loans being made pursuant to such Borrowing shall constitute Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans, Tranche D Term Loans or Revolving Loans and whether the Loans being incurred 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)(i) Whenever the Borrower desires to incur Swingline Loans hereunder, the Borrower shall give the Swingline Bank no later than 2:00 P.M. (New York time) on the date that a Swingline Loan is to be incurred, written notice or telephonic notice promptly confirmed in writing of each Swingline Loan to be incurred hereunder. Each such notice shall be irrevocable and specify in each case (A) the date of Borrowing (which shall be a Business Day) and (B) the aggregate principal amount of the Swingline Loans to be incurred pursuant to such Borrowing. (ii) Mandatory Borrowings shall be made upon the notice specified in Section 1.01(g), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of the Mandatory Borrowings as set forth in Section 1.01(g). (c) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice of any Borrowing or prepayment of Loans, the Administrative Agent or the Swingline Bank, as the case may be, may act without liability upon the basis of telephonic notice of such Borrowing or prepayment believed by the Administrative Agent or the Swingline Bank, as the case may be, in good faith to be from an 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 or the Swingline Bank's record of the terms of such telephonic notice of such Borrowing or prepayment of Loans (absent manifest error). 1.04 Disbursement of Funds. No later than 1:00 P.M. (New York time) --------------------- on the date specified in each Notice of Borrowing (or (x) in the case of Swingline Loans, no later than 3:00 P.M. (New York time) on the date specified pursuant to Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, no later than 12:00 Noon (New York time) on the date specified in Section 1.01(g)), each Bank which has received the notice referred to in the last sentence of Section 1.03(a) (or (x) in the case of Swingline Loans, Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, Section 1.01(g)) will disburse its pro --- rata portion of each Borrowing requested to be made on such date (or, in the - ---- case of Swingline Loans, the Swingline Bank will make available the full amount thereof). All such amounts shall be disbursed in Dollars and in immediately available funds at the Payment Office of the Administrative Agent, and the Administrative Agent will promptly disburse 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 (other than in respect of Mandatory Borrowings). Unless the Administrative Agent shall have been notified by any Bank prior to the date of Borrowing that such Bank does not intend to -5- disburse 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 disbursed such amount to the Administrative Agent on such date of Borrowing and the Administrative Agent may, in reliance upon such assumption, disburse to the Borrower a corresponding amount. If such corresponding amount is not in fact disbursed 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 three Business Days thereafter pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover (without duplication) 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 disbursed 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 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 Loans hereunder. 1.05 Notes. (a) The Borrower's obligation to pay the principal of, ----- and interest on, the Loans made by each Bank to the Borrower shall be evidenced (i) if Tranche A Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-1 with blanks appropriately completed in conformity herewith (each, a "Tranche A Term Note" and, collectively, the "Tranche A Term Notes"), (ii) if Tranche B Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-2 with blanks appropriately completed in conformity herewith (each, a "Tranche B Term Note" and, collectively, the "Tranche B Term Notes"), (iii) if Tranche C Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-3 with blanks appropriately completed in conformity herewith (each, a "Tranche C Term Note" and, collectively, the "Tranche C Term Notes"), (iv) if Tranche D Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-4, with blanks appropriately completed in conformity herewith (each, a "Tranche D Term Note", and collectively, the "Tranche D Term Notes"), (v) if Revolving Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-5, with blanks appropriately completed in conformity herewith (each, a "Revolving Note" and, collectively, the "Revolving Notes") and (vi) if Swingline Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-6, with blanks appropriately completed in conformity herewith (the "Swingline Note"). (b) The Tranche A Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank or its registered assigns and be dated the date of the issuance thereof, (iii) be in a stated principal amount equal to the outstanding Tranche A Term Loans of such Bank on such date of issuance and be payable in the principal amount of Tranche A Term Loans evidenced thereby, (iv) mature on the A/RF Maturity Date, (v) bear -6- 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 prepayment 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. (c) The Tranche B Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank or its registered assigns and be dated the date of the issuance thereof, (iii) be in a stated principal amount equal to the outstanding Tranche B Term Loans of such Bank on such date of issuance and be payable in the principal amount of Tranche B Term Loans evidenced thereby, (iv) mature on the B 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 prepayment 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. (d) The Tranche C Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank or its registered assigns and be dated the date of the issuance thereof, (iii) be in a stated principal amount equal to the outstanding Tranche C Term Loans of such Bank on such date of issuance and be payable in the principal amount of Tranche C Term Loans evidenced thereby, (iv) mature on the C 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 prepayment 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. (e) The Tranche D Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank or its registered assigns and be dated the Restatement Effective Date (or, if issued after the Restatement Effective Date, be dated the date of the issuance thereof), (iii) be in a stated principal amount equal to the Tranche D Term Loan Commitment of such Bank on the Restatement Effective Date (or, if issued after the Restatement Effective Date, equal to the outstanding Tranche D Term Loans of such Bank on such date of issuance) and be payable in the principal amount of Tranche D Term Loans evidenced thereby, (iv) mature on the D 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 prepayment 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. (f) The Revolving Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to such Bank or its registered assigns and be dated the date of the issuance thereof, (iii) be in a stated principal amount equal to the Revolving Loan Commitment of such Bank and be payable in the outstanding principal amount of the Revolving Loans evidenced thereby, (iv) mature on the A/RF 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 prepayment as provided in Section -7- 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. (g) The Swingline Note issued to the Swingline Bank shall (i) be executed by the Borrower, (ii) be payable to the Swingline Bank or its registered assigns and be dated the date of the issuance thereof, (iii) be in a stated principal amount equal to the Maximum Swingline Amount and be payable in the outstanding principal amount of the Swingline Loans evidenced thereby from time to time, (iv) mature on the Swingline Expiry Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans evidenced thereby, (vi) be subject to voluntary prepayment 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. (h) Each Bank will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will prior to any transfer of its Note endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation (or any error in such notation) shall not affect the Borrower's obligations in respect of such Loans. 1.06 Conversions. The Borrower shall have the option to convert, on ----------- any Business Day occurring after the Restatement Effective Date, all or a portion equal to at least the applicable Minimum Borrowing Amount of the outstanding principal amount of Loans made to the Borrower into a Borrowing or Borrowings (of the same Tranche) of another Type of 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 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 the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may only be converted into Eurodollar Loans if no Default or Event of Default is in existence on the date of the conversion, 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 1:00 P.M. (New York time) at least three Business Days' prior written notice (each a "Notice of Conversion") specifying the Loans to be so converted, the Borrowing(s) pursuant to which such 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 affecting any of its Loans. 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 Loans being converted. 1.07 Pro Rata Borrowings. All Borrowings of Term Loans under this ------------------- Agreement shall be incurred from the Banks pro rata on the basis of the --- ---- outstanding principal amount of outstanding Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans and Tranche D Term Loans (or, in the case of the Tranche D Term Loans being incurred on the Restatement Effective Date, the respective Tranche D Term Loan Commitments). All -8- Borrowings of Revolving Loans under this Agreement shall be incurred from the Banks pro rata on the basis of their respective Revolving Loan Commitments. It -------- is understood that no Bank shall be responsible for any default by any other Bank of its obligation to make Tranche D Term Loans or Revolving Loans hereunder and that each Bank shall be obligated to make the Tranche D Term Loans or the Revolving Loans provided to be made by it hereunder, regardless of the failure of any other Bank to make its Tranche D Term Loans or 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 from the date the proceeds thereof are made available to the Borrower or from the date of any conversion to a Base Rate Loan pursuant to Sections 1.06, 1.09 or 1.10, as applicable, 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 sum of the Applicable Margin for the Tranche under which such Loans were incurred, plus 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 from the date the proceeds thereof are made available to the Borrower or from the date of any conversion to a Eurodollar Loan pursuant to Section 1.06 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 for the Tranche under which such Loans were incurred, plus the Eurodollar Rate for such Interest Period. (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each 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 otherwise applicable to such 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 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. (e) Upon each Interest Determination Date, the Administrative Agent shall determine the Eurodollar Rate for the Interest Period applicable to the Eurodollar Loans related thereto 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. -9- 1.09 Interest Periods. At the time the Borrower 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 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) no Interest Period may be selected at any time when a Default or an Event of Default is then in existence; (vi) no Interest Period in respect of any Borrowing of any Tranche of Loans shall be selected which extends beyond the respective Maturity Date for such Tranche of Loans; and (vii) no Interest Period in respect of any Borrowing of Tranche B Term Loans, Tranche C Term Loans or Tranche D Term Loans, as the case may be, shall be selected which extends beyond any date upon which a mandatory repayment of such Tranche of Term Loans will be required to be made under Section 4.02(b) if the aggregate principal amount of Tranche B Term Loans, Tranche C Term Loans or Tranche D Term Loans, as the case may be, which have Interest Periods which will expire after such date will be in excess of the aggregate principal amount of Tranche B Term Loans, Tranche C Term Loans or Tranche D Term Loans, as the case may be, then outstanding less the aggregate amount of such required prepayment. -10- 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 Restatement Effective Date 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 Eurodollar Loan because of (x) any change since the Restatement Effective Date 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 such Eurodollar Loan or any other amounts payable hereunder (except for changes in the rate of tax on, or determined by reference to, 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 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 Restatement Effective Date 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 Restatement Effective Date 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 -11- 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, subject to the provisions of Section 13.17 (to the extent applicable), 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. In addition, if the Administrative Agent gives notice to the Borrower that the events described in clause (i) above cease to exist, then the obligations of the Banks to make Eurodollar Loans and to convert Base Rate Loans into Eurodollar Loans on the terms and conditions contained herein (but subject to clause (iii) above) shall also be reinstated. (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) the Borrower 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, after the Restatement Effective Date, the introduction of or any change in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law and including, without limitation, those announced or published prior to the Restatement Effective Date) concerning capital adequacy, or any change in interpretation or administration thereof by the NAIC or 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 Commitments hereunder or its obligations hereunder, then the Borrower shall, subject to the provisions of Section 13.17 (to the extent applicable), pay to such Bank, upon its written demand therefor, such additional amounts as shall be required to compensate such Bank or such other corporation -12- 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. In addition, each such Bank, upon determining that the circumstances giving rise to the payment of additional amounts pursuant to this Section 1.10(c) cease to exist, will give prompt written notice thereof to the Borrower. 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 excluding 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 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 Loans when required by the terms of this Agreement or the 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 Loans and/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. (a) (x) If any Bank (i) becomes a -------------------- Defaulting Bank or otherwise defaults in its obligations to make Loans or fund Unpaid Drawings or (ii) refuses 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) or (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 -13- Bank charging to the Borrower increased costs in excess of those being generally charged by the other Banks, the Borrower shall have the right, in accordance with the requirements of Section 13.04(b), 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 Transferee or Transferees, none of whom shall constitute a Defaulting Bank at the time of such replacement (collectively, the "Replacement Bank"), reasonably acceptable to the Administrative Agent, provided that (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 all of the Commitments and all of the outstanding Loans of the Replaced Bank and, in connection therewith, shall pay to the Replaced Bank in respect thereof an amount equal to the sum of (1) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Bank together with all then unpaid interest with respect thereto at such time, (2) 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 (3) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section 3.01 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. (b) Upon the execution of the respective Assignment and Assumption Agreements, the payment of amounts referred to in clauses (i) and (ii) of Section 1.13(a) and, if so requested by the Replacement Bank, delivery to the Replacement Bank of the appropriate Note executed by the Borrower, 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. 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 that any Issuing Bank issue, at any time and from time to time on and after the Restatement Effective Date and prior to the 30th day prior to the A/RF Maturity Date, (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 Obligations of the Borrower or any of its Subsidiaries, an irrevocable standby letter 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, a "Standby Letter of Credit") in support of such L/C Supportable Obligations and (y) for the account of the Borrower and for the benefit of sellers of goods and materials used in the ordinary course of business of the Borrower or any of its Subsidiaries an irrevocable sight commercial letter 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 commercial letter of credit, a "Trade Letter of Credit", and each such Trade Letter of Credit and -14- each Standby Letter of Credit, a "Letter of Credit") in support of commercial transactions of the Borrower and its Subsidiaries. All Letters of Credit shall be denominated in Dollars. On the Restatement Effective Date, all Original Letters of Credit shall be deemed to have been issued under this Agreement and shall for all purposes constitute "Letters of Credit" hereunder. (b) Subject to and upon the terms and conditions set forth herein, each Issuing Bank hereby agrees that it will, at any time and from time to time on and after the Restatement Effective Date and prior to the 30th day prior to the A/RF Maturity Date, following its receipt of the respective Letter of Credit Request, issue for the account of the Borrower, one or more Letters of Credit (x) in the case of Standby Letters of Credit, in support of such L/C Supportable Obligations of the Borrower or any of its Subsidiaries or as are permitted to remain outstanding without giving rise to a Default or an Event of Default and (y) in the case of Trade Letters of Credit, in support of sellers of goods or materials used in the ordinary course of business of the Borrower or any of its Subsidiaries as referenced in Section 2.01(a), provided that the respective -------- Issuing Bank shall be under no obligation to issue any Letter of Credit of the types described above 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 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 reasonably and in good faith deems material to it; or (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 penultimate sentence of Section 2.03(b). 2.02 Maximum Letter of Credit Outstandings; Final Maturities. ------------------------------------------------------- Notwithstanding anything to the contrary contained in this Agreement, (i) no Letter of Credit shall be issued the initial 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) $25,000,000 or (y) when added to the aggregate principal amount of all Revolving Loans then outstanding and the aggregate principal amount of all Swingline Loans then outstanding, an amount equal to the Total Revolving Loan Commitment at such time and (ii) each Letter of Credit shall by its terms terminate on or before (A) in the case of Standby Letters of Credit, the earlier of (x) the date which occurs 12 months after the date of the issuance thereof (although any such Standby Letter of Credit may be extendable for successive periods of up to 12 months, but not beyond the third Business Day prior to the A/RF Maturity Date, on terms acceptable to the Issuing Bank thereof) and (y) the -15- third Business Day prior to the A/RF Maturity Date and (B) in the case of Trade Letters of Credit, the earlier of (x) the date which occurs 360 days after the date of issuance thereof and (y) 30 days prior to the A/RF Maturity Date. 2.03 Letter of Credit Requests; Minimum Stated Amount. (a) Whenever ------------------------------------------------ the Borrower desires that a Letter of Credit be issued for its account, the Borrower shall give the Administrative Agent and the respective Issuing Bank at least five Business Days' (or such shorter period as is acceptable to the respective Issuing Bank) written notice thereof. Each notice shall be in the form of Exhibit C (each a "Letter of Credit Request"). The Administrative Agent shall promptly transmit copies of each Letter of Credit Request to each Bank. (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 2.02. 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 are not satisfied on the Restatement Effective Date or Section 6 are not then satisfied, or that the issuance of such Letter of Credit would violate Section 2.02, 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. Upon the issuance of or amendment or modification to a Letter of Credit, the respective Issuing Bank shall promptly notify the Borrower and the Administrative Agent of such issuance, amendment or modification and such notification shall be accompanied by a copy of the issued Letter of Credit or amendment or modification. (c) The initial Stated Amount of each Letter of Credit shall not be less than $10,000 or such lesser amount as is acceptable to the respective Issuing Bank. 2.04 Letter of Credit Participation. (a) Immediately upon the ------------------------------ issuance by the respective 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 Percentage in such Letter of Credit, each drawing or payment 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 of the Banks pursuant to Section 1.13 or 13.04, 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 Percentages of the assignor and assignee Bank, as the case may be. (b) In determining whether to pay under any Letter of Credit, the respective 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 -16- Credit. 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, any other Credit Party, any Bank or any other Person. (c) In the event that any Issuing Bank makes any payment under any Letter of Credit 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 such Issuing Bank the amount of such Participant's 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 such Issuing Bank in Dollars such Participant's 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 Percentage of the amount of such payment available to such Issuing Bank, such Participant agrees to pay to 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 such Issuing Bank at the overnight Federal Funds Rate for the first three days and at the interest rate applicable to Revolving Loans maintained as Base Rate Loans for each day thereafter. The failure of any Participant to make available to such Issuing Bank its Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to such Issuing Bank its Percentage of any 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 such Issuing Bank such other Participant's Percentage of any such payment. (d) Whenever any Issuing Bank receives a payment of a reimbursement obligation as to which it has received any payments from the Participants pursuant to clause (c) above, such Issuing Bank shall pay to each Participant which has paid its Percentage thereof, in Dollars and in same day funds, an amount equal to such Participant's share (based upon the proportionate aggregate amount originally 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) Upon the request of any Participant, each Issuing Bank shall furnish to such Participant copies of any Letter of Credit issued by it and such other documentation relating thereto as may reasonably be requested by such Participant. (f) The obligations of the Participants to make payments to each 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: -17- (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (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 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 Subsidiary of the Borrower 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, 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 3:00 P.M. (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 was reimbursed by the Borrower therefor at a rate per annum which shall be the Base Rate in effect from time to time plus the Applicable Margin for Revolving Loans maintained as Base Rate Loans; provided, however, to the extent such amounts are not -------- ------- reimbursed prior to 3:00 P.M. (New York time) on the third Business Day following the receipt by the Borrower of notice of such payment or disbursement or following the occurrence of a Default or an Event of Default under Section 10.05, 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 the Applicable Margin for Revolving Loans maintained as Base Rate Loans plus 2%, in each such case, with interest to be payable on demand. The respective Issuing Bank shall give the Borrower prompt written 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 obligations 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 may have or have had -18- against any Bank (including in its capacity as issuer of the Letter of Credit 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 the 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 any Issuing Bank for any wrongful payment made by such Issuing Bank under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Issuing Bank. 2.06 Increased Costs. If at any time after the Restatement Effective --------------- Date, the introduction of or any change in any applicable law, rule, regulation, order, guideline or request or in the interpretation or administration thereof by the NAIC or any governmental authority charged with the interpretation or administration thereof, or compliance by any Issuing Bank or any Participant with any request or directive by any such authority (whether or not having the force of law), 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; 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 (except for changes in the rate of tax on, or determined by reference to, the net income or profits of such Issuing Bank or such Participant pursuant to the laws of the jurisdiction in which it is organized or in which its principal office or applicable lending office is located or any subdivision thereof or therein), then, upon the delivery of the certificate referred to below to the Borrower by such Issuing Bank or any Participant, the Borrower shall, subject to the provisions of Section 13.17 (to the extent applicable), 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. In determining such additional amounts, each Issuing Bank and each Participant will act reasonably and in good faith, provided that the certificate required to be delivered pursuant to this Section 2.06 shall, absent manifest error, be final and 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 "Revolving Loan Commitment Commission") for the period from the Restatement Effective Date to but not including the A/RF Maturity Date (or to but not including such earlier date as the Total Revolving Loan Commitment shall have been terminated), computed at a rate per annum for -19- each day equal to the Applicable Commitment Commission Percentage on the Unutilized Revolving Loan Commitment of such Non-Defaulting Bank on such day. Accrued Revolving Loan Commitment Commission shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the A/RF 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 each such Bank's respective Percentage) a fee in respect of each Letter of Credit issued hereunder (the "Letter of Credit Fee"), for the period from and including the date of issuance of such Letter of Credit to and including the date of termination or expiration of such Letter of Credit, computed at a rate per annum equal to the Applicable Margin for Revolving Loans maintained as Eurodollar Loans on the daily Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees payable with respect to Standby Letters of Credit shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the first day after the termination of the Total Revolving Loan Commitment upon which no Standby Letters of Credit remain outstanding. (c) The Borrower agrees to pay to each Issuing Bank, for its own account, a facing fee in respect of each Letter of Credit issued by such Issuing Bank (the "Facing Fee"), (x) in the case of each Standby Letter of Credit, for the period from and including the date of issuance of such Standby Letter of Credit to and including the date of the termination of such Standby Letter of Credit, computed at a rate equal to 1/4 of 1% per annum (or such lesser rate as is agreed on by the Borrower and the respective Issuing Bank) of the daily Stated Amount of such Standby Letter of Credit and (y) in the case of each Trade Letter of Credit, in an amount equal to 1/4 of 1% (or such lesser rate as is agreed on by the Borrower and the respective Issuing Bank) of the Stated Amount of such Trade Letter of Credit as of the date of issuance thereof. Accrued Facing Fees payable with respect to Standby Letters of Credit shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day after the termination of the Total Revolving Loan Commitment upon which no Standby Letters of Credit remain outstanding and all Facing Fees payable with respect to each Trade Letter of Credit shall be due and payable on the date of issuance of such Trade Letter of Credit. (d) The Borrower agrees to pay, upon each drawing 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 the reasonable expenses which the applicable 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 with the Agents. 3.02 Voluntary Termination of Unutilized Commitments. (a) Upon at ----------------------------------------------- least one 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 or partially reduce the Total Unutilized Revolving Loan Commitment, in integral multiples of -20- $1,000,000; provided that each such reduction shall apply proportionately to -------- permanently reduce the Revolving Loan Commitment of each 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 may, subject to the requirements of said Section 13.12(b) and upon five Business Days' written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks) terminate the entire Commitment of such Bank so long as all 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 this Section 3.02(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 Tranche D Term ---------------------------------- Loan Commitment of each Bank with such a Commitment shall terminate in their entirety on June 30, 2000, and the Original Credit Agreement (including, without limitation, the Revolving Loan Commitment of each Bank thereunder) shall continue in effect unless the Restatement Effective Date shall have occurred on or prior to such date. (b) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Tranche D Term Loan Commitment (and the Tranche D Term Loan Commitment of each Bank with such a Commitment) shall terminate in its entirety on the date the Tranche D Term Loans are incurred (after giving effect to the making of Tranche D Term Loans on such date). (c) 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 with such a Commitment) shall terminate in its entirety on the A/RF Maturity Date. (d) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, on each date after the Restatement Effective Date upon which the Total Revolving Loan Commitment is required to be reduced pursuant to Section 4.02(h), the Total Revolving Loan Commitment shall be permanently reduced by the amount required to be applied pursuant to said Section. (e) Each reduction to the Tranche D Term Loan Commitment or the Total Revolving Loan Commitment pursuant to this Section 3.03 shall be applied proportionately to reduce the Tranche D Term Loan Commitment or the Revolving Loan Commitment, respectively, of each Bank with such a Commitment. SECTION 4. Prepayments; Payments; Taxes. -21- 4.01 Voluntary Prepayments. (a) The Borrower shall have the right to --------------------- prepay the Loans, without premium or penalty, in whole or in part at any time and from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent prior to 2:00 P.M. (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, whether Term Loans, Revolving Loans or Swingline Loans shall be prepaid, the amount of such prepayment and the Types of 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 of Loans shall be in an aggregate principal amount of at least $500,000 (or $100,000 in the case of Swingline Loans), 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 the Minimum Borrowing Amount applicable thereto, then such Borrowing may not be continued as a Borrowing of Eurodollar Loans and any election of an Interest Period with respect thereto given by the Borrower shall have no force or effect; (iii) at the time of any prepayment of Eurodollar Loans pursuant to this Section 4.01 on any date other than the last day of the Interest Period applicable thereto, the Borrower shall pay the amounts required pursuant to Section 1.11; (vi) each voluntary prepayment of Term Loans pursuant to this Section 4.01 (except pursuant to clause (b) below) shall be applied to the Tranche A Term Loans, the Tranche B Term Loans, the Tranche C Term Loans and the Tranche D Term Loans on a pro rata basis (based upon the then outstanding principal amount of --- ---- Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans and Tranche D Term Loans); and (v) each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans, provided that at the --- ---- -------- Borrower's election in connection with any prepayment of Revolving Loans, such prepayment shall not be applied to the prepayment of Revolving Loans of a Defaulting Bank. Each prepayment of principal of any Tranche B Term Loans, Tranche C Term Loans or Tranche D Term Loans pursuant to this Section 4.01 shall be applied to reduce the then remaining Scheduled Repayments of such respective Tranche of Term Loans pro rata based upon the then remaining principal amounts --- ---- of the Scheduled Repayments of such Tranche after giving effect to all prior reductions thereto. (b) In the event of a refusal 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) repay all Loans, together with accrued and unpaid interest, Fees, and all 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 any Loans of any Bank pursuant to this Section 4.01(b) the Commitments of such Bank are terminated concurrently with such repayment pursuant to Section 3.02(b) (at which time Schedule I shall be deemed modified to reflect the changed Commitments) and (B) the consents required by Section 13.12(b) in connection with the repayment pursuant to this Section 4.01(b) have been obtained. -22- 4.02 Mandatory Repayments. (a) On any day on which the aggregate -------------------- outstanding principal amount of Revolving Loans, Swingline Loans and the Letter of Credit Outstandings exceeds the Total Revolving Loan Commitment as then in effect, the Borrower shall prepay on such day principal of Swingline Loans and, after all Swingline Loans have been repaid in full, Revolving Loans in an amount equal to such excess. If, after giving effect to the prepayment of all outstanding Swingline Loans and Revolving Loans, the aggregate amount of the Letter of Credit Outstandings exceeds the Total Revolving Loan Commitment as then in effect, the Borrower shall pay to the Administrative Agent at the Payment Office on such day 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 hereunder in a cash collateral account to be established by the Administrative Agent. (b) (i) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, the Borrower shall be required to repay all then outstanding Tranche A Term Loans on the A/RF Maturity Date. (ii) In addition to any mandatory repayments or commitment reductions pursuant to this Section 4.02, the Borrower shall be required to repay on each date set forth below the principal amount of Tranche B Term Loans, to the extent outstanding, set forth opposite such date (each such repayment as the same may be reduced as provided in Sections 4.01 and 4.02(h) and (i), a "Tranche B Term Loan Scheduled Repayment"):
Tranche B Scheduled Repayment Date Amount ---------------------------------- ------ Each December 31 commencing December 31, 1999 An amount equal to 1% of the through and including aggregate principal amount of December 31, 2002 Tranche B Term Loans outstanding on September 1, 1998 Each of March 31, 2003, An amount equal to 24% of June 30, 2003, September 30, 2003 and the B Maturity the aggregate principal amount of Date Tranche B Term Loans outstanding on September 1, 1998
(iii) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, the Borrower shall be required to repay on each date set forth below the principal amount of the Tranche C Term Loans, to the extent outstanding, set forth opposite such date (each such repayment as the same may be reduced as provided in Section 4.01 and 4.02(h) and (i), a "Tranche C Term Loan Scheduled Repayment"):
Tranche C Scheduled Repayment Date Amount ---------------------------------- ------ Each December 31 commencing December 31, An amount equal to 1% of the
-23- 2000 through and including December 31, 2003 aggregate principal amount of Tranche C Term Loans outstanding on April 15, 1999 Each March 31, 2004, June 30, 2004, An amount equal to 24% of the September 30, 2004 and the C Maturity Date aggregate principal amount of Tranche C Term Loans outstanding on April 15, 1999
(iv) In addition to any mandatory repayments or commitment reductions pursuant to this Section 4.02, the Borrower shall be required to repay on each date set forth below the principal amount of Tranche D Term Loans, to the extent outstanding, set forth opposite such date (each such repayment as the same may be reduced as provided in Sections 4.01 and 4.02(h) and (i), a "Tranche D Term Loan Scheduled Repayment"):
Tranche D Scheduled Repayment Date Amount ---------------------------------- ------ Each December 31 commencing December 31, 2001 An amount equal to 1% of the through and including aggregate principal amount of December 31, 2005 Tranche D Term Loans outstanding on the Restatement Effective Date Each of September 30, 2006, December 31, 2006, An amount equal to 23.75% of March 31, 2007 and the D Maturity Date the aggregate principal amount of Tranche D Term Loans outstanding on the Restatement Effective Date
(c) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date after the Original Effective Date upon which the Borrower or any of its Subsidiaries receives any cash proceeds from any sale or issuance of its equity (excluding (i) cash proceeds received from capital contributions to, or equity investments in, any Wholly-Owned Subsidiary of the Borrower or any Subsidiary Guarantor to the extent made by the Borrower or any Subsidiary of the Borrower and (ii) cash proceeds received from sales or issuances of equity to directors or employees of the Borrower or any of its Subsidiaries pursuant to any stock option or other similar incentive plan), an amount equal to 100% of the Net Equity Proceeds of the respective sale or issuance shall be applied as a mandatory repayment of Revolving Loans to the extent outstanding at such time in accordance with the requirements of Section 4.02(i). (d) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date after the Original Effective Date upon which the Borrower or any of its Subsidiaries receives any cash proceeds from any incurrence by the Borrower or any of its Subsidiaries of Indebtedness for borrowed money (excluding Indebtedness for borrowed money permitted to be incurred pursuant to Section 9.04), an amount equal to 100% of the Net Debt Proceeds of the respective incurrence of Indebtedness shall be applied as a -24- mandatory repayment (or commitment reduction, as the case may be) of outstanding Loans (or Commitments) in accordance with the requirements of Section 4.02(h) and (i). (e) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date after the Original Effective Date upon which the Borrower or any of its Subsidiaries receives proceeds from any sale or other disposition of assets (including capital stock and securities held thereby, but excluding (i) sales or transfers of assets permitted by Sections 9.02(ii), (v), (ix) and (x), (ii) sales or transfers of assets with a fair market value less than (A) $10,000,000 per such sale or disposition (or in a series of related sales or dispositions) and (B) $25,000,000 in the aggregate for all such transfers in any fiscal year and (iii) so long as no Default or Event of Default then exists, sales or transfers of assets the Net Sale Proceeds of which do not exceed $35,000,000 in any fiscal year of the Borrower provided that such Net Sale Proceeds are used to purchase similar assets within two years following the receipt of such Net Sale Proceeds and (x) the Borrower delivers a certificate to the Agents on or prior to such date of receipt stating that such Net Sale Proceeds shall be used to purchase similar assets within two years following the date of the receipt of such Net Sale Proceeds (which certificate shall set forth the estimates of the proceeds to be so expended) and (y) within 360 days following the date of such receipt of Net Sale Proceeds, the Borrower or the applicable Subsidiary has purchased such similar assets or entered into a binding commitment to purchase such similar assets), an amount equal to 100% of the Net Sale Proceeds therefrom shall be applied as a mandatory repayment (or commitment reduction, as the case may be) of outstanding Loans (or Commitments) in accordance with the requirements of Section 4.02(h) and (i). To the extent Net Sale Proceeds are not required to be applied pursuant to this Section 4.02(e) as a result of clause (iii) contained in the parenthetical appearing in the first sentence of this Section 4.02(e) and all or any portion of such Net Sale Proceeds are not so reinvested in like assets within such two-year period (or committed to be so reinvested within such 360-day period), then the remaining portion of such Net Sale Proceeds shall be applied on the last day of such applicable period as otherwise required by this Section 4.02(e) (determined without regard to clause (iii) contained in the parenthetical appearing in the first sentence of this Section 4.02(e)). (f) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each Excess Cash Payment Date, so long as Excess Cash Flow for the relevant Excess Cash Payment Period exceeds $1,000,000, an amount equal to 50% of the Excess Cash Flow for such relevant Excess Cash Payment Period shall be applied as a mandatory repayment (or commitment reduction, as the case may be) of outstanding Loans (or Commitments) in accordance with the requirements of Section 4.02(h) and (i). (g) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, within 10 days following each date after the Original Effective Date on which the Borrower or any of its Subsidiaries receives any proceeds in excess of $500,000 from any Recovery Event, an amount equal to 100% of the Net Insurance Proceeds (and not just the portion in excess of $500,000) shall be applied as a mandatory repayment (or commitment reduction, as the case may be) of outstanding Loans (or Commitments) in accordance with Section 4.02(h) and (i), provided that so long as no Default -------- or Event of Default then exists, such Net Insurance Proceeds shall not be required to be so applied on such date of -25- receipt to the extent that the Borrower has delivered a certificate to the Agents on or prior to such date stating that such proceeds shall be used or shall be committed to be used to replace or restore any properties or assets in respect of which such proceeds were paid within one year following the date of receipt of such proceeds (which certificate shall set forth the estimates of the proceeds to be so expended) and provided further, that if all or any portion of ---------------- such Net Insurance Proceeds not required to be applied to the repayment of Loans pursuant to the preceding proviso are either (A) not so used or committed to be so used within one year after the date of receipt of such proceeds or (B) if committed to be used within one year after the date of receipt of such Net Insurance Proceeds and not so used within two years after the date of receipt of such proceeds then, in either such case, such remaining portion not used or committed to be used in the case of preceding clause (A) and not used in the case of preceding clause (B) shall be applied on the date which is the first anniversary of the date of receipt of such proceeds in the case of clause (A) above or the date occurring two years after the date of receipt of such proceeds in the case of clause (B) above as a mandatory repayment (or commitment reduction, as the case may be,) of outstanding Term Loans (or Term Loan Commitments) in accordance with Section 4.02(h) and (i). (h) Each amount required to be applied to repay Loans (or to reduce Commitments) pursuant to Sections 4.02(d), (e), (f) and (g) shall be applied first, pro rata, to the reduction of the Term Loan Facilities as set forth below - ----- --- ---- and second after all Term Loan Commitments have been reduced to zero and all Term Loans shall have been repaid, to the reduction of the Total Revolving Loan Commitment. Each required reduction of Term Loan Facilities shall be applied pro rata to each Tranche of Term Loans based upon the then remaining Commitments - --- ---- and principal amounts outstanding under the respective Tranche (with each Tranche to be allocated that percentage of the amount to be applied as is equal to a fraction (expressed as a percentage) the numerator of which is the sum of the then outstanding principal amount of the remaining Term Loan Commitments and Term Loans outstanding under such Tranche, and the denominator of which is equal to the then remaining Term Loan Commitments and outstanding principal amount of all Term Loans under all Tranches of Term Loan Facilities. Each amount required to be applied to a respective Term Loan Facility shall be applied first to ----- reduce the Commitment under such Term Loan Facility and second to repay the ------ outstanding principal amount of Term Loans under such Term Loan Facility. The amount of each principal repayment of Term Loans made as required by Sections 4.02(d), (e), (f), and (g) shall be applied to reduce the then remaining Scheduled Repayments of the respective Tranche pro rata based upon the then --- ---- remaining principal amounts of the Scheduled Repayments of the respective Tranche after giving effect to all prior reductions thereto. (i) With respect to each repayment of Loans required by this Section 4.02, the Borrower may designate the Types of Loans of the respective Tranche which are to be repaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which made, provided that: (i) repayments -------- of Eurodollar Loans pursuant to this Section 4.02 shall be made on the last day of an Interest Period applicable thereto unless all Eurodollar Loans with Interest Periods ending on such date of required repayment and all Base Rate Loans have been paid in full; (ii) 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 -26- than the Minimum Borrowing Amount applicable thereto, such Borrowing shall be converted at the end of the then current Interest Period into a Borrowing of Base Rate Loans; and (iii) each repayment of Loans made pursuant to a Borrowing shall be applied pro rata among such Loans of all Banks. 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. (j) Notwithstanding anything to the contrary contained elsewhere in the Agreement, (i) all then outstanding Tranche A Term Loans and Revolving Loans shall be repaid in full on the A/RF Maturity Date, (ii) all then outstanding Tranche B Term Loans shall be repaid in full on the B Maturity Date, (iii) all then outstanding Tranche C Term Loans shall be repaid in full on the C Maturity Date, (iv) all then outstanding Tranche D Term Loans shall be repaid in full on the D Maturity Date and (v) all then outstanding Swingline Loans shall be repaid in full on the Swingline Expiry Date. 4.03 Method and Place of Payment. Except as otherwise specifically --------------------------- provided herein, all payments under this Agreement or any Note shall be made to the Administrative Agent for the account of the Bank or Banks entitled thereto not later than 2:00 P.M. (New York time) on the date when due and shall be 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 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 any Credit Party ------------------- hereunder or under any 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"). Subject to Section 4.04(b), 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 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 Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each Bank, promptly after 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 -27- 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 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. All amounts payable pursuant to this Section 4.04(a) shall be subject to the provisions of Section 13.17 (to the extent applicable). (b) Each Bank that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower and the Administrative Agent on or prior to the Original Effective Date (or the Restatement Effective Date in the case of such Banks that first become party hereto on the Restatement 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 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 Note. In addition, each Bank agrees that from time to time after the Restatement Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, such Bank 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 Note, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such Form or Certificate, in which case such Bank should not be required to deliver any such Form or Certificate pursuant to this Section 4.04(b). 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 -28- 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 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 Restatement Effective 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. (c) If the Borrower pays any additional amount under this Section 4.04 to a Bank and such Bank determines in its sole discretion that it has actually received or realized in connection therewith any refund or any reduction of, or credit against, its Tax liabilities in or with respect to the taxable year in which the additional amount is paid (a "Tax Benefit"), such Bank shall pay to the Borrower an amount that the Bank shall, in its sole discretion, determine is equal to the net benefit, after tax, which was obtained by the Bank in such year as a consequence of such Tax Benefit; provided, however, that (i) any Taxes that are imposed on a Bank as a result of a disallowance or reduction (including through the expiration of any tax credit carryover or carryback of such Bank that otherwise would not have expired) of any Tax Benefit with respect to which such Bank has made a payment to the Borrower pursuant to this Section 4.04(c) shall be treated as a Tax for which the Borrower is obligated to indemnify such Bank pursuant to this Section 4.04 without any exclusions or defenses; and (ii) nothing in this Section 4.04(c) shall require the Bank to disclose any confidential information to the Borrower (including, without limitation, its tax returns). SECTION 5. Conditions Precedent to Restatement Effective Date. The -------------------------------------------------- occurrence of the Restatement Effective Date, and the obligation of each Bank to continue, convert and/or make Loans, and the obligation of each Issuing Bank to issue Letters of Credit, on the Restatement Effective Date, is subject at the time of the occurrence of the Restatement Effective Date to the satisfaction of the following conditions: 5.01. Execution of Agreement; Notes. (i) On or prior to the ----------------------------- Restatement Effective Date (i) this Agreement shall have been executed and delivered as provided in Section 13.10 and (ii) there shall have been delivered to the Administrative Agent for the account of each of the Banks with a Tranche D Term Loan Commitment the appropriate Tranche D Term Note executed by the Borrower, in each case in the amount, maturity and as otherwise provided herein. -29- 5.02 Fees, etc. On or prior to the Restatement Effective Date, the ---------- Borrower shall have paid to the Agents and the Banks all reasonable costs, fees and expenses (including, without limitation, reasonable legal fees and expenses) payable to the respective Agents and the Banks to the extent then due. 5.03 Opinion of Counsel. On the Restatement Effective Date, the ------------------ Administrative Agent shall have received from Bell, Boyd & Lloyd, counsel to the Borrower and the Subsidiary Guarantors, an opinion addressed to each of the Agents and each of the Banks and dated the Restatement Effective Date covering the matters set forth in Exhibit E and such other matters incident to the transactions contemplated herein as either Agent may reasonably request. 5.04 Corporate Documents; Proceedings; etc. (a) On the Restatement -------------------------------------- Effective Date, the Administrative Agent shall have received a certificate, dated the Restatement Effective Date, signed by the chairman of the board, the president, any vice president or the treasurer of the Borrower and each Subsidiary of the Borrower which is to become a Credit Party on the Restatement Effective Date (excluding any such Person which was a Credit Party on the effective date of Tranche C under the Original Credit Agreement), and attested to by the secretary or any assistant secretary of the respective such Person, in the form of Exhibit F with appropriate insertions, together with copies of the certificate of incorporation and by-laws of the respective such Person, and the resolutions of the respective such Person referred to in such certificate, and the foregoing shall be reasonably acceptable to the Agents. (b) On the Restatement Effective Date, the Administrative Agent shall have received certificates of all Credit Parties (other than the Credit Parties delivering certificates pursuant to preceding clause (a)) (x) certifying that there were no changes, or providing the text of any changes, to the certificate of incorporation and by-laws of such Credit Parties as delivered pursuant to the Original Credit Agreement, (y) to the effect that each such Credit Party is in good standing in its respective state of incorporation and in those states where each such Credit Party conducts business and (z) providing the resolutions adopted by each such Credit Party with respect to the actions contemplated in this Agreement (including without limitation with respect to the amendment and restatement of this Agreement, and the obligations of such Credit Party with respect to the increased extensions of credit pursuant hereto), and the foregoing shall be reasonably acceptable to the Agents in their reasonable discretion. (c) On or prior to the Restatement Effective Date, all corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be reasonably satisfactory in form and substance to the Agents and the Required Banks, and the Agents shall have received all information and copies of all documents and papers, including records of corporate and partnership proceedings, governmental approvals, good standing certificates and bring-down telegrams, if any, which any Agent may have reasonably requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate, or governmental authorities. -30- 5.05 Employee Benefit Plans; Shareholders' Agreements; Management ------------------------------------------------------------ Agreements; Collective Bargaining Agreements; Existing Indebtedness Agreements; - ------------------------------------------------------------------------------- Tax Sharing Agreements; Material Leases. (a) On or prior to the Restatement - --------------------------------------- Effective Date, there shall have been delivered to the Agents true and correct copies of the following documents (in each case except to the extent already delivered to the Agents and the Banks on or prior to the effective date of Tranche C under the Original Credit Agreement), in each case as same will be in effect on the Restatement Effective Date: (i) all Plans (and for each Plan that is required to file an annual report on Internal Revenue Service Form 5500-series, a copy of the most recent such report (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information), and for each Plan that is a "single-employer plan," as defined in Section 4001(a)(15) of ERISA, the most recently prepared actuarial valuation therefor) and any other "employee benefit plans," as defined in Section 3(3) of ERISA, and any other material agreements, plans or arrangements, with or for the benefit of current or former employees of the Borrower or any of its Subsidiaries or any ERISA Affiliate (provided that the foregoing shall -------- apply in the case of any multiemployer plan, as defined in 4001(a)(3) of ERISA, only to the extent that any document described therein is in the possession of the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate or reasonably available thereto from the sponsor or trustee of any such plan) (collectively, together with any agreements, plans or arrangements referred to in Section 5.05(i) of the Original Credit Agreement, and any amendments thereto referred in Section 5.05(b), the "Employee Benefit Plans"); (ii) all material 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, together with any agreements referred to in Section 5.05(ii) of the Original Credit Agreement, and any amendments thereto referred in Section 5.05(b), the "Shareholders' Agreements"); (iii) all material agreements with members of, or with respect to, the senior management and management of the Borrower or any of its Subsidiaries (collectively, together with any agreements referred to in Section 5.05(iii) of the Original Credit Agreement, and any amendments thereto referred in Section 5.05(b), the "Management Agreements"); (iv) all collective bargaining agreements applying or relating to any employee of the Borrower or any of its Subsidiaries (collectively, together with any agreements referred to in Section 5.05(iv) of the Original Credit Agreement, and any amendments thereto referred in Section 5.05(b), the "Collective Bargaining Agreements"); (v) 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 -31- Restatement Effective Date to the extent such Indebtedness exceeds (or upon the utilization of any unused commitments may exceed) $10,000,000 (collectively, together with any agreements referred to in Section 5.05(v) of the Original Credit Agreement, and any amendments thereto referred in Section 5.05(b), the "Existing Indebtedness Agreements"); (vi) all tax sharing, tax allocation and other similar agreements entered into by the Borrower or any of its Subsidiaries (collectively, together with any agreements referred to in Section 5.05(vi) of the Original Credit Agreement and any amendments thereto referred to in Section 5.05(b), the "Tax Sharing Agreements"); and (vii) all material leases under which the Borrower or any of its Subsidiaries lease (as lessee) any Hotel Property (collectively, together with any agreements referred to in Section 5.05(vi) of the Original Credit Agreement and any amendments thereto referred to in Section 5.05(b), the "Material Leases"); all of which Employee Benefit Plans, Shareholders' Agreements, Management Agreements, Collective Bargaining Agreements, Existing Indebtedness Agreements, Tax Sharing Agreements and Material Leases shall be in full force and effect on the Restatement Effective Date. (b) On or prior to the Restatement Effective Date, the Administrative Agent shall have received (i) a certification from the chairman of the board, the president, any vice president or the treasurer of the Borrower that all agreements and plans referenced in Section 5.05 of the Original Credit Agreement, previously delivered to the Administrative Agent by each Credit Party, remain in full force and effect (or specifying which of such agreements and plans do not remain in full force and effect) and (ii) any amendments thereto or additional such agreements. 5.06 Pledge Agreement. On or prior to the Restatement Effective ---------------- Date, the Credit Parties shall furnish to the Administrative Agent true and correct updates, as necessary, to the schedules to the Pledge Agreement (as prepared as of the Restatement Effective Date and after giving effect thereto) and each Credit Party shall deliver to the Collateral Agent, as Pledgee, all of the Pledged Securities, if any, referred to therein that are owned by such Credit Party (to the extent not already delivered pursuant to the Pledge Agreement) (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. 5.07 Security Agreement. On or prior to the Restatement Effective ------------------ Date, the Credit Parties shall furnish to the Administrative Agent true and correct updates, as necessary, to the schedules to the Security Agreement (as prepared as of the Restatement Effective Date and after giving effect thereto). In addition, each Subsidiary of the Borrower which becomes party to the Security Agreement on the Restatement Effective Date shall, in addition to executing counterparts of the Security Agreement as required above, deliver the following: (a) proper Financing Statements (Form UCC-1) fully executed for filing under the UCC or other appropriate filing offices of each jurisdiction as may be necessary or, in -32- the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Security Agreement, as the case may be; (b) certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements that name such Credit Party as debtor and that are filed in the jurisdictions referred to in clause (a) above, together with copies of such other financing statements that name any such Credit Party as debtor (none of which shall cover the Collateral except to the extent evidencing Permitted Liens or in respect of which the Collateral Agent shall have received termination statements (Form UCC-3 or such other termination statements as shall be required by local law) fully executed for filing); and (c) evidence that all other actions reasonably necessary (including the amending of any existing financing statements) or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect (or maintain the perfection of) the security interests purported to be created (or maintained) by the Security Agreement have been taken. 5.08 Subsidiary Credit Parties; etc. (a) Each Subsidiary Guarantor ------------------------------- shall have executed and delivered a counterpart of this Agreement, pursuant to which it makes the acknowledgments in the form appearing before the signature pages of the Subsidiary Guarantors at the end of this Agreement. (b) Each Subsidiary Guarantor which was not a Subsidiary Guarantor immediately before giving effect to the Restatement Effective Date, shall have duly authorized, executed and delivered counterparts of the Subsidiaries Guaranty, the Security Agreement and the Pledge Agreement, thereby becoming parties thereto. 5.09 Adverse Change, etc. (a) On the Restatement Effective Date, -------------------- nothing shall have occurred (and the Banks shall have become aware of no facts, conditions or other information not previously known) which any Agent or the Required Banks believe would reasonably be expected to have a material adverse effect (i) on the rights or remedies of the Agents or the Banks, or on the ability of any Credit Party to perform its respective obligations to the Agents and the Banks or (ii) on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. (b) On or prior to the Restatement Effective Date, all necessary governmental (domestic and foreign) and third party approvals and/or consents (if any) in connection with the making of the Loans and the transactions contemplated by the Credit Documents and otherwise referred to herein or therein 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 making of the Loans and the transactions contemplated by the Credit Documents or otherwise referred to herein or therein. 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 -33- prohibiting or imposing materially adverse conditions upon the making of the Loans or the transactions contemplated by the Credit Documents. 5.10 Litigation. On the Restatement Effective Date, no litigation by ---------- any entity (private or governmental) shall be pending or, to the best of the Borrower's knowledge, threatened with respect to the making of the Loans or the Credit Documents or any documentation executed in connection therewith or the transactions contemplated thereby. 5.11 Solvency Certificate; Environmental Assessments; Insurance ---------------------------------------------------------- Certificates. On or prior to the Restatement Effective Date, there shall have - ------------ been delivered to the Agents: (a) a solvency certificate in the form of Exhibit G, addressed to each of the Agents and each of the Banks and dated the Restatement Effective Date from the Chief Financial Officer of the Borrower providing the opinion of such Chief Financial Officer as to the solvency of the Borrower and the Borrower's Subsidiaries; (b) such environmental updates as may be reasonably requested by the Agents; and (c) certificates of insurance complying with the requirements of Section 8.03 for the business and properties of the Borrower and its Subsidiaries, in scope, form and substance reasonably satisfactory to the Administrative Agent and naming the Collateral Agent as an additional insured and/or loss payee (as its respective interest may appear), and stating that such insurance shall not be cancelled or materially changed without at least 30 days' prior written notice by the respective insurer to the Collateral Agent. 5.12 Projections. On or prior to the Restatement Effective Date, the ----------- Agents shall have received copies of the financial statements and Projections referred to in Sections 7.05(a) and (d). 5.13 Subordinated Debt Compliance. On the Restatement Effective ---------------------------- Date, the Borrower shall deliver to the Agent a certificate (i) dated the Restatement Effective Date and (ii) certifying that the incurrence of the Tranche D Loans is in compliance with Section 4.03 of the 9.15% Senior Subordinated Note Indenture and showing the calculations thereof. SECTION 6. Conditions Precedent to All Credit Events. The obligation ----------------------------------------- of each Bank to make Loans (including any Loans made on the Restatement Effective Date), and the obligation of each Issuing Bank to issue Letters of Credit (including any Letters of Credit issued on the Restatement Effective Date), 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 -34- 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 Notice of Borrowing; Letter of Credit Request. (a) Prior to --------------------------------------------- the making of each Loan (other than a Swingline Loan or a Revolving Loan made pursuant to a Mandatory Borrowing), the Administrative Agent shall have received a Notice of Borrowing meeting the requirements of Section 1.03(a). Prior to the making of each Swingline Loan, the Swingline Bank shall have received the notice referred to in Section 1.03(b)(i). (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. The occurrence of the Restatement Effective Date and the acceptance of the proceeds of each Loan and the making of each Letter of Credit Request 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 (with respect to Credit Events on the Restatement Effective Date) and in this Section 6 (with respect to Credit Events on and after the Restatement Effective Date) and applicable to the Restatement Effective Date and/or such Credit Event, as the case may be, exist as of that time. All of the 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 Administrative Agent at the Notice Office for the account of each of the Banks and, except for the Notes, in sufficient counterparts for each of the Banks and shall be in form and substance reasonably satisfactory to the Agents and the Required Banks. SECTION 7. Representations and Warranties. In order to induce the ------------------------------ Banks to enter into this Agreement and to make the Loans and issue (or participate in) the Letters of Credit as provided herein, the Borrower makes the following representations, warranties and agreements, all of which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans and issuance of the Letters of Credit, with the occurrence of the Restatement Effective Date and the occurrence of each Credit Event on or after the Restatement Effective Date 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 Restatement Effective 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 Other Status. The Borrower and each of its -------------------------- Subsidiaries (i) is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its organization, (ii) has the 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 qualifications except for failures to be so -35- qualified which, individually or in the aggregate, would 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 and its Subsidiaries taken as a whole. 7.02 Corporate or Partnership Power and Authority. Each Credit Party -------------------------------------------- has the corporate power and authority, to execute, deliver and perform the terms and provisions of each of the Credit Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance by it of each of such Credit Documents. Each Credit Party has duly executed and delivered each of the Credit Documents to which it is a party, and each of such Credit 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, 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). 7.03 No Violation. Neither the execution, delivery or performance by ------------ any Credit Party of the Credit Documents to which it is a party, nor compliance by it with the terms and provisions thereof, nor the consummation of the transactions contemplated therein, (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 Security Documents) upon any of the properties or assets of the Borrower 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 agreement, contract or instrument, to which the Borrower 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 of the Borrower 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 execution, delivery and performance of any Credit Document or (ii) the legality, validity, binding effect or enforceability of any such Credit Document. 7.05 Financial Statements; Financial Condition; Undisclosed ------------------------------------------------------ Liabilities; Projections; etc. (a) The consolidated balance sheet of the - ------------------------------ Borrower and its Subsidiaries at December 31, 1998 and December 31, 1999 and the related consolidated statements of operations, cash flows and shareholders' equity of the Borrower and its Subsidiaries for the fiscal years ended on such dates, as the case may be, copies of which have been furnished to the Banks prior to the Restatement Effective Date, present fairly the financial position of the Borrower and its Subsidiaries at the date of such balance sheets and the results of the operations of the Borrower and its Subsidiaries for the periods covered thereby. All such financial statements -36- have been prepared in accordance with generally accepted accounting principles consistently applied. Since December 31, 1999, there has been no material adverse change in the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. (b) (i) On and as of the Restatement Effective Date and after giving effect to the transaction contemplated hereby and to all Indebtedness (including the Loans) being incurred or assumed and Liens created by the Credit Parties in connection therewith, (a) the sum of the assets, at a fair valuation, of each of the Borrower on a stand alone basis and of the Borrower and its Subsidiaries taken as a whole will exceed its debts; (b) each of the Borrower on a stand alone basis and the Borrower and its Subsidiaries taken as a whole has not incurred and does not intend to incur, and does not believe that they will incur, debts beyond their ability to pay such debts as such debts mature; and (c) each of the Borrower on a stand alone basis and the Borrower and its Subsidiaries taken as a whole will 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. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. (c) Except as fully disclosed in the financial statements delivered pursuant to Section 7.05(a), there were as of the Restatement Effective Date no liabilities or obligations (other than the Obligations under, and as defined in, the Original Credit Agreement) 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 reasonably be expected to be material to the Borrower and its Subsidiaries taken as a whole. As of the Restatement Effective Date, the Borrower does not know of any basis for the assertion against it or any of its Subsidiaries of any liability or obligation of any nature whatsoever that is not fully disclosed in the financial statements delivered pursuant to Section 7.05(a) which, either individually or in the aggregate, would reasonably be expected to be material to the Borrower and its Subsidiaries taken as a whole. (d) On and as of the Restatement Effective Date, the Projections delivered to the Agents and the Banks prior to the Restatement Effective Date have been prepared in good faith and are based on reasonable assumptions, and there are no statements or conclusions in the Projections which are based upon or include information known to the Borrower to be misleading in any material respect or which fail to take into account material information known to the Borrower regarding the matters reported therein. On the Restatement Effective Date, the Borrower believes that the Projections are reasonable, it being understood that the Projections include assumptions as to future events that are not to be viewed as facts and there can be no assurance that such assumptions, statements, estimates and Projections will be realized and that -37- actual results may differ from the projected results and such differences may be material and adverse. 7.06 Litigation. There are no actions, suits or proceedings pending ---------- or, to the Borrower's knowledge, threatened (i) with respect to any Credit Document or (ii) that would reasonably be expected to materially and adversely affect the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. 7.07 True and Complete Disclosure. To the best knowledge of the ---------------------------- Borrower, all factual information (taken as a whole) regarding the Borrower or any of its Subsidiaries furnished by or on behalf of the Borrower or any of its Subsidiaries in writing to any Agent or any Bank (including, without limitation, all information contained in the Credit Documents) for purposes of or in connection with this Agreement, the other Credit 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 any 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 in any material respect at such time in light of the circumstances under which such information was provided. It is understood that the Projections do not constitute factual information for purposes of this Section 7.07. 7.08 Use of Proceeds; Margin Regulations. (a) The proceeds of all ----------------------------------- Loans shall be used by the Borrower (i) for its general corporate purposes, including, without limitation, the construction or acquisition of Hotel Properties and for such other purposes as are not prohibited hereby and (ii) to pay fees and expenses incurred in connection with the Credit Documents, provided that the proceeds of the Tranche D Term Loans shall be used to repay outstanding Revolving Loans (without any reduction to the Revolving Loan Commitment of any Bank). (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 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 T, U or X of the Board of Governors of the Federal Reserve System. 7.09 Tax Returns and Payments. Each of the Borrower and each of its ------------------------ Subsidiaries has filed all federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all material taxes and assessments payable by it which have become due, except for those contested in good faith and adequately disclosed and fully provided for on the financial statements of the Borrower and its Subsidiaries in accordance with generally accepted accounting principles. The Borrower and each of its Subsidiaries have at all times paid, or have provided adequate reserves (in the good faith judgment of the management of the Borrower) for the payment of, all federal, state and foreign income taxes applicable for all prior fiscal years and for the current fiscal year to date. There is no material (with respect to the Borrower and its Subsidiaries taken as a whole) action, suit, proceeding, -38- investigation, audit, or claim now pending or, to the knowledge of the Borrower, threatened by any authority regarding any taxes relating to the Borrower or any of its Subsidiaries. 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 of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of the Borrower or any of its Subsidiaries not to be subject to the normally applicable statute of limitations. 7.10 Compliance with ERISA. (i) Schedule IV sets forth each Plan; --------------------- each Plan (and each related trust, insurance contract or fund) is in substantial compliance with its terms and with all applicable laws, including without limitation ERISA and the Code; each Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; no Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has an Unfunded Current Liability; no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning of such sections of the Code or ERISA, or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period, within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan have been timely made; neither the Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such liability under any of the foregoing sections with respect to 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; no proceedings have been instituted to terminate or appoint a trustee to administer any Plan which is subject to Title IV of ERISA; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, expected or threatened; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the 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 $200,000; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of the Borrower, any Subsidiary of the Borrower, or any ERISA Affiliate has at all times been operated in material compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; 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. -39- (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. All contributions required to be made with respect to a Foreign Pension Plan have been timely made. 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 Security Documents. (a) On and after the Restatement ---------------------- Effective Date, the provisions of the Security Agreement are effective to create in favor of the Collateral Agent for the benefit of the Secured Creditors a legal, valid and enforceable security interest in all right, title and interest of the Credit Parties in the Security Agreement Collateral described therein, and the Security Agreement, upon the filing of Form UCC-1 financing statements or the appropriate equivalent (which filings have been made), create a fully perfected first lien on, and security interest in, all right, title and interest in all of the Security Agreement Collateral described therein, to the extent that a security interest may be perfected therein by filing a financing statement under the UCC, subject to no other Liens other than Permitted Liens. The recordation of the Assignment of Security Interest in U.S. Patents and Trademarks in the form attached to the Security Agreement in the United States Patent and Trademark Office together with filings on Form UCC-1 made pursuant to the Security Agreement will be effective, under applicable law, to perfect the security interest granted to the Collateral Agent in the trademarks and patents covered by the Security Agreement. Each of the Credit Parties party to the Security Agreement has good and valid title to all Security Agreement Collateral owned by such Credit Party described therein, free and clear of all Liens. Except for filings made pursuant to Section 5.07 on or prior to the Restatement Effective Date, no additional filings with respect to the Security Agreement are required at the time of, or in connection with the occurrence of, the Restatement Effective Date. (b) On and after the Restatement Effective Date and assuming the continued possession by the Collateral Agent of the Pledged Securities, 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. Assuming the continued possession by the Collateral Agent of the Pledged Securities, 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 Manager Subordination Agreements. To the extent required to be -------------------------------- executed and delivered pursuant to Section 8.14, each Manager Subordination Agreement is in full force and effect and all Obligations hereunder and under the other Credit Documents are within the definition of "senior debt" or any substantially similar definition contained in the subordination provisions of each Manager Subordination Agreement. -40- 7.13 Properties. The Borrower and each of its Subsidiaries have good ---------- and marketable title to all properties owned by them, including all property reflected in the consolidated balance sheets of the Borrower 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 Permitted Liens. 7.14 Capitalization. On the Restatement Effective Date, the -------------- authorized capital stock of the Borrower shall consist of (i) 500,000,000 shares of common stock, $.01 par value per share and (ii) 10,000,000 shares of preferred stock, $.01 par value per share, none of which preferred stock is issued and outstanding. All outstanding shares of such capital stock have been duly and validly issued, are fully paid and nonassessable and are free of preemptive rights. Except for certain options issued pursuant to employee and director stock option plans (including any assumed plans), 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. The Borrower has no Subsidiaries other than (i) ------------ those Subsidiaries listed on Schedule V and (ii) new Subsidiaries created in compliance with Section 9.16. Schedule V correctly sets forth, as of the Restatement Effective Date, the percentage ownership (direct or indirect) of the Borrower in each class of capital stock or other equity of each of its Subsidiaries and also identifies the direct owner thereof. 7.16 Compliance with Statutes, etc. The Borrower and each of its ------------------------------ Subsidiaries are in compliance with all applicable statutes, regulations and orders of all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable Environmental Laws) except such noncompliances as would 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 and its Subsidiaries 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) The Borrower and each of its --------------------- Subsidiaries have complied with all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws. There are no pending or, to the Borrower's knowledge, threatened Environmental Claims against the Borrower or any of its Subsidiaries or any Real Property owned or operated by the Borrower or any of its Subsidiaries. There are no facts, circumstances, conditions or occurrences on any Real Property owned or operated by the -41- Borrower or any of its Subsidiaries or, to the Borrower's knowledge, on any property adjoining or in the vicinity of any such Real Property that would reasonably be expected (i) to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries 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 under any applicable Environmental Law. (b) 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 except in compliance with all applicable Environmental Laws. (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, noncompliance, activities, facts, circumstances, conditions and occurrences of the types described above would 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 and its Subsidiaries taken as a whole. 7.20 Labor Relations. Neither the Borrower nor any of its --------------- Subsidiaries nor any Facility Manager is engaged in any unfair labor practice that could reasonably be expected to have a material adverse effect on the Borrower and its Subsidiaries taken as a whole. There is (i) no unfair labor practice complaint pending against the Borrower or any of its Subsidiaries or any Facility Manager or, to the best knowledge of the Borrower, threatened against any of them, before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Borrower or any of its Subsidiaries or any Facility Manager or, to the best knowledge of the Borrower, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against the Borrower or any of its Subsidiaries or any Facility Manager or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries and (iii) no union representation question exists with respect to the employees of the Borrower or any of its Subsidiaries or any Facility Manager, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as would 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 and its Subsidiaries taken as a whole. 7.21 Patents, Licenses, Franchises and Formulas. Each of the ------------------------------------------ Borrower and each of its Subsidiaries owns all the patents, trademarks, permits, service marks, trade names, copyrights, licenses, franchises, proprietary information (including but not limited to rights in computer programs and databases) and formulas, or rights with respect to the foregoing, and has obtained assignments of all leases and other rights of whatever nature, 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 reasonably be expected to result in a material adverse -42- effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries 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 as of the Restatement Effective Date (excluding the Loans and the Letters of Credit, 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 Indebtedness. (b) At all times after the issuance of any New Subordinated Notes, all Obligations of the Borrower hereunder and under the other Credit Documents will be within the definition of "senior debt" or any similar definition contained in such New Subordinated Notes. 7.23 Hotel Properties. The Borrower owns no Hotel Properties ---------------- directly and (i) on the Restatement Effective Date, each Hotel Property is owned by a Wholly-Owned Subsidiary of the Borrower and (ii) after the Restatement Effective Date, each Hotel Property is owned by a Wholly-Owned Subsidiary of the Borrower which is a Foreign Subsidiary or a Subsidiary of the Borrower which is a Subsidiary Guarantor. Each Hotel Property which is located in the United States is owned by a Subsidiary Guarantor which is organized under the laws of a state in the United States. 7.24 Updated Security Agreement and Pledge Agreement Schedules. The --------------------------------------------------------- updated schedules to the Pledge Agreement and Security Agreement furnished pursuant to Sections 5.06 and 5.07 are true and correct, in all material respects, as of the Restatement Effective Date, and accurately present all information which was originally required to be scheduled pursuant to the Pledge Agreement and Security Agreement on the Original Effective Date, but modified to reflect the additional Credit Parties on the Restatement Effective Date and any changes which occurred between the Original Effective Date and the Restatement Effective Date. SECTION 8. Affirmative Covenants. The Borrower hereby covenants and --------------------- agrees that on and after the Restatement Effective Date and until the Total Commitments and all Letters of Credit have terminated and the Loans, 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) Quarterly Financial Statements. Within 55 days after the close ------------------------------ of the first three quarterly accounting periods in each fiscal year of the Borrower, (i) the consolidated balance sheet of the Borrower and its 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 for such quarterly 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 -43- fiscal year, all of which shall be certified by the Chief Financial Officer of the Borrower, subject to normal recurring adjustments and (ii) management's discussion and analysis of the important operational and financial developments during the quarterly and year-to-date periods, it being understood that the delivery by the Borrower of its Form 10-Q as filed with the SEC shall satisfy the requirements of this Section 8.01(a). (b) Annual Financial Statements. (A) Within 100 days after the --------------------------- close of each fiscal year of the Borrower, (i) the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year and the related consolidated 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 by Pricewaterhouse Coopers LLP, any other "Big Five" independent certified public accountants or such other independent certified public accountants of recognized national standing reasonably acceptable to the Administrative Agent and (ii) management's discussion and analysis of the important operational and financial developments during the respective fiscal year, it being understood that the delivery by the Borrower of its Form 10-K as filed with the SEC shall satisfy the requirements of this Section 8.01(b). (B) At the time of the delivery of the annual financial statements pursuant to clause (A) above, a report of the applicable accounting firm stating that in the course of its regular audit of the financial statements of the Borrower and its 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 Section 9.08, 9.09, 9.10 or 9.11 or, if in the opinion of such accounting firm such a Default or an Event of Default has occurred and is continuing, a statement as to the nature thereof. (c) Budgets. No later than the 30th day of each fiscal year of the ------- Borrower, a budget in form reasonably satisfactory to the Agents (including, in any event, budgeted statements of income and sources and uses of cash and balance sheets of cash flow and budgeted debt and cash balances) for such fiscal year prepared by the Borrower in reasonable detail and accompanied by a statement of the Chief Financial Officer of the Borrower to the effect that, to the best of such officer's knowledge, the budget is a reasonable estimate of the period covered thereby. (d) Officer's Certificates. At the time of the delivery of the ---------------------- financial statements provided for in Sections 8.01(a) and (b), a certificate of the Chief Financial Officer of the Borrower to the effect that, to the best of such officer's knowledge, 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 shall (x) set forth the calculations required to establish whether the Borrower and its Subsidiaries were in compliance with the provisions of Sections 4.02(d), 4.02(e) (to the extent delivered with the financial statements required by Section 8.01(b)), 9.02, 9.04, 9.05, 9.07 and 9.08 through 9.11, inclusive, at the end of such fiscal quarter or year, as the case may be and (y) if delivered with the financial statements required by -44- Section 8.01(b), set forth the amount of (and the calculations required to establish) Excess Cash Flow for the respective Excess Cash Payment Period. (e) Management Letters. Promptly after the Borrower's or any of its ------------------ Subsidiaries' receipt thereof, a copy of any "management letter" received from its certified public accountants. (f) Notice of Default or Litigation. Promptly, and in any event ------------------------------- within five Business Days after any officer of any Credit Party obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or an Event of Default and (ii) any litigation or governmental investigation or proceeding pending or threatened (x) against the Borrower or any of its Subsidiaries which would reasonably be expected to materially and adversely affect the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole or (y) with respect to the transaction contemplated hereby or any Credit Document. (g) Other Reports and Filings. Promptly after the filing or ------------------------- delivery thereof, copies of all financial information, proxy materials and other information and reports with respect to the Borrower or any of its Subsidiaries, if any, which the Borrower or any of its Subsidiaries shall file with or furnish to the Securities and Exchange Commission or any successor thereto (the "SEC") and copies of all material notices and reports which the Borrower or its Subsidiaries 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). (h) Environmental Matters. Promptly upon, and in any event within --------------------- fifteen Business Days after, any senior or executive officer of any Credit Party obtaining knowledge thereof, notice of one or more of the following environmental matters, unless such environmental matters would not, individually or when aggregated with all other such environmental matters, be reasonably expected to materially and adversely affect the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole: (i) any pending or threatened material Environmental Claim against the Borrower or any of its Subsidiaries or any Real Property owned or operated by the Borrower or any of its Subsidiaries; (ii) any condition or occurrence on or arising from any Real Property owned or operated by the Borrower or any of its Subsidiaries that (a) results in non-compliance by the Borrower or any of its Subsidiaries 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 any such Real Property; -45- (iii) any condition or occurrence on any Real Property owned or operated by the Borrower or any of its Subsidiaries that could reasonably be expected to cause such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability by it or any of its Subsidiaries 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 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 the Borrower or any of its Subsidiaries from any government or governmental agency under, or pursuant to, CERCLA which identify the Borrower or any of its Subsidiaries as potentially responsible parties for remediation costs or which otherwise notify the Borrower or any of its Subsidiaries of potential liability under CERCLA. 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 addition, the Borrower and any of its Subsidiaries will provide the Banks with copies of all material communications with any governmental agency or other third Person that is adverse to the Borrower or such Subsidiary relating to material Environmental Claims, and such detailed reports of any material Environmental Claim as may reasonably be requested by any Agent or any Bank. (i) Other Information. From time to time, such other information or ----------------- documents (financial or otherwise) with respect to the Borrower or its Subsidiaries as any Agent may reasonably request. 8.02 Books, Records and Inspections. The Borrower will, and will ------------------------------ cause each of its Subsidiaries 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. Upon reasonable notice, the Borrower will, and will cause each of its Subsidiaries to, permit officers and designated representatives of any Agents or any Bank (at the expense of such Agent or Bank) to visit and inspect, under guidance of officers of its or such Subsidiary, any of the properties of the Borrower or any of its Subsidiaries, and to examine the books of account of the Borrower and any of its Subsidiaries and discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries with, and be advised as to the same by, its and their officers and independent accountants, all at such reasonable times and intervals and to such reasonable extent as such Agent or such Bank may reasonably request (provided that the Borrower shall have the right to take part in any discussions with its independent accountants). -46- 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 as of the Restatement Effective Date. The Borrower will, and will cause each of its Subsidiaries and Facility Managers to, (i) keep all property necessary to the business of the Borrower and its Subsidiaries in good working order and condition, ordinary wear and tear excepted, (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. The Borrower will at all times cause insurance to be maintained at levels which are consistent and in accordance with industry practice for a company similarly situated. (b) The Borrower will, and will cause each of its Subsidiaries and Facility Managers to, at all times keep its property insured in favor of the Collateral Agent, and all policies or certificates with respect to such insurance (and any other insurance maintained by, or on behalf of, the Borrower or any Subsidiary of the Borrower) (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee and/or additional insured), (ii) shall state that such insurance policies shall not be cancelled without at least 30 days' prior written notice thereof by the respective insurer to the Collateral Agent (or such shorter period of time as a particular insurance company policy generally provides), (iii) shall provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Collateral Agent and the Secured Creditors, (iv) shall contain the standard non-contributory mortgage clause endorsement in favor of the Collateral Agent with respect to hazard insurance coverage, (v) shall, except in the case of public liability insurance, provide that any losses shall be payable notwithstanding (A) any act or neglect of the Borrower or any Subsidiary of the Borrower, (B) the occupation or use of the properties for purposes more hazardous than those permitted by the terms of the respective policy if such coverage is obtainable at commercially reasonable rates and is of the kind from time to time customarily insured against by Persons owning or using similar property and in such amounts as are customary, (C) any foreclosure or other proceeding relating to the insured properties or (D) any change in the title to or ownership or possession of the insured properties and (vi) shall be deposited with the Collateral Agent. (c) If the Borrower or any of its Subsidiaries or any Facility Manager shall fail to insure its property in accordance with this Section 8.03, or if the Borrower or any of its Subsidiaries or any Facility Manager shall fail to so endorse and deposit all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation), after giving the Borrower at least five Business Days' prior written notice, to procure such insurance and the Borrower agrees to reimburse the Collateral Agent for all reasonable costs and expenses of procuring such insurance. 8.04 Corporate Franchises. The Borrower will, and will cause each of -------------------- its Subsidiaries 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) any of the transactions permitted in accordance with Section 9.02 or (ii) the withdrawal by the Borrower or any of its Subsidiaries of its -47- qualification as a foreign corporation in any jurisdiction where such withdrawal would 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 and its Subsidiaries taken as a whole. 8.05 Compliance with Statutes, etc. The Borrower will, and will ------------------------------ cause each of its Subsidiaries to, comply with all applicable statutes, regulations and orders of all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable Environmental Laws), except such noncompliances as would 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 and its Subsidiaries taken as a whole. 8.06 Compliance with Environmental Laws. (a) The Borrower will ---------------------------------- comply, and will cause each of its Subsidiaries to comply, 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 (except such noncompliances as would not, individually or in the aggregate, reasonably be expected to have the 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), 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 Property free and clear of any Liens imposed pursuant to such Environmental Laws except for Permitted Liens. Neither the Borrower nor any of its Subsidiaries will generate, use, treat, store, Release or dispose of, or knowingly 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 transport or permit the transportation of Hazardous Materials to or from any such Real Property except for Hazardous Materials generated, used, treated, stored, released or disposed of at any such Real Properties in compliance with all applicable Environmental Laws (except such noncompliances as would not, individually or in the aggregate, reasonably be expected to have the 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), and reasonably required in connection with the operation, use and maintenance of the business or operations of the Borrower or any of its Subsidiaries. (b) To the extent any Credit Party delivers notice of the occurrence of the environmental matters as described in Section 8.01(i), the Borrower will provide, upon the written request of the Agents or the Required Banks, which request shall specify in reasonable detail the basis therefor, at its sole cost and expense, an environmental site assessment report concerning the relevant Real Property now or hereafter owned or operated by such Credit Party, prepared by an environmental consulting firm reasonably approved by the Agents, indicating the presence or absence of Hazardous Materials and the potential cost of any removal or remedial action in connection with any Hazardous Materials on such Real Property. If the Borrower fails to provide the same within 90 days after such request was made, the Agents may order the same, and the Borrower shall grant and hereby grants, to the Agents and the Banks and their agents access to such Real Property and specifically grants, the Agents and the Banks an irrevocable -48- non-exclusive license, subject to the rights of tenants, to undertake such an assessment, all at the Borrower's reasonable expense. 8.07 ERISA. As soon as possible and, in any event, within ten (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 the Administrative Agent a certificate of the chief financial officer of the Borrower setting forth the full 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 (except to the extent that the Borrower has previously delivered to the Banks a certificate and notices (if any) concerning such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with respect to such Plan within the following 30 days; that an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of ERISA, has been incurred or an application may be or has been made 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 or Section 303 or 304 of ERISA with respect to a Plan; that any contribution required to be made with respect 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; that proceedings may be or have been instituted to terminate or appoint a trustee to administer a Plan which is subject to Title IV of ERISA; that a proceeding has been instituted 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 material 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 with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; 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 Plan or any Foreign Pension Plan. The Borrower will deliver to each of the Banks (i) a complete copy of the annual report (on Internal Revenue Service Form 5500-series) of each Plan (including, to the extent required, 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 and (ii) copies of any records, documents or other information that must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA. In addition to any certificates or notices delivered to the Banks pursuant to the first sentence hereof, copies of annual reports and any records, documents or other information required to be furnished to the -49- PBGC, 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 ten (10) days after the date such annual report has been filed with the Internal Revenue Service or such records, documents and/or information has been furnished to the PBGC 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', fiscal years to end on December 31 and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end on March 31, June 30, September 30 and December 31, provided any such fiscal -------- year or fiscal quarter, as the case may be, may be modified so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) the Borrower shall have given the Agents at least 10 Business Days' prior written notice thereof and (iii) at the time of such modification, the Borrower and the Required Banks shall have entered into certain technical amendments and modifications to this Agreement to preserve the intent of the parties with respect to the covenants and agreements set forth in Sections 9.08 through 9.11, inclusive, the definitions of Applicable Commitment Percentage and Applicable Margin and any other provisions of this Agreement deemed appropriate by the Agents and the Borrower. 8.09 Performance of Obligations. The Borrower will, and will cause -------------------------- each of its Subsidiaries to, perform all of its obligations under the terms of each mortgage, deed of trust, indenture, security agreement, loan agreement or credit agreement and each other material agreement, contract or instrument by which it or any Real Property is bound, except such non-performances as would 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 and its Subsidiaries taken as a whole. 8.10 Payment of Taxes. The Borrower will pay and discharge, and will ---------------- cause each of its Subsidiaries 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, prior to the date on which penalties attach thereto, and all lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 9.01(i); provided, that neither the Borrower nor any of its Subsidiaries 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 GAAP. 8.11 [INTENTIONALLY OMITTED] 8.12 Additional Security; Further Assurances. (a) On the --------------------------------------- Restatement Effective Date and thereafter, at the reasonable request from time to time by the Administrative Agent, the Borrower will, and will cause each of the Subsidiary Guarantors to, grant to the Collateral Agent security interests in such assets and properties (other than Real Property) of the Borrower and such Subsidiary Guarantors, which assets and property are of the kind that are the subject of the Pledge Agreement and/or the Security Agreement and which are not covered by the original -50- Security Documents (collectively, the "Additional Security Documents"). All such security interests shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Agents and shall constitute valid and enforceable perfected security interests superior to and prior to the rights of all third Persons and subject to no other Liens except for Permitted Liens. The Additional Security Documents or instruments related thereto shall have been duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Additional Security Documents and all taxes, fees and other charges payable in connection therewith shall have been paid in full. (b) On the Restatement Effective Date and thereafter, the Borrower will, and will cause each of the Subsidiary Guarantors to, at the expense of the Borrower, take such further reasonable steps relating to the collateral covered by any of the Security Documents as the Collateral Agent may reasonably require which are necessary to maintain the liens and security interest pursuant to the Security Documents. Furthermore, the Borrower will cause to be delivered to the Collateral Agent such opinions of counsel and other related documents as may be reasonably requested by the Agents to assure itself that this Section 8.12 has been complied with. (c) The Borrower agrees that each action required above by this Section 8.12 shall be completed within 90 days after such action is either requested to be taken by the Agents or the Required Banks or required to be taken by the Borrower and the Subsidiary Guarantors pursuant to the terms of this Section 8.12; provided that (x) in no event will the Borrower be required -------- to take any action, other than using its best efforts, to obtain consents from third parties with respect to its compliance with this Section 8.12 and (y) the Borrower shall not be deemed to be in default under its obligations under this clause (c) to the extent that any action is not completed within the time required hereunder solely by reason of the failure of a third Person to take such actions provided that the Borrower has utilized, and continues to utilize, its best efforts to cause such third Person to take such action. 8.13 Foreign Subsidiaries Security. If following a change in the ----------------------------- relevant sections of the Code or the regulations, rules, rulings, notices or other official pronouncements issued or promulgated thereunder, counsel for the Borrower reasonably acceptable to the Agents does not within 30 days after a request from the Agents or the Required Banks deliver evidence, in form and substance mutually satisfactory to the Agents and the Borrower, with respect to any Foreign Subsidiary of the Borrower which has not already had all of its stock pledged pursuant to the Pledge Agreement that (i) a pledge of 66-2/3% or more of the total combined voting power of all classes of capital stock of such Foreign Subsidiary entitled to vote, (ii) the entering into by such Foreign Subsidiary of a security agreement in substantially the form of the Security Agreement and (iii) the entering into by such Foreign Subsidiary of a guaranty in substantially the form of the Subsidiaries Guaranty, in any such case would cause the undistributed earnings of such Foreign Subsidiary as determined for Federal income tax purposes to be treated as a deemed dividend to such Foreign Subsidiary's United States parent for Federal income tax purposes, then in the case of a failure to deliver the evidence described in clause (i) above, that portion of such Foreign Subsidiary's outstanding capital stock not theretofore pledged pursuant to the Pledge -51- Agreement shall be pledged to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement in substantially similar form, if needed), and in the case of a failure to deliver the evidence described in clause (ii) above, such Foreign Subsidiary (to the extent that same is a Wholly-Owned Foreign Subsidiary) will execute and deliver the Security Agreement (or another security agreement in substantially similar form, if needed), granting the Secured Creditors a security interest in all of such Foreign Subsidiary's assets and securing the Obligations of the Borrower under the Credit Documents and under any Interest Rate Protection Agreement or Other Hedging Agreement and, in the event the Subsidiaries Guaranty shall have been executed by such Foreign Subsidiary, the obligations of such Foreign Subsidiary thereunder, and in the case of a failure to deliver the evidence described in clause (iii) above, such Foreign Subsidiary (to the extent that same is a Wholly-Owned Foreign Subsidiary) will execute and deliver the Subsidiaries Guaranty (or another guaranty in substantially similar form, if needed), guaranteeing the Obligations of the Borrower under the Credit Documents and under any Interest Rate Protection Agreement or Other Hedging Agreement, in each case to the extent that the entering into such Security Agreement or Subsidiaries Guaranty is permitted by the laws of the respective foreign jurisdiction and with all documents delivered pursuant to this Section 8.13 to be in form and substance reasonably satisfactory to the Agents. 8.14 Hotel Property Management. The Borrower will take, and will ------------------------- cause each of its Subsidiaries to take, all action necessary so that each Hotel Property owned or leased by a Subsidiary of the Borrower is managed by either the Subsidiary Guarantor owning such Hotel Property or another Wholly-Owned Subsidiary of the Borrower, provided that such Hotel Property may be managed by a Person other than such owner or such Wholly-Owned Subsidiary of the Borrower so long as (i) such manager is a Permitted Facility Manager, (ii) such Permitted Facility Manager executes and delivers a Hotel Property Management Agreement and Manager Subordination Agreement. 8.15 Maintenance of Corporate Separateness. (a) The Borrower will, ------------------------------------- and will cause each of its Unrestricted Subsidiaries to, satisfy customary corporate formalities, including the holding of regular board of directors' and shareholders' meetings or action by directors or shareholders without a meeting and the maintenance of corporate offices and records. Neither the Borrower nor any of its Subsidiaries will make any payment to a creditor of any Unrestricted Subsidiary in respect of any liability of any Unrestricted Subsidiary, and no bank account of any Unrestricted Subsidiary shall be commingled with any bank account of the Borrower or any of its Subsidiaries. Any financial statements distributed to any creditors of any Unrestricted Subsidiary shall clearly establish or indicate the corporate separateness of such Unrestricted Subsidiary from the Borrower and its Subsidiaries. Finally, neither the Borrower nor any of its Subsidiaries shall take any action, or conduct its affairs in a manner, which is likely to result in the corporate existence of the Borrower or any of its Subsidiaries or Unrestricted Subsidiaries being ignored, or in the assets and liabilities of the Borrower or any of its Subsidiaries being substantively consolidated with those of any other such Person or any Unrestricted Subsidiary in a bankruptcy, reorganization or other insolvency proceeding. -52- (b) All Hotel Properties owned by a Subsidiary shall be owned by a Wholly-Owned Subsidiary of the Borrower which is a Foreign Subsidiary or by a Subsidiary Guarantor. The Borrower shall not directly own any Hotel Property. All Hotel Properties owned by a Subsidiary which are located in the United States will be owned by a Subsidiary Guarantor which is organized under the laws of a state in the United States. SECTION 9. Negative Covenants. The Borrower covenants and agrees ------------------ that on and after the Restatement Effective Date and until the Total Commitments and all Letters of Credit have terminated and the Loans, 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 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, 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 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 (collectively, "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 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 or such Subsidiary's property or assets or materially impair the use thereof in the operation of the business of the Borrower or such Subsidiary 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 Restatement Effective Date which are listed, and the property subject thereto described, in Schedule VIII, but only to the respective date, if any, set forth in such Schedule VIII for the removal and termination of any such Liens, but no renewals or extensions of such Liens shall be permitted; (iv) Permitted Encumbrances; (v) Liens created pursuant to the Security Documents; -53- (vi) leases or subleases granted to other Persons not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries or the interest of a ground lessor arising by operation of law in real property interests located on the property subject to such ground lease; (vii) Liens upon assets subject to Capitalized Lease Obligations to the extent such Capitalized Lease Obligations are permitted by Section 9.04(iii), 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 of the Borrower's Subsidiaries; (viii) Liens placed upon equipment or machinery used in the ordinary course of business of the Borrower or any of its Subsidiaries at the time of acquisition thereof by the Borrower or any such Subsidiary or within 90 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 (viii) shall not at any time exceed $15,000,000 and (y) in all events, the Lien encumbering the equipment or machinery so acquired does not encumber any other asset of the Borrower or such Subsidiary; (ix) 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; (x) Liens arising from precautionary UCC financing statement filings in respect of operating leases; (xi) statutory and common law landlords' liens under leases to which the Borrower or any of its Subsidiaries is a party; (xii) Liens (other than Liens created or imposed under ERISA) incurred 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), provided that -------- the aggregate outstanding amount of obligations secured by Liens permitted by this clause (xii) (and the value of all cash and property encumbered by Liens permitted pursuant to this clause (xii)) shall not at any time exceed $10,000,000; (xiii) Liens arising out of judgments or awards in respect of which the Borrower or any of the Borrower's Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall have been secured a subsisting stay -54- of execution pending such appeal or proceedings, provided that the -------- aggregate amount of all such judgments or awards does not exceed $10,000,000 at any time outstanding; (xiv) Liens on Escrowed Securities, for the benefit of the holders of the New Subordinated Notes, to secure payments on or with respect to the New Subordinated Notes or interest thereon, provided that such Liens are established in connection with the issuance of such New Subordinated Notes and such Escrowed Securities and the proceeds thereof are used solely to make payments in respect of the related New Subordinated Notes; (xv) Liens on property or assets acquired pursuant to a Hotel Property acquisition effected pursuant to Section 9.02(viii), or on property or assets of a Subsidiary of the Borrower in existence at the time such property or assets are acquired pursuant to such Hotel Property acquisition, provided that (i) any Indebtedness that is secured by such -------- Liens is permitted to exist under Section 9.04(ix) and (ii) such Liens are not incurred in connection with or in anticipation of such Hotel Property acquisition and do not attach to any other asset of the Borrower or any of its Subsidiaries; (xvi) Liens upon cash and Cash Equivalents not exceeding $15,000,000 at any one time to secure Indebtedness in respect of any letters of credit issued pursuant to Section 9.04(x); and (xvii) additional Liens incurred by the Borrower and its Subsidiaries so long as the aggregate amount of the Indebtedness and other obligations secured thereby do not exceed $1,000,000. 9.02 Consolidation, Merger, Purchase or Sale of Assets, etc. The ------------------------------------------------------- Borrower will not, and will not permit any of the Borrower's Subsidiaries 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 by the Borrower and its Subsidiaries shall be permitted to the extent not in violation of Section 9.07; (ii) the Borrower and each of its Subsidiaries may in the ordinary course of business, sell 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; (iii) Investments may be made to the extent permitted by Section 9.05; -55- (iv) the Borrower and each of its Subsidiaries 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 Section 9.04(iii)); (v) the Borrower and each of its Subsidiaries may make sales of inventory in the ordinary course of business; (vi) each of the Borrower and its Subsidiaries may sell other assets (other than less than all of the capital stock of any Subsidiary held by the Borrower and its Subsidiaries) so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) each such sale is in an arm's-length transaction and the Borrower or the respective Subsidiary receives at least fair market value (as determined in good faith by the Borrower or such Subsidiary, as the case may be), (iii) at least 75% of the total consideration received by the Borrower or such Subsidiary is cash and is received at the time of the consummation of such sale and (iv) the amount of the proceeds received from the assets sold pursuant to this clause (vi) shall not exceed (A) $10,000,000 per such sale (or in a series of related sales) and (B) $25,000,000 in the aggregate for all such sales in any fiscal year of the Borrower; (vii) each of the Borrower and its Subsidiaries may sell other assets (other than less than all of the capital stock of any Subsidiary held by the Borrower and its Subsidiaries) so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) each such sale is in an arm's-length transaction and the Borrower or the respective Subsidiary receives at least fair market value (as determined in good faith by the Borrower or such Subsidiary, as the case may be), (iii) at least 75% of the total consideration received by the Borrower or such Subsidiary is cash and is received at the time of the consummation of such sale, (iv) the aggregate amount of the proceeds received from all assets sold pursuant to this clause (vii) shall not exceed $35,000,000 in any fiscal year of the Borrower and (v) the Net Sale Proceeds therefrom are either applied as provided in Section 4.02(e) or reinvested in assets to the extent permitted by Section 4.02(e); (viii) any of the Borrower's Subsidiaries may acquire or construct Hotel Properties (including by purchasing the capital stock or partnership interests of the Person or Persons that own such Hotel Properties); (ix) the Borrower may transfer assets to a Subsidiary Guarantor, and any Wholly-Owned Subsidiary of the Borrower may merge with and into any Subsidiary Guarantor which is a Wholly-Owned Subsidiary, in each case so long as the respective Subsidiary Guarantor is the surviving corporation of any such merger; (x) each of the Borrower and its Subsidiaries may grant leases or subleases to other Persons not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries; and -56- (xi) each of the Borrower and its Subsidiaries may, in the ordinary course of business, license, as licensor or licensee, patents, trademarks, copyrights and know-how to third Persons and to one another so long as any such license by the Borrower or any other Credit Party in its capacity as licensor is permitted to be assigned pursuant to the Security Agreement (to the extent that the security interest in such patents, trademarks, copyrights and know-how is granted thereunder) and does not otherwise prohibit the granting of a Lien by the Borrower or any other Credit Party pursuant to the Security Agreement in the intellectual property covered by such license. To the extent the Required Banks or all of the Banks, as the case may be, waive the provisions of this Section 9.02 with respect to the sale of any Collateral, or any Collateral is sold or otherwise disposed of as permitted by this Section 9.02, such Collateral shall be sold or otherwise disposed of free and clear of the Liens created by the Security Documents, 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 Dividends. The Borrower will not, and will not permit any of --------- its Subsidiaries to, authorize, declare or pay any Dividends with respect to the Borrower or any of its Subsidiaries, except that: (i) any Subsidiary of the Borrower may pay cash Dividends to the Borrower or to a Wholly-Owned Subsidiary of the Borrower, (ii) so long as there shall exist no Default under Section 10.01 or Event of Default (both before and after giving effect to the payment thereof) any non-Wholly-Owned Subsidiary of the Borrower may pay cash Dividends to its shareholders or partners generally so long as the Borrower or its respective Subsidiary which owns the equity interest or interests in the Subsidiary paying such Dividends receives at least its proportionate share thereof (based upon its relative holdings of equity interests in the Subsidiary paying such Dividends and taking into account the relative preferences, if any, of the various classes of equity interests in such Subsidiary), (iii) so long as there shall exist no Default or Event of Default (both before and after giving effect to the payment thereof), the Borrower may pay Dividends so long as the aggregate amount of Dividends paid by the Borrower pursuant to this clause (iii) shall not exceed $10,000,000 in any fiscal year of the Borrower and (iv) so long as there exist no Default or Event of Default (both before and after giving effect to the payment thereof), the Borrower may pay Dividends to repurchase shares of the Borrower's capital stock so long as the aggregate amount of Dividends paid by the Borrower pursuant to this clause (iv), together with any amounts paid in cash to make Permitted Redemptions, shall not exceed in the aggregate $75,000,000. For purposes of this Section 9.03, (a) the amount of any non-cash Dividends shall be deemed to be the greater of the book value or the fair market value thereof at the time of the declaration thereof, and (b) in the event that a Dividend made by Borrower meets the criteria of more than one of the permitted Dividends described in the above clauses, then Borrower, in its sole -57- discretion, shall only be required to include the amount and type of such Dividend in only one of such clauses. 9.04 Indebtedness. The Borrower will not, and will not permit any ------------ of its Subsidiaries 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 refinancings or renewals thereof; (iii) Indebtedness of the Borrower and its Subsidiaries evidenced by Capitalized Lease Obligations to the extent permitted pursuant to Section 9.07, provided that in no event shall the aggregate principal amount of -------- Capitalized Lease Obligations permitted by this clause (iii) exceed $15,000,000 at any time outstanding; (iv) Indebtedness of the Borrower and its Subsidiaries subject to Liens permitted under Section 9.01(viii) or to the extent that such Indebtedness does not constitute Indebtedness of a type described in clause (i), (ii), (iii), (iv) or (v) of the definition of Indebtedness, Liens permitted under Section 9.01(xii) or (xiii); (v) intercompany Indebtedness among the Borrower and Subsidiaries of the Borrower to the extent permitted by Section 9.05(iv); (vi) Indebtedness of the Borrower under Interest Rate Protection Agreements; (vii) Indebtedness under Other Hedging Agreements providing protection against fluctuations in currency values in connection with the Borrower's or any of its Subsidiaries' ordinary course of business operations so long as management of the Borrower or such Subsidiary, as the case may be, has determined in good faith that the entering into of such Other Hedging Agreements are bona fide hedging activities; (viii) unsecured subordinated Indebtedness of the Borrower (the "New Subordinated Notes") including the 9.15% Senior Subordinated Notes and any Qualified Convertible Subordinated Notes, so long as (w) the aggregate initial principal amount thereof (exclusive of any initial Escrowed Amount in respect thereof) does not exceed the Aggregate Permitted Amount, (x) except in the case of the 9.15% Senior Subordinated Notes, at least 10 days prior to the issuance thereof, the Borrower shall have delivered to each of the Banks substantially final drafts of the documents pursuant to which the New Subordinated Notes are to be issued and with any changes thereto made after the initial delivery of such documents to be delivered to the Agents and with any significant changes thereto made after such initial delivery to be delivered to each of the Banks at least three days prior to the issuance of such New Subordinated Notes, (y) except in the case of the 9.15% Senior Subordinated Notes, all terms and conditions of the New Subordinated Notes and the documentation with respect thereto (including, without -58- limitation, the maturity thereof, the interest rate applicable thereto, the required repayments with respect thereto, the covenants, events of default and ranking provisions with respect thereto) shall be in form and substance reasonably satisfactory to each Agent, and (z) no Default or Event of Default then exists or would result therefrom; (ix) Indebtedness of a Subsidiary acquired pursuant to a Hotel Property acquisition, provided that (i) such Indebtedness was not incurred -------- in connection with or in anticipation of such Hotel Property acquisition, (ii) such Indebtedness does not constitute Indebtedness for borrowed money, it being understood and agreed that Capitalized Lease Obligations and purchase money Indebtedness shall not constitute Indebtedness for borrowed money for purposes of this clause (ix), and (iii) at the time of such Hotel Property acquisition such Indebtedness does not exceed 10% of the total value of the assets of the Subsidiary so acquired; and (x) additional Indebtedness of the Borrower and its Subsidiaries not to exceed $15,000,000 in aggregate principal amount at any time outstanding. 9.05 Advances, Investments and Loans. The Borrower will not, and ------------------------------- will not permit any of its Subsidiaries 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, or hold any cash or Cash Equivalents (each of the foregoing an "Investment" and, collectively, "Investments"), except that the following shall be permitted: (i) the Borrower and its Subsidiaries 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, and the Borrower and its Subsidiaries may own Investments received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (ii) the Borrower and its Subsidiaries may acquire and hold cash and Cash Equivalents; (iii) the Borrower may enter into Interest Rate Protection Agreements; (iv) the Borrower and its Subsidiaries may hold and to the extent permitted by Section 9.16 acquire Investments in Subsidiaries of the Borrower and may make additional Investments in such Subsidiaries so long as (i) no more than $10,000,000 in aggregate principal amount of Investments may be outstanding at any one time to Subsidiaries that are not Subsidiary Guarantors (determined without regard to any write-downs or write-offs thereof), (ii) each intercompany loan or advance, the principal amount of which exceeds $500,000, shall be evidenced by a note that is pledged to the -59- Collateral Agent pursuant to (and to the extent required by) the Pledge Agreement and (iii) to the extent required by Section 9.16 the capital stock of the Subsidiary in which such Investments are made is pledged to the Collateral Agent pursuant to (and to the extent required by) the Pledge Agreement; (v) the Borrower and its Subsidiaries 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 outstanding (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed $5,000,000; (vi) the Borrower and its Subsidiaries may enter into Other Hedging Agreements to the extent permitted by Section 9.04(vii); (vii) the Borrower and its Subsidiaries may receive non-cash consideration in connection with any asset sale permitted by Sections 9.02(vi) and (vii) but only to the extent set forth in such Sections 9.02(vi) and (vii); (viii) the Borrower may purchase securities (the "Escrowed Securities") with the proceeds of the Escrowed Amount at such time; (ix) the Borrower and its Subsidiaries may acquire Hotel Properties which may consist in whole or in part of stock acquisitions (and otherwise in compliance with this Agreement); and (x) the Borrower and its Subsidiaries may make Investments in Unrestricted Subsidiaries effected through the issuance of the Borrower's common stock; and (xi) in addition to Investments permitted by clauses (i) through (x) above, the Borrower and its Wholly-Owned Subsidiaries may make Investments in Unrestricted Subsidiaries so long as the aggregate amount invested pursuant to this clause (xi) does not exceed $25,000,000 in the aggregate. The Investments permitted under clause (x) above shall not be counted against the limit set forth in this clause (xi). 9.06 Transactions with Affiliates. The Borrower will not, and will ---------------------------- not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with (x) any Affiliate of the Borrower or any of its Subsidiaries or (y) any Unrestricted Subsidiary, other than in the ordinary course of business and on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would reasonably be obtained by the Borrower or such Subsidiary at that time in a comparable arm's-length transaction with a Person other than an Affiliate, except that notwithstanding the foregoing: (i) Dividends may be paid to the extent provided in Section 9.03; (ii) loans may be made and other transactions may be entered into by and among the Borrower and the Borrower's Subsidiaries to the extent permitted by Section 9.02, 9.04 or 9.05; -60- (iii) customary fees may be paid to non-officer directors of the Borrower; and (iv) Subsidiaries of the Borrower may pay management and similar fees to the Borrower or any Wholly-Owned Subsidiary of the Borrower. 9.07 Capital Expenditures. (a) The Borrower will not, and will not -------------------- permit any of its Subsidiaries to make any Capital Expenditures (other than such Capital Expenditures of the type permitted by clauses (b), (c) and (d) hereof), except that the Borrower and its Subsidiaries may make Capital Expenditures in an aggregate amount not to exceed the Permitted CapEx Amount at the time of such Capital Expenditure. (b) In addition to the foregoing, the Borrower and its Subsidiaries may effect construction and acquisitions of Hotel Properties. (c) In addition to the Capital Expenditures permitted pursuant to preceding clauses (a) and (b) the Borrower and its Subsidiaries may make additional Capital Expenditures consisting of the reinvestment of proceeds of Recovery Events not required to be applied as a mandatory repayment pursuant to Section 4.02(g). (d) In addition to the Capital Expenditures permitted pursuant to preceding clauses (a), (b) and (c) the Borrower and its Subsidiaries may make additional Capital Expenditures in an aggregate amount not to exceed the CapEx Cumulative Basket at the time of such Capital Expenditure. (e) For purposes of determining compliance with Sections 9.07(a) and (d), the amount of Capital Expenditures shall be first applied to the amount permitted under Section 9.07(a) at the time of such Capital Expenditures to the extent permitted thereby and thereafter to the amount permitted under Section 9.07(d). 9.08 Consolidated Interest Coverage Ratio. The Borrower will not ------------------------------------ permit the Consolidated Interest Coverage Ratio for any Test Period ending during a fiscal quarter of the Borrower set forth below to be less than the ratio set forth opposite such fiscal quarter below: ============================================================= Fiscal Quarter Ended in Ratio ----------------------- ----- ------------------------------------------------------------- June 2000 2.00:1.00 ------------------------------------------------------------- September 2000 2.00:1.00 ------------------------------------------------------------- December 2000 2.00:1.00 ------------------------------------------------------------- March 2001 2.25:1.00 and each fiscal quarter thereafter ============================================================= 9.09 Maximum Run Rate Leverage Ratio. The Borrower will not permit ------------------------------- the Run Rate Leverage Ratio at any time during a fiscal quarter of the Borrower set forth below to be greater than the ratio set forth opposite such fiscal quarter below: -61- ============================================================= Fiscal Quarter Ended in Ratio ----------------------- ----- ------------------------------------------------------------- June 2000 5.75:1.00 and each fiscal quarter thereafter ============================================================= 9.10 Maximum Senior Debt Leverage Ratio. The Borrower will not ---------------------------------- permit the Senior Debt Leverage Ratio at any time during a fiscal quarter of the Borrower set forth below to be greater than the ratio set forth opposite such fiscal quarter below: ============================================================= Fiscal Quarter Ended in Ratio ----------------------- ----- June 2000 4.25:1.00 ------------------------------------------------------------- September 2000 4.25:1.00 ------------------------------------------------------------- December 2000 4.25:1.00 ------------------------------------------------------------- March 2001 4.25:1.00 ------------------------------------------------------------- June 2001 4.25:1.00 ------------------------------------------------------------- September 2001 4.25:1.00 ------------------------------------------------------------- December 2001 4.00:1.00 and each fiscal quarter thereafter ============================================================= 9.11 Maximum Debt to Capitalization Ratio. The Borrower will not ------------------------------------ permit Consolidated Debt at any time to be more than 55% of Consolidated Capitalization at such time. 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 the - ------------------------ Borrower's Subsidiaries to, (i) except for Permitted Redemptions, 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 New Subordinated Notes, (ii) amend or modify, or permit the amendment or modification of, any provision of the New Subordinated Notes or any agreement (including, without limitation, any purchase agreement, indenture or loan agreement) related thereto other than amendments not adverse to the interests of the Banks in any material respect provided that a copy of such amendment is delivered to the Agents at least 10 Business Days prior to the execution thereof by the Borrower, (iii) amend or modify, or permit the amendment or modification of, any provision of any Hotel Property Management Agreement between the Borrower and a Person other than a Subsidiary Guarantor (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 management agreement (other than Hotel Property Management Agreements, if applicable, entered into in connection with the acquisition or construction of new Hotel Properties), or (iv) amend, modify or change its certificate of incorporation (including, without limitation, by the filing or modification of any -62- 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 which are not adverse in any respect to the interests of the Banks. 9.13 Limitation on Certain Restrictions on Subsidiaries. The -------------------------------------------------- Borrower will not, and will not permit any of its Subsidiaries 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 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 pay any Indebtedness owed to the Borrower or any Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any Subsidiary of the Borrower or (c) transfer any of its properties or assets to the Borrower or any Subsidiary of the Borrower, 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 of the Borrower, (iv) customary provisions restricting assignment of any licensing agreement entered into by the Borrower or any Subsidiary of the Borrower in the ordinary course of business and (v) customary provisions restricting the transfer of assets subject to Liens permitted under Section 9.01(vii) or (viii). 9.14 Limitation on Issuance of Capital Stock. (a) The Borrower will --------------------------------------- not issue (i) any preferred stock other than Qualified Preferred Stock or (ii) any redeemable common stock. (b) The Borrower will not permit any of its Subsidiaries 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 the Borrower's Subsidiaries in any class of the capital stock of such Subsidiary, (iii) to qualify directors to the extent required by applicable law, (iv) for issuances by newly created or acquired Subsidiaries in accordance with the terms of this Agreement or (v) issuances of capital stock to the Borrower or a Wholly- Owned Subsidiary provided that such capital stock is pledged to the Collateral Agent pursuant to the Security Documents. 9.15 Business. The Borrower will not, and will not permit any of its -------- Subsidiaries to, engage (directly or indirectly) in any business other than the business in which the Borrower and its Subsidiaries are engaged on the Restatement Effective Date and reasonable extensions thereof and reasonably related thereto. 9.16 Limitation on Creation of Subsidiaries. Notwithstanding -------------------------------------- anything to the contrary contained in this Agreement, the Borrower will not, and will not permit any of its Subsidiaries to establish, create or acquire after the Restatement Effective Date any Subsidiary, provided that the Borrower and -------- its Wholly-Owned Subsidiaries shall be permitted to (i) establish or create one or more Wholly-Owned Subsidiaries so long as within a reasonable time from such -63- establishment or creation (x) the capital stock of such new Wholly-Owned Subsidiary that is owned by any Credit Party 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 for the benefit of the Secured Creditors, (y) such new Wholly- Owned Subsidiary (other than a Wholly-Owned Foreign Subsidiary, except to the extent otherwise required pursuant to Section 8.13) executes a counterpart of the Subsidiaries Guaranty, the Pledge Agreement and the Security Agreement, and (z) such new Wholly-Owned Subsidiary, to the extent requested by the Agents or the Required Banks, takes all actions required pursuant to Section 8.12 and (ii) acquire a Person which immediately upon such acquisition will constitute a Subsidiary of the Borrower in connection with the acquisition of a Hotel Property so long as within a reasonable time from such acquisition (x) the capital stock of such Subsidiary that is owned by any Credit Party 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 for the benefit of the Secured Creditors, (y) such Subsidiary (including any such Subsidiary which is a Foreign Subsidiary) executes a counterpart of the Subsidiaries Guaranty, the Pledge Agreement and the Security Agreement, and (z) such Subsidiary, to the extent requested by the Agents or the Required Banks, takes all actions required pursuant to Section 8.12. In addition, each such 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 Subsidiary would have had to deliver if such new Wholly-Owned Subsidiary were a Credit Party on the Restatement Effective Date. 9.17 Representative. The Borrower will not, and will not permit any -------------- of its Subsidiaries to, designate any holder of Indebtedness, other than the Banks or their representative, to deliver blockage notices which the holders of senior debt are permitted to provide under the New Subordinated Notes. 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 Loan or any Note or (ii) default, and such default shall continue unremedied for three or more Business Days, in the payment when due of any interest on any Loan or Note, any Unpaid Drawing or any Fees or any other amounts owing hereunder or under any other Credit Document; or 10.02 Representations, etc. Any representation or warranty made by --------------------- any Credit Party herein or in any other Credit Document or in any certificate delivered to any Agent or any Bank 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 9 or (ii) default in the due performance or observance by it of any other term, covenant or agreement contained in this Agreement or any other Credit Document (other than as provided in Sections 10.01 and 10.02) -64- and such default shall continue unremedied for a period of 45 days after written notice to the Borrower by the Administrative Agent or the Required Banks; or 10.04 Default Under Other Agreements. (i) The Borrower or any of ------------------------------ its Subsidiaries shall (x) default in any payment of any Indebtedness (other than the Obligations) beyond the period of grace or cure, 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 shall be declared to be (or shall become) due and payable, or required to be prepaid other than by a regularly scheduled required prepayment (including, without limitation, by reason of the occurrence of a change of control or other similar event), prior to the stated maturity thereof, provided that it shall not be a Default or an -------- Event of Default under clauses (i) or (ii) of this Section 10.04 unless the aggregate outstanding principal amount of all Indebtedness as described in such clauses (i) and (ii) is at least $15,000,000; or 10.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries ---------------- (other than an Immaterial Subsidiary) 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 (other than an Immaterial Subsidiary) and the petition is not controverted within 15 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 (other than an Immaterial Subsidiary) or the Borrower or any of its Subsidiaries (other than an Immaterial Subsidiary) 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 (other than an Immaterial Subsidiary), or there is commenced against the Borrower or any of its Subsidiaries (other than an Immaterial Subsidiary) any such proceeding which remains undismissed for a period of 60 days, or the Borrower or any of its Subsidiaries (other than an Immaterial Subsidiary) is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Borrower or any of its Subsidiaries (other than an Immaterial Subsidiary) 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 (other than an Immaterial Subsidiary) makes a general assignment for the benefit of creditors; or any corporate action is taken by the Borrower or any of its Subsidiaries (other than an Immaterial Subsidiary) for the purpose of effecting any of the foregoing; or -65- 10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding ----- standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such Plan within the following 30 days, any Plan which is subject to Title IV of ERISA shall have had or is likely to have a trustee appointed to administer such Plan, any Plan which is subject to Title IV of ERISA 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 with respect 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 any 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 or 4975 of the Code or on account of a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or the Borrower or any Subsidiary of the Borrower 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 Plans or Foreign Pension Plans; (b) there shall result from any such event or events the imposition of a lien on, the granting of a security interest by, or a liability or a material risk of incurring a liability by, the Borrower, a Subsidiary of the Borrower or an ERISA Affiliate; and (c) such lien, security interest or liability, individually, and/or in the aggregate, in the opinion of the Required Banks, has had, or could reasonably be expected to have, a material adverse effect upon the business, operations, condition (financial or otherwise) or prospects of the Borrower or any Subsidiary of the Borrower; or 10.07 Security Documents. At any time after the execution and ------------------ delivery thereof, any of the Security Documents 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 (except as permitted by Section 9.01), and subject to no other Liens (except as permitted by Section 9.01), provided that it shall not be a Default or Event of Default under this Section 10.07 unless the value of the Collateral adversely affected thereby exceeds $500,000 in the aggregate; or 10.08 Subsidiaries Guaranty. At any time after the execution and --------------------- delivery thereof, the Subsidiaries Guaranty or any provision thereof shall cease to be in full force or effect as to any Subsidiary Guarantor (other than a Subsidiary Guarantor which is an Immaterial Subsidiary), or any Subsidiary Guarantor (other than a Subsidiary Guarantor which is an Immaterial Subsidiary) or any Person acting by or on behalf of such Subsidiary Guarantor shall deny or disaffirm such Subsidiary Guarantor's obligations under the Subsidiaries Guaranty or -66- any Subsidiary Guarantor shall default in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant to the Subsidiaries Guaranty; or 10.09 Judgments. One or more judgments or decrees shall be entered --------- against the Borrower or any of its Subsidiaries involving in the aggregate for the Borrower and its Subsidiaries a liability (not paid or not 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 $15,000,000; or 10.10 Manager Subordination Agreements. Any Manager Subordination -------------------------------- Agreement (to the extent required pursuant to Section 8.14) or any provision thereof shall cease to be a legal, valid and binding obligation enforceable against any party to such Manager Subordination Agreement, or any party to a Manager Subordination Agreement (other than the Administrative Agent) or any Person acting by or on behalf of any such party shall deny or disaffirm such party's obligations under any such Manager Subordination Agreement, or any such party shall default in the due performance of any term, covenant or agreement on its part to be performed or observed pursuant to any such Manager Subordination Agreement, in each case so long as such event, act or condition would either individually or in the aggregate have a material adverse effect in the interests of the Banks; or 10.11 Change of Control. A Change of Control shall occur; ----------------- 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 any Agent, any Bank or the holder of any 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, 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 Commitments terminated, whereupon all of the Commitments 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 Loans and the 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 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 Security Documents; and (vi) apply any cash collateral held by the Administrative Agent pursuant to Section 4.02 to the repayment of the Obligations. -67- 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): "9.15% Senior Subordinated Notes" shall mean the New Subordinated Notes consisting of the Borrower's 9.15% Senior Subordinated Notes due 2008 issued pursuant to the 9.15% Senior Subordinated Note Indenture. "9.15% Senior Subordinated Note Indenture" shall mean the Indenture dated as of March 10, 1998 by and between the Borrower, as Issuer, and Manufacturers and Traders Trust Company, as Trustee. "Additional Security Documents" shall have the meaning provided in Section 8.12(a). "Adjusted Consolidated Net Income" shall mean for any period Consolidated Net Income of the Borrower and its Subsidiaries for such period plus, without duplication, the sum of the amount of all net non-cash charges (including, without limitation, depreciation, amortization, deferred tax expense, non-cash interest expense) and net non-cash losses which were included in arriving at Consolidated Net Income for such period less the sum of the amount of all net non-cash gains and gains from the sale of assets (other than sales of inventory in the ordinary course of business) which were included in arriving at Consolidated Net Income for such period. "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. "Administrative Agent" shall mean IBJ in its capacity as Administrative Agent (including in its capacity as Collateral 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. "Agent" shall mean the Administrative Agent and the Sole Lead Arranger. "Aggregate Permitted Amount" shall mean, on any date of determination, an amount equal to $500,000,000 plus (i) 50% of the Net Equity Proceeds received by the Borrower -68- from issuances of its common equity after July 21, 1997 and on or prior to such date, plus (ii) 33% of the Net Debt Proceeds received by the Borrower from any issuance by it on or prior to such date of Qualified Convertible Subordinated Notes. "Agreement" shall mean this Credit Agreement, as modified, supplemented, amended, restated, extended, renewed, refinanced or replaced from time to time. "Applicable A/RF Margin" shall mean a percentage per annum equal to in the case of Tranche A Term Loans and Revolving Loans maintained as (x) Base Rate Loans, 1.00% and (y) Eurodollar Loans, 2.00%. "Applicable B Margin" shall mean in the case of Tranche B Term Loans maintained as (x) Base Rate Loans, 1.75% and (y) Eurodollar Loans, 2.75%. "Applicable C Margin" shall mean in the case of Tranche C Term Loans maintained as (x) Base Rate Loans, 2.50% and (y) Eurodollar Loans, 3.50%. "Applicable D Margin" shall mean in the case of Tranche D Term Loans maintained as (x) Base Rate Loans, 2.50% and (y) Eurodollar Loans, 3.50%. "Applicable Commitment Commission Percentage" shall mean 0.50% per annum. "Applicable Margin" shall mean each of the Applicable A/RF Margin, Applicable B Margin, Applicable C Margin and the Applicable D Margin. "A/RF Maturity Date" shall mean December 31, 2002. "Assignment and Assumption Agreement" shall mean the Assignment and Assumption Agreement substantially in the form of Exhibit H (appropriately completed). "Authorized Officer" of any Credit Party shall mean any of the President, the Chief 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. "B Maturity Date" shall mean December 31, 2003. "Bank" shall mean each financial institution listed on Schedule I or Schedule II, as well as any Person which becomes a "Bank" hereunder pursuant to Section 1.13, 13.04(b) or 13.04(c). "Bank Default" shall mean (i) the refusal (which has not been retracted) or the failure of a Bank to make available its portion of any Borrowing (including any Mandatory Borrowing) or to fund its portion of any unreimbursed payment under Section 2.04(c) 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(a), (b), (c), (d), (e), (f) or (g) or Section 2, in case of either clause (i) or (ii) as a result of any takeover or control (including, without -69- limitation, as a result of the occurrence of any event of the type described in Section 10.05 with respect to such Bank) of such Bank by any regulatory authority or agency. "Bankruptcy Code" shall have the meaning provided in Section 10.05. "Base Rate" at any time shall mean the higher of (i) the rate which is 1/2 of 1% in excess of the Federal Funds Rate and (ii) the Prime Lending Rate. "Base Rate Loan" shall mean (i) each Swingline Loan and (ii) each other 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 Loan from all the Banks (or from the Swingline Bank in the case of Swingline Loans) 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 (x) Base Rate -------- Loans incurred pursuant to Section 1.10(b) shall be considered part of the related Borrowing of Eurodollar Loans and (y) each Borrowing applicable to each of the Loans outstanding on the Restatement Effective Date shall continue to be applicable thereto as if the Original Credit Agreement had not been amended and restated as herein provided. "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, New York 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 Eurodollar market. "C Maturity Date" shall mean December 31, 2004. "CapEx Cumulative Basket" shall mean at any time an amount equal to (x) $10,000,000 plus $5,000,000 for each January 1 which has occurred since January 2, 1998 and prior to such time less (y) the amount theretofore expended by the Borrower and its Subsidiaries to make Capital Expenditures pursuant to Section 9.07(d) during the period commencing on October 1, 1997 and ending at such time. "CapEx Test Period" shall mean on any date of determination the period of eight consecutive fiscal quarters or 24 consecutive fiscal months, as the case may be, ended on the last day of the then most recently ended Test Period. "Capital Expenditures" shall mean, with respect to any Person, all expenditures by such Person (other than with respect to any Investment) which should be capitalized in -70- accordance with generally accepted accounting principles, and, without duplication, the amount of Capitalized Lease Obligations incurred by such Person, provided that Capital Expenditures shall not include financing costs -------- required to be capitalized. "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, as to any Person, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the -------- United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (ii) Dollar denominated time deposits and certificates of deposit of any commercial bank having, or which is the principal banking subsidiary of a bank holding company having, a long-term unsecured debt rating of at least "A" or the equivalent thereof from S&P or "A2" or the equivalent thereof from Moody's with maturities of not more than six months from the date of acquisition by such Person, (iii) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (ii) above, (iv) commercial paper issued by any Person incorporated in the United States rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's and in each case maturing not more than six months after the date of acquisition by such Person, (v) other Dollar denominated securities issued by any Person incorporated in the United States rated at least "A-" or the equivalent by S&P or at least "A3" or the equivalent by Moody's and in each case either (x) maturing not more than 90 days after the date of acquisition by such Person or (y) which are subject to a repricing arrangement (such as a Dutch auction) not more than 90 days after the date of acquisition by such Person which such Person believes in good faith will permit such Person to sell such security at par in connection with such repricing mechanism and (vi) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (i) through (iv) above. "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.A. (S) 9601 et seq. -- ---- "Change of Control" shall mean (i) any Person or "group" (within the meaning of Rules 13d-3 or 13d-5 under the Securities Exchange Act (as in effect on the Restatement Effective Date)), other than the Permitted Holders, shall (A) have acquired beneficial ownership of 35% or more on a fully diluted basis of the voting and/or economic interest in the Borrower's capital stock or (B) have obtained the power (whether or not exercised) to elect a majority of the Borrowers' directors or (ii) the Board of Directors of the Borrower shall cease to consist of a majority of Continuing Directors. "Claims" shall have the meaning provided in the definition of "Environmental Claims." -71- "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement, and to any subsequent provision of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all property with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document, including, without limitation, all Pledge Agreement Collateral and all Security Agreement Collateral. "Collateral Agent" shall mean the Administrative Agent acting as collateral agent for the Secured Creditors pursuant to the Security Documents. "Collective Bargaining Agreements" shall have the meaning provided in Section 5.05. "Commitment" shall mean any of the commitments of any Bank, i.e., ---- whether the Tranche A Term Loan Commitment, Tranche B Term Loan Commitment, Tranche C Term Loan Commitment, Tranche D Term Loan Commitment or Revolving Loan Commitment. "Consolidated Capitalization" shall mean, at any time, the sum of (x) Consolidated Debt, (y) Consolidated Net Worth and (z) the aggregate amount expended pursuant to Section 9.03(iv), each at such time or, in the case of clause (z), at and prior to such time. "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 GAAP in a classified 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 GAAP in a classified balance sheet, but excluding the current portion of any Indebtedness under this Agreement and any other long-term Indebtedness which would otherwise be included therein. "Consolidated Debt" shall mean, at any time, the principal amount of all Indebtedness of the Borrower and its Subsidiaries at such time (including any Indebtedness incurred at such time); provided that to the extent that a Net -------- Escrowed Amount exists at such time, the aggregate principal amount of Indebtedness in respect of the New Subordinated Notes shall equal the Net Subordinated Notes Amount at such time. "Consolidated EBIT" shall mean, for any period, Consolidated Net Income of the Borrower and its Subsidiaries before Consolidated Interest Expense and provision for taxes for such period and without giving effect (x) to any extraordinary gains or losses and (y) to any gains or losses from sales of assets other than from sales of inventory sold in the ordinary course of business. -72- "Consolidated EBITDA" shall mean, for any period, Consolidated EBIT for such period, adjusted by adding thereto the amount of all amortization of intangibles and depreciation that were deducted in arriving at Consolidated EBIT for such period. "Consolidated Interest Coverage Ratio" shall mean, for any period, the ratio of Consolidated EBITDA to Consolidated Interest Expense for such period. "Consolidated Interest Expense" shall mean, for any period, the total consolidated cash interest expense reduced by cash interest income (including, without limitation, investment income on the Escrowed Amount) and other investment earnings earned on Cash Equivalents of the Borrower and its Subsidiaries, in each case, for such period (calculated without regard to any limitations on the payment thereof) plus, without duplication, that portion of Capitalized Lease Obligations of the Borrower and its Subsidiaries representing the interest factor for such period, but excluding the amortization of any deferred financing costs. "Consolidated Leverage Ratio" shall mean, at any time the ratio of Consolidated Debt at such time to Consolidated EBITDA for the then most recently ended Test Period. "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 Subsidiary of the Borrower or a Subsidiary thereof or is accounted for by the Borrower or a Subsidiary thereof by the equity method of accounting shall be included only to the extent of the payment of dividends or distributions by such other Person to the Borrower or a Subsidiary thereof during such period, (ii) the net income (or loss) of any other Person (other than Studio Plus Hotels, Inc.) 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 and (iii) to the extent Consolidated Net Income reflects amounts attributable to minority interests in Subsidiaries that are not Wholly-Owned Subsidiaries of the Borrower, Consolidated Net Income shall be reduced by the amounts attributable to such minority interests. "Consolidated Net Worth" shall mean, at any time, the consolidated net worth of the Borrower and its Subsidiaries at such time, provided that to the extent Consolidated Net Worth reflects amounts attributable to minority interests in Subsidiaries that are not Wholly-Owned Subsidiaries of the Borrower, Consolidated Net Worth shall be reduced by the amount attributable to such minority interests. "Consolidated Senior Debt" at any time shall mean Consolidated Debt on such date, adjusted by excluding therefrom the amount of New Subordinated Notes reflected in Consolidated Debt on such date. "Contingent Obligation" shall mean, as to any Person, any obligation of such Person guaranteeing or intended to guarantee (including, without limitation, 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) any Indebtedness, leases, dividends or other -73- 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 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 Restatement Effective Date and each other director if such other director's nomination for election or appointment to the Board of Directors of the Borrower is recommended or approved by a majority of the then Continuing Directors or is recommended or approved by a committee of the Board of Directors a majority of which is composed of the then Continuing Directors. "Credit Documents" shall mean this Agreement and, after the execution and delivery thereof pursuant to the terms of this Agreement, each Note, the Subsidiary Guaranty, each Security Document and each Manager Subordination Agreement. "Credit Event" shall mean the making of any Loan or the issuance of any Letter of Credit but shall not include the commencement of a new Interest Period applicable to a Borrowing of Eurodollar Loans upon the expiration of the Interest Period applicable thereto or the conversion of Loans of one Type into Loans of the other Type, provided that, in any such case, the aggregate outstanding principal amount of Loans is not increased as a result thereof. "Credit Party" shall mean the Borrower and each Subsidiary Guarantor. "D Maturity Date" shall mean June 30, 2007. "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. "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 -74- Person and, in the case of the Borrower, other than additional shares of Qualified Preferred Stock) 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 September 26, 1997 (or any options or warrants issued by such Person with respect to its capital stock or partnership interest), 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 September 26, 1997 (or any options or warrants issued by such Person with respect to its capital stock or partnership interest). Without limiting the foregoing, "Dividends" with respect to any Person shall also include all payments (other than as excluded above) 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. "Dollars" and the sign "$" shall each mean freely transferable lawful money of the United States. "Domestic Subsidiary" shall mean each Subsidiary of the Borrower incorporated or organized in the United States or any State or territory thereof. "Drawing" shall have the meaning provided in Section 2.05(b). "Eligible Transferee" shall mean and include 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 5.05. "Environmental Claims" shall mean any and all administrative, regulatory or judicial actions, suits, formal demands, demand letters, claims, liens, notices of non-compliance or violation, investigations or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such law (hereafter "Claims"), 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 in connection with alleged injury or threat of injury to health, safety or the environment due to the presence of Hazardous Materials. "Environmental Law" shall mean any applicable Federal, state, foreign or local statute, law, rule, regulation, ordinance, code, written guideline, 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 judgment 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.A. (S) 2601 et seq., the Toxic Substances Control Act, 15 U.S.C. -- ---- (S) 2601 et seq.; the Clean Air Act, 42 U.S.C.A. (S) 7401 et seq.; the Safe -- ---- -- ---- Drinking Water Act, 42 U.S.C.A. (S) 3803 et -- -75- seq.; the Oil Pollution Act of 1990, 33 U.S.C.A. (S) 2701 et seq.; the Emergency - ---- -- --- Planning and the Community Right-to-Know Act of 1986, 42 U.S.C.A. (S) 11001 et -- seq., the Hazardous Material Transportation Act, 49 U.S.C.A. (S) 1801 et seq. - ---- and the Occupational Safety and Health Act, 29 U.S.C.A. (S) 651 et seq.; 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 a Subsidiary of the Borrower 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 being or having been a general partner of such person. "Escrowed Amount" shall mean the portion of the proceeds of the New Subordinated Notes which is deposited in an escrow account in accordance with the terms of the documentation in respect of the New Subordinated Notes and is used to make payments of principal or interest in respect of the New Subordinated Notes and any cash investment income earned thereon to the extent actually received. "Escrowed Securities" shall have the meaning provided in Section 9.05(viii). "Eurodollar Loan" shall mean each Loan designated as such by the Borrower at the time of the incurrence thereof or conversion thereto. "Eurodollar Rate" shall mean for any Interest Determination Date with respect to an Interest Period for a Eurodollar Loan, the rate per annum obtained by dividing (i)(a) per annum rate for deposits in Dollars for a period -------- corresponding to the duration of the relevant Interest Period which appears on Telerate Page 3750 at approximately 11:00 a.m. (London time) on such Interest Determination Date or (b) if such rate does not appear on Telerate Page 3750 on such Interest Determination Date, per annum rate (rounded upward to the nearest 1/16 of one percent) at which deposits in Dollars are offered by Administrative Agent to first-class banks in the London interbank market, in the approximate amount of Administrative Agent's relevant Eurodollar Loan and having a maturity approximately equal to such Interest Period, at approximately 11:00 a.m. (London time) on such Interest Determination Date by (ii) 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). The Eurodollar Rate shall be rounded to the next higher multiple of 1/100 of 1% if the rate is not such a multiple. The reference to Telerate Page 3750 in this definition shall be construed to be a reference to the relevant page or any other page -76- that may replace such page on the Telerate service or any other service that may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association Interest Settlement Rates for deposits in Dollars. "Event of Default" shall have the meaning provided in Section 10. "Excess Cash Flow" shall mean, for any period, the remainder of (i) the sum of (a) Adjusted Consolidated Net Income for such period and (b) the decrease, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period, minus (ii) the sum of (a) the amount of all Capital Expenditures made by the Borrower and its Subsidiaries pursuant to Sections 9.07(a), (b) and (d) during such period, (b) the aggregate principal amount of permanent principal payments of Indebtedness for borrowed money of the Borrower and its Subsidiaries (other than repayments of Loans, provided that repayments -------- of Loans shall be deducted in determining Excess Cash Flow if such repayments were (x) required as a result of a Scheduled Repayment under Section 4.02(b) or (y) made as a voluntary prepayment with internally generated funds (but in the case of a voluntary prepayment of Revolving Loans or Swingline Loans, only to the extent accompanied by a voluntary reduction to the Total Revolving Loan Commitment in an equal amount)) during such period and (c) 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 date occurring 100 days after the last day of each fiscal year of the Borrower (beginning with its fiscal year ending December 31, 1998). "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. "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 Indebtedness Agreements" shall have the meaning provided in Section 5.05. "Facility Manager" shall mean each manager under a Hotel Property Management Agreement of a Hotel Property owned or leased by the Borrower or any Subsidiary Guarantor. "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 -77- 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. "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. "Foreign Subsidiary" shall mean each Subsidiary of the Borrower other than a Domestic Subsidiary. "GAAP" shall have the meaning provided in Section 13.07(a). "Hazardous Materials" shall mean (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; (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; and (c) any other chemical, material or substance, the Release of which is prohibited, limited or regulated by any governmental authority. "Hotel Property" shall mean each hotel owned or leased directly by the Borrower or any of its Subsidiaries (including the furniture, fixture and equipment thereon), provided that the term "Hotel Property" shall not include -------- any casino or gaming hotel or any hotel owned or leased by an Unrestricted Subsidiary. "Hotel Property Management Agreement" shall mean an agreement, in form and substance reasonably satisfactory to the Agents, with respect to the management of a Hotel Property. "IBJ" shall mean The Industrial Bank of Japan, Limited, in its individual capacity. "Immaterial Subsidiary" shall mean any Subsidiary of the Borrower that does not have assets with a fair market value or book value in excess of $1,000,000 and has not had revenues in excess of $1,000,000 for the Test Period then most recently ended and whose obligations are non-recourse to the Borrower or any other Subsidiary of the Borrower that is not an Immaterial Subsidiary, provided that (x) a Subsidiary shall not be considered to be an Immaterial Subsidiary for purposes of Sections 10.05 and 10.08 if more than 15 other -78- Subsidiaries are affected by the events, acts or conditions described in Sections 10.05 and 10.08 and (y) the net income of Hotel Properties of Immaterial Subsidiaries affected by the events, acts or conditions described in Sections 10.05 and 10.08 shall not be included in the determination of Consolidated Net Income. "Indebtedness" shall mean, as to any Person, without duplication, (i) all indebtedness (including principal, interest, fees and charges) of such Person for borrowed money or for the deferred purchase price of property or services, (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) or (vii) 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 (provided that, if the Person has not assumed or -------- otherwise become liable in respect of such Indebtedness, such Indebtedness shall be deemed to be in an amount equal to the fair market value of the property to which such Lien relates as determined in good faith 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, and (vii) all obligations under any Interest Rate Protection Agreement or Other Hedging Agreement or under any similar type of agreement or arrangement. Notwithstanding the foregoing, Indebtedness shall not include obligations under (or in respect of) construction contracts (to the extent such obligations do not constitute Indebtedness for borrowed money), trade payables and accrued expenses incurred by any Person in accordance with its customary practices and in the ordinary course of business of such Person. "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 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. "Issuing Bank" shall mean IBJ and any other Bank which at the request of the Borrower and with the consent of the Administrative Agent (which consent shall not be unreasonably withheld) 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 only Issuing Bank on the Restatement Effective Date is IBJ. "Leasehold" of any Person shall mean all of the right, title and interest of such Person as lessee or licensee in, to and under any lease or license of land, improvements and/or fixtures. -79- "L/C Supportable Obligations" shall mean (i) obligations of the Borrower or any of its Subsidiaries incurred in the ordinary course of business with respect to workers compensation, surety bonds and other similar statutory obligations and (ii) such other obligations of the Borrower or any of its Subsidiaries as are otherwise permitted to exist pursuant to (or otherwise not restricted by) the terms of this Agreement. "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). "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). "Loan" shall mean each Tranche A Term Loan, each Tranche B Term Loan, each Tranche C Term Loan, each Tranche D Term Loan, each Revolving Loan and each Swingline Loan. "Management Agreements" shall have the meaning provided in Section 5.05. "Manager Subordination Agreement" shall mean an agreement, in form and substance reasonably satisfactory to the Agents, in respect of a Hotel Property whereby, inter alia, the manager thereof subordinates certain of the ----- ---- obligations, owed to it under the respective Hotel Property Management Agreement, to the payment of the Obligations hereunder. "Mandatory Borrowing" shall have the meaning provided in Section 1.01(g). "Margin Stock" shall have the meaning provided in Regulation U. "Material Leases" shall have the meaning provided in Section 5.05. "Maturity Date" shall mean, with respect to any Tranche of Loans, the A/RF Maturity Date, the B Maturity Date, the C Maturity Date, the D Maturity Date or the Swingline Expiry Date, as the case may be. "Maximum Swingline Amount" shall mean $10,000,000. -80- "Minimum Borrowing Amount" shall mean (i) for Swingline Loans, $250,000 and (ii) for all other Loans, $2,500,000. "Moody's" shall mean Moody's Investors Service, Inc. "MSSF" shall mean Morgan Stanley Senior Funding, Inc., in its individual capacity. "NAIC" shall mean the National Association of Insurance Commissioners. "Net Debt Proceeds" shall mean, with respect to each incurrence of Indebtedness for borrowed money by any Person, the cash proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) received by such Person from the respective incurrence of such Indebtedness for borrowed money. "Net Equity Proceeds" shall mean, with respect to each issuance or sale of any equity by any Person or any capital contribution to such Person, the cash proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) received by such Person from the respective sale or issuance of its equity or from the respective capital contribution. "Net Escrowed Amount" shall mean the Escrowed Amount less any amounts that are released from time to time from the relevant escrow account in order to make payments on or in respect of the New Subordinated Notes. "Net Insurance Proceeds" shall mean, with respect to any Recovery Event, the cash proceeds (net of reasonable costs and taxes incurred in connection with such Recovery Event) received by the respective Person in connection with the respective Recovery Event. "Net Sale Proceeds" shall mean, for any asset sale, the gross 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 sale of assets, net of the reasonable costs of such sale (including fees and commissions, payments of unassumed liabilities relating to the assets sold and required payments of any Indebtedness (other than Indebtedness under the Credit Documents or any Indebtedness owned to the Borrower or a Subsidiary thereof) which is secured by the respective assets which were sold), and the incremental taxes paid or payable as a result of such asset sale. "Net Subordinated Notes Amount" shall mean the aggregate principal amount originally issued pursuant to the New Subordinated Notes less the Net Escrowed Amount. "New Bank" shall mean each of the Persons listed on Schedule I that is not an Original Bank. "New Subordinated Notes" shall have the meaning provided in Section 9.04(viii). -81- "Non-Defaulting Bank" shall mean and include each Bank other than a Defaulting Bank. "Note" shall mean each Tranche A Term Note, each Tranche B Term Note, each Tranche C Term Note, each Tranche D Term Note, each Revolving Note and the Swingline Note. "Notice of Borrowing" shall have the meaning provided in Section 1.03(a). "Notice of Conversion" shall have the meaning provided in Section 1.06. "Notice Office" shall mean the office of the Administrative Agent located at 1251 Avenue of the Americas, New York, NY 10020-1104 Attention: Chris Droussiotis, with a copy to IBJ Agent Services, One State Street, New York, NY 10004 Attention: Kevin Miles, 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 any Agent, the Collateral Agent or any Bank pursuant to the terms of this Agreement or any other Credit Document. "Original Banks" shall mean each Person which is a Bank under, and as defined in, the Original Credit Agreement on the Restatement Effective Date. "Original Credit Agreement" shall have the meaning provided in the first WHEREAS clause to this Agreement. "Original Effective Date" shall mean September 26, 1997. "Original Letters of Credit" shall mean the letters of credit previously issued under the Original Credit Agreement. "Original Revolving Loans" shall mean the revolving loans under the Original Credit Agreement. "Original Swingline Loans" shall mean the swingline loans under the Original Credit Agreement. "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(a). "Payment Office" shall mean the office of the Administrative Agent located at One State Street, New York, NY 10004, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. -82- "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 CapEx Amount" shall mean on any date of the determination thereof an amount equal to (i) 5% of the aggregate gross revenues from Hotel Properties owned or leased by the Borrower or any of its Wholly-Owned Subsidiaries for the CapEx Test Period last ended less (ii) the amount theretofore expended by the Borrower and its Subsidiaries to make Capital Expenditures pursuant to Section 9.07(a) during the period commencing on the later of October 1, 1997 or the first day of such CapEx Test Period and ending on such date of determination. "Permitted Encumbrances" shall mean, with respect to any Real Property, such exceptions to title (i) which, individually or in the aggregate, do not materially detract from the value of such Real Property or (ii) are otherwise acceptable to the Agents in their reasonable discretion. "Permitted Facility Manager" shall mean, with respect to each Hotel Property owned or leased by a Subsidiary of Borrower, a Wholly-Owned Subsidiary of the Borrower or another hotel management company in good standing. "Permitted Holders" shall mean the directors of the Borrower on the Restatement Effective Date, their spouses and any one or more of their lineal descendants and their spouses or any trust which has been created solely for the benefit of any such Person or any corporation, partnership or other entity controlled by any such Person. "Permitted Liens" shall have the meaning provided in Section 9.01. "Permitted Redemption" shall mean the redemption or repurchase of New Subordinated Notes so long as the amount expended for all such repurchases or redemptions does not exceed the lesser of (a) $75,000,000 minus all Dividends paid pursuant to Section 9.03(iv) or (b) $25,000,000. "Person" shall mean any individual, partnership, limited liability company, 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 pension plan as defined in Section 3(2) 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 -83- Borrower or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan. "Pledge Agreement" shall mean the Pledge Agreement, dated as of September 26, 1997, executed and delivered pursuant to the Original Credit Agreement, as same may from time to time be amended, modified or supplemented (including by the addition of certain additional Credit Parties as parties thereto as required by Section 5.08 hereof) in accordance with the terms thereof. "Pledge Agreement Collateral" shall mean all "Collateral" as defined in the Pledge Agreement. "Pledged Securities" shall have the meaning provided in the Pledge Agreement. "Pledged Stock" shall have the meaning provided in the Pledge Agreement. "Prime Lending Rate" shall mean the rate which the Administrative Agent 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. The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "Projections" mean the financial assumptions and projections prepared by the Borrower, dated May, 2000 and delivered to Agents and the Banks prior to the Restatement Effective Date. "Qualified Convertible Subordinated Notes" shall mean New Subordinated Notes issued by the Borrower which (i) are convertible into common equity of the Borrower, (ii) bear interest (after giving effect to any original issue discount) at a rate per annum not to exceed 7.50% and (iii) mature not less than one year after the latest Maturity Date. "Qualified Preferred Stock" shall mean any preferred stock of the Borrower so long as the terms of any such preferred stock (i) do not contain any mandatory put, redemption, repayment, sinking fund or other similar provision occurring before December 31, 2007, (ii) do not require the cash payment of dividends prior to December 31, 2007 (provided that the terms of Qualified Preferred Stock shall provide that the payment of such Dividends are otherwise subject to the provisions set forth in this Agreement, as same may be amended, modified, replaced or refinanced from time to time), (iii) do not contain any covenants that are more restrictive in any material respect than those covenants contained in any indenture in respect of the New Subordinated Notes, (iv) do not grant the holders thereof any voting rights except for (x) voting rights required to be granted to such holders under applicable law and (y) limited customary voting rights on fundamental matters such as mergers, consolidations, sales of all or substantially all of the assets of the Borrower, liquidations involving the Borrower or amendments to any of the covenants set forth therein, and (v) are otherwise reasonably satisfactory to the Agents. -84- "Quarterly Payment Date" shall mean the last Business day of each March, June, September and December occurring after the Original Effective Date. "RCRA" shall mean the Resource Conservation and Recovery Act, as the same may be amended from time to time, 42 U.S.C. (S) 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 of any cash insurance proceeds or condemnation awards payable (i) by reason of theft, loss, physical destruction or damage or any other similar event with respect to any property or assets of the Borrower or any of its Subsidiaries and (ii) under any policy of insurance required to be maintained under Section 8.03. "Register" shall have the meaning provided in Section 13.16. "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 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. "Related Business" shall mean the business of developing, owning and operating lodging facilities, conducted by the Borrower and its Subsidiaries (or, if the reference is to an Unrestricted Subsidiary, by such Unrestricted Subsidiary) and any and all related businesses in support of and ancillary to or reasonably related to such business of developing, owning and operating lodging facilities. "Related Fund" shall mean, with respect to any Bank that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Bank or by an Affiliate of such investment advisor. "Release" shall have the meaning provided such term in CERCLA. "Replaced Bank" shall have the meaning provided in Section 1.13. "Replacement Bank" shall have the meaning provided in Section 1.13. -85- "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043. "Required Banks" shall mean Non-Defaulting Banks, the sum of whose outstanding Term Loans (and Term Loan Commitments, if any) and Revolving Loan Commitments (or after the termination of the Revolving Loan Commitments, outstanding Revolving Loans and Percentage of Swingline Loans and Letter of Credit Outstandings) represent an amount greater than 50% of the sum of all outstanding Term Loans (or Term Loan Commitments, if any) of Non-Defaulting Banks and the Total Revolving Loan Commitment (or after the termination of the Total Revolving Loan Commitment, the sum of the then total outstanding Revolving Loans of Non-Defaulting Banks and the aggregate Percentages of all Non- Defaulting Banks of the total outstanding Swingline Loans and Letter of Credit Outstandings at such time). "Restatement Effective Date" shall have the meaning provided in Section 13.10. "Revolving Loan" shall have the meaning provided in Section 1.01(e). "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 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 Section 1.13 or 13.04(b). "Revolving Loan Commitment Commission" shall have the meaning provided in Section 3.01(a)(iii). "Revolving Note" shall have the meaning provided in Section 1.05(a). "Run Rate Leverage Ratio" shall mean, at any time, the ratio of Consolidated Debt at such time to Consolidated EBITDA for the most recently ended Test Period. "S&P" shall mean Standard & Poor's Ratings Services. "Schedule Repayments" shall mean Tranche B Term Loan Scheduled Repayments, Tranche C Term Loan Scheduled Repayments and Tranche D Term Loan Scheduled Repayments. "SEC" shall have the meaning provided in Section 8.01(g). "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. -86- "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Security Agreement" shall mean the Security Agreement, dated as of September 26, 1997, executed and delivered pursuant to the Original Credit Agreement, as same may from time to time be amended, modified or supplemented (including by the addition of certain additional Credit Parties as parties thereto as required by Section 5.08 hereof) in accordance with the terms thereof. "Security Agreement Collateral" shall mean all "Collateral" as defined in the Security Agreement. "Security Documents" shall mean the Pledge Agreement and the Security Agreement. "Senior Debt Leverage Ratio" shall mean on any date a ratio calculated as provided in the definition of Run Rate Leverage Ratio contained herein, provided that the term "Consolidated Senior Debt" be deemed inserted in lieu of the term "Consolidated Debt" appearing therein. "Shareholders' Agreements" shall have the meaning provided in Section 5.05. "Sole Lead Arranger" shall mean MSSF in its capacity as Sole Lead Arranger for the Banks hereunder. "Standby Letter of Credit" shall have the meaning provided in Section 2.01(a). "Stated Amount" of each Letter of Credit shall mean, at any time, the maximum amount available to be drawn thereunder (in each case determined without regard to whether any conditions to drawing could then be met). "Subsidiary" shall mean, as to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time 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, limited liability company, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% 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. "Subsidiary Guarantor" shall mean each Subsidiary of the Borrower designated as a "Subsidiary Guarantor" on Schedule V hereto or which executes a guarantee after the Restatement Effective Date pursuant to Section 9.16. -87- "Subsidiaries Guaranty" shall mean the Subsidiaries Guaranty, dated as of September 26, 1997, executed and delivered pursuant to the Original Credit Agreement, as same may from time to time be amended, modified or supplemented (including by the addition of certain additional Credit Parties as parties thereto as required by Section 5.08 hereof) in accordance with the terms thereof. "Swingline Bank" shall mean IBJ and its successors and assigns. "Swingline Expiry Date" shall mean the date which is five Business Days prior to the A/RF Maturity Date. "Swingline Loan" shall have the meaning provided in Section 1.01(f). "Swingline Note" shall have the meaning provided in Section 1.05(a). "Tax Benefit" shall have the meaning provided in Section 4.04(c). "Tax Sharing Agreements" shall have the meaning provided in Section 5.05. "Taxes" shall have the meaning provided in Section 4.04(a). "Term Loan" shall mean each Tranche A Term Loan, Tranche B Term Loan, Tranche C Term Loan and Tranche D Term Loan. "Term Loan Facility" shall mean each of the Tranche A Term Loan Facility, the Tranche B Term Loan Facility, the Tranche C Term Loan Facility and the Tranche D Term Loan Facility. "Test Period" shall mean in respect of any date, the period of four consecutive fiscal quarters of the Borrower last ended prior to such date for which financial statements have been delivered (or should have been delivered on or before such date) to the Administrative Agent pursuant to Section 8.01(a) or (b), as the case may be, in each case taken as one accounting period. "Total Commitments" shall mean, at any time, the sum of the Commitments of each of the Banks. "Total Revolving Loan Commitment" shall mean, at any time, the sum of the Revolving Loan Commitments of each of the Banks, it being understood that on the Restatement Effective Date, the Total Revolving Loan Commitment shall equal $350,000,000. "Total Tranche D Term Loan Commitment" shall mean, at any time, the sum of the Tranche D Term Loan Commitments of each of the Banks. "Total Unutilized Revolving Loan Commitment" shall mean, at any time, an amount equal to the remainder of (x) the Total Revolving Loan Commitment then in effect less -88- (y) the sum of the aggregate principal amount of Revolving Loans and Swingline Loans then outstanding plus the then aggregate amount of Letter of Credit Outstandings. "Trade Letter of Credit" shall have the meaning provided in Section 2.01(a). "Tranche" shall mean the respective facility and commitments utilized in making Loans hereunder, with there being five separate Tranches, i.e., ---- Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans, Tranche D Term Loans, Revolving Loans and Swingline Loans. "Tranche A Term Loan" shall have the meaning provided in Section 1.01(a). "Tranche A Term Loan Facility" shall mean the credit facility evidenced by the Tranche A Term Loans. "Tranche A Term Note" shall have the meaning provided in Section 1.05(a). "Tranche B Term Loan" shall have the meaning provided in Section 1.01(b). "Tranche B Term Loan Facility" shall mean the credit facility evidenced by the Tranche B Term Loans. "Tranche B Term Loan Scheduled Repayment" shall have the meaning provided in Section 4.02(b)(ii). "Tranche B Term Note" shall have the meaning provided in Section 1.05(a). "Tranche C Term Loan" shall have the meaning provided in Section 1.01(c). "Tranche C Term Loan Facility" shall mean a credit facility evidenced by the Tranche C Term Loans. "Tranche C Term Loan Scheduled Repayment" shall have the meaning provided in Section 4.02(b)(iii). "Tranche C Term Note" shall have the meaning provided in Section 1.05(a). "Tranche D Term Loan Commitment" shall mean for each Bank, the amount set forth opposite such Bank's name in Schedule I hereto directly below the column entitled "Tranche D Term Loan Commitment," as same may be (x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Bank pursuant to Sections 1.03 and 13.04(b). "Tranche D Term Loan Facility" shall mean the credit facility evidenced by the Tranche D Term Loans. -89- "Tranche D Term Loan Scheduled Repayment" shall have the meaning provided in Section 4.02(b)(iv). "Tranche D Term Note" shall have the meaning provided in Section 1.05(a). "Type" shall mean the type of 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 shall mean 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, determined in accordance with actuarial assumptions at such time consistent with Statement of Financial Accounting Standards No. 87, exceeds the market value of the assets allocable thereto. "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(a). "Unrestricted Subsidiary" shall mean any Subsidiary of the Borrower that, at the time of determination, 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 a Related Business. The Borrower may designate any Person acquired after the Restatement Effective Date to be an Unrestricted Subsidiary so long as (a) no Default or Event of Default is existing or will occur as a consequence thereof, and (b) such Subsidiary does not own any equity interests in, or hold any Lien on any property of, the Borrower or any other Subsidiary (excluding other Unrestricted Subsidiaries). Any such designation shall also be deemed to constitute an investment pursuant to Sections 9.05(x) or (xi), as the case may be, in an amount equal to the Borrower's and its Subsidiaries' percentage ownership interest of such Unrestricted Subsidiary of the sum of the net assets (with assets other than cash and Cash Equivalents valued at fair market value) of such Subsidiary at the time of the designation (which investment must be permitted to be made in accordance with the requirements of Sections 9.05(x) or (xi), as the case may be). 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 the provisions of Section 9.16 are complied with for such Subsidiary at the time of 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. "Unutilized Revolving Loan Commitment" with respect to any Bank at any time shall mean such Bank's Revolving Loan Commitment at such time, if any, less the sum of (i) the aggregate outstanding principal amount of Revolving Loans made by such Bank and (ii) such Bank's Percentage of the Letter of Credit Outstandings. -90- "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, limited liability company, 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 IBJ as Administrative ----------- Agent (for purposes of this Section 12, the term "Administrative Agent" shall include IBJ in its capacity as Collateral Agent pursuant to the Security Documents) to act as specified herein and in the other Credit Documents. The Banks hereby designate MSSF as Sole Lead Arranger (for purposes of this Section 12, the term "Sole Lead Arranger" also shall include MSSF in its capacity as Sole Book Runner) to act as specified herein and in the other Credit Documents. Each Bank hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, any 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 duties hereunder and thereunder as are specifically delegated to or required of such 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. No Agent shall have any duties or ---------------- responsibilities except those expressly set forth in this Agreement and in the other Credit Documents. Neither any 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; no 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 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 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 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 the Borrower and each of its Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of the Borrower and each of its Subsidiaries and, except as expressly provided in this Agreement, no Agent shall have any duty or responsibility, either initially or on a continuing basis, to provide any Bank or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the -91- making of the Loans or at any time or times thereafter. No 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, collectability, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of the Borrower or any of its Subsidiaries 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 the Borrower or any of its Subsidiaries 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 such Agent shall have received instructions from the Required Banks; and such Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Bank or the holder of any 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 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 to the extent that any -------- Agent is reimbursed by the Borrower for amounts paid by the Banks pursuant to this Section 12.06, such Agent shall reimburse the Banks for such amounts; provided further 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 Each Agent in Its Individual Capacity. With respect to its ------------------------------------- obligation to make Loans, or issue or participate in Letters of Credit, 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 Notes" or any similar terms shall, unless the context clearly -92- 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, investment banking, trust or other business with, or provide debt financing, equity capital or other services (including financial advisory services) to, any Credit Party or any Affiliate of any Credit Party (or any Person engaged in a similar business with any Credit Party or any Affiliate thereof) 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 or any Affiliate of any 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 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 such 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 Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 12.09 Resignation by the Administrative Agent and the Sole Lead ------------------------------------------------ Arranger. (a) The Administrative Agent and/or the Sole Lead Arranger may resign from the performance of all their respective functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days' prior written notice to the Banks and the Borrower (provided that no such notice shall be required to be given to the Borrower if a Default or an Event of Default of the type described in Section 10.05 exists with respect to the Borrower). Such resignation, in the case of the Administrative Agent, shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below, and such resignation, in the case of the Sole Lead Arranger, 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 thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower (it being understood and agreed that (i) so long as no Default or Event of Default exists at such time such successor Administrative Agent shall be required to be reasonably satisfactory to the Borrower and (ii) at all other times any Non-Defaulting Bank is deemed to be 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 or delayed), shall then appoint a 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 30th Business Day after the date such notice of resignation was given by the Administrative Agent, Administrative Agent's resignation shall become effective and the -93- Required 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 agrees that it shall: ------------------------- (i) whether or not the transactions contemplated herein are consummated, pay all reasonable out-of-pocket costs and expenses of the Agents (including, without limitation, the reasonable fees and disbursements of White & Case LLP), in connection with the preparation, execution, delivery and performance of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein, any amendment, waiver or consent relating hereto or thereto, of the Agents in connection with its syndication efforts with respect to this Agreement and, upon the occurrence and during the continuance of an Event of Default, the reasonable costs and expenses of each of the Agents and each of the Banks in connection with the enforcement of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein (including, without limitation, the reasonable fees and disbursements of counsel for the Agents and, following an Event of Default, for each of the Banks), provided that the Borrower's obligation to reimburse the Agents for the -------- reasonable fees and disbursements of White & Case LLP incurred in connection with the preparation, execution and delivery of this Agreement shall be subject to the letter dated May 10, 2000 from the Sole Lead Arranger to the Borrower; (ii) pay and hold each of the Banks harmless from and against any and all present and future stamp, excise and other similar documentary 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 Loans hereunder or the consummation of any transactions contemplated herein 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 any Credit Party or any of its Subsidiaries, the Release, generation, storage, transportation, handling or disposal of Hazardous Materials at any location, whether or not owned or operated by any Credit Party or any of its 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 any Credit Party, any of its Subsidiaries or any Real Property owned or at any time operated by any Credit Party or any of its Subsidiaries, including, in each case, without limitation, the reasonable -94- 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. 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 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 any Credit Party against and on account of the Obligations and liabilities of such Credit Party 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 any Credit Party, at the address specified opposite its signature below or in the other relevant Credit Documents; if to any Bank, at its address specified on Schedule II; if to the Sole Lead Arranger, at the address specified 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 any Agent or any Credit Party shall not be effective until received by such Agent or such Credit Party. 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, the Borrower may not -------- ------- assign or transfer any of its rights, obligations or interest hereunder or under any other Credit Document without the prior written consent of the Banks and, provided further, that, although any Bank may transfer, assign or grant - ---------------- participations -95- in its rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder (and may not transfer or assign all or any portion of its 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 Loan, Note or Letter of Credit (unless such Letter of Credit is not extended beyond the A/RF 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 Commitments shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan 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 under all of the Security Documents (except as expressly provided in the Credit Documents) supporting the 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) and/or its outstanding Term Loans (or, if not theretofore terminated, Term Loan Commitment) to (i) one or more Banks, (ii) any Related Fund that is an Eligible Transferee or (iii) its parent company, or any Affiliate of such Bank which is an Eligible Transferee and which is at least 50% owned by such Bank or its parent company or (y) assign all, or if less than all, a portion equal to at least $1,000,000 in the aggregate for the assigning Bank or assigning Banks, of such Revolving Loan Commitment (and related outstanding Obligations hereunder) and/or its outstanding Term Loans (or, if not theretofore terminated, Term Loan Commitment) to one or more Eligible Transferees (treating any fund that invests in commercial loans and any other fund that invests in commercial loans and is managed by the same investment advisor of such fund or by an Affiliate of such investment advisor as a single assignee), 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 Commitments (and/or outstanding Loans, as the case may be) of such new Bank and of the existing Banks, (ii) upon surrender of the old Notes (or, upon such assigning Bank's indemnifying the Borrower for any lost Note pursuant to a customary indemnification agreement), new 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 Notes to be in conformity with the requirements of Section 1.05 (with appropriate -96- modifications) to the extent needed to reflect the revised Commitments (and/or outstanding Loans, as the case may be), (iii) the consent (which shall not be unreasonably withheld or delayed) of each Agent shall be required in connection with any such assignment pursuant to clause (y) above, (iv) so long as no Default or Event of Default exists, the consent of the Borrower shall be required in connection with any assignment to an Eligible Transferee pursuant to clause (y) above (which consent shall not be unreasonably withheld or delayed), and (v) the Administrative Agent shall receive at the time of each such assignment (other than in connection with an assignment by a Bank to an Affiliate of such Bank or to a Related Fund of any Bank), from the assigning or assignee Bank, the payment of a non-refundable assignment fee of $1,500 or in the case of an assignment to an assignee which is not a Bank, the payment of a nontransferable assignment fee of $3,000 (except that in the case of assignments on the same day by a Bank to more than one fund managed or advised by the same investment advisor or by an Affiliate of such investment advisor (which funds are not then Banks hereunder), only a single $3,000 assignment fee shall be payable for all such assignments by such Bank to such funds) and, provided -------- further, that such transfer or assignment will not be effective until recorded - ------- by the Administrative Agent on the Register pursuant to Section 13.16. 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 Commitments. 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 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 Commitments 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 or reimburse 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) Notwithstanding any other provision set forth in this Agreement, any Bank may, without the consent of the Borrower, the Administrative Agent or the Sole Lead Arranger, pledge its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Bank from such Federal Reserve Bank or to any trustee for, or any other representative of, holders of obligations owed or securities issued, by such Bank, as security for such obligations or securities; provided that any foreclosure or similar action by -------- such trustee or representative shall be subject to the provisions of this Section 13.04 concerning assignments. 13.05 No Waiver; Remedies Cumulative. No failure or delay on the ------------------------------ part of any Agent or any Bank or any holder of any Note in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between any Borrower or any other Credit Party and any Agent or any Bank or the holder of any 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 -97- 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 holder of any 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 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 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. 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) ("GAAP"); provided that, (i) except as otherwise specifically provided herein, -------- all computations of Excess Cash Flow and all computations determining compliance with Sections 9.08 through 9.11, inclusive, and the determination of the Applicable Margin and Applicable Commitment Commission Percentage shall utilize accounting principles and policies in conformity with those used to prepare the annual financial statements first delivered to the Banks pursuant to Section 7.05(a) and (ii) for purposes of calculating financial terms, all covenants and related definitions, all such calculations based on the operations of the Borrower and its Subsidiaries on a consolidated basis shall be made without giving effect to the operations of any Unrestricted Subsidiaries. (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 -98- (including the first day but excluding the last day) occurring in the period for which such interest, Commitment Commission or other 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 NON-EXCLUSIVE 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 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, 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 THE BORROWER 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. -99- (c) EACH OF THE PARTIES TO THIS AGREEMENT 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. (a) This Agreement shall become effective on ------------- the date (the "Restatement Effective Date") on which (i) each of the Borrower, each Subsidiary Guarantor, each New Bank, the Required Banks (determined immediately before the occurrence of the Restatement Effective Date) 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 and (ii) the conditions contained in Sections 5 and 6 are met to the reasonable satisfaction of the Administrative Agent and the Required Banks (determined immediately after the occurrence of the Restatement Effective Date. Unless the Agents received actual notice from any Bank that the conditions described in clause (ii) of the preceding sentence have not been met to its satisfaction, upon the satisfaction of the condition described in clause (i) of the immediately preceding sentence and upon the Agents' good faith determination that the conditions described in clause (ii) of the immediately preceding sentence have been met, then the Restatement Effective Date shall have deemed to have occurred, regardless of any subsequent determination that one or more of the conditions thereto had not been met. The Administrative Agent will give the Borrower, the Sole Lead Arranger and each Bank prompt written notice of the occurrence of the Restatement Effective Date. (b) Notwithstanding anything to the contrary contained in this Agreement or in any Note, interest and fees which have accrued under the Original Credit Agreement prior to the Restatement Effective Date but which remain unpaid on such date shall be payable at the times otherwise provided for in this Agreement (but calculated at the respective rates provided in the Original Credit Agreement prior to the Restatement Effective Date) for the interest and fees involved. In addition, any Eurodollar Loan that has an Interest Period which began prior to the Restatement Effective Date shall continue to bear interest at the Eurodollar Rate established for such Interest Period prior to the commencement of such Interest Period plus for any period prior to the Restatement Effective Date, the Applicable Margin established under the Original Credit Agreement for such Loans and for the period commencing on (and including) the Restatement Effective Date, the Applicable Margin established under this Agreement. -100- 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, 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 Loan or Note, or extend the stated expiration date of any Letter of Credit beyond the A/RF 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) (it being understood that any amendment or modification to the financial definitions in this Agreement or to Section 13.07(a) shall not constitute a reduction in the rate of interest or any Fees for purposes of this clause (i)), (ii) release all or substantially all of the Collateral (except as expressly provided in the Credit Documents) under all the Security Documents, (iii) amend, modify or waive any provision of this Section 13.12, (iv) 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 Loans and Commitments are included on the Original Effective Date) or (v) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement; provided further, that ---------------- no such change, waiver, discharge or termination shall (w) increase the 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 Commitments shall not constitute an increase of the Commitment of any Bank, and that an increase in the available portion of any Commitment of any Bank shall not constitute an increase in the Commitment of such Bank), (x) without the consent of each Issuing Bank, amend, modify or waive any provision of Section 2 or alter its rights or obligations with respect to Letters of Credit, (y) without the consent of each Agent affected thereby, 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 or (z) without the consent of the Collateral Agent, amend, modify or waive any provision relating to the rights or obligations of the Collateral Agent. (b) If, in connection with any proposed change, waiver, discharge or termination with respect to any of the provisions of this Agreement as contemplated by clauses (i) through (v), 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 clause (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- -101- consenting Bank's Commitments in accordance with Sections 3.02(b) and/or 4.01(b), provided that, unless the Commitments are terminated, and 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 Commitments and/or outstanding Loans 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 before 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 any of its Commitments or repay its 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). 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 Notes and the making and repayment of the Obligations. 13.14 Domicile of Loans. Each Bank may transfer and carry its 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 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). 13.15 Confidentiality. (a) Subject to the provisions of clause (b) --------------- of this Section 13.15, each Bank agrees that it will use its reasonable efforts not to disclose without the prior written consent of the Borrower (other than to its directors, 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 any Credit Party 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 any Credit Party 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 other than by virtue of a breach of this Section 13.15(a), (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, the Federal Deposit Insurance Corporation or the NAIC 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, (f) to any prospective or actual transferee or participant in connection with any contemplated transfer or participation of any of the Notes or Commitments or any interest therein by such Bank, provided, that such prospective transferee agrees -------- in writing with such Bank for the benefit of the Borrower to be subject to the provisions of this Section 13.15(a) and (g) to any direct or -102- indirect contractual counterparty in any swap, hedge or similar agreement (or to any such contractual counterparty's professional advisor, so long as such contractual counterparty (or such professional advisor) agrees to be bound by the provisions of this Section 13.15(a). (b) The Borrower hereby acknowledges and agrees that each Bank may share with any of its affiliates any information related to Credit Parties or any of their respective Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of the Credit Parties and their respective Subsidiaries, provided such Persons shall be subject to the provisions of this Section 13.15 to the same extent as such Bank), it being understood that for purposes of this Section 13.15(b) the term "affiliate" shall mean any direct or indirect holding company of a Bank as well as any direct or indirect Subsidiary of such holding company. 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 Commitments from time to time of each of the Banks, the Loans made by each of the Banks and each repayment in respect of the principal amount of the 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 Loans. With respect to any Bank, the transfer of the Commitments of such Bank and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. Upon receipt of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 13.04(b), the Administrative Agent shall record on the Register the assignment or transfer of all or part of any Commitments and Loans set forth in such Assignment and Assumption Agreement. 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 Loan, or as soon thereafter as practicable, the assigning or transferor Bank shall surrender the Note evidencing such Loan, and thereupon one or more new 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 Agent in performing its duties under this Section 13.16. 13.17 Limitation on Increased Costs. 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 it is obligated to pay an amount under any such Section within 180 days after the later of (x) the date such Bank incurs the respective increased costs, Taxes, loss, expense or liability, or 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, or 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 -103- 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, or 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 or any other Credit Document other than said Sections 1.10, 1.11, 2.06 and 4.04. 13.18 Acknowledgment and Agreement of Credit Parties. Each of the ---------------------------------------------- Credit Parties, by executing and delivering a counterpart of this Agreement, hereby consents to the increased extensions of credit pursuant to this Agreement which will be made available as a result of the amendment and restatement hereof on the Restatement Effective Date. All such extensions of credit, as well as the extensions of credit pursuant to the Original Credit Agreement shall be entitled to all benefits of (and shall be fully guaranteed pursuant to) each of the Guaranties and shall be fully secured pursuant to, and in accordance with the terms of, the various Security Documents. * * * -104- 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: - ------- 450 East Las Olas Boulevard EXTENDED STAY AMERICA, INC. Suite 1100 Ft. Lauderdale, FL 33301 Telephone No.: (954) 713-1600 Telecopier No.: (954) 713-1650 Attention: Gregory R. Moxley By: /s/ Gregory R. Moxley ------------------------------ Title: Chief Financial Officer MORGAN STANLEY SENIOR FUNDING, INC., Individually, as Sole Book Runner and as Sole Lead Arranger By: /s/ Todd Vannucci ----------------------------- Title: Vice President THE INDUSTRIAL BANK OF JAPAN, LIMITED, Individually and as Administrative Agent By: /s/ Takuya Honjo ----------------------------- Title: Deputy General Manager -105- ARCHIMEDES FUNDING II, LTD. By: ING Capital Advisors LLC, as Collateral Manager By: /s/ Wade T. Winter ------------------ Title: Vice President ARCHIMEDES FUNDING III, LTD. By: ING Capital Advisors LLC, as Collateral Manager By: /s/ Wade T. Winter ------------------------------------ Title: Vice President BANK ONE By: /s/ Bradley W. Lehl ------------------------------------ Title: Assistant Vice President BAVARIA TRR CORPORATION By: /s/ Frank B. Bilotta ------------------------------------ Title: Vice President BHF (USA) CAPITAL CORP. By: /s/ Nicholas Nouvel ------------------------------------ Title: Vice President By: /s/ Matthew Blesso ------------------------------------ Title: Associate CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ Karen Volk ------------------------------------ Title: Authorized Signatory -106- CARILLON HOLDING LIMITED By: /s/ Steven R. Sutermeister ------------------------------------ Title: Director CHEVY CHASE BANK By: /s/ Robert L. Smith ------------------------------------ Title: Vice President CREDIT INDUSTRIEL ET COMMERCIAL By: /s/ Marcus Edward ------------------------------------ Title: Vice President By: /s/ Sean Mounier ------------------------------------ Title: First Vice President ELF FUNDING TRUST I By: /s/ James Dondero, CFA, CPA ------------------------------------ Title: President ERSTE BANK By: /s/ Paul Judicke ------------------------------------ Title: Vice President By: /s/ John Runnion ------------------------------------ Title: First Vice President FIRST COMMERCIAL BANK (INCORPORATED IN TAIWAN R.O.C.) LOS ANGELES BRANCH By: /s/ June Shiong Lu ------------------------------------ Title: S.V.P. & General Manager -107- FIRST DOMINION FUNDING II By: /s/ Andrew H. Marshak ------------------------------------ Title: Managing Director FIRST DOMINION FUNDING III By: /s/ Andrew H. Marshak ------------------------------------ Title: Managing Director FLEET NATIONAL BANK By: /s/ Renee Ross Nadler ------------------------------------ Title: Managing Director GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ William E. Magee ------------------------------------ Title: Duly Authorized Signatory HELLER FINANCIAL, INC. By: /s/ K. Craig Gallehugh ------------------------------------ Title: Vice President HIGHLAND LEGACY LIMITED By: Highland Capital Management, L.P. as Collateral Manager By: /s/ James Dondero, CFA, CPA ------------------------------------ Title: President IMPERIAL BANK By: /s/ Ray Vadalma ------------------------------------ Title: Senior Managing Director -108- KZH III LLC By: /s/ Peter Chin ------------------------------------ Title: Authorized Agent KZH HIGHLAND-2 LLC By: /s/ Peter Chin ------------------------------------ Title: Authorized Agent KZH ING-1 LLC By: /s/ Peter Chin ------------------------------------ Title: Authorized Agent KZH ING-2 LLC By: /s/ Peter Chin ------------------------------------ Title: Authorized Agent KZH ING-3 LLC By: /s/ Peter Chin ------------------------------------ Title: Authorized Agent KZH LANGDALE LLC By: /s/ Peter Chin ------------------------------------ Title: Authorized Agent KZH PAMCO LLC By: /s/ Peter Chin ------------------------------------ Title: Authorized Agent KZH PONDVIEW LLC By: /s/ Peter Chin ------------------------------------ Title: Authorized Agent -109- KZH STERLING LLC By: /s/ Peter Chin ------------------------------------ Title: Authorized Agent LAND BANK OF TAIWAN, LOS ANGELES BRANCH By: /s/ Mayer Chen ------------------------------------ Title: SVP & General Manager MANUFACTURERS AND TRADERS TRUST COMPANY By: /s/ Kevin B. Quinn ------------------------------------ Title: Assistant Vice President ML CLO XII PILGRIM AMERICA (CAYMAN), LTD. By: Pilgrim Investments, Inc. as its investment manager By: /s/ Jason T. Groom ------------------------------------ Title: Assistant Vice President ML CLO XX PILGRIM AMERICA (CAYMAN), LTD. By: Pilgrim Investments, Inc. as its investment manager By: /s/ Jason T. Groom ------------------------------------ Title: Assistant Vice President -110- ML CLO XIX PILGRIM AMERICA (CAYMAN), LTD. By: Sterling Asset Manager, L.L.C., as its Investment Advisor By: /s/ Louis A. Pistecchia ------------------------------------ Title: Executive Vice President MOUNTAIN CAPITAL CLO I LTD. By: /s/ Darren P. Riley ------------------------------------ Title: Director MUIRFIELD TRADING LLC By: /s/ Ashley R. Hamilton ------------------------------------ Title: Assistant Vice President OLYMPIC FUNDING TRUST, SERIES 1999-1 By: /s/ Ashley R. Hamilton ------------------------------------ Title: Authorized Agent OPPENHEIMER SENIOR FLOATING RATE FUND By: /s/ David Foxhoven ------------------------------------ Title: AVP ORIX USA CORPORATION By: /s/ Hiroyuki Miyauchi ------------------------------------ Title: Executive Vice President -111- OSPREY INVESTMENT PORTFOLIO By: Citibank N.A., as Managers By: /s/ Mike Regan ------------------------------------ Title: Vice President PAM CAPITAL FUNDING, L.P. By: Highland Capital Management, L.P. as Collateral Manager By: /s/ James Dondero, CFA, CPA ------------------------------------ Title: President PAMCO CAYMAN, LTD. By: Highland Capital Management, L.P. as Collateral Manager By: /s/ James Dondero, CFA, CPA ------------------------------------ Title: President PILGRIM AMERICA HIGH INCOME INVESTMENTS, LTD. By: Pilgrim Investments, Inc. as its investment manager By: /s/ Jason T. Groom ------------------------------------ Title: Assistant Vice President PILGRIM CLO 1999-1 LTD. By: Pilgrim Investments, Inc. as its investment manager By: /s/ Jason T. Groom ------------------------------------ Title: Assistant Vice President -112- PILGRIM PRIME RATE TRUST By: Pilgrim Investments, Inc. as its investment manager By: /s/ Jason T. Groom ------------------------------------ Title: Assistant Vice President RZB FINANCE LLC By: /s/ Dieter Beintrexler ------------------------------------ Title: President By: /s/ Christoph Hoedl ------------------------------------ Title: Assistant Vice President SEQUILS-ING 1 (HBDGM), LTD. By: ING Capital Advisors LLC, as Collateral Manager By: /s/ Wade T. Winter ------------------------------------ Title: Vice President SEQUILS - PILGRIM I, LTD. By: Pilgrim Investments, Inc. as its investment manager By: /s/ Jason T. Groom ------------------------------------ Title: Assistant Vice President SKM-LIBERTY VIEW CBO, LTD. By: /s/ Kenneth C. Klegar ------------------------------------ Title: Authorized Signatory SRV-HIGHLAND, INC. By: /s/ Ashley R. Hamilton ------------------------------------ Title: Assistant Vice President -113- STANFIELD CLO LTD. By: Stanfield Capital Partners LLC as its Collateral Manager By: /s/ Gregory L. Smith ------------------------------------ Title: Partner STANFIELD/RMF TRANSATLANTIC CDO LTD. By: Stanfield Capital Partners LLC as its Collateral Manager By: /s/ Gregory L. Smith ------------------------------------ Title: Partner SUMMIT BANK By: /s/ Gregory Egli ------------------------------------ Title: Regional Vice President TORONTO DOMINION (NEW YORK), INC. By: /s/ David G. Parker ------------------------------------ Title: Vice President TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ Perry Vavoules ------------------------------------ Title: Senior Vice President TYLER TRADING, INC. By: /s/ Johnny E. Graves ------------------------------------ Title: President -114- ACKNOWLEDGEMENT AND AGREEMENT ----------------------------- Each of the undersigned, each being a Subsidiary Guarantor on the Restatement Effective Date (including each Subsidiary of the Borrower which was a Subsidiary Guarantor immediately before the Restatement Effective Date and each Subsidiary of the Borrower which becomes a Subsidiary Guarantor on the Restatement Effective Date) hereby acknowledges and agrees to the provisions of the foregoing amended and restated Agreement, and hereby agrees for the benefit of the Banks that (i) all extensions of credit pursuant thereto (including the increased extensions of credit made as a result of the occurrence of the Restatement Effective Date and all other obligations pursuant to this Agreement), shall be fully entitled to the benefits of (and shall be fully guaranteed and secured pursuant to the provisions of) all Subsidiaries Guaranties and Security Documents and (ii) all references in the Credit Documents to the "Credit Agreement" shall be deemed to be a reference to this Agreement. ESA 0102, Inc. ESA 0106, Inc. ESA 0121, Inc. ESA 0123, Inc. ESA 0124, Inc. ESA 0125, Inc. ESA 0127, Inc. ESA 0153, Inc. ESA 0155, Inc. ESA 0161, Inc. ESA 0163, Inc. ESA 0174, Inc. ESA 0186, Inc. ESA 0201, Inc. ESA 0206, Inc. ESA 0231, Inc. ESA 0232, Inc. ESA 0280, Inc. ESA 0302, Inc. ESA 0303, Inc. ESA 0305, Inc. ESA 0311, Inc. ESA 0315, Inc. ESA 0328, Inc. ESA 0370, Inc. ESA 0371, Inc. ESA 0373, Inc. ESA 0381, Inc. ESA 0382, Inc. ESA 0417, Inc. ESA 0450, Inc. ESA 0454, Inc. ESA 0455, Inc. -115- ESA 0479, Inc. ESA 0510, Inc. ESA 0525, Inc. ESA 0527, Inc. ESA 0530, Inc. ESA 0532, Inc. ESA 0541, Inc. ESA 0552, Inc. ESA 0600, Inc. ESA 0640, Inc. ESA 0646, Inc. ESA 0660, Inc. ESA 0670, Inc. ESA 0675, Inc. ESA 0677, Inc. ESA 0680, Inc. ESA 0733, Inc. ESA 0734, Inc. ESA 0737, Inc. ESA 0745, Inc. ESA 0752, Inc. ESA 0753, Inc. ESA 0780, Inc. ESA 0788, Inc. ESA 0789, Inc. ESA 0858, Inc. ESA 0859, Inc. ESA 0860, Inc. ESA 0861, Inc. ESA 0869, Inc. ESA 0884, Inc. ESA 0885, Inc. ESA 0901, Inc. ESA 0990, Inc. ESA 0991, Inc. ESA 0992, Inc. ESA 0993, Inc. ESA 0994, Inc. ESA 0996, Inc. ESA 1500, Inc. ESA 1501, Inc. ESA 1502, Inc. ESA 1510, Inc. ESA 1514, Inc. ESA 1546, Inc. ESA 1550, Inc. ESA 1591, Inc. ESA 1594, Inc. -116- ESA 1596, Inc. ESA 1634, Inc. ESA 2509, Inc. ESA 2522, Inc. ESA 3504, Inc. ESA 4012, Inc. ESA 4013, Inc. ESA 4016, Inc. ESA 4019, Inc. ESA 4023, Inc. ESA 7502, Inc. ESA 7508, Inc. ESA 7513, Inc. ESA Arizona, Inc. ESA Arkansas, Inc. ESA COL, Inc. ESA Connecticut, Inc. ESA Florida, Inc. ESA Georgia, Inc. ESA Idaho, Inc. ESA Illinois, Inc. ESA Indiana, Inc. ESA Iowa, Inc. ESA Kansas, Inc. ESA Kentucky, Inc. ESA Louisiana, Inc. ESA Maryland, Inc. ESA Michigan, Inc. ESA Minnesota, Inc. ESA Mississippi, Inc. ESA Missouri, Inc. ESA New Jersey, Inc. ESA New Mexico, Inc. ESA New York, Inc. ESA Ohio, Inc. ESA Oklahoma, Inc. ESA Oregon, Inc. ESA South Carolina, Inc. ESA Tejas, Inc. ESA Tennessee, Inc. ESA Utah, Inc. ESA Virginia, Inc. ESA Washington, Inc. ESA Wisconsin, Inc. Extended Stay 0453, Inc. Extended Stay 0463, Inc. Extended Stay 0507, Inc. Extended Stay 0547, Inc. -117- Extended Stay 2506, Inc. Extended Stay 2511, Inc. Extended Stay America Redevelopment Corp. Extended Stay CA, Inc. Extended Stay MA, Inc. ESA Services, Inc. ESA Management, Inc. ESA West, Inc. ESA International, Inc. Studio Plus Hotels, Inc. Studio Plus Properties, Inc. -118- By: /s/ Gregory R. Moxley ----------------------------------- Title: Vice President - Finance On behalf of each Subsidiary Guarantor listed above -119- EX-27 12 0012.txt FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 6-MOS DEC-31-2000 DEC-31-2000 APR-01-2000 JAN-01-2000 JUN-30-2000 JUN-30-2000 10,066 10,066 0 0 7,443 7,443 0 0 0 0 63,495 63,495 2,109,114 2,109,114 163,920 163,920 2,029,063 2,029,063 82,654 82,654 917,000 917,000 0 0 0 0 950 950 938,746 938,746 2,029,063 2,029,063 0 0 133,236 247,176 0 0 51,972 102,903 27,427 54,490 0 0 18,420 35,564 35,417 54,219 14,168 21,689 21,249 32,530 0 0 0 0 0 0 21,249 32,530 0.22 0.34 0.22 0.34
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