-----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, GSePWmzhHejevLugRutfmQBBe09sKIlTL+LuBAMP2GYwHtj3Wja2TZERDHhJrOnu Asxxl4KMWaEOKl/d1wpFeA== 0000950123-01-501470.txt : 20010502 0000950123-01-501470.hdr.sgml : 20010502 ACCESSION NUMBER: 0000950123-01-501470 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ON COMMAND CORP CENTRAL INDEX KEY: 0001020871 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 770435194 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-21315 FILM NUMBER: 1617477 BUSINESS ADDRESS: STREET 1: 6331 SAN IGNACIO AVENUE CITY: SAN JOSE STATE: CA ZIP: 95119 BUSINESS PHONE: 4083604500 MAIL ADDRESS: STREET 1: 6331 SAN IGNACIO AVENUE CITY: SAN JOSE STATE: CA ZIP: 95119 FORMER COMPANY: FORMER CONFORMED NAME: ASCENT ACQUISITION CORP DATE OF NAME CHANGE: 19960812 10-K/A 1 y48339a1e10-ka.txt ON COMMAND CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K/A Amendment No. 1 [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from ____ to ____ Commission File Number 00-21315 ON COMMAND CORPORATION ----------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) State of Delaware 77-04535194 ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 7900 E. Union Ave Denver, Colorado 80237 - ---------------------------------------- ------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (720) 873-3200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock Series A Common Stock Purchase Warrants Series B Common Stock Purchase Warrants 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 and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant as of March 28, 2001, was $191,033,000 based upon a price of $6.25 per share, which was the last sales price of such stock on March 28, 2001, as reported on the NASDAQ National Market Reporting System. As of March 28, 2001, there were 30,565,362 shares of the Registrant's Common Stock issued and outstanding. 1 2 EXPLANATORY NOTE Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, On Command Corporation (the "Company" or "On Command") hereby amends the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 2, 2001 (the "Annual Report"). This Amendment No. 1 to the Annual Report adds the information required by Part III of Form 10-K in accordance with General Instruction G to Form 10-K and includes certain exhibits that were inadvertently omitted from the Annual Report. PART III ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the names, ages, at March 1, 2001, and titles of executive officers of the Company, and biographical information with respect to such officers. NAME AGE POSITION ---- --- -------- Jerome H. Kern 63 Chairman and Chief Executive Officer Gregory B. Armstrong 54 Senior Vice President, Operations, International and Special Projects Ganesh R. Basawapatna 58 Senior Vice President, Strategic Development Kathryn L. Hale 51 Senior Vice President, Finance and Chief Financial Officer Jerry M. Hodge 58 Senior Vice President, Sales Marianne G. Morgan 43 Senior Vice President, Human Resources Bertram Perkel 71 Senior Vice President and General Counsel David A. Simpson 43 Senior Vice President, Engineering Jerome H. Kern has been Chairman and Chief Executive Officer of On Command since April 1, 2000. Prior to joining On Command, Mr. Kern served as Vice Chairman and a member of the board of directors for Tele-Communications, Inc. (TCI). Prior to joining TCI, Mr. Kern was Special Counsel at Baker & Botts, LLP, where he was the senior corporate lawyer in the New York office. For more than twenty years, he was the principal outside legal counsel to TCI and Liberty Media, and currently serves on Liberty Media's board of directors. Mr. Kern is a member of the board of trustees for the New York University Law Center Foundation, and serves as a director on the boards of Volunteers of America (Colorado Chapter), City Meals-on-Wheels in New York, the Colorado Symphony Foundation and the Institute for Children's Mental Disorders. Jerome H. Kern is the father of Peter M. Kern, a director of the Company. Gregory B. Armstrong has been Senior Vice President for International and Special Projects since September 1, 2000. Prior to joining On Command, Mr. Armstrong has held numerous senior management positions with leading international organizations, including Chief Executive for British Cable Services, Ltd., Managing Director of Latin American Operations for Telecommunications, Inc., Vice President and General Manager for Mid-West Communications, Inc. and Chief Operating Officer for Satellink Corporation. Most recently he was Managing Director for Liberty Media International's Latin American operations. Ganesh R. Basawapatna has been Senior Vice President of Strategic Development since June 1, 2000. Prior to joining On Command, Mr. Basawapatna served as Vice President and Chief Technology Officer of TSAT, Inc., a Liberty Media Group company. Prior to joining TSAT, Mr. Basawapatna was a co-founder of Asvan Technology, LLC. Prior to Asvan Technology, Mr. Basawapatna was President and Chief Operating Officer for Encore International, Inc. ("EI") founded in March 1995. 2 3 Kathryn L. Hale has been Senior Vice President, Finance and Chief Financial Officer since March 2001 having been promoted from Vice President, Finance, a title Ms. Hale held since August 7, 2000. Prior to joining On Command, Ms. Hale served as Chief Financial Officer for InterComm Holdings, LLC, an international cable holding company. Ms. Hale has held several senior executive positions in the cable industry, including Vice President and Controller for Rifkin & Associates, Inc. and Tax Director for American Television and Communications Corporation. Jerry M. Hodge has been Senior Vice President and Division Chief Executive Officer, Casinos and Resorts since December 6, 2000. Prior to joining On Command, Mr. Hodge served as President and Chief Executive Officer of Hospitality Network, Inc. (a Cox Communications company). He has held several senior executive positions in the communications industry, including Executive Vice President of F & M Communications and vice president of Sonitrol Corporation. Marianne G. Morgan has been Senior Vice President of Human Resources since March 2001 having been promoted from Vice President of Human Resources, a title Ms. Morgan held since August 22, 2000. Prior to joining On Command, Ms. Morgan was Vice President of Human Resources for Westell Technologies, Inc. Bertram Perkel has been Senior Vice President and General Counsel since November 1, 2000. Prior to joining On Command, Mr. Perkel spent the last nine years with the New York office of the law firm of Baker & Botts, LLP, where he was "of counsel," specializing in the areas of securities and antitrust litigation. While at Baker & Botts, Perkel worked with a number of clients, including TCI and Liberty Media. Before that, Perkel was with two other New York law firms, Shea & Gould and Hartman & Craven. Mr. Perkel also has served as special counsel to two New York City police commissioners and was on the Advisory Committee on Law Enforcement under former New York Governor Hugh Carey. David A. Simpson has been Senior Vice President, Regional Operations and Engineering since October 2000, having been promoted from Vice President, Operations, a title Mr. Simpson held since July 1, 1998. Prior to joining On Command, Mr. Simpson founded a high-tech startup venture and participated at the Texas Technology Summit. He also was division manager, information systems and engineering services at Electrospace Systems, a defense electronics manufacturer based in Richardson, Texas. DIRECTORS OF THE REGISTRANT Jerome H. Kern, 63, Chairman of the Board, has been a Director of On Command since April 2000. Mr. Kern served as Vice Chairman of TCI from June 1998 to March 1999. Prior to joining TCI, Mr. Kern was Special Counsel with the law firm of Baker Botts, L.L.P. from July 1996 to June 1998, and a Senior Partner of Baker Botts L.L.P. from September 1992 to July 1996. Mr. Kern is a director of Liberty Media and TCI Pacific Communications, Inc. Jerome H. Kern is the father of Peter M. Kern, a director of the Company. Richard D. Goldstein, 48, has been a Director of On Command Corporation since November 1998. Mr. Goldstein has served as a Managing Director or Senior Managing Director and as one of three principals of Alpine Capital Group Inc., a merger advisory and investment/merchant banking firm in New York and related entities (including Alpine Equity Partners L.P.) since 1990. From 1976 to 1990 Mr. Goldstein was with the law firm of Paul, Weiss, Rifkand, Wharton & Garrison, where he became a partner in 1984. Mr. Goldstein is also a Director of US Franchise Systems, Inc., a NASDAQ company that is a hotel franchiser. Paul A. Gould, 55, has been a director of On Command Corporation since April 2000. Mr. Gould has served as a Managing Director and Executive Vice President of Allen & Company Incorporated, an investment banking services company, for over five years. Mr. Gould is a director of Liberty Media and Ascent. Gary S. Howard, 50, has been a director of On Command Corporation since April 2000. Mr. Howard has served as Executive Vice President, Chief Operating Officer and a director of Liberty Media since July 1998. Mr. Howard has also served as Chief Executive Officer of TCI Satellite Entertainment, Inc. since December 1996. Mr. Howard served as Executive Vice President of Tele-Communications, Inc. ("TCI") from December 1997 to March 1999; as Chief Executive Officer, Chairman of the Board and a director of TV Guide, Inc. from June 1997 to March 1999; and as President and Chief Executive Officer of TCI Ventures Group, LLC from December 1997 to March 1999. Mr. Howard served as President of TV Guide, Inc. from June 1997 to September 1997; as President of TCI Satellite Entertainment, Inc. from February 1995 through August 1997; and as Senior Vice President of TCI Communications, Inc. ("TCIC") from October 1994 to December 1996. Mr. Howard is a director of Liberty Digital, Inc., Liberty Living Corporation and TCI Satellite Entertainment, Inc. 3 4 Peter M. Kern, 33, has been a Director of On Command Corporation since April 2000. Mr. Kern has served as President of Gemini Associates, Inc., a firm that provides strategic advisory services primarily to media companies, since April 1996. From December 1993 to January 1996, he served as Senior Vice President of Strategic Development and Corporate Finance of Home Shopping Network, Inc. and served as its Vice President of Strategic Development and Assistant to the Chief Executive Officer from March 1993 to December 1993. Mr. Kern also serves as a director of Liberty Digital, Inc. Peter M. Kern is the son of Jerome H. Kern, Chairman and Chief Executive Officer of the Company. Carl E. Vogel, 42, has been a Director of On Command Corporation since April 2000. Mr. Vogel has served as a Senior Vice President of Liberty Media since December 1999. Mr. Vogel's President, Chief Executive Officer and a director of Liberty Survelliance & Technology, Inc. Mr. Vogel served as Executive Vice President/Chief Operating Officer of Field Operations for A T & T Broadband, LLC from June 1999 until joining Liberty Media. He served as Chairman and Chief Executive Officer of Primestar, Inc. from June 1998 to June 1999. From October 1997 to June 1998, Mr. Vogel was Chief Executive Officer of Star Choice Communications. From March 1994 to March 1997, he served initially as Executive Vice President and Chief Operating Officer, and later as President of EchoStar Communications Corporation. J. David Wargo, 46, has been a Director of On Command Corporation since November 1998. Mr. Wargo is President of Wargo & Company, Inc. Mr. Wargo is also a Director of Gemstar-TV Guide, International, Inc. and Liberty Digital, Inc. Gary L. Wilson, 61, has been a Director of On Command Corporation since September 1996. Mr. Wilson is chairman of the board and a principal investor in NWA, Inc., parent of Northwest Airlines and several other transportation-related subsidiaries. He served as co-chairman since 1991 and was named chairman in 1997. Mr. Wilson is a director of The Walt Disney Company. He joined The Walt Disney Company in 1985 and served as executive vice president and chief financial officer until 1990. He also serves on the board of trustees at Duke University, the board of visitors at the Fuqua School of Business at Duke, and also the board of overseers of The Wharton School at the University of Pennsylvania. Mr. Wilson is a member of the board of directors of CB Richard Ellis, Inc. and the National Collegiate Athletic Association Foundation. COMPLIANCE WITH SECURITIES LAWS Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers, and persons who own more than 10% of a registered class of the Company's equity securities, to file initial reports of ownership and reports of changes in ownership with the SEC and the NASDAQ National Market System. Such persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. The Company has undertaken the obligation to make these filings on behalf of its directors and executive officers. Based solely on its review of copies of such forms received and filed by it with respect to 2000, or written representations from certain reporting persons, the Company believes that all of its directors and executive officers and persons who own more than 10% of the Company's registered equity have complied with the reporting requirements of Section 16(a). 4 5 ITEM 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table shows the compensation received for each of the three fiscal years ended December 31, 2000 by the (i) Chairman and Chief Executive Officer, (ii) the Senior Vice President of Operations, (iii) the Chief Financial Officer, (iv) the Senior Vice President, Engineering, (v) the Senior Vice President, Programming and Marketing, and (vi) the former Senior Vice President, Engineering (the officers being hereafter referred to as the "Named Executive Officers").
ANNUAL COMPENSATION LONG TERM COMPENSATION ------------------- ---------------------- OTHER RESTRICTED SECURITIES ANNUAL STOCK UNDERLYING ALL OTHER NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS COMPENSATION POSITION YEAR ($) ($) ($)(6) ($) (#) ($)(7) Jerome Kern (1) 2000 390,000 -- -- -- -- 667 Chairman and Chief 1999 -- -- -- -- -- -- Executive Officer 1998 -- -- -- -- -- -- James A Cronin, III (2) 2000 49,259 200,000 -- -- -- 2,311 Chairman and Acting 1999 500,000 200,000 -- -- -- 33,699 Chief Executive Officer 1998 498,846 375,000 -- -- -- 16,069 Ronald D. Lessack (3) 2000 325,000 88,000 56,940 -- -- 6,471 Senior Vice 1999 294,617 250,000 -- -- 50,000 5,832 President, 1998 290,000 203,000 -- -- 48,200 6,320 Operations Paul J. Milley (3) 2000 265,438 90,312 -- -- -- 6,471 Chief Operating 1999 194,375 57,500 -- -- 50,000 5,528 Officer and CFO 1998 181,249 54,000 -- -- 50,000 5,000 David Simpson (4) 2000 212,855 19,812 -- -- 100,000 6,231 Senior Vice 1999 155,308 -- -- -- 35,000 5,478 President, Engineering 1998 75,000 40,000 72,464 -- 30,000 20 Jean DeVera 2000 291,294 67,475 -- -- -- 6,475 Senior Vice President, 1999 178,000 38,000 -- -- 50,000 5,790 Sales 1998 152,500 -- 65,251 -- 40,000 5,770 Richard C. Fenwick, Jr (5) 2000 300,000 76,125 254,869 -- -- 6,471 Senior Vice 1999 204,375 50,500 -- -- 50,000 5,324 President, 1998 178,958 45,000 -- -- 35,300 6,320 Engineering
(1) Mr. Kern was hired as Chairman and Chief Executive Officer of the Company on April 1, 2000. The compensation above is compensation for the period from April 1, 2000 to December 31, 2000. (2) Mr. Cronin's compensation was paid by Ascent for fiscal years 2000, 1999 and 1998. (3) Mr. Lessack's employment with the Company was terminated on December 31, 2000. (4) Mr. Simpson was promoted to Senior Vice President, Engineering on October 16, 2000. He was hired by the Company on July 1, 1998. (5) Mr. Fenwick was dismissed from the Company on September 8, 2000. (6) Other Annual Compensation consists of a SAR exercise by Mr. Lessack, relocation bonus for Mr. Simpson, and proceeds from stock option and SAR exercises for Mr. Fenwick. (7) For 2000, other compensation includes: (i) contributions by the Company on behalf of the executive to the Company's 401(k) plan, (ii) life insurance premiums for policies in excess of $50,000 face value and (iii) in the case of Mr. Cronin, the value of certain fringe benefits. 5 6
401(k) INSURANCE NAME MATCHING PREMIUM TOTAL Jerome Kern $ - $ 667 $ 667 James A. Cronin 2,311 -- 2,311 Ronald Lessack 5,250 1,221 6,471 Paul Milley 5,250 1,221 6,471 David Simpson 5,250 981 6,231 Jean DeVera 5,250 1,225 6,475 Richard Fenwick 5,250 1,221 6,471
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS - ------------------------------------------------------------------- NUMBER OF PERCENT OF TOTAL GRANT DATE SECURITIES OPTIONS GRANTED TO EXERCISE OR EXPIRATION DATE PRESENT VALUE UNDERLYING EMPLOYEES IN FISCAL BASE PRICE ($) NAME OPTIONS YEAR (2) ($/SH) GRANTED (#)(1) -------------------- -------------- ------------------- ----------- --------------- ------------- David Simpson 100,000 4% $ 15.1875 6/13/10 $ 760,000
(1) The options expire ten years from grant date and vest 20% annually over five years. (2) The total number of options granted to OCC employees in 2000 was 2,611,500. (3) On Command used the Black-Scholes option pricing model to determine grant date present values using the following assumptions for the year 2000: stock price volatility of 47.7%, a five year option term, a risk-free rate of return range from 4.99% to 6.71%, and no dividend yield. Forfeitures are reflected as they occur. The use of this model is in accordance with SEC rules; however the actual value of an option will be measured by the difference between the stock price and the exercise price on the date the option is exercised. OPTION EXERCISES AND FISCAL YEAR-END VALUES The following table sets forth information on (i) options exercised by the Named Executive Officers in 2000, and (ii) the number and value of their unexercised options at December 31, 2000. AGGREGATED OPTION EXERCISES IN 2000, AND YEAR-END OPTION VALUES
NAME OPTION DATE TYPE Granted Price Exercised Vested Cancelled Unvested Outstanding Exercisable - ---- ----------- ------- ----- --------- ------ --------- -------- ----------- ----------- Ronald D. Lessack 2-14-94 ISO 56,800 11.4400 - 56,800 - - 56,800 56,800 11-21-96 NQ 65,000 15.8750 - 52,000 - 13,000 65,000 52,000 2-4-98 NQ 48,200 13.0000 - 28,920 - 19,280 48,200 28,920 12-7-99 NQ 50,000 16.0000 - 25,000 - 25,000 50,000 25,000 Paul J. Milley 12-17-96 NQ 50,000 15.8130 - 40,000 - 10,000 50,000 40,000 2-4-98 NQ 50,000 13.0000 - 30,000 - 20,000 50,000 30,000 12-7-99 NQ 50,000 16.0000 - 25,000 - 25,000 50,000 25,000 David Simpson 8-4-98 NQ 30,000 12.7500 - 12,000 - 18,000 30,000 12,000 12-7-99 NQ 35,000 16.0000 - 17,500 - 17,500 35,000 17,500 6-13-00 NQ 100,000 15.1875 - - - 100,000 100,000 - Jean DeVera 11-21-96 NQ 20,000 15.8750 - 16,000 - 4,000 20,000 16,000 2-4-98 NQ 20,000 13.000 - 8,000 - 12,000 20,000 8,000 2-4-98 NQ 20,000 13.000 - 12,000 - 8,000 20,000 12,000 12-7-99 NQ 50,000 16.000 - 25,000 - 25,000 50,000 25,000
6 7 Richard C. Fenwick, Jr. 9-3-92 ISO 49,700 5.9200 49,700 49,700 - - - - 11-21-96 NQ 65,000 15.8750 - 52,000 - 13,000 65,000 52,000 2-4-98 NQ 35,300 13.0000 - 21,180 - 14,120 35,300 21,180 12-7-99 NQ 50,000 16.0000 - 25,000 - 25,000 50,000 25,000 6-13-00 NQ 150,000 15.1875 - - - 150,000 150,000 -
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF IN-THE MONEY OPTIONS AT 12/31/00 OPTIONS AT 12/31/00 ---------------------------- ---------------------------- SHARES UNDERLYING UN- UN- OPTIONS VALUE EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE NAME EXERCISED REALIZED (#) (#) ($) ($) Jerome Kern - - - - - - James A. Cronin - - - - $ - $ - Ronald D. Lessack - - 153,080 66,920 $ - $ - Paul J. Milley - - 85,000 65,000 $ - $ - David Simpson - - 29,500 135,500 $ - $ - Jean DeVera - - 61,000 49,000 $ - $ - Richard Fenwick, Jr 24,700 $198,239 150,300 - $ - $ -
EMPLOYMENT AND SEVERANCE ARRANGEMENTS In September 1996, the Company and Mr. Steel entered into an employment agreement that was to expire on September 11, 2000. Pursuant to the agreement, Mr. Steel's initial base salary was $290,000 per year, subject to increases at the discretion of the Board of Directors of the Company. Under the agreement, Mr. Steel was eligible for annual bonuses based on performance measures determined by the Compensation Committee with a target bonus equal to 70% of Mr. Steel's base salary for achieving 100% of the target level for the performance measures. In addition, Mr. Steel was granted options to purchase 385,312 shares of On Command Common Stock, exercisable at the following per-share prices: (i) 80% of such options at a per-share price equal to $15.33 and (ii) 20% of such options at a per-share price equal to $16.40. The options vested 25% on September 11, 1997 and an additional 25% on September 11, 1998, and the remaining 50% were to vest on September 11, 1999. The agreement provided that the options would expire at the earlier of (i) three months after the date upon which Mr. Steel is terminated for "cause" (as defined in the employment agreement); (ii) one year after Mr. Steel's employment agreement is terminated as a result of death; or (iii) on September 11, 2006. In addition, the employment agreement for Mr. Steel provides that upon a "Change of Control Event" (as defined in the agreement), Mr. Steel will be entitled to elect to terminate his employment with the Company and, for the longer of (a) the remainder of the term of his employment agreement as if such agreement had not been terminated and (b) one year following the date of such termination (such period being the "Duration Period"), will receive: (i) his then current base salary; (ii) an annual bonus equal to 70% of his then current base salary for each year during the Duration Period; and (iii) all other benefits provided pursuant to the employment agreement. A "Change of Control Event" is defined in the employment agreement as an affirmative determination, either jointly by Mr. Steel and the Board of Directors or pursuant to an arbitration which Mr. Steel has the right to invoke, that any "change of control" of the Company (defined as an event as result of which (i) a single person or entity other than Ascent or its affiliates owns 50% or more of the voting stock of the Company or (ii) a single person or entity other than COMSAT Corporation ("COMSAT") or its affiliates (which as of the date of the employment agreements held approximately 80% of the outstanding Common Stock of Ascent, but which consummated the distribution of its 80.67% ownership interest in Ascent to the COMSAT shareholders on June 27, 1997) owns directly or indirectly 50% or more of the voting stock of Ascent) or prospective change of control would be reasonably likely to have a materially detrimental effect on either the day-to-day circumstances of Mr. Steel's employment, or the compensation payable to Mr. Steel under his employment agreement. On December 28, 1998, On Command and Mr. Steel entered into an amendment to Mr. Steel's employment agreement. Pursuant to the amendment, Mr. Steel assumed the title of President and Chief Operating Officer of the Company through September 7 8 11, 2000, while reporting directly to the Chief Executive Officer and Board of Directors of the Company, and if there was no Chief Executive Officer, then to the Chairman. In addition, under the terms of the amendment (i) Mr. Steel's base salary was increased to $375,000 per year and (ii) if the Company failed to review Mr. Steel's compensation prior to June 1, 1999 or revise such compensation prior to August 1, 1999, then Mr. Steel would be entitled to terminate his employment with the Company and receive (a) his then base salary for a year from such termination, and (b) a pro-rated annual bonus for the year in which employment was terminated, and (iii) if Mr. Steel terminated his employment pursuant to the foregoing clause (ii), then a pro-rated portion of the options previously granted to Mr. Steel under the Company's stock option plans that were scheduled to vest during the year of such termination, would vest as of the date of such termination and would expire on the first anniversary of such termination. Although the Company and Mr. Steel entered into negotiations regarding his position and compensation at the Company during the above time periods, Mr. Steel's compensation was not revised prior to August 1, 1999 and on August 6, 1999, Mr. Steel resigned from the Company pursuant to the terms of his amended employment agreement. On January 7, 2000, On Command and Allan Goodson entered into an employment agreement that expires on January 7, 2002. Pursuant to the agreement, Mr. Goodson's initial base salary under the agreement is $300,000 per year, subject to increases at the discretion of the Board of Directors of the Company. Under the agreement, Mr. Goodson is eligible for annual bonuses based on performance measures determined by the Company's Compensation Committee with a target bonus equal to 70% of Mr. Goodson's base salary for achieving 100% of the target level for the performance measures. In addition, Mr. Goodson has been granted options to purchase 100,000 shares of On Command Common Stock, exercisable at a per-share price equal to $15.90625. The options vest 50% on January 7, 2001 and 50% on January 7, 2002. The options will expire at the earliest of: (i) three months after the date upon which Mr. Goodson is terminated for "cause" (as defined in the employment agreement); (ii) one year after Mr. Goodson's employment agreement is terminated as a result of death; or (iii) on January 7, 2010. Mr. Goodson's agreement does not contain "change-of-control" provisions. In addition, Mr. Goodson's agreement provides that if Mr. Goodson is terminated without "cause" (as defined in the agreement) or upon any substantial reduction (except in connection with the termination of his employment voluntarily by Mr. Goodson, or by the Company for "cause") by the Company of Mr. Goodson's responsibilities as Executive Vice President and Chief Operating Officer of the Company, or the Company is in material default of the agreement, then: (i) there shall be no forfeiture of any rights or interests related to fringe benefits granted under the agreement, including, without limitation, the SARs and any other stock-based incentives, except that half of his 100,000 options will vest, to the extent not previously vested, and the other half of which will be canceled, immediately upon such termination becoming effective and final; (ii) the executive shall receive current base salary, fringe benefits and the annual bonus outlined in the agreement for the longer of (a) the remainder of the employment period under the agreement or (b) one year following the date of such termination, with no obligation to seek other employment and no offset to the amounts paid by the Company if other employment is obtained; and (iii) all other benefits provided pursuant to the agreement shall be received by the executive. In May 2000, Mr. Goodson's employment was terminated. In February 1999, the Company adopted a change of control severance plan for the Company's executive officers at or above the level of vice president (the "Severance Plan"). Under the Severance Plan, such employees are eligible for certain payments and benefits, if within one year of a Change of Control, such employee's employment is either terminated by the Company for any reason other than death, disability or cause, or is terminated by the employee for good reason. "Change of Control" is defined as any event as a result of which any single entity or "group" (as defined in Rule 13d-5 of the Exchange Act) other than Ascent or a group of which Ascent is a part owns more than fifty percent (50%) of the voting stock of the Company. Under the Severance Plan eligible employees would be entitled to salary continuation of from six months to twelve months depending upon the employee's length of service, an annual bonus prorated to the effective date of termination, and during the relevant period of salary continuation, continued participation in the Company's benefit plans. In addition, stock options held by an eligible employee would become 100% vested immediately and remain exercisable for one year. 8 9 DIRECTORS COMPENSATION In May 1997 the Company adopted a compensation plan for Independent Directors (defined as directors who are not employees of the Company). Independent Directors are entitled to receive an annual retainer of $6,000 in cash, payable quarterly; $500 for each Board meeting attended; and $500 for each meeting of a Committee of the Board attended. Each Independent Director who is also a chairman of a Committee of the Board is entitled to receive an additional annual fee of $2,000, payable in equal quarterly amounts. In addition, pursuant to the 1997 Non-Employee Directors Stock Plan, as amended (the "Directors Plan"), each Independent Director is entitled to (a) an annual award of 400 shares of the Company's Common Stock, awarded immediately following the Company's annual meeting of stockholders and (b) a one-time grant of an option to purchase 50,000 shares of the Company's Common Stock (an "Option"). Any Independent Director who receives a grant of an Option will not be eligible to receive an additional grant of an Option until the fifth annual meeting after the original grant. The Options vest 25% on the first anniversary of grant, and 25% and 50%, respectively, on the second and third anniversaries, or 100% upon a change in control of the Company, as defined in the Directors Plan. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT COMMON STOCK OWNERSHIP OF FIVE PERCENT HOLDERS As of February 28, 2001, 30,556,768 shares of the Company's Common Stock were issued and outstanding. To the knowledge of the Company, based upon Schedules 13G or 13D filed with the Securities and Exchange Commission (the "SEC" or "Commission"), the following persons were the only beneficial owners of more than five percent of the Company's Common Stock as of February 28, 2001.
AMOUNT AND NATURE OF NAME AND ADDRESS OF BENEFICIAL OWNERSHIP PERCENT OF COMMON STOCK BENEFICIAL OWNER (IN THOUSANDS) ISSUED AND OUTSTANDING (1) Liberty Media Corporation (2) 18,274 57.68% 9197 South Peoria Street Englewood, CO 80112 Jerome H. Kern (3) 3,574 11.20% 7900 E. Union Ave. Denver, CO 80237 Credit Suisse First Boston (4) 2,970 9.72% 11 Madison Avenue New York, NY 10010 Merrill Lynch & Co., Inc.(5) 2,153 7.05% 800 Scudders Mill Road Plainsboro, NJ 08536 Gary Wilson(6) 1,827 5.64% 300 Delfern Drive Los Angeles, CA 90077
9 10 - ---------- (1) Based on shares of Common Stock outstanding at February 28, 2001. Pursuant to the rules of the SEC, shares of Common Stock over which a person has the right to acquire sole or shared voting power within 60 days through the exercise of any stock option or other right are deemed to be outstanding for the purpose of computing the percentage ownership of such person but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. (2) Liberty Media Corporation, through its wholly-owned subsidiary Ascent Entertainment Group, Inc., holds 17,150,299 shares of Common Stock and 1,123,792 Series A Warrants to purchase shares of Common Stock. (3) Mr. Kern holds 2,224,155 shares of Common Stock and 13,500 shares of Series A Preferred Stock, which are convertible at the option of the holder into an aggregate of 1,350,000 shares of Common Stock. Does not include (a) 18,274,091 shares of Common Stock beneficially owned by Liberty Media Corporation, of which Mr. Kern is a director, or (b) 21,000 shares of Common Stock owned by members of Mr. Kern's immediate family. Mr. Kern disclaims beneficial ownership of any shares of Common Stock referred to in clause (a) or (b) of the previous sentence. (4) Based on information contained in Schedule 13G/A filed with the Commission and dated February 15, 2001. Credit Suisse First Boston shares voting and dispositive power over 2,969,952 shares of Common Stock with its consolidated subsidiaries to the extent that they constitute a part of the Credit Suisse First Boston business unit which is engaged in corporate and investment banking, trading, private equity investment and derivatives business on a world-wide basis. (5) Based on information contained in Schedule 13G/A filed with the Commission and dated February 7, 2001. Merrill Lynch & Co., Inc., ("MLI") is the beneficial owner of 2,153,239 shares of OCC Common Stock (7.05%) (sole voting and dispositive power: 0 shares and shared voting and dispositive power: 2,153,239 shares) as parent holding company of Merrill Lynch Asset Management Group, which is comprised of registered investment advisors to various registered investment companies. (6) Mr. Wilson holds 1,810,000 Series C Warrants to purchase shares of Common Stock having an exercise price of $15.33 per share and vested options to purchase 16,500 shares of Common Stock. COMMON STOCK OWNERSHIP OF MANAGEMENT The following table sets forth information with respect to the ownership by each director and each of the Named Executive Officers and by all directors and executive officers as a group of shares of On Command Common Stock, AT&T Common Stock, Class A AT&T Liberty Media Group Common Stock, Class B AT&T Liberty Media Group Common Stock and AT&T Wireless Group Common Stock. AT&T Common Stock, Class A Liberty Media Group Common Stock, Class B Liberty Media Group Common Stock and AT&T Wireless Group Common Stock are all equity securities of AT&T Corp., which owns 100% of AT&T Broadband LLC, which in turn indirectly owns 100% of the outstanding common stock of Liberty Media. The following information is given as of February 28, 2001 and, in the case of percentage ownership information, is based on (1) 30,556,768 shares of On Command Common Stock; (2) 3,807,460,036 shares of AT&T Common Stock; (3) 2,376,765,123 shares of Class A AT&T Liberty Media Group Common Stock; (4) 212,045,288 shares of Class B AT&T Liberty Media Group Common Stock; and (5) 362,750,025 shares of AT&T Wireless Group Common Stock, in each case outstanding on that date. Shares of common stock issuable upon exercise or conversion of options, warrants and convertible securities that were exercisable or convertible on or within 60 days after February 28, 2001, are deemed to be outstanding and to be beneficially owned by the person holding the options, warrants or convertible securities for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. So far as is known to On Command, the persons indicated below have sole voting power with respect to the shares indicated as owned by them except as otherwise stated in the notes to the table. 10 11
AMOUNT AND NATURE OF NAME OF BENEFICIAL OWNERSHIP PERCENT OF BENEFICIAL OWNER TITLE OF CLASS (IN THOUSANDS) CLASS ---------------- -------------- -------------- ----- Richard D. Goldstein On Command Common Stock 50 (1) * AT&T Common Stock 0 -- Class A Liberty Media Group 0 -- Class B Liberty Media Group 0 -- AT&T Wireless Group 0 -- Paul A. Gould On Command Common Stock 0 -- AT&T Common Stock 0 -- Class A Liberty Media Group 1,498 (2) * Class B Liberty Media Group 438 * AT&T Wireless Group 0 -- Jerry M. Hodge On Command Common Stock 150 4 AT&T Common Stock -- -- Class A Liberty Media Group -- -- Class B Liberty Media Group -- -- AT&T Wireless Group -- -- Gary S. Howard On Command Common Stock 0 -- AT&T Common Stock 16 * Class A Liberty Media Group 1,370 (3) * Class B Liberty Media Group 0 -- AT&T Wireless Group 0 -- Jerome H. Kern On Command Common Stock 3,595 (4) 11.76% AT&T Common Stock 1,415 (5) * Class A Liberty Media Group 6,237 (6) * Class B Liberty Media Group 0 -- AT&T Wireless Group 0 -- Peter M. Kern On Command Common Stock 0 -- AT&T Common Stock 64 * Class A Liberty Media Group 51 * Class B Liberty Media Group 0 -- AT&T Wireless Group 0 --
11 12
AMOUNT AND NATURE OF NAME OF BENEFICIAL OWNERSHIP PERCENT OF BENEFICIAL OWNER TITLE OF CLASS (IN THOUSANDS) CLASS ---------------- -------------- -------------- ----- $ David A. Simpson On Command Common Stock 30 (7) -- AT&T Common Stock 0 -- Class A Liberty Media Group 0 -- Class B Liberty Media Group 0 -- AT&T Wireless Group 0 -- Carl E. Vogel On Command Common Stock 0 -- AT&T Common Stock 0 -- Class A Liberty Media Group 219 (8) $ Class B Liberty Media Group 0 -- AT&T Wireless Group 0 -- J. David Wargo On Command Common Stock 50 (9) * AT&T Common Stock 0 -- Class A Liberty Media Group 556 (10) * Class B Liberty Media Group 4 * AT&T Wireless Group 0 -- Gary L. Wilson On Command Common Stock 1,827 (11) 5.64% AT&T Common Stock 0 -- Class A Liberty Media Group 0 -- Class B Liberty Media Group 0 -- AT&T Wireless Group 0 -- All directors and executive officers as a group (15 persons) On Command Common Stock 5,702 16.76% AT&T Common Stock 1,495 * Class A Liberty Media Group 9,712 * Class B Liberty Media Group 442 * AT&T Wireless Group 0 --
(1) Includes vested options to purchase 50,000 shares of On Command Common Stock. (2) Includes beneficial ownership of 91,400 shares of Class A AT&T Liberty Media Group Common Stock that may be acquired within 60 days after February 28, 2001 pursuant to stock options granted in tandem with stock appreciation rights. (3) Includes 582,177 restricted shares of Class A AT&T Liberty Media Group Common Stock, none of which is currently vested. (4) Mr. Kern holds 2,224,155 shares of Common Stock and 13,500 shares of Series A Preferred Stock, which are convertible at the option of the holder into an aggregate of 1,350,000 shares of Common Stock. Includes 21,000 shares of Common Stock owned by members of Mr. Kern's immediate family, as to which Mr. Kern has disclaimed beneficial ownership. (5) Includes beneficial ownership of 1,396,261 shares of AT&T Common Stock that may be acquired within 60 days after February 28, 2001 pursuant to stock options granted in tandem with stock appreciation rights. Includes 12,798 shares of AT&T Common Stock held by Mr. Kern's wife, Mary Rossick Kern, as to which shares Mr. Kern has disclaimed beneficial ownership. (6) Includes beneficial ownership of 5,904,600 shares of Class A AT&T Liberty Media Group Common Stock that may be acquired within 60 days after February 28, 2001 pursuant to stock options granted in tandem with stock appreciation rights. Includes 80,400 shares of Class A AT&T Liberty Media Group Common Stock held by Mr. Kern's wife, Mary Rossick Kern, as to which shares Mr. Kern has disclaimed beneficial ownership. (7) Includes vested options to purchase 29,500 shares of On Command Common Stock. (8) Includes 200,000 vested options granted in tandem with stock appreciation rights. (9) Includes vested options to purchase 50,000 shares of On Command Common Stock. (10) Includes 514,598 shares of Class A AT&T Liberty Media Group Common Stock held in investment accounts managed by Mr. Wargo as to which he shares voting and investment power and as to which he disclaims beneficial ownership. (11) Mr. Wilson holds 1,810,000 Series C Warrants to purchase shares of Common Stock having an exercise price of $15.33 per share and vested options to purchase 16,500 shares of Common Stock. 12 13 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On February 22, 2000, Ascent entered into an Agreement and Plan of Merger (the "Merger Agreement") with Liberty and Liberty AEG Acquisition, Inc. ("Merger Sub"), an indirect wholly-owned subsidiary of Liberty. Prior to Ascent entering into the Merger Agreement, the Company's Board of Directors approved Liberty's indirect acquisition of shares of Common Stock through its acquisition of Ascent in such Merger. Pursuant to the Merger Agreement, Merger Sub commenced a tender offer (the "Offer") offering Ascent stockholders $15.25 in cash for each share of Ascent common stock. Liberty commenced the Offer on February 29, 2000 and under its terms and subject to its conditions, the Offer expired on March 27, 2000, Pursuant to the Offer, Merger Sub purchased 85% of the common stock of Ascent. Pursuant to Merger Agreement, on June 8, 2000, Merger Sub merged with and into Ascent (the "Merger") with Ascent as the surviving entity. As a result of the Merger, Liberty acquired beneficial ownership of the shares of Common Stock held by Ascent and succeeded to certain of Ascent's rights with respect to the Company as described below. Through its ownership of Ascent, Liberty indirectly owned approximately 56.13% of the Company's issued and outstanding Common Stock at December 31, 2000. For so long as Liberty continues to own more than 50% of the outstanding voting stock of the Company, it will be able, among other things, to approve any corporate action requiring majority stockholder approval, including the election of a majority of the Company's directors, effect amendments to the Company's Amended and Restated Certificate of Incorporation and Bylaws and approve any other matter submitted to a vote of the stockholders without the consent of the other stockholders of the Company. In addition, through its representation on the Board of Directors, Liberty is able to influence certain decisions, including decisions with respect to the Company's dividend policy, the Company's access to capital (including the decision to incur additional indebtedness or issue additional shares of Common Stock or Preferred Stock), mergers or other business combinations involving the Company, the acquisition or disposition of assets by the Company and any change in control of the Company. The Company and Ascent were previously parties to a Management Services Agreement (the "Services Agreement") pursuant to which Ascent provided certain management services, including insurance, administration, coordination and advisory services regarding corporate financing, employee benefits administration, public relations and other corporate functions to the Company and made available certain of its employee benefit plans to the Company's employees. Pursuant to the Services Agreement, Ascent was entitled to the payment of (i) an annual fee of $1.2 million, (ii) the actual cost to Ascent of the benefits provided to the Company's employees and (iii) certain of Ascent's actual out-of-pocket expenses in connection with the Services Agreement (not including overhead and the cost of its personnel). Further, the Company agreed to indemnify Ascent from all damages from Ascent's performance of services under the Services Agreement unless such damages are caused by willful breach by Ascent or willful misconduct or gross negligence by Ascent's employees in fulfilling its obligations under the Services Agreement. Ascent agreed to indemnify the Company from damages arising from willful breach by Ascent or gross negligence or willful misconduct by Ascent's employees in the performance of the Services Agreement. The Services Agreement was for an initial term through December 31, 1999, renewable for additional one-year terms by Ascent upon notice to On Command which election Ascent could exercise as long as it and its subsidiaries owned at least 50% of the outstanding Common Stock. The Services Agreement was terminated in August 2000. No charges were incurred by the Company or billed by Ascent pursuant to the Services Agreement during its term. The Company and Ascent also were parties to a Corporate Agreement governing certain other relationships and arrangements between the Company and Ascent. Pursuant to the Corporate Agreement, for so long as Ascent beneficially owned, directly or indirectly, the largest percentage (and at least 40%) of the outstanding securities of the Company entitled to be cast for the election of directors, Ascent could propose, at each election of directors, a slate of directors, or in the case of vacancies, individual directors, for election so that at all times during the term of the Corporate Agreement, a majority of the Board of Directors of the Company would be comprised of persons designated by Ascent. In addition, pursuant to the Corporate Agreement, as amended, for so long as Ascent owned the largest percentage (and at least 40%) of the outstanding Common Stock (i) the Company agreed not to incur any indebtedness, other than that under its existing Credit Facility (and refinancings thereof) and indebtedness incurred in the ordinary course of business which together would not exceed $200 million in the aggregate through June 30, 2000, or issue any equity securities or any securities convertible into equity securities without Ascent's prior consent, (ii) the Company agreed not to amend its Certificate of Incorporation or Bylaws without Ascent's prior consent, and (iii) the Company agreed to utilize reasonable cash management procedures and use its reasonable best efforts to minimize the Company's excess cash holdings. The Corporate Agreement was terminated in August 2000. The Company has made arrangements for the use of an airplane owned by a limited liability company of which Jerome H. Kern is the sole member. When that airplane is used for purposes related to the conduct of the Company's business, the Company reimburses the limited liability company for such use at market rates. On Command reimbursed that limited liability company an aggregate of approximately $437,000 during the year ended December 31, 2000. 13 14 At a meeting of the Board held on April 6, 2000, Jerome H. Kern was appointed Chairman of the Board of Directors and Chief Executive Officer of the Company. Also at that meeting, the Board approved the principal terms of a purchase by Mr. Kern from the Company of 2,700,000 shares of Common Stock at a per share price of $15.625, which price was less than the closing price for a share of Common Stock on that date. Thereafter, Mr. Kern and representatives of the Company engaged in discussions relating to the structure of Mr. Kern's equity purchase. On August 4, 2000, following the approval of the Board of Directors, the Company and Mr. Kern entered into a Stock Purchase and Loan Agreement (the "Stock Purchase Agreement") relating to the purchase by Mr. Kern of 13,500 shares of Series A Preferred Stock. Pursuant to the Stock Purchase Agreement, on August 10, 2000, Mr. Kern purchased 13,500 shares of Series A Preferred Stock at a purchase price of $1,562.50 per share, or an aggregate of $21,093,750. Mr. Kern paid the purchase price for these shares of Series A Preferred Stock by payment of $13,500 in cash and the execution of a promissory note, dated August 10, 2000 (the "Secured Note"), payable to the order of the Company and bearing an initial principal amount of $21,080,250. The payment of principal of and interest on the Secured Note is secured by a pledge of the 13,500 shares of Series A Preferred Stock issued to Mr. Kern, and any proceeds thereof, pursuant to the terms of a Pledge and Security Agreement, dated August 10, 2000 (the "Pledge and Security Agreement"), between the Company and Mr. Kern. Pursuant to the terms of the Certificate of Designations for the Series A Preferred Stock (the "Certificate of Designations"), each share of Series A Preferred Stock may be converted at any time, at the option of the holder, into 100 shares of Common Stock (subject to certain customary adjustments) (the "Conversion Rate"). In addition, each share of Series A Preferred Stock will, subject to the receipt of any required governmental consents and approvals, automatically be converted into shares of Common Stock at the then effective Conversion Rate upon the satisfaction of all of Mr. Kern's obligations under the Secured Note. Shares of Series A Preferred Stock will participate in any dividends or distributions on the Common Stock on an as-converted basis, but otherwise are not entitled to receive any regular dividends. Shares of Series A Preferred Stock are entitled to a preference on liquidation equal to $.01 per share, and thereafter will participate with the shares of Common Stock in any liquidating distributions on an as-converted basis. Shares of Series A Preferred Stock vote together with the Common Stock on all matters presented to a vote of the stockholders of the Company, and holders of Series A Preferred Stock are entitled to one vote per share of Series A Preferred Stock held. Pursuant to the terms of the Stock Purchase Agreement, Mr. Kern has agreed that if the shares of Series A Preferred Stock held by him become entitled to vote as a separate class on any matter presented to the stockholders of the Company he will cause such shares of Series A Preferred Stock to be voted for or against such matter in the same proportion as the holders of shares of Common Stock vote upon such matter. The Secured Note has an initial principal amount of $21,080,250 and, unless accelerated earlier, will mature and become payable, together with accrued interest, on August 1, 2005. Interest on the Secured Note will accrue at a rate of 7% per annum, compounded quarterly. Upon the occurrence of certain events of default, the interest rate will increase to 9% per annum. The Secured Note is nonrecourse against Mr. Kern personally except for an amount equal to 25% of the principal of and accrued interest on the Secured Note. In determining Mr. Kern's personal liability under the Secured Note, the Company must first proceed against the shares of Series A Preferred Stock (or proceeds thereof) held as collateral for the Secured Note, with such proceeds being applied first to the obligations for which Mr. Kern is personally liable. Except in connection with the repurchase by the Company of shares of Series A Preferred Stock, or shares of Common Stock issued upon conversion thereof, as described below, neither the principal of nor interest on the Secured Note may be prepaid. In the event of such a repurchase, the proceeds thereof will be applied to the repayment of principal of and interest on the Secured Note. The Stock Purchase Agreement provides that Mr. Kern and the Company will enter into a mutually acceptable registration rights agreement having customary terms and conditions and providing Mr. Kern with two demand registration rights (each of which may be a "shelf" registration) in respect of shares of Common Stock issuable upon conversion of shares of Series A Preferred Stock, but will not provide any rights to participate in registrations initiated by the Company or others. If Mr. Kern's employment with the Company is terminated before April 6, 2005 by the Company for cause (as defined in the Stock Purchase Agreement) or by Mr. Kern without good reason (as defined in the Stock Purchase Agreement), the Company will have the right to repurchase all or a specified portion (depending upon the date on which Mr. Kern's employment is terminated) of the shares of Series A Preferred Stock, or shares of Common Stock issued upon conversion thereof, for a purchase price that is equivalent to the amount of Mr. Kern's indebtedness related thereto under the Secured Note. The Company will be entitled to offset the purchase price of any such shares of Series A Preferred Stock or Common Stock against the principal of and interest on the Secured Note. The Stock Purchase Agreement and the Pledge and Security Agreement provide that Mr. Kern may not directly or indirectly sell, exchange or otherwise dispose of, or grant any option or other right with respect to, or create or suffer any lien or other encumbrance on, any of the collateral under the Pledge and Security Agreement (including the shares of Series A Preferred Stock issued to Mr. Kern or shares of Common Stock issued upon conversion thereof) except that (a) to the extent that the Company's repurchase right under the Stock Purchase Agreement has expired, Mr. Kern may direct the Company to effect a sale of the portion of the collateral with respect to which such repurchase right has expired, provided that the proceeds of any such sale are held in an 14 15 escrow account pending the date all amounts under the Secured Note become due and owing and (b) Mr. Kern is entitled to assign his rights to the pledged collateral to an entity if (i) Mr. Kern holds at least 50% of the equity interests of such entity, (ii) Mr. Kern "controls" (as that term is defined in the Stock Purchase Agreement) such entity, (iii) the financial obligations of such entity under the Secured Note and the Pledge and Security Agreement have been personally guaranteed by Mr. Kern and (iv) such entity becomes a party to and bound by Mr. Kern's obligations under the Pledge and Security Agreement. In addition, the shares of Series A Preferred Stock issued to Mr. Kern are "restricted securities" within the meaning of Rule 144 under the Securities Act, and accordingly may not be sold, transferred or otherwise disposed of unless such sale, transfer or other disposition is effected pursuant to an effective registration statement under the Securities Act or pursuant to a valid exemption from the registration requirements of the Securities Act. On March 5, 2001, the Company 15,000 shares of the Company's Cumulative Redeemable Preferred Stock, Series B, par value $.01 per share (the "Series B Preferred Stock"), to Ascent in consideration of $15,000,000 in cash, pursuant to a Preferred Stock Purchase Agreement, dated March 5, 2001 (the "Ascent Purchase Agreement"), between the Company and Ascent. The liquidation preference (the "Liquidation Preference") of each share of the Series B Preferred Stock as of any date of determination is equal to the sum of (a) the stated value per share of $1,000, plus (b) an amount equal to all dividends accrued on such share which have been added to and remain a part of the Liquidation Preference as of such date, plus (c) for purposes of the liquidation and redemption provisions of the Series B Preferred Stock, an amount equal to all unpaid dividends accrued on the sum of the amounts specified in clauses (a) and (b) above during the period from and including the immediately preceding dividend payment date to but excluding the date in question. The holders of Series B Preferred Stock are entitled to receive cumulative dividends, when and as declared by the Company, in preference to dividends on junior securities, including the common stock and the Series A Preferred Stock. Dividends accrue on the Series B Preferred Stock on a daily basis at the rate of 8.5% per annum of the Liquidation Preference from and including March 5, 2001 to but excluding April 15, 2001 and at the rate of 12% per annum of the Liquidation Preference from and including April 15, 2001 to but excluding the date on which the Liquidation Preference is made available pursuant to a redemption of the Series B Preferred Stock or a liquidation of the Company. Accrued dividends are payable monthly, commencing on April 15, 2001, in cash. Dividends not paid on any dividend payment date are added to the Liquidation Preference on such date and remain a part of the Liquidation Preference until such dividends are paid. Dividends added to the Liquidation Preference shall accrue dividends on a daily basis at the rate of 12% per annum. Accrued dividends not paid as provided above on any dividend payment date accumulate and such accumulated unpaid dividends may be declared and paid at any time without reference to any regular dividend payment date, to holders of record of Series B Preferred Stock as of a special record date fixed by the Company. Subject to certain specified exceptions, the Company is prohibited from paying dividends on any parity securities or any junior securities (including common stock) during any period in which the Company is in arrears with respect to payment of dividends on Series B Preferred Stock. Upon any liquidation, dissolution or winding up of the Company, the holders of Series B Preferred Stock are entitled to receive from the assets of the Company available for distribution to stockholders an amount in cash per share equal to the Liquidation Preference of a share of Series B Preferred Stock, after payment is made on any senior securities and before any distribution or payment is made on any junior securities, which payment will be made ratably among the holders of Series B Preferred Stock and the holders of any parity securities. The holders of Series B Preferred Stock will be entitled to no other or further distribution of or participation in the remaining assets of the Company after receiving the Liquidation Preference per share. Series B Preferred Stock is not convertible into any other security of the Company. Shares of Series B Preferred Stock are redeemable at the option of the Company at any time after March 5, 2001 at a redemption price per share payable in cash equal to the Liquidation Preference of such share on the redemption date. Any redemptions by the Company are required to be made pro rata if less than all shares of Series B Preferred Stock are to be redeemed. At any time on or after April 15, 2001, or prior to that date if an event described as a "default" below has occurred and is continuing, any holder of Series B Preferred Stock has the right to require the Company to redeem all or any portion of such holder's shares for a redemption price per share payable in cash equal to the Liquidation Preference of that share on the redemption date. The Company will redeem shares at the option of the holder out of funds that are legally available for that purpose and not restricted pursuant to the Company's Credit Agreement. If the legally available funds are insufficient for that purpose, the Company will redeem the maximum number possible of the shares requested to be redeemed on the redemption date and will redeem the balance of such shares as additional funds become legally available. 15 16 If and so long as the Company fails to redeem all shares of Series B Preferred Stock required to be redeemed on a particular redemption date, the Company may not redeem or discharge any sinking fund obligation with respect to any shares of Series B Preferred Stock or any parity securities or junior securities or pay any dividends on any junior securities, and neither the Company nor any of its subsidiaries may purchase or otherwise acquire any shares of Series B Preferred Stock, parity securities or junior securities unless all shares of Series B Preferred Stock required to be redeemed are redeemed. The foregoing prohibitions do not apply to certain purchase or exchange offers made to all holders of Series B Preferred Stock. Series B Preferred Stock will not rank junior to any other capital stock of the Company in respect of rights of redemption or rights to receive dividends or liquidating distributions. The Company may not issue any senior securities without the consent of the holders of at least 66 2/3% of the number of shares of Series B Preferred Stock then outstanding. Holders of Series B Preferred Stock are not entitled to vote on any matters submitted to a vote of the stockholders of the Company, except as required by law and except that without the consent of the holders of at least 66 2/3% of the number of shares of Series B Preferred Stock then outstanding, the Company may not take any action, including by merger, to amend any of the provisions of the certificate of designations of the Series B Preferred Stock (the "Certificate of Designations") or amend any of the provisions of the Amended and Restated Certificate of Incorporation of the Company so as to adversely affect any preference or right of the Series B Preferred Stock Any provision of the Certificate of Designations which, for the benefit of the holders of Series B Preferred Stock, prohibits, limits or restricts actions by, or imposes obligations on, the Company may be waived in whole or in part by the affirmative vote or with the consent of the holders of record of at least 66 2/3% of the number of shares of Series B Preferred Stock then outstanding. Holders of Series B Preferred Stock do not have any preemptive right to purchase any class of securities that may be issued by the Company. A default under the Certificate of Designations occurs if any of the following occur: (1) the entry of a decree or order for relief in respect of the Company under any Bankruptcy law or the appointment of a Receiver of the Company or of any substantial part of its properties, or ordering the winding up or liquidation of the affairs of the Company or the filing of an involuntary petition and the entry of a temporary stay and such petition and stay are not diligently contested or continue undismissed for a period of 60 consecutive days; or (2) the filing by the Company of a petition, answer or consent seeking relief under any Bankruptcy Law or the consent by the Company to the institution of proceedings under any Bankruptcy Law or to the filing of any such petition or to the appointment or taking of possession of a Receiver of the Company or any substantial part of its properties or the Company failing generally to pay its respective debts as they become due or taking any action in furtherance of any such action. In the event of any action at law or suit in equity with respect to the Series B Preferred Stock, the Company may be required to pay reasonable sums for attorneys' fees incurred by the holder thereof in connection with such action or suit and all other costs of collections. PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. The following items are included as exhibits to this Amendment No. 1 to the Annual Report on Form 10-K: EXHIBIT NUMBER DESCRIPTION 10.8* Amended and Restated On Command Corporation 1996 Key Employee Stock Plan. 10.16 Credit Agreement, dated as of July 18, 2000, by and among On Command Corporation, the lenders party thereto, Toronto Dominion (Texas), Inc., Fleet National Bank, Bank of America, N.A., and the Bank of New York. 10.17 Amendment No. 1, dated as of March 27, 2001, to the Credit Agreement, dated as of July 18, 2000, by and among On Command Corporation, the lenders party thereto, Toronto Dominion (Texas), Inc., Fleet National Bank, Bank of America, N.A., and the Bank of New York. * Indicates compensatory plan or arrangement 16 17 17 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado on April 30, 2001. On Command Corporation By: /s/ Jerome H. Kern Jerome H. Kern Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Jerome H. Kern ________________________________ Chairman of the Board April 30, 200 Jerome H. Kern (Principal Executive Officer) /s/Katgrtn L. Hale _________________________________ Senior Vice President, Finance April 30, 2001 Kathryn L. Hale (Principal Accounting and Financial Officer) /s/ Richard D. Goldstein _________________________________ Director April 30, 2001 Richard D. Goldstein /s/ Paul A. Gould _________________________________ Director April 30, 2001 Paul A. Gould /s/ Gary S. Howard _________________________________ Director April 30, 2001 Gary S. Howard /s/ Peter M. Kern _________________________________ Director April 30, 2001 Peter M. Kern /s/ Carl E. Vogel _________________________________ Director April 30, 2001 Carl E. Vogel _________________________________ Director April ___, 2001 J. David Wargo _________________________________ Director April ___, 2001 Gary L. Wilson
18 19 INDEX OF EXHIBITS EXHIBIT NUMBER DESCRIPTION 10.8* Amended and Restated On Command Corporation 1996 Key Employee Stock Plan. 10.16 Credit Agreement, dated as of July 18, 2000, by and among On Command Corporation, the lenders party thereto, Toronto Dominion (Texas), Inc., Fleet National Bank, Bank of America, N.A., and the Bank of New York. 10.17 Amendment No. 1, dated as of March 27, 2001, to the Credit Agreement, dated as of July 18, 2000, by and among On Command Corporation, the lenders party thereto, Toronto Dominion (Texas), Inc., Fleet National Bank, Bank of America, N.A., and the Bank of New York. * Indicates compensatory plan or arrangement 19 EX-10.8 2 y48339a1ex10-8.txt AMENDED AND RESTATED KEY EMPLOYEE STOCK PLAN 1 Exhibit 10.8 AMENDED AND RESTATED ON COMMAND CORPORATION 1996 KEY EMPLOYEE STOCK PLAN On Command Corporation, a Delaware corporation, has adopted this Amended and Restated 1996 Key Employee Stock Plan (the "Plan"), effective as of October 5, 2000, as an amendment and restatement of the On Command Corporation 1996 Key Employee Stock Plan, originally effective as of October 7, 1996, for the benefit of its eligible employees. The purposes of this Plan are as follows: (1) To provide an additional incentive for key Employees to further the growth, development and financial success of the Company by personally benefiting through the ownership of Company stock and/or rights which recognize such growth, development and financial success. (2) To enable the Company to obtain and retain the services of key Employees considered essential to the long range success of the Company by offering them an opportunity to own stock in the Company and/or rights which will reflect the growth, development and financial success of the Company. ARTICLE I DEFINITIONS 1.1 General. Wherever the following terms are used in this Plan they shall have the meaning specified below, unless the context clearly indicates otherwise. 1.2 Award Limit. "Award Limit" shall mean 300,000 (Three hundred thousand) shares of Common Stock. 1.3 Board. "Board" shall mean the Board of Directors of the Company. 1.4 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended. 1.5 Committee. "Committee" shall mean the Compensation Committee of the Board, or a subcommittee of the Board, appointed as provided in Section 9.1. 1.6 Common Stock. "Common Stock" shall mean the common stock of the Company, par value $.0l per share, and any equity security of the Company issued or authorized to be issued in the future, but excluding any warrants, Options or other rights to purchase Common Stock. Debt securities of the Company convertible into Common Stock shall be deemed equity securities of the Company. 1.7 Company. "Company" shall mean On Command Corporation, a Delaware corporation. 2 1.8 Deferred Stock. Preferred Stock" shall mean Common Stock awarded under Article VII of this Plan. 1.9 Director. "Director" shall mean a member of the Board. 1.10 Dividend Equivalent. "Dividend Equivalent" shall mean a right to receive the equivalent value (in cash or Common Stock) of dividends paid on Common Stock, awarded under Article VII of this Plan. 1.11 Employee. "Employee" shall mean any officer or other employee (as defined in accordance with Section 3401 (c) of the Code) of the Company, or of any corporation which is a Subsidiary. 1.12 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 1.13 Fair Market Value. "Fair Market Value" of a share of Common Stock as of a giver date shall be (i) the mean between the highest and lowest selling price of a share of common Stock on the principal exchange on which shares of Common Stock are then trading, if any, on such date, or if shares were not traded on such date, then on the closest preceding date on which a trade occurred, or (ii) if Common Stock is not traded on an exchange, the mean between the closing representative bid and asked prices for the Common Stock on such date as reported by NASDAQ or, if NASDAQ is not then in existence, by its successor quotation system; or (iii) if Common Stock is not publicly traded, the Fair Market Value of a share of Common Stock as established by the Committee acting in good faith. 1.14 Grantee. "Grantee" shall mean an Employee granted a Performance Award, Dividend Equivalent, Stock Payment or Stock Appreciation Right, or an award of Deferred Stock, under this Plan. 1.15 Incentive Stock Option. "Incentive Stock Option" shall mean an Option which conforms to the applicable provisions of Section 422 of the Code and which is designated as an Incentive Stock Option by the Committee. 1.16 Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean an Option which is not designated as an Incentive Stock Option by the Committee. 1.17 Option. "Option" shall mean a stock Option granted under Article III of this Plan. An Option granted under this Plan shall, as determined by the Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option. 1.18 Optionee. "Optionee" shall mean an Employee granted an Option under this Plan. 1.19 Performance Award. "Performance Award" shall mean a cash bonus, stock bonus or other performance or incentive award that is paid in cash, Common Stock or a combination of both, awarded under Article VII of this Plan. 2 3 1.20 Plan. "Plan" shall mean The On Command Corporation 1996 Key Employee Stock Plan. 1.21 Restricted Stock. "Restricted Stock" shall mean Common Stock awarded under Article VI of this Plan. 1.22 Restricted Stockholder. "Restricted Stockholder" shall mean an Employee granted an award of Restricted Stock under Article VI of this Plan. 1.23 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time. 1.24 Stock Appreciation Right. "Stock Appreciation Right" shall mean a stock appreciation right granted under Article VIII of this Plan. 1.25 Stock Payment. "Stock Payment" shall mean (i) a payment in the form of shares of Common Stock, or (ii) an Option or other right to purchase shares of Common Stock, as part of a deferred compensation arrangement, made in lieu of all or any portion of the compensation, including without limitation, salary, bonuses and commissions, that would otherwise become payable to a key Employee in cash, awarded under Article VII of this Plan. 1.26 Subsidiary. "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 1.27 Termination of Employment. "Termination of Employment" shall mean the time when the employee-employer relationship between the Optionee, Grantee or Restricted Stockholder and the Company or any Subsidiary is terminated for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding (i) terminations where there is a simultaneous reemployment or continuing employment of the Optionee, Grantee or Restricted Stockholder by the Company or any Subsidiary, (ii) at the discretion of the Committee, terminations which result in a temporary severance of the employee-employer relationship, and (iii) at the discretion of the Committee, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company or a Subsidiary with the former employee. The Committee, in its discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether particular leaves of absence constitute Terminations of Employment; provided, however, that, with respect to Incentive Stock Options, a leave of absence or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. Notwithstanding any other provision of this Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate an Employee's employment at any time for any reason whatsoever, with or 3 4 without cause, except to the extent expressly provided otherwise in writing; provided that the foregoing shall be subject to Section 10.3 of this Plan. ARTICLE II SHARES SUBJECT TO PLAN 2.1 Shares Subject to Plan. (a) The shares of stock subject to Options, awards of Restricted Stock, Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock Payments or Stock Appreciation Rights shall be Common Stock, initially shares of the Company's Common Stock, par value $.01 per share. The aggregate number of such shares which may be issued upon exercise of such Options or rights or upon any such awards under the Plan shall not exceed 5,250,000 (Five Million Two Hundred Fifty Thousand) shares, The shares of Common Stock issuable upon exercise of such Options or rights or upon any such awards may be either previously authorized but unissued shares or treasury shares. (b) The maximum number of shares which may be subject to Options or Stock Appreciation Rights granted under the Plan to any individual in any calendar year shall not exceed the Award Limit. To the extent required by Section 162(m) of the Code, shares subject to Options which are cancelled continue to be counted against the Award Limit and if, after grant of an Option, the price of shares subject to such Option is reduced, the transaction is treated as a cancellation of the Option and a grant of a new Option and both the Option deemed to be canceled and the Option deemed to be granted are counted against the Award Limit. Furthermore, to the extent required by Section 162 (m) of the Code, if, after grant of a Stock Appreciation Right, the base amount on which stock appreciation is calculated is reduced to reflect a reduction in the Fair Market Value of the Company's Common Stock, the transaction is treated as a cancellation of the Stock Appreciation Right and a grant of a new Stock Appreciation Right and both the Stock Appreciation Right deemed to be canceled and the Stock Appreciation Right deemed to be granted are counted against the Award Limit. 2.2 Add-back of Options and other Rights. If any Option, or other right to acquire shares of Common Stock under any other award under this Plan, expires or is cancelled without having been fully exercised, or is exercised in whole or in part for cash as permitted by this Plan, the number of shares subject to such Option or other right but as to which such Option or other right was not exercised prior to its expiration, cancellation or exercise may again be Optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. Shares of Common Stock which are delivered by the Optionee or Grantee or withheld by the Company upon the exercise of any Option or other award under this Plan, in payment of the exercise price thereof, may again be Optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. If any share of Restricted Stock is forfeited by the Grantee or repurchased by the Company pursuant to Section 6.6 hereof, such share may again be Optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. 4 5 ARTICLE III GRANTING OF OPTIONS 3.1 Eligibility. Any Employee selected by the Committee pursuant to Section 3.4(a)(i) shall be eligible to be granted an Option. 3.2 Disqualification for Stock Ownership. No person may be granted an Incentive Stock Option under this Plan if such person, at the time the Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any then existing Subsidiary unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. 3.3 Qualification of Incentive Stock Options. No Incentive Stock Option shall be granted unless such Option, when granted, qualifies as an "incentive stock Option" under Section 4.22 of the Code. No Incentive Stock Option shall be granted to any person who is not an Employee, 3.4 Granting of Options. (a) The Committee shall from time to time, in its discretion, and subject to applicable limitations of this Plan: (i) Determine which Employees are key Employees and select from among them (including Employees who have previously received Options or other awards under this Plan) such of them as in its opinion should be granted Options; (ii) Subject to the Award Limit, determine the number of shares to be subject to such Options granted to the selected key Employees; (iii) Determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options and whether such Options are intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the code; and (iv) Determine the terms and conditions of such Options, consistent with this Plan; provided, however, that the terms and conditions of Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162 (m) of the Code. (b) Upon the selection of a key Employee to be granted an Option, the Committee shall instruct the Secretary of the Company to issue the Option and may impose such conditions on the grant of the Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Committee may, in its discretion and on such terms as it deems appropriate, require as a condition on the grant of an Option to an Employee that the Employee 5 6 surrender for cancellation some or all of the unexercised Options, awards of Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments or other rights which have been previously granted to him under this Plan or otherwise. An Option, the grant of which is conditioned upon such surrender, may have an Option price lower (or higher) than the exercise price of such surrendered Option or other award, may cover the same (or a lesser or greater) number of shares as such surrendered Option or other award, may contain such other terms as the Committee deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of shares, price, exercise period or any other term or condition of such surrendered Option or other award. (c) Any Incentive Stock Option granted under this Plan may be modified by the Committee to disqualify such Option from treatment as an "incentive stock Option" under Section 422 of the Code. ARTICLE IV TERMS OF OPTIONS 4.1 Option Agreement. Each Option shall be evidenced by a written Stock Option Agreement, which shall be executed by the Optionee and an authorized officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with this Plan. Stock Option Agreements evidencing Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162 (m) of the Code. Stock Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. 4.2 Option Price. The price per share of the shares subject to each Option shall be set by the Committee; provided, however, that such price shall be no less than the par value of a share of Common Stock and (i) in the case of Incentive Stock Options and Options intended to qualify as performance-based compensation as described in Section 162(m)(4)C) of the Code, such price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted and (ii) in the case of Incentive Stock Options granted to an individual then owning (with in the meaning of Section 424 (d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary such price shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date the Option is granted. 4.3 Option Term. The term of an Option shall be set by the Committee in its discretion; provided, however, that, in the case of Incentive Stock Options, the term shall not be more than ten (10) years from the date the Incentive Stock Option is granted, or five (5) years from such date if the Incentive Stock Option is granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary. Except as limited by requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options, the Committee may extend the term of any outstanding Option in connection with any 6 7 Termination of Employment of the Optionee, or amend any other term or condition of such Option relating to such a termination. 4.4 Option Vesting. (a) The period during which the right to exercise an Option in whole or in part vests in the Optionee shall be set by the Committee and the Committee may determine that an Option may not be exercised in whole or in part for a specified period after it is granted; provided, however, that, unless the Committee otherwise provides in the terms of the Option, no Option shall be exercisable by any Optionee who is then subject to Section 16 of the Exchange Act within the period ending six months and one day after the date the Option is granted. At any time after grant of an Option, the Committee may, in its sole discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option vests. (b) No portion of an Option which is unexercisable at Termination of Employment shall thereafter become exercisable, except as may be otherwise provided by the Committee either in the Stock Option Agreement or in a resolution adopted following the grant of the Option. (c) To the extent that the aggregate Fair Market Value of stock with respect to which "incentive stock Options" (within the meaning of Section 422 of the Code, but without regard to Section 422 (d) of the Code) are exercisable for the first time by an Optionee during any calendar year (under the Plan and all other incentive stock Option plans of the Company and any Subsidiary) exceeds $100,000, such Options shall be treated as Non-Qualified Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of this Section 4.4(c), the Fair Market Value of stock shall be determined as of the time the Option with respect to such stock is granted. 4.5 Consideration. In consideration of the granting of an Option, the Optionee shall agree, in the written Stock Option Agreement, to remain in the employ of the Company or any Subsidiary for a period of at least one year after the Option is granted. Nothing in this Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue in the employ of the Company or any Subsidiary, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Optionee at any time for any reason whatsoever, with or without good cause. ARTICLE V EXERCISE OF OPTIONS 5.1 Partial Exercise. An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional shares and the Committee may require that, by the terms of the Option, a partial exercise be with respect to a minimum number of shares. 7 8 5.2 Manner of Exercise. All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company or his office: (a) A written notice complying with the applicable rules established by the Committee or the Board stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Optionee or other person then entitled to exercise the Option or such portion; (b) Such representations and documents as the Committee or the Board, in its discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations. The Committee or Board may, in its discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars; (c) In the event that the Option shall be exercised pursuant to Section 10.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option.; and (d) Full cash payment to the Secretary of the Company for the shares with respect to which the Option, or portion thereof, is exercised. However, at the discretion of the Committee, the terms of the Option may (i) allow a delay in payment up to thirty (30) days from the date the Option, or portion thereof, is exercised; (ii) allow payment, in whole or in part, through the delivery of shares of Common Stock owned by the Optionee for a period of not less than six months, duly endorsed for transfer to the Company with a Fair Market Value on the dare of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; (iii) allow payment, in whole or in part, through the delivery of property of any kind which constitutes good and valuable consideration; (iv) allow payment, in whole or in part, through the delivery of a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Committee or the Board; or (v) allow payment through any combination of the consideration provided in the foregoing subparagraphs (ii), (iii) and (iv). In the case of a promissory note, the Committee or the Board may also prescribe the form of such note and the security to be given for such note. The Option may not be exercised, however, by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law. 5.3 Certain Timing Requirements. At the discretion of the Committee, shares of Common Stock issuable to the Optionee upon exercise of the Option may be used to satisfy the Option exercise price or the tax withholding consequences of such exercise, provided that in the case of persons subject to Section 15 of the Exchange Act, only (i) during the period beginning on the third business day following the date of release of the quarterly or annual summary statement of sales and earnings of the Company and ending on the twelfth business day following such date or (ii) pursuant to an irrevocable written election by the Optionee to use shares of Common Stock issuable to the Optionee upon exercise of the Option to pay all or part 8 9 of the Option price or the withholding taxes made at least six months prior to the payment of such Option price or withholding taxes. 5.4 Conditions to Issuance of Stock Certificates. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; (b) The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Committee or Board shall, in its discretion, deem necessary or advisable; (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee or Board shall, in its discretion, determine to be necessary or advisable; (d) The lapse of such reasonable period of time following the exercise of the Option as the Committee or Board may establish from time to time for reasons of administrative convenience; and (e) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax. 5.5 Rights as Stockholders. The holders of Options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such holders. 5.6 Ownership and Transfer Restrictions. The Committee, in its discretion, may impose such restrictions on the ownership and transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Stock Option Agreement and may be referred to on the certificates evidencing such shares. The Committee may require the Employee to give the Company prompt notice of any disposition of shares of Common Stock acquired by exercise of an Incentive Stock Option within (i) two years from the date of granting such Option to such Employee or (ii) one year after the transfer of such shares to such Employee. The Committee may direct that the certificates evidencing shares acquired by exercise of an Option refer to such requirement to give prompt notice of disposition. 9 10 ARTICLE VI AWARD OF RESTRICTED STOCK 6.1 Award of Restricted Stock. (a) The Committee shall from time to time, in its absolute discretion: (i) Select from among the key Employees (including Employees who have previously received other awards under this Plan) such of them as in its opinion should be awarded Restricted Stock; and (ii) Determine the purchase price, if any, and other terms and conditions applicable to such Restricted Stock, consistent with this Plan. (b) The committee shall establish the purchase price, if any, and form of payment for Restricted Stock; provided, however, that such purchase price shall be no less than the par value of the Common Stock to be purchased. In all cases, legal consideration shall be required for each issuance of Restricted Stock. (c) Upon the selection of a key Employee to be awarded Restricted Stock, the Committee shall instruct the Secretary of the Company to issue such Restricted Stock and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate. 6.2 Restricted Stock Agreement. Restricted Stock shall be issued only pursuant to a written Restricted Stock Agreement, which shall be executed by the selected key Employee and an authorized officer of the Company and which shall contain such terms anal conditions as the Committee shall determine, consistent with this Plan. 6.3 Consideration. As consideration for the issuance of Restricted Stock, in addition to payment of any purchase price, the Restricted Stockholder shall agree, in the written Restricted Stock Agreement, to remain in the employ of, or to consult for, the Company or any Subsidiary for a period of at least one year after the Restricted Stock is issued. Nothing in this Plan or in any Restricted Stock Agreement hereunder shall confer on any Restricted Stockholder any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Restricted Stockholder at any time for any reason whatsoever, with or without good cause. 6.4 Rights as Stockholders. Upon delivery of the shares of Restricted Stock to the escrow holder pursuant to Section 6.7, the Restricted Stockholder shall have, unless otherwise provided by the Committee, all the rights of a stockholder with respect to said shares, subject to the restrictions in his Restricted Stock Agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided, however, that in the discretion of the Committee, any extraordinary distributions with respect to the Common Stock shall be subject to the restrictions set forth in Section 6.5. 10 11 6.5 Restriction. All shares of Restricted Stock issued under this Plan (including any shares received by holders thereof with respect to shares of Restricted Stock as a result or stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each individual Restricted Stock Agreement, be subject to such restrictions as the Committee shall provide, which restrictions may include, without limitation, restrictions concerning voting rights and transferability and restrictions based on duration of employment with the Company, Company performance and individual performance; provided, however, that by a resolution adopted after the Restricted Stock is issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Restricted Stock Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire. Unless provided otherwise by the Committee, if no consideration was paid by the Restricted Stockholder upon issuance, a Restricted Stockholder's rights in unvested Restricted Stock shall lapse upon Termination of Employment or, if applicable, upon the termination of his consulting relationship with the Company. 6.6 Repurchase of Restricted Stock. The Committee shall provide in the terms of each individual Restricted Stock Agreement that the Company shall have the right to repurchase from the Restricted Stockholder the Restricted Stock then subject to restrictions under the Restricted Stock Agreement immediately upon a Termination of Employment or, if applicable, upon a termination of any consulting relationship between the Restricted Stockholder and the Company, at a cash price per share equal to the price paid by the Restricted Stockholder for such Restricted Stock; provided, however, that provision may be made that no such right of repurchase shall exist in the event of a Termination of employment without cause, or following a change in control of the Company or because of the Restricted Stockholder's retirement, death or disability, or otherwise. 6.7 Escrow. The Secretary of the Company or such other escrow holder as the Committee may appoint shall retain physical custody of each certificate representing Restricted Stock until all of the restrictions imposed under the Restricted Stock Agreement with respect to the shares evidenced by such certificate expire or shall have been removed. 6.8 Legend. In order to enforce the restrictions imposed upon shares of Restricted Stock hereunder, the Committee shall cause a legend or legends to be placed on certificates representing all shares of Restricted Stock that are still subject to restrictions under Restricted Stock Agreements, which legend or legends shall make appropriate reference to the conditions imposed thereby. ARTICLE VII PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK PAYMENTS 7.1 Performance Awards. Any key Employee selected by the Committee may be granted one or more Performance Awards. The value of such Performance Awards may be linked to the market value, book value, net profits or other measure of the value of Common Stock or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee, or 11 12 may be based upon the appreciation in the market value, book value, net profits or other measure of the value of a specified number of shares of Common Stock over a fixed period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular key Employee. 7.2 Dividend Equivalents. Any key Employee selected by the Committee may be granted Dividend Equivalents based on the dividends declared on Common Stock, to be credited as of dividend payment dates, during the period between the date an Option, Stock Appreciation Right, Deferred Stock or Performance Award is granted, and the date such Option, Stock Appreciation Right, Deferred Stock or Performance Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as may be determined by the Committee. 7.3 Stock Payments. Any key Employee selected by the Committee may receive Stock Payments in the manner determined from time to time by the Committee. The number of shares shall be determined by the Committee and may be based upon the Fair Market Value, book value, net profits or other measure of the value of Common Stock or other specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter. 7.4 Deferred Stock. Any key Employee selected by the Committee may be granted an award of Deferred Stock in the manner determined from time to time by the Committee. The number of shares of Deferred Stock shall be determined by the Committee and may be linked to the market value, book value, net profits or other measure of the value of Common Stock or other specific performance criteria, in each case on a specified date or dates or over any period or periods determined by the Committee. Common Stock underlying a Deferred Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless otherwise provided by the Committee, a Grantee of Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the award has vested and the Common Stock underlying the award has been issued. 7.5 Performance Award Agreement, Dividend Equivalent Agreement, Deferred Stock Agreement, Stock payment Agreement. Each Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall be evidenced by a written agreement, which shall be executed by the Grantee and an authorized Officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with this Plan. 7.6 Term. The term of a Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall be set by the Committee in its discretion. 7.7 Exercise Upon Termination of Employment. A Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment is exercisable or payable only while the Grantee is an Employee; provided that the Committee may determine that the 12 13 Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment may be exercised subsequent to Termination of Employment without cause, or following a change in control of the Company, or because of the Grantee's retirement, death or disability, or otherwise. 7.8 Payment on Exercise. Payment of the amount determined under Section 7.1 or 7.2 above shall be in cash, in Common Stock or a combination of both, as determined by the Committee. To the extent any payment under this Article VII is effected in Common Stock, it shall be made subject to satisfaction of all provisions of Section 5.4. 7.9 Consideration. In consideration of the granting of a Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment, the Grantee shall agree, in a written agreement, to remain in the employ of, or to consult for, the Company or any Subsidiary for a period of at least one year after such Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment is granted, Nothing in this Plan or in any agreement hereunder shall confer on any Grantee any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the company and any Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any time for any reason whatsoever, with or without good cause. ARTICLE VIII STOCK APPRECIATION RIGHTS 8.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be granted to any key Employee selected by the Committee. A Stock Appreciation Right may be granted (i) in connection and simultaneously with the grant of an Option, (ii) with respect to a previously granted Option, or (iii) independent of an Option. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with this Plan as the Committee shall impose and shall be evidenced by a written Stock Appreciation Right Agreement, which shall be executed by the Grantee and an authorized officer of the Company. The Committee, in its discretion, may determine whether a Stock Appreciation Right is to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code and Stock Appreciation Right Agreements evidencing Stock Appreciation Rights intended to so qualify shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162 (m) of the Code. Without limiting the generality of the foregoing, the Committee may, in its discretion and on such terms as it deems appropriate, require as a condition of the grant of a Stock Appreciation Right to an Employee that the Employee surrender for cancellation some or all of the unexercised Options, awards of Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments, or other rights which have been previously granted to him under this Plan or otherwise. A Stock Appreciation Right, the grant of which is conditioned upon such surrender, may have an exercise price lower (or higher) than the exercise price of the surrendered Option or other award, may cover the same (or a lesser or greater) number of shares as such surrendered Option or other award, may contain such other terms as the Committee deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of shares, price, exercise period or any other term or condition of such surrendered Option or other award. 13 14 8.2 Coupled Stock Appreciation Rights. (a) A Coupled Stock Appreciation Right ("CSAR") shall be related to a particular Option and shall be exercisable only when and to the extent the related Option is exercisable. (b) A CSAR may be granted to the Grantee for no more than the number of shares subject to the simultaneously or previously granted Option to which it is coupled. (c) A CSAR shall entitle the Grantee (or other person entitled to exercise the Option pursuant to this Plan) to surrender to the Company unexercised a portion of the Option to which the CSAR relates (to the extent then exercisable pursuant to its terms) and to receive from the Company in exchange therefor an amount determined by multiplying the difference obtained by subtracting the Option exercise price from the Fair Market Value of a share of Common Stock on the date of exercise of the CSAR by the number of shares of Common Stock with respect to which the CSAR shall have been exercised, subject to any limitations the Committee may impose. 8.3 Independent Stock Appreciation Rights. (a) An Independent Stock Appreciation Right ("ISAR") shall be unrelated to any Option and shall have a term set by the Committee. An ISAR shall be exercisable in such installments as the Committee may determine. An ISAR shall cover such number of shares of Common Stock as the Committee may determine; provided, however, that unless the Committee otherwise provides in the terms of the ISAR, no ISAR granted to a person subject to Section 16 of the Exchange Act shall be exercisable until at least six months have elapsed from (but excluding) the date on which the Option was granted. The exercise price per share of Common Stock subject to each ISAR shall be set by the Committee. An ISAR is exercisable only while the Grantee is an Employee; provided that the Committee may determine that the ISAR may be exercised subsequent to Termination of Employment without cause, or following a change in control of the Company, or because of the Grantee's retirement, death or disability, or otherwise. (b) An ISAR shall entitle the Grantee (or other person entitled to exercise the ISAR pursuant to this Plan) to exercise all or a specified portion of the ISAR (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the ISAR from the Fair Market Value of a share of Common Stock on the date of exercise of the ISAR by the number of shares of Common Stock with respect to which the ISAR shall have been exercised, subject to any limitations the Committee may impose. 8.4 Payment and Limitations on Exercise. (a) Payment of the amount determined under Section 8.2 (c) and 8. 3 (b) above shall be in cash, in Common Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee. To the extent such payment is effected in Common Stock it shall be made subject to satisfaction of all provisions of Section 5.4 hereinabove pertaining to Options. 14 15 (b) Grantees of Stock Appreciation Rights who are subject to Section 16 of the Exchange Act may, in the discretion of the Board or Committee, be required to comply with any timing or other restrictions under Rule 16b-3 applicable to the settlement or exercise of a Stock Appreciation Right. 8.5 Consideration. In consideration of the granting of a Stock Appreciation Right, the Grantee shall agree, in the written Stock Appreciation Right Agreement, to remain in the employ of, or to consult for, the Company or any Subsidiary for a period of at least one year after the Stock Appreciation Right is granted. Nothing in this Plan or in any Stock Appreciation Right Agreement hereunder shall confer on any Grantee any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any time for any reason whatsoever, with or without good cause, ARTICLE IX ADMINISTRATION 9.1 Compensation Committee. The Compensation Committee (or a subcommittee of the Board assuming the functions of the Committee under this Plan) shall consist of two or more Independent Directors appointed by and holding office at the pleasure of the Board, each of whom is both a "disinterested person" as defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m) of the Code. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may be filled by the Board. 9.2 Duties and Powers of Committee. It shall be the duty of the Committee to conduct the general administration of this Plan in accordance with its provisions. The Committee shall have the power to interpret this Plan and the agreements pursuant to which Options, awards of Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments are granted or awarded and to adopt such rules for the administration, interpretation, and application of this Plan as are consistent therewith and to interpret, amend or revoke any such rules. Any such grant or award under this Plan need not be the same with respect to each Optionee, Grantee or Restricted Stockholder. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan except with respect to matters which under Rule 16b-3 or Section 162 (m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. 9.3 Majority Rule. The Committee shall act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Committee. 15 16 9.4 Compensation; Professional Assistance; Good Faith Actions. Members of the Committee shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of this Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and the Company's officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Optionees, Grantees, Restricted Stockholders, the Company and all other interested persons. No members of the Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan, Options, awards of Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments, and all members of the Committee shall be fully protected by the Company in respect of any such action, determination or interpretation. ARTICLE X MISCELLANEOUS PROVISIONS 10.1 Not Transferable. Options, awards of Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this Plan may not be sold, pledged, assigned, or transferred in any manner other than by will or the laws of descent and distribution unless and until such right or award has been exercised, or the shares underlying such right or award have been issued, and all restrictions applicable to such shares have lapsed. No Option, award of Restricted Stock or Deferred Stock, Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment or interest or right therein shall be liable for the debts, contracts or engagements of the Optionee, Grantee, Restricted Stockholder or his successors in interest, or shall be subject co disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect. During the lifetime of the Optionee or Grantee, only he may exercise an Option or other right or award (or any portion thereof) granted to him under the Plan. After the death of the Optionee or Grantee, any exercisable portion of an Option or other right or award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement or other agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Optionee's or Grantee's will or under the then applicable laws of descent and distribution. 10.2 Amendment, Suspension or Termination of this Plan. Unless sooner terminated under this Section 10.2, the Plan will terminate after the expiration of ten years from the date the Company's Registration Statement, as amended and filed in connection with the Company's proposed initial public offering of Common Stock, is declared or deemed to be effective by the Securities and Exchange Commission. This Plan may be wholly or partially 16 17 amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee, and may be terminated at any time by the Board. However, without approval of the Company's stockholders given within twelve months before or after the action by the Committee, no action of the Committee may, except as provided in Section 10.3, increase the limits imposed in Section 2.1 on the maximum number of shares which may be issued under this Plan or modify the Award Limit, and no action of the Committee may be taken that would otherwise require stockholder approval as a matter of applicable law, regulation or rule. No amendment, suspension or termination of this Plan shall, without the consent of the holder of Options, Restricted Stock or Deferred Stock awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments, alter or impair any rights or obligations under any Options, awards of Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments theretofore granted or awarded, unless the award itself otherwise expressly so provides. No Options, Restricted Stock, Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be granted or awarded during any period of suspension or after termination of this Plan, and in no event may any Incentive Stock Option be granted under this Plan after the first to occur of the following events: (a) The expiration of ten years from the date the Plan is adopted by the Board; or (b) The expiration of ten years from the date the Plan is approved by the Company's stockholders under Section 10.5. 10.3 Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events. (a) Subject to Section 10.3(e), in the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, in the Committee's sole discretion, affects the Common Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Option, Restricted Stock award, Performance Award, Stock Appreciation Right, Dividend Equivalent, Deferred Stock award or Stock Payment, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Common Stock (or other securities or property) with respect to which Options, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be granted under the Plan, or which may be granted as Restricted Stock or Deferred Stock (including, but not limited to, adjustments of the limitations in Section 2.1 on the 17 18 maximum number and kind of shares which may be issued and adjustments of the Award Limit), (ii) the number and kind of shares of Common Stock (or other securities or property) subject to outstanding Options, Performance Awards, Stock Appreciation Rights, Dividend Equivalents, or Stock Payments, and in the number and kind of shares of outstanding Restricted Stock or Deferred Stock, and (iii) the grant or exercise price with respect to any Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment. (b) Subject to Section 10.3 (e), in the event of any corporate transaction or other event described in Section 10.3 (a) which results in shares of Common Stock being exchanged for or converted into cash, securities (including securities of another corporation) or other property, the Committee will have the right to terminate this Plan as of the date of the event or transaction, in which case all Options, rights and other awards granted under this Plan shall become the right to receive such cash, securities or other property, net of any applicable exercise price. (c) In the event of any corporate transaction or other event described in Section 10.3 (a) or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations, or accounting principles, the Committee in its discretion is hereby authorized to take any one or more of the following actions whenever the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Option, right or other award under this Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles: (i) In its sole and absolute discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either automatically or upon the Optionee's request, for either the purchase of any such Option, Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or any Restricted Stock or Deferred Stock for an amount of cash equal to the amount that could have been attained upon the exercise of such Option, right or award or realization of the Optionee's rights had such Option, right or award been currently exercisable or payable or the replacement of such Option, right or award with other rights or property selected by the Committee in its sole discretion; (ii) In its sole and absolute discretion, the committee may provide, either by the terms of such Option, Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock or by action taken prior to the occurrence of such transaction or event that it cannot be exercised after such event; 18 19 (iii) In its sole and absolute discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of such Option, Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock or by action taken prior to the occurrence of such transaction or event, that for a specified period of time prior to such transaction or event, such Option, right or award shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in (i) Section 4.4 or (ii) the provisions of such Option, Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock; (iv) In its sole and absolute discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of such Option, Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock or by action taken prior to the occurrence of such transaction or event, that upon such event, such Option, right or award be assumed by the successor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar Options, rights or awards covering the stock of the successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; and (v) In its sole and absolute discretion, and on such terms and conditions as it deems appropriate, the Committee may make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Options, Performance Awards, Stock Appreciation Rights, Dividend Equivalents, or Stock Payments, and in the number and kind of outstanding Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Options, rights and awards and Options, rights and awards which may be granted in the future. (vi) In its sole and absolute discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of a Restricted Stock award or Deferred Stock award or by action taken prior to the occurrence of such event that, for a specified period of time prior to such event, the restrictions imposed under a Restricted Stock Agreement or a Deferred Stock Agreement upon some or all shares of Restricted Stock or Deferred Stock may be terminated, and, in the case of Restricted Stock, some or all shares of such Restricted Stock may cease to be subject to repurchase under Section 6.6 after such event. (d) Subject to Sections 10.3(e) and 10.8, the Committee may, in its discretion, include such further provisions and limitations in any Option, Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock agreement or certificate, as it may deem equitable and in the beet interests of the Company. 19 20 (e) With respect to Incentive Stock Options and Options and Stock Appreciation Rights intended to qualify as performance-based compensation under Section 162(m), no adjustment or action described in this Section 10.3 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code or would cause such Option or stock appreciation right to fail to so qualify under Section 162(m), as the case may be, or any successor provisions thereto. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would violate Section 16 or the exemptive conditions of Rule 16b-3. The number of shares of Common Stock subject to any Option, right or award shall always be rounded to the next whole number. 10.4 Approval of Plan by Stockholders. This Plan will be submitted for the approval of the Company's stockholders within twelve months after the date of the Board's initial adOption of this Plan. Options, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be granted and Restricted Stock or Deferred Stock may be awarded prior to such stockholder approval, provided that such Options, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments shall not be exercisable and such Restricted Stock or Deferred Stock shall not vest prior to the time when this Plan is approved by the stockholders, and provided further that if such approval has not been obtained at the end of said twelve-month period, all Options, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments previously granted and all Restricted Stock or Deferred Stock previously awarded under this Plan shall thereupon be cancelled and become null and void. 10.5 Tax Withholding. The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Optionee, Grantee or Restricted Stockholder of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting or exercise of any Option, Restricted Stock, Deferred Stock, Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment. Subject to the timing requirements of Section 5.3, the Committee may in its discretion and in satisfaction of the foregoing requirement allow such Optionee, Grantee or Restricted Stockholder to elect to have the Company withhold shares of Common Stock otherwise issuable under such Option or such other award (or allow the return of shares of Common Stock) having a Fair Market Value equal to the sums required to be withheld. 10.6 Loans. The Committee may, in its discretion, extend one or more loans to key Employees in connection with the exercise or receipt of an Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment granted under this Plan, or the issuance of Restricted Stock or Deferred Stock awarded under this Plan. The terms and conditions of any such loan shall be set by the Committee. 10.7 Forfeiture Provisions. Pursuant to its general authority to determine the terms and conditions applicable to awards under the Plan, the Committee shall have the right (to the extent consistent with the requirements of Rule 16b-3) to provide, in the terms of Options or other awards made under the Plan, or to require the recipient to agree by separate written instrument, that (a) any proceeds, gains or other economic benefit actually or constructively received by the recipient upon any receipt or exercise of the award, or upon the receipt or resale 20 21 of any Common Stock underlying such award, must be paid to the company, and (b) the award shall terminate and any unexercised portion of such award (whether or not vested) shall be forfeited, if (i) a Termination of Employment occurs prior to a specified date, or within a specified time period following receipt or exercise of the award, or (ii) the recipient at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Committee. 10.8 Limitations Applicable to Section 16 Persons and Performance-Based Compensation. Notwithstanding any other provision of this Plan, this Plan, and any Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment granted, or Restricted Stock or Deferred Stock awarded, to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan, Options, Performance Awards, Stock Appreciation Rights, Dividend Equivalents, Stock Payments, Restricted Stock and Deferred Stock granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. Furthermore, notwithstanding any other provision of this Plan, any Option or Stock Appreciation Right intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162 (m) of the Code (including any amendment to Section 152 (m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance-based compensation as described in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent necessary to conform to such requirements. Notwithstanding the foregoing, this Section 10.8 shall be subject to the provisions of Section 10.13 of this Plan. 10.9 Effect of Plan Upon Options and Compensation Plans. The adOption of this Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in this Plan shall he construed to limit the right of the Company (i) to establish any other forms of incentives or compensation for Employees of the Company or any Subsidiary or (ii) to grant or assume Options or other rights otherwise than under this Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of Options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, firm or association. 10.10 Compliance with Laws. This Plan, the granting and vesting of Options, awards of Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this Plan and the issuance and delivery of shares of Common Stock and the payment of money under this Plan or under Options, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments granted or Restricted Stock or Deferred Stock awarded hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be 21 22 necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan, Options, awards of Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. 10.11 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Plan. 10.12 Governing Law. This Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof. 10.13 Consistency with Other Agreements. (a) Notwithstanding any other provision of this Plan, the provision of this Plan shall be subject to the terms and provisions of the following agreements: (i) the On Command Corporation Non-Qualified Stock Option Agreement between On Command Corporation and Robert Kavner dated as of September 11, 1996; (ii) the On Command Corporation Non-Qualified Stock Option Agreement between On Command Corporation and Brian A.C. Steel dated as of September 11, 1996; (iii) the Employment Agreement between On Command Corporation and Robert Kavner dated as of September 11, 1996; and (iv) the Employment Agreement between On Command Corporation and Brian A.C. Steel dated as of September 11, 1996. (b) Options may be granted under this Plan with terms differing from those provided in this Plan where such Options are granted in substitution for stock Options held by employees of other companies who concurrently become employees of the Company or a Subsidiary as a result of a merger or consolidation of the other company with, or the acquisition of the property or stock of the other company by, the Company or any of its Subsidiaries. 22 23 I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of On Command Corporation effective as of October 5, 2000. Executed on this October 5, 2000. ------------------------------ Assistant Secretary 23 EX-10.16 3 y48339a1ex10-16.txt CREDIT AGREEMENT 1 Exhibit 10.16 $350,000,000 CREDIT AGREEMENT DATED AS OF JULY 18, 2000 BY AND AMONG ON COMMAND CORPORATION, AS THE BORROWER, THE LENDERS PARTY THERETO, TORONTO DOMINION (TEXAS), INC., AS THE DOCUMENTATION AGENT (AGENT-ONLY LEAGUE TABLE CREDIT), FLEET NATIONAL BANK, AS THE DOCUMENTATION AGENT, BANK OF AMERICA, N.A., AS THE SYNDICATION AGENT (AGENT-ONLY LEAGUE TABLE CREDIT) AND THE BANK OF NEW YORK, AS THE ADMINISTRATIVE AGENT (AGENT-ONLY LEAGUE TABLE CREDIT) BNY CAPITAL MARKETS, INC., AS THE LEAD ARRANGER AND BOOK MANAGER AND BANCAMERICA SECURITIES, INC., AS THE CO-LEAD ARRANGER AND CO-BOOK MANAGER 2 EXHIBITS AND SCHEDULES EXHIBITS Exhibit A - Form of Assignment and Acceptance Exhibit B - Form of Borrowing Notice Exhibit C - Form of Guarantee Agreement SCHEDULES Schedule 1.1 - Pro Rata Percentages Schedule 1.1A - Unrestricted Subsidiaries Schedule 3.8 - Subsidiaries Schedule 3.9 - Litigation Schedule 3.10 - Restrictive Material Agreements Schedule 3.20 - Environmental Matters Schedule 6.1 - Subsidiary Indebtedness Schedule 6.2 - Liens Schedule 6.4 - Investments Schedule 6.8 - Restrictive Agreements 3 TABLE OF CONTENTS
Page ---- ARTICLE I. Definitions........................................................................................... 1 Section 1.1. Defined Terms.............................................................................. 1 Section 1.2. Terms Generally............................................................................ 18 ARTICLE II. The Credits.......................................................................................... 18 Section 2.1. Revolving Loans............................................................................ 18 Section 2.2. Loans...................................................................................... 18 Section 2.3. Swingline Loans............................................................................ 20 Section 2.4. Borrowing Procedure........................................................................ 22 Section 2.5. Evidence of Debt; Repayment of Loans....................................................... 23 Section 2.6. Fees....................................................................................... 24 Section 2.7. Interest on Loans.......................................................................... 25 Section 2.8. Default Interest........................................................................... 26 Section 2.9. Alternate Rate of Interest................................................................. 26 Section 2.10. Termination and Reduction of the Revolving Loan Commitment................................ 26 Section 2.11. Conversion and Continuation of Borrowings................................................. 27 Section 2.12. Prepayment................................................................................ 28 Section 2.13. Reserve Requirements; Change in Circumstances............................................. 30 Section 2.14. Change in Legality........................................................................ 32 Section 2.15. Indemnity................................................................................. 32 Section 2.16. Pro Rata Treatment........................................................................ 33 Section 2.17. Sharing of Setoffs........................................................................ 33 Section 2.18. Payments.................................................................................. 34 Section 2.19. Taxes..................................................................................... 34 Section 2.20. Assignment of the Revolving Loan Commitment Under Certain Circumstances; Duty to Mitigate.............................................................................. 38 Section 2.21. Letters of Credit......................................................................... 39 Section 2.22. Incremental Facilities.................................................................... 43 ARTICLE III. Representations and Warranties...................................................................... 44 Section 3.1. Organization; Powers....................................................................... 44 Section 3.2. Authorization.............................................................................. 44 Section 3.3. Enforceability............................................................................. 44 Section 3.4. Governmental Approvals..................................................................... 45 Section 3.5. Financial Statements....................................................................... 45 Section 3.6. No Material Adverse Change................................................................. 45 Section 3.7. Title to Properties; Possession Under Leases............................................... 45 Section 3.8. Subsidiaries............................................................................... 46 Section 3.9. Litigation; Compliance with Laws........................................................... 46 Section 3.10. Agreements................................................................................ 46 Section 3.11. Federal Reserve Regulations............................................................... 46
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Page ---- Section 3.12. Investment Company Act; Public Utility Holding Company Act................................ 47 Section 3.13. Use of Proceeds........................................................................... 47 Section 3.14. Tax Returns............................................................................... 47 Section 3.15. No Material Misstatements................................................................. 47 Section 3.16. Employee Benefit Plans.................................................................... 47 Section 3.17. Solvency.................................................................................. 47 Section 3.18. Insurance................................................................................. 48 Section 3.19. Labor Matters............................................................................. 48 Section 3.20. Environmental Matters..................................................................... 48 Section 3.21. Survival of Representations and Warranties, etc........................................... 49 ARTICLE IV. Conditions of Lending................................................................................ 49 Section 4.1. All Credit Events.......................................................................... 50 Section 4.2. First Credit Event......................................................................... 50 ARTICLE V. Affirmative Covenants................................................................................. 52 Section 5.1. Existence; Businesses and Properties....................................................... 52 Section 5.2. Insurance.................................................................................. 52 Section 5.3. Obligations and Taxes...................................................................... 53 Section 5.4. Financial Statements, Reports, etc......................................................... 53 Section 5.5. Litigation and Other Notices............................................................... 54 Section 5.6. Employee Benefits.......................................................................... 54 Section 5.7. Maintaining Records; Access to Properties and Inspections.................................. 54 Section 5.8. Use of Proceeds............................................................................ 55 Section 5.9. Compliance with Environmental Laws......................................................... 55 Section 5.10. Compliance with Material Contracts........................................................ 55 Section 5.11. Ownership of Restricted Subsidiaries; Additional Restricted Subsidiaries.................. 55 ARTICLE VI. Negative Covenants................................................................................... 56 Section 6.1. Indebtedness of the Borrower and the Restricted Subsidiaries............................... 56 Section 6.2. Liens...................................................................................... 57 Section 6.3. Sale and Lease Back Transactions; Off-Balance Sheet Financings............................. 58 Section 6.4. Investments, Acquisitions, Loans and Advances.............................................. 58 Section 6.5. Mergers, Consolidations and Sales of Assets................................................ 59 Section 6.6. Dividends and Distributions; Restrictions on Ability of Subsidiaries to Pay Dividends............................................................................. 60 Section 6.7. Transactions with Affiliates............................................................... 60 Section 6.8. Limitation on Restrictive Agreements....................................................... 61 Section 6.9. Leverage Ratio............................................................................. 61
ii 5 TABLE OF CONTENTS (CONTINUED)
Page ---- Section 6.10. Coverage Ratio............................................................................ 62 Section 6.11. Amendments to Organizational Documents.................................................... 62 Section 6.12. Capital Expenditures...................................................................... 62 ARTICLE VII. Events of Default................................................................................... 62 ARTICLE VIII. The Administrative Agent........................................................................... 65 ARTICLE IX. Miscellaneous........................................................................................ 67 Section 9.1. Notices.................................................................................... 67 Section 9.2. Survival of Agreement...................................................................... 68 Section 9.3. Binding Effect............................................................................. 69 Section 9.4. Successors and Assigns..................................................................... 69 Section 9.5. Expenses; Indemnity........................................................................ 72 Section 9.6. Right of Setoff............................................................................ 73 Section 9.7. Governing Law; Jurisdiction; Consent to Service of Process................................. 73 Section 9.8. Waivers; Amendment......................................................................... 74 Section 9.9. Interest Rate Limitation................................................................... 75 Section 9.10. Entire Agreement.......................................................................... 75 Section 9.11. Waiver of Jury Trial...................................................................... 76 Section 9.12. Severability.............................................................................. 76 Section 9.13. Counterparts.............................................................................. 76 Section 9.14. Headings.................................................................................. 76 Section 9.15. Confidentiality........................................................................... 76
iii 6 CREDIT AGREEMENT This CREDIT AGREEMENT (as the same may be amended, supplemented, modified, substituted, increased, replaced or extended from time to time, this "Agreement"), dated as of July 18, 2000, by and among ON COMMAND CORPORATION, a Delaware corporation (the "Borrower"), the Lenders (as defined in Section 1.1), TORONTO DOMINION (TEXAS), INC. and FLEET NATIONAL BANK, as the documentation agents (in such capacity, the "Documentation Agents"), BANK OF AMERICA, N.A., as the syndication agent (in such capacity, the "Syndication Agent"), THE BANK OF NEW YORK COMPANY, INC., as the Swingline Lender (as defined in Section 1.1), and THE BANK OF NEW YORK, as the Issuing Bank (as defined in Section 1.1), and as the administrative agent (in such capacity, the "Administrative Agent") for the Lenders. ARTICLE I. Definitions SECTION 1.1. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans. "ABR Loans" shall mean Loans (other than Swingline Loans) bearing interest at the Alternate Base Rate in accordance with the provisions of Article II. "Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, a simple per annum interest rate equal to the sum of (a) the LIBO Rate, stated as a decimal, plus (b) the Applicable Margin. The Adjusted LIBO Rate shall apply to Interest Periods of one, two, three or six months. The Adjusted LIBO Rate shall be subject to availability with respect to the Lenders and to Section 2.14. Once determined, the Adjusted LIBO Rate shall remain unchanged during the applicable Interest Period, except for changes in Applicable Margin. "Administrative Agent" shall have the meaning assigned to such term in the preamble hereto. "Administrative Questionnaire" shall mean an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" shall mean, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Agent Register" shall have the meaning assigned to such term in Section 9.4(d). 7 "Agreement" shall have the meaning assigned to such term in the preamble hereto. "Alternate Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the sum of (a) the Applicable Margin plus (b) the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b)(ii) of the preceding sentence, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Applicable Law" shall mean, in respect of any Person, all provisions of Laws of tribunals applicable to such Person, and all orders and decrees of all courts and arbitrators in proceedings or actions to which such Person is a party. "Applicable Margin" shall mean, for any day, with respect to any Eurodollar Loan or any ABR Loan, the percentage set forth below under the caption "Eurodollar Margin" or "ABR Margin", as the case may be, based upon the Leverage Ratio, then in effect for purposes hereof:
Leverage Ratio Eurodollar Margin ABR Margin -------------- ----------------- ---------- Category 1 Greater than or equal to 3.00 to 1.00 1.325% 0.000% Category 2 Greater than or equal to 2.50 to 1.00 but less than 3.00 to 1.00 1.125% 0.000%
-2- 8
Leverage Ratio Eurodollar Margin ABR Margin -------------- ----------------- ---------- Category 3 Greater than or equal to 2.00 to 1.00 but less than 2.50 to 1.00 0.925% 0.000% Category 4 Greater than or equal to 1.00 to 1.00 but less than 2.00 to 1.00 0.700% 0.000% Category 5 Less than 1.00 to 1.00 0.600% 0.000%.
Except as set forth below, the Leverage Ratio utilized for purposes of determining the Applicable Margin shall be that in effect as of the last day of the most recent fiscal quarter of the Borrower in respect of which financial statements have been delivered pursuant to this Agreement. The Applicable Margin from time to time in effect shall be based on the Leverage Ratio from time to time in effect, and each change in the Applicable Margin resulting from a change in (or the initial establishment of) the Leverage Ratio shall be effective with respect to all Loans, the Revolving Loan Commitment and Letters of Credit outstanding on and after the date of delivery to the Administrative Agent of the financial statements and certificates required by Section 5.4(a) or (b) indicating such change to and including the date immediately preceding the next date of delivery of such financial statements and certificates indicating another such change. Notwithstanding the foregoing, at all times during the period commencing on the Closing Date and ending on the date that is one year thereafter, at all times during which the Borrower has failed to deliver the financial statements and certificates required by Section 5.4(a) or (b), and at all times after the occurrence and during the continuance of an Event of Default, the Leverage Ratio shall, in each case, be deemed to be in Category 1 above. "Application" shall mean any stand-by letter of credit application delivered to the Administrative Agent for or in connection with any Letter of Credit pursuant to Section 2.21, in the Administrative Agent's standard form for stand-by letters of credit. "Asset Disposition" shall have the meaning assigned to it in Section 6.5(b). "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit A or such other form as shall be approved by the Administrative Agent. "Attributable Debt" shall mean, as of any date of determination, the present value (discounted semiannually at the interest rate set forth or implicit in the terms of such transaction, as determined by the principal accounting or financial officer of the Borrower) of the obligation of a lessee for rental payments pursuant to any Equipment Lease Transaction during the -3- 9 remaining term of such Equipment Lease Transaction (including any period for which the lease relating thereto has been extended), such rental payments not to include amounts payable by the lessee for maintenance and repairs, insurance, taxes, assessments and similar charges. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" shall have the meaning assigned to such term in the preamble hereto. "Borrowing" shall mean (a) Revolving Loans of a single Type made by the Lenders in accordance with the terms hereof on a single date and as to which a single Interest Period is in effect or (b) a Swingline Loan. "Borrowing Request" shall mean a request by the Borrower in accordance with the terms of Section 2.4 and substantially in the form of Exhibit B. "Breakage Event" shall have the meaning assigned to such term in Section 2.15. "Business Day" shall mean any day other than a Saturday, Sunday or day on which banks in New York, New York are authorized or required by Law to close; provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Expenditures" of any Person shall mean expenditures (whether paid in cash or other consideration or accrued as a liability) for fixed or capital assets (excluding any capitalized interest and any such expenditure in respect of an asset acquired in connection with normal replacement and maintenance programs properly charged to current operations and excluding any such expenditure in respect of replacement assets acquired with the proceeds of insurance) made by such Person. "Capital Lease Obligations" of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock" shall mean, as to any Person, the equity interests in such Person, including the shares of each class of capital stock of any Person that is a corporation and each class of partnership interests (including general, limited and preference units) in any Person that is a partnership. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Swingline Loans. -4- 10 "Closing Date" shall mean the date of the first Credit Event. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Consolidated Assets" shall mean, at any date, the total assets of the Borrower and the Restricted Subsidiaries at such date, as determined on a consolidated basis in accordance with GAAP. "Consolidated Cash Interest Expense" shall mean, for any period of determination, the gross interest expense of the Borrower and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, excluding any amounts paid other than in cash or not required (whether during or after such period) to be paid in cash. For purposes of the foregoing, gross interest expense shall be determined after giving effect to any net cash payments made or received by the Borrower with respect to rate protection agreements entered into as a hedge against interest rate exposure. Gross interest expense shall be calculated in accordance with GAAP as in effect and applied by the Borrower on the date of this Agreement and, accordingly, shall exclude the effects of any changes in GAAP or its application by the Borrower after the date hereof. "Consolidated Liabilities" shall mean, at any date, the total liabilities of the Borrower and the Restricted Subsidiaries at such date, as determined on a consolidated basis in accordance with GAAP. "Consolidated Tangible Assets" shall mean, at any date, with respect to the Borrower and the Restricted Subsidiaries on a consolidated basis, Consolidated Assets as of such date, excluding all assets which would be classified as intangibles under GAAP, including goodwill (whether representing the excess of cost over book value of assets acquired or otherwise), organizational expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and treasury stock held as an asset. "Consolidated Tangible Net Worth" shall mean, at any date, the excess of the Consolidated Tangible Assets as of such date over the Consolidated Liabilities as of such date. "Consolidated Total Indebtedness" shall mean, without duplication, all Indebtedness of the Borrower and the Restricted Subsidiaries (other than Indebtedness referred to in clause (h) of the definition of such term, and excluding obligations of such Person with respect to deposits with such Person or advances to such Person of any kind, up to a maximum aggregate amount of $5,000,000), determined on a consolidated basis in accordance with GAAP. "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and "Controlling" and "Controlled" shall have meanings correlative thereto. -5- 11 "Coverage Ratio" shall mean, on any date, the ratio of (a) EBITDA for the four most recently completed consecutive fiscal quarters to (b) Consolidated Cash Interest Expense for such period. "Credit Event" shall have the meaning assigned to such term in Section 4.1. "Debtor Relief Laws" shall mean applicable bankruptcy, reorganization, moratorium, or similar Laws, or principles of equity affecting the enforcement of creditors' rights generally. "Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. "Documentation Agents" shall have the meaning assigned to such term in the preamble hereto. "dollars" or "$" shall mean lawful money of the United States of America. "EBITDA" shall mean, for any period, the consolidated net income of the Borrower and the Restricted Subsidiaries for such period, computed on a consolidated basis in accordance with GAAP, plus, to the extent deducted in computing such consolidated net income and without duplication, the sum of (a) income tax expense, (b) interest expense, (c) depreciation, amortization and stock based compensation expense, (d) allocation of income to minority interests in earnings of consolidated Subsidiaries, (e) extraordinary losses (including restructuring provisions) and all other non-operating losses during such period, and (f) expenses incurred in connection with the relocation of the Borrower's executive offices to the Denver, Colorado metropolitan area, up to a maximum aggregate amount of $5,000,000 for such period and $10,000,000 for the term of this Agreement, minus, to the extent added in computing such consolidated net income and without duplication, (i) extraordinary gains and all other non-operating gains during such period and (ii) allocation of losses to minority interests in earnings of consolidated Subsidiaries. EBITDA shall be calculated in accordance with GAAP as in effect and applied by the Borrower on the date of this Agreement and, accordingly, shall exclude the effects of any changes in GAAP or its application by the Borrower after the date hereof. "Environment" shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, the workplace or as otherwise defined in any Environmental Law. "Environmental Claim" shall mean any written accusation, allegation, notice of violation, claim, demand, order, directive, consent decree, cost recovery action or other cause of action by, or on behalf of, any Governmental Authority or any Person for damages, injunctive or equitable relief, personal injury (including sickness, disease or death), Remedial Action costs, tangible or intangible property damage, natural resource damages, nuisance, pollution, any adverse effect on the Environment caused by any Hazardous Material, or for fines, penalties or restrictions, resulting from or based upon: (a) the existence, or the continuation of the existence, of a Release (including sudden or non-sudden, accidental or non-accidental Releases); (b) -6- 12 exposure to any Hazardous Material; (c) the presence, use, handling, transportation, storage, treatment or disposal of any Hazardous Material; or (d) the violation or alleged violation of any Environmental Law or Environmental Permit. "Environmental Law" shall mean any and all applicable present and future treaties, Laws, codes, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the Environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Sections 9601 et seq. (collectively "CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Sections 6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Sections 1251 et seq., the Clean Air Act of 1970, 42 U.S.C. Sections 7401 et seq., as amended, the Toxic Substances Control Act of 1976, 15 U.S.C. Sections 2601 et seq., the Occupational Safety and Health Act of 1970, as amended by 29 U.S.C. Sections 651 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Sections 11001 et seq., the Safe Drinking Water Act of 1974, as amended by 42 U.S.C. Sections 300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Sections 5101 et seq., and any similar or implementing state or local law, and all amendments or regulations promulgated thereunder. "Environmental Permit" shall mean any permit, approval, authorization, certificate, license, variance, filing or permission required by or from any Governmental Authority pursuant to any Environmental Law. "Equipment Lease Transaction" shall mean any transaction or arrangement (other than (a) a Capital Lease Obligation reflected as such on the consolidated financial statements of the Borrower or (b) an operating lease) (i) pursuant to which the Borrower or any of the Restricted Subsidiaries sells or transfers any equipment or fixtures used or useful in its business, whether now owned or hereafter acquired, to any other Person, and thereafter rents or leases such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred or (ii) pursuant to which the Borrower or any of the Restricted Subsidiaries rents or leases from any other Person any equipment or fixtures used or useful in its business and which, although not required to be accounted for as a Capital Lease Obligation, in substance represents the financing of the acquisition of such property by the Borrower or such Restricted Subsidiary. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA Affiliate" shall mean any Subsidiary of the Borrower and any trade or business (whether or not incorporated) that, together with the Borrower or any Subsidiary of the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for -7- 13 purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA upon the termination of any Plan or the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (f) the receipt by the Borrower or any ERISA Affiliate from the PBGC of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g) the receipt by the Borrower or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; and (h) the occurrence of a "prohibited transaction" with respect to which the Borrower or any of the Restricted Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of the Code) or with respect to which the Borrower or any such Restricted Subsidiary could otherwise be liable. "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans. "Eurodollar Loans" shall mean Loans (other than Swingline Loans) bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. "Event of Default" shall have the meaning assigned to such term in Article VII. "Existing Credit Documents" shall mean (a) the First Amended and Restated Credit Agreement, dated as of November 24, 1997, among the Borrower, the lenders party thereto, and NationsBank of Texas, N.A., as administrative agent thereunder, (b) the line of credit letter agreement, dated June 29, 2000, by and between the Borrower and The Bank of New York Company, Inc., and (c) the demand promissory note, dated June 29, 2000, made the Borrower to the The Bank of New York Company, Inc., in each case as amended, supplemented or otherwise modified. "Facility Fees" shall have the meaning assigned to such term in Section 2.6(b). "Federal Funds Effective Rate" shall mean, for any day, a rate per annum (expressed as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published on the next succeeding Business Day by the Federal Reserve Bank of New York or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such -8- 14 transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fees" shall mean the L/C Participation Fees, the Issuing Bank Fees, the Facility Fees and all other fees in respect of the credit facilities established hereby payable by the Obligors to the Administrative Agent, the Lenders, the Issuing Bank, the Syndication Agent, the Documentation Agents, the Swingline Lender and/or any Affiliates thereof. "Financial Officer" of any Person shall mean the chief financial officer, principal accounting officer, Treasurer, Controller or other analogous counterpart of such Person. "Free Cash Flow" shall mean, for the Borrower and the Restricted Subsidiaries on a consolidated basis, EBITDA for the period commencing on the Closing Date and ending on the relevant date of determination minus the sum of Consolidated Cash Interest Expense plus consolidated cash taxes paid plus Capital Expenditures made, in each case for such period. Notwithstanding anything herein or in any other Loan Document to the contrary, fiscal quarters of the Borrower with negative Free Cash Flow shall be excluded from the calculation of "Free Cash Flow". "GAAP" shall mean generally accepted accounting principles. "Governmental Authority" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guarantee" of or by any Person shall mean any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or (d) to guarantee the obligations, payments by or performance of, a Person that is not a wholly-owned direct or indirect subsidiary of the Borrower; provided, however, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Guarantee Agreement" shall mean the Guarantee Agreement, in the form of Exhibit C, by and among the Borrower, the Guarantors and the Administrative Agent, as the same may be amended, supplemented, modified, substituted, increased, replaced or extended from time to time. "Guarantors" shall mean all Subsidiaries of the Borrower that execute and deliver the Guarantee Agreement in accordance with Sections 4.2(f) and 5.11(b). -9- 15 "Hazardous Materials" shall mean all explosive or radioactive substances or wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or gaseous wastes, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls ("PCBs") or PCB-containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Indebtedness" of any Person shall mean, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits with such Person or advances to such Person of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (d) all obligations of such Person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business, and excluding any obligations relating to operating leases), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (f) all Guarantees by such Person, (g) all Capital Lease Obligations of such Person, (h) all net obligations of such Person in respect of interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements and (i) all obligations of such Person as an account party in respect to letters of credit and bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity in which such Person has an ownership interest or with which such Person otherwise has a relationship (including any partnership in which such Person is a general partner), to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Interest Payment Date" shall mean (i) with respect to any Borrowing other than a Swingline Loan, the last day of the Interest Period applicable to such Borrowing, and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months' duration been applicable to such Borrowing, and, in addition, the date of any repayment or prepayment of such Borrowing or conversion of such Borrowing to a Borrowing of a different Type, and (ii) with respect to any Swingline Loan, the date of repayment of or prepayment of such Swingline Loan. "Interest Period" shall mean (a) as to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is one, two, three or six months thereafter, as applicable, and (b) as to any ABR Borrowing, the period commencing on the date of such Borrowing and ending on the earliest of (i) the next succeeding March 31, June 30, September 30 or December 31, (ii) the Revolving Loan Maturity Date, as applicable, and (iii) the date such Eurodollar Borrowing or ABR Borrowing, as the case may be, is converted to a Borrowing of a different Type in accordance with Section 2.11 hereof -10- 16 or repaid or prepaid in accordance with Section 2.12 hereof; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "Investment" shall have the meaning assigned to such term in Section 6.4. "Issuing Bank" shall mean The Bank of New York (or any Affiliate thereof) or any other Lender that may become an Issuing Bank pursuant to Section 2.21(i), in each case with respect to Letters of Credit issued by it. "Issuing Bank Fees" shall have the meaning assigned to such term in Section 2.6(a). "Law" shall mean any constitution, statute, law, ordinance, regulation, rule, order, writ, injunction, or decree of any tribunal. "L/C Commitment" shall mean the commitment of the Issuing Bank to issue Letters of Credit pursuant to Section 2.21 hereof. "L/C Disbursement" shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit. "L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate principal amount of all L/C Disbursements that have not yet been reimbursed at such time. The L/C Exposure of any Lender at any time shall mean its Pro Rata Percentage of the aggregate L/C Exposure at such time. "L/C Participation Fee" shall have the meaning assigned to such term in Section 2.6(a). "Lenders" shall mean (a) the financial institutions listed on the signature pages hereof (other than any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Acceptance) and (b) any financial institution that has become a party hereto pursuant to an Assignment and Acceptance. Unless the context otherwise requires, the term "Lenders" includes the Swingline Lender. "Letter of Credit" shall mean any letter of credit issued pursuant to Section 2.21. "Leverage Ratio" shall mean, on any date, the ratio of (a) Consolidated Total Indebtedness as of such date to (b) EBITDA for the most recently completed four fiscal quarters. "LIBO Rate" shall mean, for any Eurodollar Borrowing for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) -11- 17 appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. If for any reason such rate is not available, the term "LIBO Rate" shall mean, for any Eurodollar Borrowing for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on Reuters Screen LIBO page as the London interbank offered rate for deposits in dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "Lien" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan Documents" shall mean this Agreement, the promissory notes evidencing the Loans, the Guarantee Agreement, all agreements between or among the Obligors and the Administrative Agent, the Lenders, the Issuing Bank, the Syndication Agent, the Documentation Agents, the Swingline Lender and/or any Affiliates thereof relating to the payment of fees in respect of the credit facilities established hereby, all Letters of Credit, all Applications and all other agreements between the Borrower or any Subsidiary of the Borrower and the Administrative Agent related to any Letter of Credit, all Assignment and Acceptances, post-closing letters, and all other documents, instruments, agreements, or certificates executed or delivered from time to time by any Person in connection with this Agreement or as security for the Obligations hereunder, as each such agreement may be amended, supplemented, modified, substituted, increased, replaced or extended from time to time. "Loans" shall mean the Revolving Loans and the Swingline Loans made in accordance with the terms of this Agreement. "Material Adverse Effect" shall mean (a) a materially adverse effect on the business, assets, operations, or financial condition of the Borrower and the Restricted Subsidiaries, taken as a whole, (b) material impairment of the ability of the Borrower or any other Obligor to perform any of its obligations under this Agreement or under any other Loan Document or (c) material impairment of the enforceability of this Agreement, any other Loan Document or the Loans. "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" shall mean, with respect to any Asset Disposition, the gross amount of any cash paid to or received by the Borrower or any of the Restricted Subsidiaries in respect of such Asset Disposition (including (a) payments of principal or interest, or cash proceeds from the sale or other disposition in respect of non-cash consideration permitted under -12- 18 Section 6.5, and (b) insurance proceeds, condemnation awards and payments from time to time in respect of installment obligations, if applicable) minus the sum of the amount, if any, of (i) the Borrower's good faith best estimate of all taxes attributable to such Asset Disposition which it in good faith expects to be paid in the taxable year in which such Asset Disposition shall occur or in the next taxable year, (ii) reasonable and customary fees, discounts, commissions, costs and other expenses (other than those payable to the Borrower or any Affiliate of the Borrower), which are incurred in connection with such Asset Disposition and are payable by the Borrower or any of the Restricted Subsidiaries, (iii) in the case of an Asset Disposition that is a sale, transfer or other disposition of assets or properties, proceeds required to discharge Liens in respect of such assets or properties permitted by Section 6.2, and (iv) reserves established in connection with such Asset Disposition and in accordance with GAAP, in each case (A) up to a maximum amount per Asset Disposition equal to 25% of the gross proceeds from such Asset Disposition and (B) for no longer than one year after each such Asset Disposition; provided, however, that, with respect to any Asset Disposition made in reliance of Section 6.5(b)(ii), if the Borrower shall deliver a certificate of a Financial Officer thereof to the Administrative Agent at the time of such Asset Disposition setting forth the Borrower's or the applicable Restricted Subsidiary's intent to use the proceeds of such Asset Disposition to replace or repair the assets that are the subject thereof with, or otherwise purchase, other assets to be used in the same line of business within 180 days of receipt of such proceeds and no Default or Event of Default shall have occurred and shall be continuing at the time of such certificate or at the proposed time of the application of such proceeds, such proceeds shall not constitute Net Cash Proceeds, except to the extent not so used at the end of such 180-day period, at which time such proceeds shall be deemed Net Cash Proceeds. "New Lending Office" shall have the meaning assigned to such term in Section 2.19(f). "Non-U.S. Lender" shall have the meaning assigned to such term in Section 2.19(f). "Obligations" shall mean all present and future obligations, indebtedness and liabilities, and all renewals and extensions of all or any part thereof, of the Borrower and each other Obligor to the Lenders, the Issuing Bank and the Administrative Agent arising from, by virtue of, or pursuant to this Agreement, any of the other Loan Documents and any and all renewals and extensions thereof or any part thereof, or future amendments, supplements or other modifications thereto, all interest accruing on all or any part thereof and all fees and expenses incurred pursuant to Section 9.5, in each case whether such obligations, indebtedness and liabilities are direct, indirect, fixed, contingent, joint, several or joint and several. Without limiting the generality of the foregoing, the term "Obligations" includes all amounts which would be owed by the Borrower, each other Obligor and any other Person (other than the Administrative Agent, the Issuing Bank or the Lenders) to the Administrative Agent, the Issuing Bank or the Lenders under any Loan Document, but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower, any other Obligor or any other Person (including all such amounts which would become due or would be secured but for the filing of any petition in bankruptcy, or -13- 19 the commencement of any insolvency, reorganization or like proceeding of the Borrower, any other Obligor or any other Person under any Debtor Relief Law). "Obligor" shall mean (a) the Borrower, (b) each Guarantor, (c) each other Person liable for performance of any of the Obligations and (d) each other Person the property of which hereafter secures the performance of any of the Obligations. "Other Taxes" shall have the meaning assigned to such term in Section 2.19(b). "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Permitted Investments" shall mean: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from Standard & Poor's Ratings Group, a Division of McGraw-Hill, Inc. or from Moody's Investors Service, Inc.; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any Lender or any commercial bank which bank or office is organized under the Laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $250,000,000; and (d) fully collateralized repurchase agreements with a term of not more than 30 days for underlying securities of the type described in clause (a) above entered into with any institution meeting the qualifications specified in clause (c) above. "Person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company or government, or any agency or political subdivision thereof. "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 112 of the Code or Section 307 of ERISA and in respect of which the Borrower or any ERISA Affiliate is (or if such plan were terminated would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Preferred Stock", as applied to the Capital Stock of any Person, shall mean Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares or other units of Capital Stock of any other class of such Person. "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime commercial lending rate; each change in -14- 20 the Prime Rate shall be effective on the date such change is publicly announced as being effective. The Prime Rate is not intended to be lowest rate of interest charged by the Administrative Agent in connection with extensions of credit to borrowers. "Pro Rata Percentage" of any Lender at any time shall mean the percentage of such Lender set forth in Schedule 1.1 and designated as such, as such percentage may be hereafter be adjusted pursuant to any Assignment and Acceptance or any amendment, supplement or other modification to this Agreement. "Properties" shall have the meaning assigned to such term in Section 3.20. "Registered Note" shall have the meaning assigned to such term in Section 2.19(j). "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the Environment. "Remedial Action" shall mean (a) "remedial action" as such term is defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any Governmental Authority or voluntarily undertaken to: (i) cleanup, remove, treat, abate or in any other way address any Hazardous Material in the Environment; (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material so it does not migrate or endanger or threaten to endanger public health, welfare or the Environment; or (iii) perform studies and investigations in connection with, or as a precondition to, clause (i) or (ii) above. "Required Lenders" shall mean, at any time, (i) Lenders having Pro Rata Percentages of the Revolving Loan Commitment representing in the aggregate at least 51% of the Revolving Loan Commitment at such time, (ii) with respect to acceleration pursuant to clause (ii) of Article VII, Lenders having Loans, Swingline Exposure and L/C Exposure in the aggregate of at least 51% of the Total Exposure at such time or (iii) if the Revolving Loan Commitment has terminated, Lenders having Loans, Swingline Exposure and L/C Exposure in the aggregate of at least 51% of the Total Exposure at such time. "Responsible Officer" of any Person shall mean any executive officer or Financial Officer of such Person and any other officer or similar official thereof responsible for the administration of the obligations of such Person in respect of this Agreement and the other Loan Documents. "Restricted Payment" shall have the meaning assigned thereto in Section 6.6. "Restricted Subsidiary" shall mean each Subsidiary of the Borrower existing on the Closing Date and each Subsidiary of the Borrower created or acquired from time to time hereafter except Unrestricted Subsidiaries. -15- 21 "Revolving Loan Commitment" shall mean $350,000,000, (a) as the same may be reduced from time to time pursuant to Section 2.10 hereof and (b) with respect to each Lender, the commitment of the Lenders to make Revolving Loans hereunder in its Pro Rata Percentage of the Revolving Loan Commitment as set forth in Schedule 1.1 as the same may be reduced from time to time pursuant to Section 2.20 hereof, or in any Assignment and Acceptance executed in accordance with this Agreement, as applicable. "Revolving Loan Maturity Date" shall mean July 18, 2005 or any earlier date as the Revolving Loans are due and payable in full (whether by scheduled reduction, acceleration, termination or otherwise). "Revolving Loans" shall mean the Revolving Loans made available by the Lenders to the Borrower pursuant to the Revolving Loan Commitment and Section 2.1. Each Revolving Loan shall be a Eurodollar Loan or an ABR Loan. "Subsidiary" shall mean, with respect to any Person (herein referred to as the "parent"), any corporation, partnership, limited liability company, association or other business entity of which securities or other ownership interests representing more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Swingline Commitment" shall mean $15,000,000 and, with respect to the Swingline Lender, the commitment of the Swingline Lender to make Swingline Loans hereunder. "Swingline Exposure" shall mean at any time the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall mean its Pro Rata Percentage of the aggregate Swingline Exposure at such time. "Swingline Lender" shall mean The Bank of New York Company, Inc. (or any Affiliate thereof) with respect to Swingline Loans made by it. "Swingline Loans" shall mean the Swingline Loans made available by the Swingline Lender to the Borrower pursuant to the Swingline Commitment and Section 2.3. "Swingline Rate" shall mean, with respect to each Swingline Loan, the per annum interest rate agreed to by the Borrower and the Swingline Lender in accordance with Section 2.3 as the interest rate that such Swingline Loan shall bear. "Syndication Agent" shall have the meaning assigned to such term in the preamble hereto. "Taxes" shall have the meaning assigned to such term in Section 2.19(a). -16- 22 "Total Exposure" shall mean, at any time, the aggregate principal amount at such time of the sum of (a) all outstanding Revolving Loans at such time plus (b) the aggregate amount at such time of total Swingline Exposure plus (c) the aggregate amount at such time of total L/C Exposure. "Transactions" shall have the meaning assigned to such term in Section 3.2. "Transferee" shall have the meaning assigned to such term in Section 2.19(a). "Type", when used in respect of any Loan or Borrowing, shall refer to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to (a) in the case of a Borrowing comprised of Revolving Loans, the Adjusted LIBO Rate or the Alternate Base Rate, or (b) in the case of a Swingline Loan, the Swingline Rate. "Unrestricted Subsidiaries" shall mean (a) those foreign organized Subsidiaries of the Borrower listed on Schedule 1.1A, (b) each other foreign organized Subsidiary of the Borrower which the Borrower designates from time to time as an "Unrestricted Subsidiary" and which the Borrower has given prior written notice thereof to the Administrative Agent and the Lenders, provided that (i) at the time of each such designation and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing and (ii) no such designation may occur in any fiscal year (the "current year") if, immediately after giving effect thereto, the consolidated revenue (determined in accordance with GAAP) during the immediately preceding fiscal year (the "prior year") of the Subsidiary so being designated, together with the aggregate revenue during the prior year of all Subsidiaries of the Borrower so designated in the current year (determined, in the case of each such Subsidiary, on a consolidated basis in accordance with GAAP), represents more than 25% of the consolidated revenue (determined in accordance with GAAP) of the Borrower and its Subsidiaries during the prior year (provided, further, that, notwithstanding anything to the contrary in any Loan Document, in the event the Borrower shall complete, directly or through a Restricted Subsidiary, a permitted acquisition or disposition hereunder, or any Subsidiary is designated as an Unrestricted Subsidiary hereunder, in each case during the prior year, the consolidated revenue of the Borrower and its Subsidiaries during the prior year shall be determined, to the extent necessary, by computing such revenue on a pro forma basis as if, in the case of such acquisition or disposition, such acquisition or disposition, as the case may be, had been completed on the first day of the prior year, and as if, in the case of such designation, the relevant Subsidiary had been disposed of on the first day of the prior year), (c) each Subsidiary of any Unrestricted Subsidiary, and (d) each other Subsidiary of the Borrower which the Borrower and each Lender agree from time to time shall be designated as an Unrestricted Subsidiary hereunder. "Wholly-Owned Subsidiary" of any Person shall mean a subsidiary of such Person of which securities (except for directors' qualifying shares) or other ownership interests representing 100% of the outstanding Capital Stock are, at the time any determination is being made, owned by such Person or one or more Wholly-Owned Subsidiaries of such Person or by such Person and one or more Wholly-Owned Subsidiaries of such Person. -17- 23 "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.2. Terms Generally. The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that for purposes of determining compliance with the covenants contained in Article VI, all accounting terms herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP as in effect on the date of this Agreement and applied on a basis consistent with the application used in the financial statements referred to in Section 3.5. ARTICLE II. The Credits SECTION 2.1. Revolving Loans. Subject to the terms and conditions and relying upon the representations and warranties set forth in the Loan Documents, each Lender agrees, severally and not jointly, to make Revolving Loans to the Borrower in dollars, at any time and from time to time on or after the date hereof and until the earlier of (a) the Revolving Loan Maturity Date and (b) the termination of the Revolving Loan Commitment in accordance with the terms hereof, in an aggregate principal amount at any time up to such Lender's Pro Rata Percentage of the Revolving Loan Commitment, provided that the Borrower agrees that, notwithstanding anything in this Agreement or in any other Loan Document to the contrary, no Lender shall at any time be obligated to make any Loan if such Loan would result in the Total Exposure exceeding the Revolving Loan Commitment. Within the limits set forth in the preceding sentence and subject to the terms, conditions and limitations set forth herein, the Borrower may borrow, pay or prepay and reborrow Revolving Loans. SECTION 2.2. Loans. (a) Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Pro Rata Percentages; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Each Swingline Loan shall be made in accordance with the procedures set forth in Section 2.3. If the Revolving Loan Commitment has been reduced to zero, Swingline Loans shall not be available hereunder. Except for Loans -18- 24 deemed made pursuant to Sections 2.2(f), 2.3(c) or 2.3(d), the Loans (other than Swingline Loans) comprising any Borrowing shall be in an aggregate principal amount that is (i) with respect to any Borrowing, an integral multiple of $1,000,000 and not less than $3,000,000 or (ii) equal to the remaining available balance of the Revolving Loan Commitment. (b) Subject to Sections 2.9 and 2.14, each Borrowing shall be comprised entirely of a Swingline Loan or ABR Loans or Eurodollar Loans as the Borrower may request pursuant to Section 2.3 or 2.4, as applicable; provided, however, that Borrowings on the Closing Date shall be comprised entirely of ABR Loans. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than ten Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings. (c) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York, New York as the Administrative Agent may designate not later than 2:00 p.m., New York, New York time, and the Administrative Agent shall by 3:00 p.m., New York, New York time, credit the amounts so received to an account in the name of the Borrower, maintained with the Administrative Agent and designated by the Borrower in the applicable Borrowing Request or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders, provided that Swingline Loans shall be made in accordance with the procedures set forth in Section 2.3. (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above, paragraph (f) below or Section 2.3(c) and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. -19- 25 (e) The Borrower acknowledges that if the Borrower requests any Eurodollar Borrowing with an Interest Period that would end after the Revolving Loan Maturity Date, a Breakage Event will occur on the Revolving Loan Maturity Date, as applicable, and the Borrower will be obligated to indemnify the Lenders in accordance with the terms of Section 2.15. (f) If the Issuing Bank shall not have received from the Borrower the payment required to be made by Section 2.21(e) within the time specified in such Section, the Issuing Bank will promptly notify the Administrative Agent of the L/C Disbursement and the Administrative Agent will promptly notify each Lender of such L/C Disbursement and its Pro Rata Percentage thereof. Each Lender shall pay by wire transfer of immediately available funds to the Administrative Agent not later than 2:00 p.m., New York, New York time, on such date (or, if such Lender shall have received such notice later than 12:00 (noon), New York, New York time, on any day, not later than 10:00 a.m., New York, New York time, on the immediately following Business Day), an amount equal to such Lender's Pro Rata Percentage of such L/C Disbursement (it being understood that such amount shall be deemed to constitute an ABR Loan of such Lender and such payment shall be deemed to have reduced the L/C Exposure), and the Administrative Agent will promptly pay to the Issuing Bank amounts so received by it from the Lenders. The Administrative Agent will promptly pay to the Issuing Bank any amounts received by it from the Borrower pursuant to Section 2.21(e) prior to the time that any Lender makes any payment pursuant to this paragraph (f); any such amounts received by the Administrative Agent thereafter will be promptly remitted by the Administrative Agent to the Lenders that shall have made such payments and to the Issuing Bank, as their interests may appear. If any Lender shall not have made its Pro Rata Percentage of such L/C Disbursement available to the Administrative Agent as provided above, such Lender and the Borrower severally agree to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with this paragraph to but excluding the date such amount is paid, to the Administrative Agent at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable to ABR Loans pursuant to Section 2.7, and (ii) in the case of such Lender, for the first such day, the Federal Funds Effective Rate, and for each day thereafter, the Alternate Base Rate. SECTION 2.3. Swingline Loans (a) Subject to the terms and conditions and relying upon the representations and warranties set forth in the Loan Documents, the Swingline Lender agrees to make Swingline Loans to the Borrower in dollars, at any time and from time to time on or after the date hereof and until the fifth Business Day preceding the Revolving Loan Maturity Date, in an aggregate principal amount at any time outstanding that would not result in the Swingline Exposure exceeding $15,000,000 or the Total Exposure exceeding the Revolving Loan Commitment, provided that the Swingline Lender shall not be obligated to make a Swingline Loan to refinance an outstanding Swingline Loan. Notwithstanding the foregoing, the Swingline Lender shall not be required to make a Swingline Loan if (i) prior thereto or simultaneously therewith the Borrower shall not have borrowed Revolving Loans, (ii) any Lender shall be in default of its obligations under this Credit Agreement or (iii) the Administrative Agent or any Lender shall have notified the Swingline Lender and the Borrower in writing at least one Business Day prior -20- 26 to the proposed date of such Swingline Loan that the conditions set forth in Section 4.1 have not been satisfied and such conditions remain unsatisfied as of the requested time of the making of such Swingline Loan. Each Swingline Loan shall be due and payable on the maturity thereof, provided that in no event shall such maturity be later than the fifth Business Day preceding the Revolving Loan Maturity Date. (b) In order to request a Swingline Loan, the Borrower shall hand deliver or telecopy to the Administrative Agent and the Swingline Lender a duly completed request therefor not later than 2:00 p.m., New York, New York time, on the date (which shall be a Business Day) of the proposed Swingline Loan. Each such request shall be irrevocable, shall be signed by or on behalf of the Borrower and shall specify the following information: (i) the date of the Swingline Loan being requested (which shall be a Business Day); (ii) the number and location of the account to which funds are to be disbursed; (iii) the amount of such Swingline Loan; and (iv) the maturity date of such Swingline Loan which shall be not later than ten Business Days after the making of such Swingline Loan. The Swingline Lender will make the requested amount available promptly on that same day to the Administrative Agent (for the account of the Borrower as set forth in clause (ii) above) who, thereupon, will promptly make such amount available to the Borrower in like funds as provided therein. Each Swingline Loan shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $100,000. (c) The Swingline Lender may by written notice given to the Administrative Agent not later than 11:00 a.m., New York, New York time, on any Business Day notify the Administrative Agent that the Swingline Lender is requesting that the Lenders make an ABR Borrowing in an amount equal to the outstanding principal balance of and accrued interest on the Swingline Loans, in which case (i) the Administrative Agent will promptly notify each Lender and the Borrower of the details thereof and of the amount of such Lender's Revolving Loan to be made as part of such ABR Borrowing, and (ii) each Lender shall make the Revolving Loan to be made by it under this paragraph by wire transfer of immediately available funds to the Administrative Agent not later than 2:00 p.m., New York, New York time, on such date (or, if such Lender shall have received such notice later than 12:00 (noon), New York, New York time, on any day, not later than 10:00 a.m., New York, New York time, on the immediately following Business Day), it being understood that such amount shall be deemed to constitute an ABR Loan of such Lender, the proceeds of which shall be deemed to have been applied to the payment of the outstanding principal balance of and accrued interest on the Swingline Loans, and the Administrative Agent will promptly pay to the Swingline Lender amounts so received by it from the Lenders. The Administrative Agent will promptly pay to the Swingline Lender any amounts received by it from the Borrower in payment of the outstanding principal balance of and/or accrued interest on the Swingline Loans pursuant hereto prior to the time that any Lender makes any payment pursuant to this paragraph (c); any such amounts received by the Administrative Agent thereafter will be promptly remitted by the Administrative Agent to the Lenders that shall have made such payments and to the Swingline Lender, as their interests may appear. If any Lender shall not have made its ABR Loan available to the Administrative Agent as provided above, such Lender and the Borrower severally agree to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with this -21- 27 paragraph to but excluding the date such amount is paid, to the Administrative Agent at (A) in the case of the Borrower, a rate per annum equal to the interest rate applicable to ABR Loans pursuant to Section 2.7, and (B) in the case of such Lender, for the first such day, the Federal Funds Effective Rate, and for each day thereafter, the Alternate Base Rate. Each Lender acknowledges and agrees that its obligation to make Revolving Loans pursuant to this paragraph (c) is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of an Event of Default or reduction or termination of the Revolving Loan Commitment, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (d) If the Borrower fails to make any payment with respect to a Swingline Loan, or if any such sum paid by the Borrower is required to be refunded to the Borrower for any reason, the Administrative Agent will promptly notify each Lender of the applicable Swingline Loan, the payment then due from the Borrower in respect thereof and such Lender's Pro Rata Percentage thereof. Each Lender shall purchase a participation in such Swingline Loan by paying by wire transfer of immediately available funds to the Administrative Agent not later than 2:00 p.m., New York, New York time, on such date (or, if such Lender shall have received such notice later than 12:00 (noon), New York, New York time, on any day, not later than 10:00 a.m., New York, New York time, on the immediately following Business Day) an amount equal to such Lender's Pro Rata Percentage of such Swingline Loan (it being understood that such amount shall be deemed to constitute an ABR Loan of such Lender, the proceeds of which shall be deemed to have been applied to the payment of the outstanding principal balance of and accrued interest on the Swingline Loans), and the Administrative Agent will promptly pay to the Swingline Lender amounts so received by it from the Lenders. The Administrative Agent will promptly pay to the Swingline Lender any amounts received by it from the Borrower in payment of the outstanding principal balance of and/or accrued interest on such Swingline Loan pursuant hereto prior to the time that any Lender makes any payment pursuant to this paragraph (d); any such amounts received by the Administrative Agent thereafter will be promptly remitted by the Administrative Agent to the Lenders that shall have made such payments and to the Swingline Lender, as their interests may appear. If any Lender shall not have made its Pro Rata Percentage of such Swingline Loan available to the Administrative Agent as provided above, such Lender agrees to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with this paragraph to but excluding the date such amount is paid, to the Administrative Agent at, for the first such day, the Federal Funds Effective Rate, and for each day thereafter, the Alternate Base Rate. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph (d) in respect of Swingline Loans is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of an Event of Default or reduction or termination of the Revolving Loan Commitment, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. SECTION 2.4. Borrowing Procedure. In order to request a Borrowing (other than a Swingline Loan or a deemed Borrowing pursuant to Section 2.2(f), 2.3(c) or 2.3(d), as to which -22- 28 this Section 2.4 shall not apply), the Borrower shall hand deliver or telecopy to the Administrative Agent a duly completed Borrowing Request (a) in the case of a Eurodollar Borrowing, not later than 1:00 p.m., New York, New York time, three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 (noon), New York, New York time on the date (which shall be a Business Day) of a proposed Borrowing. Each Borrowing Request shall be irrevocable, shall be signed by or on behalf of the Borrower and shall specify the following information: (i) whether the Borrowing then being requested is to be a Eurodollar Borrowing or an ABR Borrowing (it being understood that the Borrowing on the Closing Date shall be an ABR Borrowing); (ii) the date of such Borrowing (which shall be a Business Day); (iii) the number and location of the account to which funds are to be disbursed (which shall be an account that complies with the requirements of Section 2.2(c)); (iv) the amount of such Borrowing; (v) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto; and (vi) if the Borrower has complied with the condition set forth in Section 2.2(b), provided, however, that notwithstanding any contrary specification in any Borrowing Request, each Swingline Loan shall comply with the requirements of Section 2.3. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall promptly advise the Lenders of any notice given pursuant to this Section 2.4 (and the contents thereof), and of each Lender's portion of the requested Borrowing. SECTION 2.5. Evidence of Debt; Repayment of Loans. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent, for the account of the Lenders, the then unpaid principal amount of each Revolving Loan on the Revolving Loan Maturity Date and (ii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the maturity date selected by the Borrower for such Swingline Loan or, if earlier, the Revolving Loan Maturity Date. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid such Lender from time to time under this Agreement. (c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type of Borrowing and the Interest Period applicable thereto, if any, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided however, that the failure of any Lender or the Administrative Agent to -23- 29 maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms. (e) As evidence of the Loans hereunder, on the Closing Date the Borrower shall deliver (i) to each Lender one promissory note evidencing its Loans (other than Swingline Loans) made hereunder and (ii) to the Swingline Lender, one promissory note evidencing the Swingline Loans. Such promissory notes will evidence each Lenders' Loan, its L/C Exposure, its Swingline Exposure and, in the case of the Swingline Lender, each Swingline Loan. SECTION 2.6. Fees. (a) The Borrower agrees to pay (i) to each Lender, through the Administrative Agent, on the last day of March, June, September and December of each year and on the date on which the Revolving Loan Commitment shall be terminated as applicable and as provided herein, a fee (an "L/C Participation Fee") calculated on such Lender's Pro Rata Percentage of the average daily aggregate L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C Disbursements) during the preceding quarter (or shorter period commencing with the date hereof or ending with the Revolving Loan Maturity Date, or the date on which all Letters of Credit have been canceled or have expired and the Revolving Loan Commitment shall have been terminated) at a rate equal to the Applicable Margin from time to time used to determine the interest rate on Borrowings comprised of Eurodollar Loans pursuant to Section 2.7, and (ii) to the Issuing Bank, with respect to each Letter of Credit, the fronting fees payable in the amounts and at the times separately agreed upon by the Borrower and the Issuing Bank and the standard issuance and drawing fees specified from time to time by the Issuing Bank (the "Issuing Bank Fees"). Subject to Section 9.9 and Applicable Law, all L/C Participation Fees and Issuing Bank Fees shall be computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as applicable. (b) Subject to Section 9.9, commencing on September 30, 2000 and continuing on the last day of March, June, September and December of each year on and until the date on which the Revolving Loan Commitment shall be terminated as provided herein, the Borrower shall pay, in arrears, to the Administrative Agent, for the account of the Lenders, facility fees (the "Facility Fees") on the average daily amount of the Revolving Loan Commitment at a per annum rate (the "facility fee rate") based on the Leverage Ratio for the most recently completed full fiscal quarter as set forth below:
Leverage Ratio Facility Fee Rate -------------- ----------------- Category 1 Greater than or equal to 3.00 to 1.00 0.300% Category 2 Greater than or equal to 2.50 to 1.00 but less than 3.00 to 1.00 0.250%
-24- 30 Category 3 Greater than or equal to 2.00 to 1.00 but less than 2.50 to 1.00 0.200% Category 4 Greater than or equal to 1.00 to 1.00 but less than 2.00 to 1.00 0.175% Category 5 Less than 1.00 to 1.00 0.150%.
Except as set forth below, the Leverage Ratio utilized for purposes of determining the facility fee rate shall be that in effect as of the last day of the most recent fiscal quarter of the Borrower in respect of which financial statements have been delivered pursuant to this Agreement. The facility fee rate from time to time in effect shall be based on the Leverage Ratio from time to time in effect, and each change in the facility fee rate resulting from a change in (or the initial establishment of) the Leverage Ratio shall be effective with respect to the facility fee rate outstanding on and after the date of delivery to the Administrative Agent of the financial statements and certificates required by Section 5.4(a) or (b) indicating such change to and including the date immediately preceding the next date of delivery of such financial statements and certificates indicating another such change. Notwithstanding the foregoing, at all times during the period commencing on the Closing Date and ending on the date that is one year thereafter, at all times during which the Borrower has failed to deliver the financial statements and certificates required by Section 5.4(a) or (b), and at all times after the occurrence and during the continuance of an Event of Default, the Leverage Ratio shall, in each case, be deemed to be in Category 1 above. Subject to Section 9.9 and Applicable Law, all Facility Fees shall be computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as applicable. (c) The Obligors agree to pay to the Administrative Agent, the Lenders, the Issuing Bank, the Syndication Agent, the Documentation Agents, the Swingline Lender and/or any Affiliates thereof, for their own respective accounts, fees and other amounts payable in the amounts and at the times separately agreed upon between or among them. (d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution to the appropriate parties, except that the Issuing Bank Fees shall be paid directly to the Issuing Bank. Once paid, none of the Fees shall be refundable, except in accordance with the provisions of Section 9.9. SECTION 2.7. Interest on Loans. (a) Subject to the provisions of Section 2.8, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate is determined by -25- 31 reference to the Prime Rate and over a year of 360 days at all other times) at a rate per annum equal to the Alternate Base Rate. (b) Subject to the provisions of Section 2.8, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing in effect from time to time. (c) Subject to the provisions of Section 2.8, each Swingline Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days) at the Swingline Rate applicable to such Swingline Loan. (d) Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.8. Default Interest. Notwithstanding any other provision of this Agreement and the other Loan Documents (except Section 9.9) to the contrary, if there shall exist any Event of Default hereunder, at the election of the Required Lenders by written notice to the Borrower, the Borrower shall pay interest on the Obligations to but excluding the date of actual payment (after as well as before judgment) at a rate per annum equal to the sum of the Alternate Base Rate plus 1.00% (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when determined by reference to the Prime Rate and over a year of 360 days at all other times). SECTION 2.9. Alternate Rate of Interest. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined that dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or that the rates at which such dollar deposits are being offered will not adequately and fairly reflect the cost to the Lenders of making or maintaining Eurodollar Loans during such Interest Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give written or telecopy notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.4 shall be deemed to be a request for an ABR Borrowing. Each determination by the Administrative Agent hereunder shall be conclusive absent manifest error. SECTION 2.10. Termination and Reduction of the Revolving Loan Commitment. (a) Maturity Dates. The Revolving Loan Commitment shall automatically terminate on the Revolving Loan Maturity Date. Each of the L/C Commitment and the -26- 32 Swingline Commitment shall terminate upon the termination of the Revolving Loan Commitment. (b) Voluntary Reduction of the Revolving Loan Commitment. Upon at least three Business Days' prior irrevocable written or telecopy notice to the Administrative Agent (specifying the amount of reduction), the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Revolving Loan Commitment; provided, however, that (i) each partial reduction shall be in an integral multiple of $500,000 and in a minimum amount of $5,000,000 and (ii) the Revolving Loan Commitment shall not be reduced to an amount that is less than the Total Exposure. (c) Total Exposure in Excess of the Revolving Loan Commitment. If, as a result of any reduction of the Revolving Loan Commitment, the Total Exposure exceeds the Revolving Loan Commitment, then the Borrower shall, on the date of such reduction, (i) first, repay or prepay Loans (other than Swingline Loans), (ii) second, cash collateralize outstanding Letters of Credit and (iii) third, repay or prepay Swingline Loans, each in accordance with this Agreement in an aggregate principal amount sufficient to eliminate such excess. (d) Revolving Loan Commitment Reductions Due to Asset Dispositions. The Revolving Loan Commitment shall be automatically and permanently reduced by any Loan prepaid pursuant to Section 2.12(c) on the date of such prepayment, in an amount equal to the amount of such prepayment. (e) Revolving Loan Commitment Reductions Generally. Each reduction in the Revolving Loan Commitment hereunder shall be made ratably among the Lenders in accordance with their respective Pro Rata Percentages of the Revolving Loan Commitment. The Borrower shall pay, to the Administrative Agent, for the account of the applicable Lenders, on the date of each termination or reduction, the Facility Fees on the amount of the Revolving Loan Commitment so terminated or reduced accrued to but excluding the date of such termination or reduction. SECTION 2.11. Conversion and Continuation of Borrowings. (a) Provided that such conversion or continuation is not otherwise prohibited by this Agreement, the Borrower shall have the right at any time upon prior irrevocable notice to the Administrative Agent (x) not later than 2:00 p.m., New York, New York time, one Business Day prior to conversion, to convert any Eurodollar Borrowing into an ABR Borrowing, (y) not later than 1:00 p.m., New York, New York time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Borrowing or, at the end of the current Interest Period, to continue any Eurodollar Borrowing as a Eurodollar Borrowing for an additional Interest Period, and (z) not later than 1:00 p.m., New York, New York time, three Business Days prior to conversion, at the end of the current Interest Period, to convert the Interest Period with respect to any Eurodollar Borrowing to another permissible Interest Period, subject in each case to the following: (i) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Borrowing; (ii) if less than all the outstanding principal amount of -27- 33 any Borrowing shall be converted or continued, then each resulting Borrowing shall satisfy the limitations specified in Sections 2.2(a) and 2.2(b) regarding the principal amount and maximum number of Borrowings of the relevant Type; (iii) each conversion shall be effected by each Lender and the Administrative Agent by recording for the account of such Lender the new Loan of such Lender resulting from such conversion and reducing the Loan (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on any Eurodollar Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion; (iv) if any Eurodollar Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15; (v) any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Borrowing; (vi) any portion of a Eurodollar Borrowing that cannot be converted into or continued as a Eurodollar Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing; and (vii) after the occurrence and during the continuance of a Default or an Event of Default, no outstanding Loan may be converted into, or continued for an additional Interest Period as, a Eurodollar Loan. This Section shall not apply to Swingline Loans which may not be converted or continued. (b) Each notice pursuant to this Section 2.11 shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that the Borrower requests be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day), and (iv) if such Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall advise the Lenders of any notice given pursuant to this Section 2.11 and of each Lender's portion of any converted or continued Borrowing. If the Borrower shall not have given notice in accordance with this Section 2.11 to continue any Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.11 to convert such Borrowing), such Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued into a new Interest Period as an ABR Borrowing. SECTION 2.12. Prepayment. (a) Voluntary Prepayment. The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, (i) in the case of ABR Loans, not later than 12:00 p.m., New York, New York time, on the date of the proposed prepayment, by written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent; provided however, that each partial prepayment shall be in an amount that is an integral multiple of $500,000 and not less than $5,000,000, (ii) in the case of Eurodollar Loans, upon at least three Business Days' prior written or telecopy notice (or -28- 34 telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent before 12:00 p.m., New York, New York time; provided, however, that each partial prepayment shall be in an amount that is an integral multiple of $500,000 and not less than $5,000,000, and (iii) in the case of Swingline Loans, upon at least one Business Day's prior written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent before 12:00 p.m., New York, New York time; provided, however, that each partial prepayment shall be in an amount that is an integral multiple of $100,000 and not less than $100,000. (b) Mandatory Prepayment and Cash Collateralization. In the event of any termination of the Revolving Loan Commitment, the Borrower shall repay or prepay all its outstanding Loans (and irrevocably cash collateralize the L/C Exposure in the manner contemplated by Section 2.21(j)) on the date of such termination. In the event of any partial reduction of the Revolving Loan Commitment, then (i) at or prior to the effective date of such reduction or termination, the Administrative Agent shall notify the Borrower and the Lenders of the aggregate amount of Total Exposure after giving effect thereto and (ii) if such amount would exceed the Revolving Loan Commitment after giving effect to such reduction or termination, then the Borrower shall, on the date of such reduction or termination, repay or prepay Borrowings (and/or irrevocably cash collateralize the L/C Exposure in the manner contemplated by Section 2.21(j)) in an amount sufficient to eliminate such excess. (c) Asset Dispositions. Whenever and on each occasion that the Borrower or any Restricted Subsidiary of the Borrower receives Net Cash Proceeds from an Asset Disposition (this provision shall not in and of itself permit the Borrower to consummate any Asset Disposition) (not including any transaction in which the Borrower transfers control through a sale, corporate transaction or other disposition, of the hotel contracts and related assets for its hotel customers outside of the United States) which, when taken together with all such Net Cash Proceeds received on and after the Closing Date, exceeds 15% of Consolidated Tangible Assets on any such date of receipt (any such Net Cash Proceeds in excess of such amount being referred to as "excess proceeds"), the Borrower will, substantially simultaneously with (and in any event not later than the Business Day following) the receipt of such excess proceeds, pay to the Administrative Agent (for application to the prepayment of (i) first, the Swingline Loans and (ii) second, Revolving Loans) an amount equal to such excess proceeds. The Revolving Loans so prepaid will result in an automatic and permanent reduction of the Revolving Loan Commitment in an amount equal to the amount of such prepayment. (d) Escrow Amounts for Repayment of Eurodollar Borrowings. In the event the amount of any prepayment required to be made under this Section shall exceed the aggregate principal amount of the applicable outstanding ABR Loans (the amount of any such excess being called the "escrow amount"), the Borrower shall have the right, in lieu of making such prepayment in full, to prepay all the outstanding applicable ABR Loans and to deposit an amount equal to the escrow amount with the Administrative Agent in a cash collateral account maintained by and in the sole dominion and control of the Administrative Agent. Any amounts so deposited shall be held by the Administrative Agent as collateral for the Obligations and applied, in accordance with this Section, to the prepayment of outstanding Eurodollar Loans at -29- 35 the end of the current Interest Periods applicable thereto and outstanding Swingline Loans at the applicable maturities thereof. On any Business Day on which (i) collected amounts remain on deposit in or to the credit of such cash collateral account after giving effect to the payments made on such day and (ii) the Borrower shall have delivered to the Administrative Agent a written request or telephonic request (which shall be promptly confirmed in writing) that such remaining collected amounts be invested in the Permitted Investments specified in such request, the Administrative Agent shall use its reasonable efforts to invest such remaining collected amounts in such Permitted Investments; provided, however, that the Administrative Agent shall have continuous dominion and full control over any such investments (and over any interest that accrues thereon) to the same extent that it has dominion and control over such cash collateral account and no Permitted Investment shall mature after the end of the Interest Period or maturity date for which it is to be applied. The Borrower shall not have the right to withdraw any amount from such cash collateral account until such Eurodollar Loans and/or such Swingline Loans, as the case may be, and accrued interest thereon, are paid in full or if a Default or Event of Default then exists or would result. (e) Notice of Voluntary Prepayment. Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid. Each such notice shall be irrevocable and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein. All prepayments under this Section 2.12 shall be subject to Section 2.15 but otherwise without premium or penalty. All prepayments under this Section 2.12 shall be accompanied by accrued interest on the principal amount being prepaid to the date of payment. (f) Prepayment as a Result of the Total Exposure in Excess of the Revolving Loan Commitment. Whenever and on each occasion that the Total Exposure exceeds the Revolving Loan Commitment, the Borrower will immediately (i) first, repay or prepay Swingline Loans, (ii) second, cash collateralize outstanding Letters of Credit and (iii) third, repay or prepay all Loans (other than Swingline Loans), each in accordance with this Agreement in an aggregate principal amount sufficient to eliminate such excess. SECTION 2.13. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision of this Agreement, if after the date of this Agreement any change in any Law or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of Law) shall change the basis of taxation of payments to any Lender or the Issuing Bank of the principal of or interest on any Eurodollar Loan or Swingline Loan made by such Lender or any Fees or other amounts payable hereunder (other than changes in respect of taxes imposed on the overall net income (including franchise taxes on net income, branch profit taxes and alternate minimum income taxes) of such Lender or the Issuing Bank by the jurisdiction in which such Lender or the Issuing Bank is incorporated or has its principal office or by any political subdivision or taxing authority therein), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including any reserve requirement under Regulation D of the Board (as from time to time in effect and all official rulings and -30- 36 interpretations thereunder or thereof) with respect to eurocurrency liabilities (as that term is defined in such Regulation D), including any basic, supplemental, emergency or marginal reserves) against assets of, deposits with or for the account of or credit extended by any Lender or the Issuing Bank (except any such reserve requirement which is reflected in the Adjusted LIBO Rate) or shall impose on such Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or the Eurodollar Loans or Swingline Loans made by such Lender or any Letter of Credit, or any participation in any thereof, and the result of any of the foregoing shall be to increase the cost to such Lender or the Issuing Bank of making or maintaining any Eurodollar Loan or Swingline Loan or increase the cost to any Lender of issuing or maintaining any Letter of Credit, or purchasing or maintaining a participation in any thereof, or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder with respect to any Eurodollar Loan, Swingline Loan or Letter of Credit, as applicable, whether of principal, interest or otherwise, by an amount deemed by such Lender or the Issuing Bank to be material, then the Borrower will pay to such Lender or the Issuing Bank, as the case may be, upon demand such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender or the Issuing Bank shall have determined that the adoption after the date hereof of any Law, agreement or guideline regarding capital adequacy, or any change after the date hereof in any such Law, agreement or guideline (regardless of whether the change in such Law, agreement or guideline has been adopted) or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance by any Lender (or any lending office of such Lender) or the Issuing Bank or any Lender's or the Issuing Bank's holding company with any request or directive regarding capital adequacy (whether or not having the force of Law) of any Governmental Authority has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's holding company, if any, as a consequence of this Agreement or the Loans made or participations in Letters of Credit or Swingline Loans purchased by such Lender pursuant hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such applicability, adoption, change or compliance (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy) by an amount deemed by such Lender or the Issuing Bank to be material, then from time to time the Borrower shall pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company, as the case may be, for any such reduction suffered. (c) A certificate of a Lender or the Issuing Bank setting forth in reasonable detail the basis for computation of the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) above shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank the amount shown as due on any such certificate delivered by it within 10 days after its receipt of the same. -31- 37 (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; provided, however, that in no event shall the Borrower be obligated to make any payment under this Section 2.13 in respect of increased costs incurred prior to the period commencing 90 days prior to the date on which demand for compensation in respect of such increased costs is first made. In addition, the Borrower shall not incur liability for additional amounts with respect to changes in the basis of taxation described above for periods of time before such Lender or Issuing Bank becomes aware of the change in such basis except in the case of any retroactive application of such a change. The protection of this Section shall be available to each Lender and the Issuing Bank regardless of any possible contention of the invalidity or inapplicability of the Law, agreement, guideline or other change or condition that shall have occurred or been imposed. SECTION 2.14. Change in Legality. (a) Notwithstanding any other provision of this Agreement or any other Loan Document, if, after the date hereof, any change in any Law or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent: (i) such Lender may declare that Eurodollar Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods and ABR Loans will not thereafter (for such duration) be converted into Eurodollar Loans), whereupon any request for a Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing for an additional Interest Period) shall, as to such Lender only, be deemed a request for an ABR Loan (or a request to continue an ABR Loan as such for an additional Interest Period or to convert a Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration shall be subsequently withdrawn; and (ii) such Lender may require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any Lender shall exercise its rights under clause (i) or (ii) above, all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans. (b) For purposes of this Section 2.14, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower. SECTION 2.15. Indemnity. The Borrower shall indemnify each Lender against any loss or expense that such Lender may sustain or incur as a consequence of (a) any event, other -32- 38 than a default by such Lender in the performance of its obligations hereunder, which results in (i) such Lender receiving or being deemed to receive any amount on account of the principal of any Eurodollar Loan prior to the end of the Interest Period in effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period with respect to any Eurodollar Loan, in each case other than on the last day of the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made by such Lender (including any Eurodollar Loan to be made pursuant to a conversion or continuation under Section 2.11) not being made after notice of any such Loan shall have been given by the Borrower hereunder for any reason other than default by a Lender (any of the events referred to in this clause (a) being called a "Breakage Event") or (b) any default in the making of any payment or prepayment required to be made hereunder. In the case of any Breakage Event, such loss shall include an amount equal to the excess, as reasonably determined by such Lender, of (A) its cost of obtaining funds (not including any Applicable Margin) for the Eurodollar Loan that is the subject of such Breakage Event for the period from the date of such Breakage Event to the last day of the Interest Period in effect (or that would have been in effect) for such Eurodollar Loan over (B) the amount of interest likely to be realized by such Lender in redeploying the funds released or not utilized by reason of such Breakage Event for such period. A certificate of any such Lender shall be delivered to the Borrower and shall be conclusive absent manifest error, so long as such certificate sets forth in reasonable detail any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.15 and the basis of computation of the amount or amounts necessary to compensate such Lender. SECTION 2.16. Pro Rata Treatment. Except as required under Section 2.14, each Borrowing (other than a Swingline Loan), each payment or prepayment of principal of any Borrowing (other than a Swingline Loan), each payment of interest on the Loans (other than Swingline Loans), each payment of the Facility Fees, each reduction of the Revolving Loan Commitment and each conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective Pro Rata Percentages of the Revolving Loan Commitment (or, if the Revolving Loan Commitment shall have expired or been terminated, in accordance with the sum of the respective principal amounts of their outstanding Revolving Loans, Swingline Exposures and L/C Exposures). For purposes of determining the available Revolving Commitment of the Lenders at any time, each outstanding Swingline Loan shall be deemed to have utilized the Revolving Commitment in accordance with each Lender's Pro Rata Percentage of the Revolving Commitment. Each Lender agrees that in computing such Lender's portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender's percentage of such Borrowing to the next higher or lower whole dollar amount. SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrower, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any Debtor Relief Law or other similar Law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or L/C Disbursement as a result of which the unpaid principal portion of its Loans and participations in L/C Disbursements or Swingline Loans shall -33- 39 be proportionately greater than the unpaid principal portion of the Loans and participations in L/C Disbursements and Swingline Loans of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Loans, L/C Exposure and Swingline Exposure of such other Lender, so that the aggregate unpaid principal amount of the Loans, L/C Exposure, Swingline Exposure and participations in Loans, L/C Exposure and Swingline Exposure held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Loans, L/C Exposure and Swingline Exposure then outstanding as the principal amount of its Loans, L/C Exposure and Swingline Exposure prior to such exercise of a right of banker's lien, setoff or counterclaim or other event was to the principal amount of all Loans, L/C Exposure and Swingline Exposure outstanding prior to such exercise of a right of banker's lien, setoff or counterclaim or other event; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.17 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. The Borrower expressly consents to the foregoing arrangements and agrees that any Lender holding a participation in a Loan or L/C Disbursement deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower to such Lender by reason thereof as fully as if such Lender had made a Loan directly to the Borrower in the amount of such participation. SECTION 2.18. Payments. (a) The Borrower shall make each payment (including principal of or interest on any Borrowing or any L/C Disbursement or any Fees or other amounts) hereunder not later than 1:00 p.m., New York, New York time, on the date when due in immediately available dollars, without setoff, defense or counterclaim. Each such payment (other than Issuing Bank Fees, which shall be paid directly to the Issuing Bank, and payments in respect of the Swingline Loans as expressly provided herein) shall be made to the Administrative Agent at its offices at One Wall Street, New York, New York. (b) Whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable. SECTION 2.19. Taxes. (a) Subject to Section 2.19(g), any and all payments by the Borrower hereunder shall be made, in accordance with Section 2.18, free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto excluding (i) income taxes imposed on the net income (including branch profit taxes and alternative minimum income taxes of the Administrative Agent, any Lender or the Issuing Bank (or any transferee or assignee thereof, -34- 40 including a participation holder (any such entity a "Transferee")), (ii) franchise taxes imposed on the net income of the Administrative Agent, any Lender or the Issuing Bank (or any Transferee), in each case by the jurisdiction under the Laws of which the Administrative Agent, such Lender or the Issuing Bank (or such Transferee) is organized or any political subdivision thereof or by the jurisdiction in which the applicable lending or issuing office of the Administrative Agent, such Lender or the Issuing Bank (or such Transferee) is located or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charge, withholdings and liabilities, collectively or individually, being called "Taxes"). If the Borrower shall be required to deduct any Taxes from or in respect of any sum payable hereunder to the Administrative Agent, any Lender or the Issuing Bank (or any Transferee), (A) the sum payable shall be increased by the amount (an "additional amount") necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.19) the Administrative Agent, such Lender or the Issuing Bank (or such Transferee), as the case may be, shall receive an amount equal to the sum it would have received had no such deductions been made, (B) the Borrower shall make such deductions and (C) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower agrees to pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement and the other Loan Documents ("Other Taxes"). (c) Subject to Section 2.19(g), the Borrower will indemnify the Administrative Agent, each Lender and the Issuing Bank (or any Transferee) for the full amount of Taxes and Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank (or such Transferee), as the case may be, and any liability (including penalties, interest and expenses (including reasonable attorney's fees and expenses)) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability prepared by the Administrative Agent, a Lender or the Issuing Bank (or a Transferee), or the Administrative Agent on its behalf, absent manifest error, shall be final, conclusive and binding for all purposes. Such indemnification shall be made within 30 days after the date the Administrative Agent, any Lender or the Issuing Bank (or any Transferee), as the case may be, makes written demand therefor. (d) If the Administrative Agent, a Lender or the Issuing Bank (or a Transferee) receives a refund in respect of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.19, it shall within 30 days from the date of such receipt pay over to the Borrower (i) such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.19 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the Issuing Bank (or such Transferee) and (ii) interest paid by the relevant Governmental Authority with respect to such refund; provided, however, that the Borrower, upon -35- 41 the request of the Administrative Agent, such Lender or the Issuing Bank (or such Transferee), shall repay the amount paid over to the Borrower (plus penalties, interest or other charges) to the Administrative Agent, such Lender or the Issuing Bank (or such Transferee) in the event the Administrative Agent, such Lender or the Issuing Bank (or such Transferee) is required to repay such refunds to such Governmental Authority. If the Borrower determines in good faith that a reasonable basis exists for contesting any Tax or Other Tax, the Administrative Agent, such Lender, the Issuing Bank (or such Transferee), as applicable, shall cooperate with the Borrower in challenging such Tax or Other Tax at the Borrower's expense if requested by the Borrower (it being understood and agreed that the Administrative Agent, such Lender, the Issuing Bank (or such Transferee), as applicable, shall have no obligation to contest or responsibility for contesting such Tax or Other Tax). (e) As soon as practicable after the date of any payment of Taxes or Other Taxes by the Borrower to the relevant Governmental Authority, the Borrower will deliver to the Administrative Agent, at its address referred to in Section 9.1, the original or a certified copy of any receipt actually issued by such Governmental Authority evidencing payment thereof. (f) Each Lender (or Transferee) that is organized under the Laws of a jurisdiction other than the United States, any State thereof or the District of Columbia (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent two copies of either United States Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a certificate containing representations regarding the status of such Non-U.S. Lender as not being a bank for purposes of Section 881(c) of the Code, as not being a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and as not being a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or reduced rate of, United States Federal withholding tax on payments by the Borrower under this Agreement. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of a Transferee that is a participation holder, on or before the date such participation holder becomes a Transferee hereunder) and on or before the date, if any, such Non-U.S. Lender changes its applicable lending office by designating a different lending office (a "New Lending Office"). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Notwithstanding any other provision of this Section 2.19(f), a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 2.19(f) that such Non-U.S. Lender is not legally able to deliver. (g) The Borrower shall not be required to indemnify any Non-U.S. Lender, or to pay any additional amounts to any Non-U.S. Lender, in respect of United States Federal withholding tax pursuant to paragraph (a) or (c) above to the extent that (i) the obligation to withhold amounts with respect to United States Federal withholding tax existed on the date such Non-U.S. Lender became a party to this Agreement (or, in the case of a Transferee that is a -36- 42 participation holder, on the date such participation holder became a Transferee hereunder) or, with respect to payments to a New Lending Office, the date such Non-U.S. Lender designated such New Lending Office with respect to a Loan; provided, however, that this paragraph (g) shall not apply (A) to any Transferee or New Lending Office that becomes a Transferee or New Lending Office as a result of an assignment, participation, transfer or designation made at the request of the Borrower and (B) to the extent the indemnity payment or additional amounts any Transferee, or any Lender (or Transferee) acting through a New Lending Office, would be entitled to receive (without regard to this paragraph (g)) do not exceed the indemnity payment or additional amounts that the Person making the assignment, participation or transfer to such Transferee, or Lender (or Transferee) making the designation of such New Lending Office, would have been entitled to receive in the absence of such assignment, participation, transfer or designation or (ii) the obligation to pay such additional amounts would not have arisen but for a failure by such Non-U.S. Lender to comply with the provisions of paragraph (f) above. (h) Nothing contained in this Section 2.19 shall require any Lender or the Issuing Bank (or any Transferee) or the Administrative Agent to make available any of its tax returns (or any other information that it deems to be confidential or proprietary). (i) Each Bank represents that, to the best of its knowledge, it is not a party to any "conduit financing arrangement" as defined under applicable Treasury Regulations promulgated under the Code. (j) Any Non-U.S. Lender that could become completely exempt from withholding of any tax, assessment or other charge or levy imposed by or on behalf of the United States of America or any taxing authority thereof in respect of payment of any obligations due to such Non-U.S. Lender under this Agreement if such obligations were in registered form for United States Federal income tax purposes may request the Borrower (through the Administrative Agent), and the Borrower agrees thereupon, to exchange any promissory note(s) evidencing such obligations for promissory note(s) registered as provided in subsection (k) below (each a "Registered Note"). Registered Notes may not be exchanged for Notes that are not Registered Notes. (k) From and after the time, if any, when any Lender requests a Registered Note, the Borrower shall maintain, or cause to be maintained, a register on which it enters the name of each registered owner of the Lender Obligation(s) evidenced by a Registered Note. A Registered Note and the Lender Obligation(s) evidenced thereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of such Registered Note and the Lender Obligation(s) evidenced thereby on such register (and each Registered Note shall expressly so provide). Any assignment or transfer of all or part of such Lender Obligation(s) and the Registered Note(s) evidencing the same shall be registered on such register only upon surrender for registration of assignment or transfer of the Registered Note(s) evidencing such Lender Obligation(s), duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the holder thereof, and thereupon one or more new Registered Note(s) in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s) pursuant to, in accordance with, and subject to the restrictions of, -37- 43 Section 9.4. Prior to the due presentment for registration of assignment or transfer of any Registered Note, the Borrower and the Administrative Agent shall treat the Person in whose name such Lender Obligation(s) and the Registered Note(s) evidencing the same is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding any notice to the contrary. Such register shall be available for inspection by the Administrative Agent and any Lender at any reasonable time upon reasonable prior notice. SECTION 2.20. Assignment of the Revolving Loan Commitment Under Certain Circumstances; Duty to Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a certificate requesting compensation pursuant to Section 2.13, (ii) any Lender or the Issuing Bank delivers a notice described in Section 2.14 or (iii) the Borrower is required to pay any additional amount to any Lender or the Issuing Bank or any Governmental Authority on account of any Lender or the Issuing Bank pursuant to Section 2.19, the Borrower may, at its sole expense and effort (including with respect to the processing and recordation fee referred to in Section 9.4(b)), upon notice to such Lender or the Issuing Bank and the Administrative Agent, require such Lender or the Issuing Bank to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 9.4), all of its interests, rights and obligations under this Agreement to an assignee that shall assume such assigned obligations which assignee may be another Lender, if a Lender accepts such assignment; provided that (A) such assignment shall not conflict with any Law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, (B) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a portion of the Revolving Loan Commitment is being assigned, of the Issuing Bank and the Swingline Lender), which consent shall not unreasonably be withheld, and (C) the Borrower or such assignee shall have paid to the affected Lender or the Issuing Bank in immediately available funds an amount equal to the sum of the principal of and interest accrued to the date of such payment on the outstanding Loans and participations in L/C Disbursements and Swingline Loans of such Lender or the Issuing Bank plus all Fees and other amounts accrued for the account of such Lender or the Issuing Bank hereunder (including any amounts under Section 2.13 and Section 2.15); provided further that, if prior to any such transfer and assignment the circumstances or event that resulted in such Lender's or the Issuing Bank's claim for compensation under Section 2.13 or notice under Section 2.14 hereof or the amounts paid pursuant to Section 2.19, as the case may be, cease to cause such Lender or the Issuing Bank to suffer increased costs or reductions in amounts received or receivable or reduction in return on capital, or cease to have the consequences specified in Section 2.14, or cease to result in amounts being payable under Section 2.19, as the case may be, including as a result of any action taken by such Lender or the Issuing Bank pursuant to paragraph (b) below, or if such Lender or the Issuing Bank shall waive its right to claim further compensation under Section 2.13 in respect of such circumstances or event or shall withdraw its notice under Section 2.14 or shall waive its right to further payments under Section 2.19 in respect of such circumstances or event, as the case may be, then such Lender or the Issuing Bank shall not thereafter be required to make any such transfer and assignment hereunder. -38- 44 (b) If (i) any Lender or the Issuing Bank shall request compensation under Section 2.13, (ii) any Lender or the Issuing Bank delivers a notice described in Section 2.14 or (iii) the Borrower is required to pay any additional amount to any Lender or the Issuing Bank or any Governmental Authority on account of any Lender or the Issuing Bank pursuant to Section 2.19, then such Lender or the Issuing Bank shall use reasonable efforts (which shall not require such Lender or the Issuing Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden deemed by it to be significant) (A) to file any certificate or document reasonably requested in writing by the Borrower or (B) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce its claims for compensation under Section 2.13 or enable it to withdraw its notice pursuant to Section 2.14 or would reduce accounts payable pursuant to Section 2.19, as the case may be, in the future. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or the Issuing Bank in connection with any such filing or assignment, delegation and transfer. SECTION 2.21. Letters of Credit. (a) General. The Borrower may request the issuance of a Letter of Credit, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, appropriately completed, for the account of the Borrower, at any time and from time to time while the Revolving Loan Commitment remains in effect. The face amount of each Letter of Credit may never be greater than the lesser of (i) $15,000,000 and (ii) the amount by which the Revolving Loan Commitment exceeds the Total Exposure on the date of issuance. This Section shall not be construed to impose an obligation upon the Issuing Bank to issue any Letter of Credit that is inconsistent with the terms and conditions of this Agreement. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. In order to request the issuance of a Letter of Credit (or to amend, renew or extend an existing Letter of Credit), the Borrower shall hand deliver or telecopy to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a completed Application and a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) below), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare such Letter of Credit. In connection with a request for the issuance of a Letter of Credit, in the event of any inconsistency between the terms of any Application and the provisions of this Agreement, the provisions of this Agreement shall be controlling. A Letter of Credit shall be issued, amended, renewed or extended only if, and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that, after giving effect to such issuance, amendment, renewal or extension (i) the L/C Exposure shall not exceed $15,000,000 and (ii) the Total Exposure (after giving effect to the issuance of such Letter of Credit) shall not exceed the Revolving Loan Commitment. The Issuing Bank shall not -39- 45 enter into any amendment of an outstanding Letter of Credit which has not been requested or approved in writing by the Borrower. (c) Expiration Date. Each Letter of Credit shall expire at the close of business on the earlier of the date that is one year after the date of the issuance of such Letter of Credit and the date that is five Business Days prior to the Revolving Loan Maturity Date, as applicable, unless such Letter of Credit (i) expires by its terms on an earlier date or (ii) has a one-year tenor and provides for the renewal thereof for additional one-year periods, so long as such periods referred to in this clause (ii) shall not in any event expire at a date later than the date that is five Business Days prior to the Revolving Loan Maturity Date. (d) Participations. By the issuance of a Letter of Credit and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender's Pro Rata Percentage of the aggregate amount available to be drawn under such Letter of Credit, effective upon the issuance of such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Pro Rata Percentage of each L/C Disbursement made by the Issuing Bank and not reimbursed by the Borrower forthwith on the date due as provided in Section 2.2(f). Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower shall pay to the Administrative Agent an amount equal to such L/C Disbursement not later than two hours after the Borrower shall have received notice from the Issuing Bank that payment of such draft will be made, or, if the Borrower shall have received such notice later than 10:00 a.m., New York, New York time, on any Business Day, not later than 10:00 a.m., New York, New York time, on the immediately following Business Day. (f) Obligations Absolute. The Borrower's obligations to reimburse L/C Disbursements as provided in paragraph (e) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, and irrespective of: (i) any lack of validity or enforceability of any Letter of Credit or any other Loan Document, or any term or provision therein; (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit, this Agreement or any other Loan Document; -40- 46 (iii) the existence of any claim, setoff, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Restricted Subsidiary of the Borrower or other Affiliate thereof or any other Person may at any time have against the beneficiary under any Letter of Credit, the Issuing Bank, the Administrative Agent or any Lender or any other Person, whether in connection with this Agreement or any other related or unrelated agreement or transaction; (iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and (vi) any other act or omission to act or delay of any kind of the Issuing Bank, the Lenders, the Administrative Agent or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrower's obligations hereunder. The foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by Applicable Law) suffered by the Borrower that are caused by the Issuing Bank's gross negligence or willful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof; it is understood that the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary and, in making any payment under any Letter of Credit (A) the Issuing Bank's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (B) any non-compliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute willful misconduct or gross negligence of the Issuing Bank (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall as promptly as possible give telephonic notification, confirmed by telecopy, to the Administrative Agent and the Borrower of such demand for -41- 47 payment and whether the Issuing Bank has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to any such L/C Disbursement. The Administrative Agent shall promptly give each Lender notice thereof. (h) Interim Interest. If the Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, then, unless the Borrower shall reimburse such L/C Disbursement in full on such date, the unpaid amount thereof shall bear interest for the account of the Issuing Bank, for each day from and including the date of such L/C Disbursement, to but excluding the earlier of the date of payment by the Borrower or the date on which interest shall commence to accrue thereon as provided in Section 2.8, at the rate per annum that would apply to such amount if such amount were an ABR Loan. (i) Resignation or Removal of the Issuing Bank. The Issuing Bank may resign at any time by giving 90 days' prior written notice to the Administrative Agent, the Lenders and the Borrower, and may be removed at any time by the Borrower by notice to the Issuing Bank, the Administrative Agent and the Lenders. Subject to the next succeeding paragraph, upon the acceptance of any appointment as the Issuing Bank hereunder by a Lender that shall agree to serve as successor Issuing Bank, such successor shall succeed to and become vested with all the interests, rights and obligations of the retiring Issuing Bank and the retiring Issuing Bank shall be discharged from its obligations to issue additional Letters of Credit hereunder. At the time such removal or resignation shall become effective, the Borrower shall pay all accrued and unpaid fees pursuant to Section 2.6(a). The acceptance of any appointment as the Issuing Bank hereunder by a successor Lender shall be evidenced by an agreement entered into by such successor, in a form satisfactory to the Borrower and the Administrative Agent, and, from and after the effective date of such agreement, (i) such successor Lender shall have all the rights and obligations of the previous Issuing Bank under this Agreement and (ii) references herein to the term "Issuing Bank", shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the resignation or removal of the Issuing Bank hereunder, the retiring Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such resignation or removal, but shall not be required to issue additional Letters of Credit. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, the Borrower shall, on the Business Day it receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit thereof and of the amount to be deposited), or if the maturity of the Loans has been accelerated automatically pursuant to Article VII, as a result of the happening of an event described in paragraph (g) or (h) thereof, forthwith, without notice of any kind, deposit in an account with the Administrative Agent, for the benefit of the Lenders, an amount in cash equal to the L/C Exposure as of such date plus any accrued and unpaid interest thereon. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the Obligations. The Administrative Agent shall have -42- 48 exclusive dominion and control, including the exclusive right of withdrawal, over such account and, if so requested by the Borrower, shall invest the deposits therein in Permitted Investments. Other than any interest earned on the investment of such deposits in Permitted Investments, which investments shall be made at the option and sole discretion of the Administrative Agent, such deposits shall not bear interest or profits, and all interest, if any, earned on such investments shall accumulate in such account. Moneys in such account shall (i) automatically be applied by the Administrative Agent to reimburse the Issuing Bank for L/C Disbursements for which it has not been reimbursed, (ii) be held for the satisfaction of the reimbursement obligations of the Borrower for the L/C Exposure at such time and (iii) if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with L/C Exposure representing greater than 50% of total L/C Exposure), be applied to satisfy other Obligations. SECTION 2.22. Incremental Facilities. The Borrower may at any time and from time to time prior to the date that is one year after the Closing Date, at its sole cost, expense and effort, request any one or more of the Lenders (the decision to be within the sole and absolute discretion of each Lender), or any other Person or Persons reasonably satisfactory to the Administrative Agent, to commit to provide one or more revolving credit facilities and/or term loan facilities to the Borrower (each an "incremental facility"), by hand delivering or telecopying to the Administrative Agent a duly completed request therefor not later than 45 days prior to the anticipated closing date of such incremental facility, (a) specifying the nature thereof as a revolving facility and/or a term loan facility, the aggregate amount of all commitments to be provided thereunder, the Lenders or other Person(s) agreeing to provide such incremental facility (each an "incremental lender"), and the anticipated closing date thereof, and (b) attaching the term sheet and related documents with respect to such incremental facility. If such request is in all respects reasonably satisfactory to the Administrative Agent and the Administrative Agent shall have received such other information relating to such incremental facility as it shall reasonably request, then (i) the Administrative Agent shall execute such request and deliver a copy thereof to the Borrower and each Lender and (ii) the Administrative Agent, the Obligors and the relevant incremental lenders shall execute and deliver such amendments, supplements and other modifications to the Loan Documents (copies of which shall be delivered by the Administrative Agent to each Lender promptly after the effectiveness thereof) as shall be necessary to include such incremental facility hereunder and under the other Loan Documents, provided, however, that (A) immediately before and after giving effect to each incremental facility, no Event of Default or Default shall have occurred and be continuing, (B) immediately after giving effect to each incremental facility, the aggregate amount of all commitments to be provided thereunder shall not be less than $25,000,000, (C) at no time shall the aggregate lending exposure under all incremental facilities exceed $100,000,000, (D) the Administrative Agent shall have received such certificates, legal opinions and other items as it shall reasonably request in connection with each incremental facility, (E) no incremental facility may be represented or otherwise included under the Loan Documents on a greater than pro rata basis with the Revolving Loans and each prior incremental facility with respect to any mandatory prepayment or other mandatory exposure reduction (including any such prepayment or reduction relating to Asset Dispositions), any collateral security (including any cash collateral deposited under Section 2.21(j) and any amounts escrowed under Section 2.12(d)), or any matter requiring the vote of the Required Lenders, and (F) each incremental facility shall be required to share, on at least a pro -43- 49 rata basis with the Revolving Loans and each prior incremental facility, in the obligations of the Lenders to indemnify the Administrative Agent. ARTICLE III. Representations and Warranties The Borrower represents and warrants to the Administrative Agent, the Issuing Bank and each of the Lenders that: SECTION 3.1. Organization; Powers. The Borrower and each of the Restricted Subsidiaries (a) is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) has the requisite power and authority to execute, deliver and perform its obligations under this Agreement, the other Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and to borrow hereunder. SECTION 3.2. Authorization. The execution, delivery and performance by each Obligor of the Loan Documents to which it is a party and the borrowings hereunder (collectively, the "Transactions") (a) have been duly authorized by all requisite corporate, partnership or other analogous and, if required, equityholder action and (b) will not (i) violate (A) any provision of Law, statute, rule or regulation, or of the certificate or articles of incorporation or other organizational documents or by-laws of the Borrower or any Restricted Subsidiary, (B) any order of any Governmental Authority or (C) any provision of any indenture, material agreement or other material instrument to which the Borrower or any Restricted Subsidiary is a party or by which any of them or any of their property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other instrument or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Borrower or any Restricted Subsidiary. SECTION 3.3. Enforceability. This Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditor's rights generally. All other Loan Documents have been duly executed and delivered by the Borrower and the other Obligors and each constitutes a legal, valid and binding obligation of the Borrower and the other Obligors, as appropriate, enforceable against the Borrower and the other Obligors, as appropriate, in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditor's rights generally. -44- 50 SECTION 3.4. Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for such as have been made or obtained and are in full force and effect. SECTION 3.5. Financial Statements. The Borrower has heretofore furnished to the Lenders its balance sheets and statements of operations, stockholders' equity and cash flows (a) as of and for the fiscal year ended December 31, 1999, audited by and accompanied by the opinion of Deloitte & Touche LLP, independent public accountants, and (b) as of and for the fiscal quarter and the portion of the fiscal year ended March 31, 2000. Such financial statements present fairly the financial position and results of operations and cash flows of the Borrower as of such dates and for such periods in accordance with GAAP. Such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of such entities as of the dates thereof. Such financial statements were prepared in accordance with GAAP applied on a consistent basis. The operating performance projections submitted prior to the Closing Date by the Borrower to the Administrative Agent for the years 2000 through 2005 were prepared in good faith, and management believes them to be based on reasonable assumptions and to fairly present the projected financial position and results of operations of the Borrower and the Restricted Subsidiaries based upon management's good faith estimates about the business, the relevant industries and the general economy as of the date of such projections. The parties hereto understand that such projections were not prepared as part of the Borrower's customary planning process, have not been subject to the same level of scrutiny and review as the Borrower undertakes in its annual business planning and budgeting process, and have not been reviewed and approved by the Borrower's Board of Directors. SECTION 3.6. No Material Adverse Change. There has been no material adverse change in the business, assets, operations, financial condition, or material agreements of the Borrower and the Restricted Subsidiaries, taken as a whole, since December 31, 1999. SECTION 3.7. Title to Properties; Possession Under Leases. (a) Each of the Borrower and the Restricted Subsidiaries has good and marketable title to, or valid leasehold interests in, all its material properties and assets, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes. All such material properties and assets are free and clear of Liens, other than Liens expressly permitted by Section 6.2. (b) Each of the Borrower and the Restricted Subsidiaries has complied with all material obligations under all material leases to which it is a party and all such leases are in full force and effect. Each of the Borrower and the Restricted Subsidiaries enjoys peaceful and undisturbed possession under all such material leases. (c) Each of the Borrower and its Subsidiaries owns or possesses, or could obtain ownership or possession of, on terms not materially adverse to it, all patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect thereto necessary for the -45- 51 present conduct of its business, without any known conflict with the rights of others, and free from any burdensome restrictions, except where such conflicts and restrictions could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 3.8. Subsidiaries. Schedule 3.8 sets forth as of the date hereof a list of all Subsidiaries of the Borrower and the percentage ownership interest of the Borrower therein. As of the date hereof, the shares of Capital Stock or other ownership interests so indicated on Schedule 3.8 are fully paid and non-assessable and are owned by the Borrower, directly or indirectly, free and clear of all Liens. SECTION 3.9. Litigation; Compliance with Laws. (a) Except as set forth on Schedule 3.9, there are not any actions, suits or proceedings at Law or in equity or by or before any Governmental Authority now pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary of the Borrower or any business, property or rights of any such Person (i) that involve this Agreement or the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (b) None of the Borrower or any of its Subsidiaries or any of their respective material properties or assets is in violation of, nor will the continued operation of their material properties and assets as currently conducted violate, any Law, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect. SECTION 3.10. Agreements. (a) Neither the Borrower nor any of its Subsidiaries is a party to any agreement or subject to any corporate, partnership or other analogous restriction that, since December 31, 1999, has resulted or could reasonably be expected to result in a Material Adverse Effect, except as disclosed on Schedule 3.10. (b) Neither the Borrower nor any of its Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect. SECTION 3.11. Federal Reserve Regulations. (a) Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock (as defined in Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof). -46- 52 (b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the regulations of the Board, including Regulation T, U or X, in each case as from time to time in effect and all official rulings and interpretations thereunder or thereof. SECTION 3.12. Investment Company Act; Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary of the Borrower is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the Loans and will request the issuance of Letters of Credit only (a) for the refinancing of existing indebtedness and other obligations under the Existing Credit Documents, (b) to fund strategic acquisitions and mergers (and other similar corporate transactions which have the same effect as a merger or acquisition), in each case that are permitted by this Agreement and the other Loan Documents, (c) for working capital and (d) for other general corporate purposes. SECTION 3.14. Tax Returns. Each of the Borrower and the Restricted Subsidiaries has filed or caused to be filed all Federal, state, and material local and foreign tax returns or materials required to have been filed by it and has paid or caused to be paid all taxes due and payable by it and all assessments received by it, except taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Restricted Subsidiary, as applicable, shall have set aside on its books adequate reserves. SECTION 3.15. No Material Misstatements. No written information, report, financial statement, exhibit or schedule prepared by the Borrower and furnished to the Administrative Agent or any Lender in connection with the negotiation of this Agreement and the other Loan Documents, or included herein or delivered pursuant hereto, contained, contains or will contain when furnished any material misstatement of fact or omitted, omits or will omit when furnished to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading. SECTION 3.16. Employee Benefit Plans. Each of the Borrower and its ERISA Affiliates is in compliance in all material respects with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in liability of the Borrower or any Subsidiary of the Borrower which would be material to the Borrower and its Subsidiaries on a consolidated basis. SECTION 3.17. Solvency. (a) Immediately after the consummation of the Transactions and the other transactions to occur on the Closing Date and immediately following the making of each Loan -47- 53 made and the issuance of each Letter of Credit issued and after giving effect to the application of the proceeds thereof, (i) the fair value of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (ii) the present fair saleable value of the property of the Borrower and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) each of the Obligors will be able to pay its debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) each of the Obligors will not have unreasonably small capital with which to conduct the businesses in which it is engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date. (b) The Borrower does not intend to, and does not believe that it or any Subsidiary of the Borrower will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it or any such Subsidiary and the timing and amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary. SECTION 3.18. Insurance. The Borrower and the Restricted Subsidiaries have insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice. SECTION 3.19. Labor Matters. As of the date hereof and the Closing Date, there are no strikes, lockouts or slowdowns against the Borrower or any of its Subsidiaries pending or, to the knowledge of the Borrower, threatened which could reasonably be expected to have a Material Adverse Effect. The hours worked by and payments made to employees of the Borrower and the Restricted Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign Law dealing with such matters. All payments due from the Borrower or any Restricted Subsidiary, or for which any claim may be made against the Borrower or any Restricted Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of the Borrower or such Restricted Subsidiary. The consummation of the Transactions to be consummated on or prior to the Closing Date will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower or any Restricted Subsidiary is bound. SECTION 3.20. Environmental Matters. Except as set forth in Schedule 3.20: (a) the properties owned, operated or leased by the Borrower and its Subsidiaries (the "Properties") do not contain any Hazardous Materials in amounts or concentrations which (i) constitute, or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, Environmental Laws, which violations and liabilities, in the aggregate, could reasonably be expected to result in a Material Adverse Effect; (b) all Environmental Permits have been obtained and are in effect with respect to the Properties and operations of the Borrower and its -48- 54 Subsidiaries, and the Properties and all operations of the Borrower and its Subsidiaries are in compliance, and in the last two years have been in compliance, with all Environmental Laws and all necessary Environmental Permits, except to the extent that such non-compliance or failure to obtain any necessary permits, in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; (c) neither the Borrower nor any of its Subsidiaries has received any notice of an Environmental Claim in connection with the Properties or the operations of the Borrower or its Subsidiaries or with regard to any Person whose liabilities for environmental matters the Borrower or any of its Subsidiaries has retained or assumed, in whole or in part, contractually, which, in the aggregate, could reasonably be expected to result in a Material Adverse Effect, nor do the Borrower or any of its Subsidiaries have knowledge that any such notice will be received or is being threatened; and (d) Hazardous Materials have not been transported from the Properties, nor have Hazardous Materials been generated, treated, stored or disposed of at, on or under any of the Properties in a manner that could reasonably be expected to give rise to liability under any Environmental Law, nor have the Borrower or its Subsidiaries retained or assumed any liability contractually, with respect to the generation, treatment, storage or disposal of Hazardous Materials, which transportation, generation, treatment, storage or disposal, or retained or assumed liabilities, in the aggregate, could reasonably be expected to result in a Material Adverse Effect. SECTION 3.21. Survival of Representations and Warranties, etc. All representations and warranties made under this Agreement and the other Loan Documents shall be deemed to be made at and as of the Closing Date and at and as of the date of each borrowing of a Loan (which, for purposes of this Section, shall in no event include any conversion or continuation under Section 2.11) and each issuance of a Letter of Credit, and each shall be true and correct when made, except to the extent (a) previously fulfilled in accordance with the terms hereof, (b) subsequently inapplicable, or (c) previously waived in writing by the Administrative Agent, the Issuing Bank and Lenders with respect to any particular factual circumstance. The representations and warranties made under this Agreement and the other Loan Documents shall be deemed applicable to each Subsidiary of the Borrower, if applicable, as of the formation or acquisition of such Subsidiary and at and as of each date the representations and warranties are remade pursuant to this provision. All representations and warranties made under this Agreement and the other Loan Documents shall survive, and not be waived by, the execution hereof by the Administrative Agent, the Issuing Bank and the Lenders, any investigation or inquiry by the Administrative Agent, the Issuing Bank or any Lender, or by the making of any Loan or the issuance of any Letter of Credit under this Agreement and the other Loan Documents. ARTICLE IV. Conditions of Lending The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder are subject to the satisfaction of the following conditions: -49- 55 SECTION 4.1. All Credit Events. On the date of each borrowing, and on the date of each issuance of a Letter of Credit (each such event being called a "Credit Event"): (a) The Administrative Agent shall have received a request for such Borrowing as required by Section 2.3 or 2.4, as applicable (or such notice shall have been deemed given in accordance with Section 2.4), or, in the case of the issuance of a Letter of Credit, the Issuing Bank and the Administrative Agent shall have received a duly completed Application and a notice requesting the issuance of such Letter of Credit, as required by Section 2.21(b). (b) The representations and warranties set forth in Article III and the other representations and warranties of the Obligors in the Loan Documents shall be true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, and there shall have occurred no event which caused a Material Adverse Effect. (c) Each of the Borrower and its Subsidiaries shall be in compliance in all material respects with the terms and provisions set forth herein and in the other Loan Documents on its part to be observed or performed, and at the time of and immediately after such Credit Event, no Event of Default or Default shall have occurred and be continuing. Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Event as to the matters specified in paragraphs (b) and (c) of this Section 4.1. SECTION 4.2. First Credit Event. On the Closing Date: (a) The Administrative Agent shall have received, on behalf of itself, the Lenders and the Issuing Bank, a favorable written opinion of Sherman & Howard L.L.C. in connection with the Transactions in each case (i) dated the Closing Date, and (ii) covering such matters relating to this Agreement and the Transactions as the Administrative Agent shall reasonably request in form reasonably acceptable to the Administrative Agent and its counsel, and the Borrower hereby requests and instructs such counsel to deliver such opinion. Such opinion shall be addressed to the Issuing Bank, the Administrative Agent and the Lenders. (b) All legal matters incident to this Agreement, the other Loan Documents, the Borrowings, the Transactions and the extensions of credit hereunder shall be reasonably satisfactory to the Lenders, to the Issuing Bank and to the Administrative Agent. (c) The Administrative Agent shall have received (i) a certificate of the Secretary or Assistant Secretary, or other analogous counterpart, of each Obligor, dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of its certificate or articles of incorporation, by-laws or other analogous organizational documents, including all amendments thereto, as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete -50- 56 copy of resolutions duly adopted by the Board of Directors or other analogous managing body of each Obligor authorizing the execution, delivery and performance of this Agreement, the other Loan Documents and the borrowings hereunder, as applicable, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that attached thereto is a certificate as to the good standing of each Obligor as of a recent date from the Secretary of State of the state of its organization, and (D) as to the incumbency and specimen signature of each officer executing this Agreement and the other Loan Documents, or any other document delivered in connection herewith or therewith, on behalf of each Obligor; (ii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary or other analogous counterpart executing the certificate pursuant to clause (i) above; and (iii) such other documents as the Lenders, the Issuing Bank, the Swingline Lender, the Administrative Agent or Bryan Cave LLP, counsel for the Administrative Agent, may reasonably request. (d) The Lenders shall have received a duly completed certificate, dated the Closing Date and executed by a Financial Officer of the Borrower, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.1, and demonstrating compliance by the Borrower with the provisions of Sections 6.9, 6.10 and 6.12. (e) Each of the Administrative Agent, the Lenders, the Issuing Bank, the Syndication Agent, the Documentation Agents, the Swingline Lender and their respective Affiliates shall have received all Fees and other amounts due and payable to it under the Loan Documents on or prior to the Closing Date, including reimbursement or payment of all reasonable out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. (f) The Borrower shall have delivered duly executed and completed copies to each of the Lenders of each of the following documents and agreements, in form and substance satisfactory to each Lender: this Agreement executed by the Borrower and the Guarantee Agreement executed by each domestic organized Subsidiary of the Borrower that exists on the Closing Date. The Borrower shall have delivered a promissory note to each Lender (including a promissory note to the Swingline Lender), in form and substance satisfactory to such Lender, and any other Loan Document reasonably required by the Issuing Bank, the Administrative Agent or any Lender in connection with this Agreement or any other Loan Document. (g) All governmental and third party approvals necessary or advisable in connection with the Transactions, and the continuing operations of the Borrower and the Restricted Subsidiaries shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any Governmental Authority which would restrain, prevent or otherwise impose adverse conditions on the Transactions, and the Administrative Agent shall have reasonably satisfactory evidence of the foregoing. (h) There shall not have occurred any material change in the capitalization (whether in debt or in equity), corporate structure or assets of the Borrower or any of its Subsidiaries, and the Administrative Agent shall have reasonably satisfactory evidence thereof. -51- 57 (i) No action, suit, litigation or similar proceeding by or before any Governmental Authority shall exist or, in the case of litigation by a Governmental Authority, be threatened, with respect to the Transactions contemplated thereby or otherwise, which would reasonably be likely to have a Material Adverse Effect, and the Administrative Agent shall have reasonably satisfactory evidence thereof. (j) The Borrower shall have fully repaid all indebtedness and other obligations owed by it under each of the Existing Credit Documents, and all commitments and other agreements thereunder or with respect thereto shall have been canceled or terminated, and the Administrative Agent shall have reasonably satisfactory evidence thereof or arrangements satisfactory to the Administrative Agent shall have been made by the Borrower to accomplish the foregoing concurrently with the initial Credit Event. ARTICLE V. Affirmative Covenants The Borrower covenants and agrees with each Lender and the Issuing Bank that, so long as this Agreement shall remain in effect and until the Revolving Loan Commitment has been terminated and the Obligations have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, the Borrower will, and will cause each of the Restricted Subsidiaries to: SECTION 5.1. Existence; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.5. (b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; comply in all material respects with all applicable Laws, rules, regulations and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted; and at all times maintain and preserve all property material to the conduct of such business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times. SECTION 5.2. Insurance. Keep its insurable properties insured in accordance with industry standards at all times by financially sound and reputable insurers; maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar locations, including public liability insurance against claims for -52- 58 personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by it; and maintain such other insurance as may be required by Law. SECTION 5.3. Obligations and Taxes. Pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrower shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP and such contest operates to suspend collection of the contested obligation, tax, assessment or charge and enforcement of a Lien. SECTION 5.4. Financial Statements, Reports, etc. In the case of the Borrower, furnish to the Administrative Agent and each Lender: (a) within 105 days after the end of each fiscal year, its consolidated and, in the event any Subsidiary has been designated as an Unrestricted Subsidiary hereunder, consolidating balance sheet and related consolidated and, in the event any Subsidiary has been designated as an Unrestricted Subsidiary hereunder, consolidating statements of operations, stockholders' equity and cash flows, showing the financial position of the Borrower and the Restricted Subsidiaries as of the close of such fiscal year and the results of their operations during such year, and a comparison of such financial position and results of operations as of the corresponding date and for the previous fiscal year, all audited (in the case of the consolidated financial statements) by Deloitte & Touche LLP or other independent public accountants of recognized national standing acceptable to the Required Lenders and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present the financial position and results of operations of the Borrower and the Restricted Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, its consolidated balance sheet and related consolidated statements of operations, stockholders' equity and cash flows showing the financial position of the Borrower and the Restricted Subsidiaries as of the close of such fiscal quarter and the results of their operations during such fiscal quarter and the then elapsed portion of the fiscal year, and a comparison of such financial position and results of operations as of the corresponding date and for the corresponding periods in the previous fiscal year, all certified by one of its Financial Officers as fairly presenting the financial position and results of operations of the Borrower and the Restricted Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustment; (c) (i) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm opining on or certifying such statements (which certificate may be limited to accounting matters and disclaim responsibility for legal interpretations) certifying that no Event of Default has occurred and is continuing in respect of Sections 6.1, 6.2(h), 6.3, 6.4, 6.5, 6.6, 6.9, 6.10 and 6.12; and (ii) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower certifying that no Event of Default or Default -53- 59 has occurred and is continuing or, if such an Event of Default or Default has occurred and is continuing, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and setting forth computations demonstrating compliance with the covenants contained in Sections 6.9, 6.10 and 6.12; (d) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements, registration statements (other than on Form S-8) and other similar materials filed by the Borrower or any Restricted Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed generally to its equityholders, as the case may be; and (e) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary of the Borrower, or compliance with the terms of this Agreement and the other Loan Documents, as the Administrative Agent, the Issuing Bank or any Lender may reasonably request. SECTION 5.5. Litigation and Other Notices. Furnish to the Administrative Agent, the Issuing Bank and each Lender prompt written notice of the following: (a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto; (b) (i) the filing or commencement of, or any written threat or notice of intention of any Person to file or commence, any action, suit or proceeding, whether at Law or in equity or by or before any Governmental Authority, or (ii) the making of any written claim, in either case against the Borrower or any Affiliate thereof as to which there is a reasonable possibility of an adverse determination and which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; and (c) any development (including developments in pending litigation and developments in pending or threatened labor disruption) that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect. SECTION 5.6. Employee Benefits. Comply in all material respects with the applicable provisions of ERISA and the Code and furnish to the Administrative Agent as soon as possible after, and in any event within 10 days after any Responsible Officer of the Borrower or any ERISA Affiliate knows or has reason to know that, any ERISA Event has occurred that, alone or together with any other ERISA Event, could reasonably be expected to result in liability of the Borrower or any Subsidiary of the Borrower, or any combination thereof, in an aggregate amount exceeding $5,000,000, a statement of a Financial Officer of the Borrower setting forth details as to such ERISA Event and the action, if any, that the Borrower proposes to take with respect thereto. SECTION 5.7. Maintaining Records; Access to Properties and Inspections. Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of Law are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent, the Issuing Bank or any Lender, upon -54- 60 reasonable prior written notice, to visit and inspect the financial records and the properties of the Borrower or any Subsidiary of the Borrower at reasonable times and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent, the Issuing Bank or any Lender to discuss the affairs, finances and condition of the Borrower or any Subsidiary of the Borrower with the officers thereof and (with the concurrence of the Administrative Agent) independent accountants therefor (provided that the Borrower has the right to have a representative present for any meeting with the Borrower's independent accountants). SECTION 5.8. Use of Proceeds. Use the proceeds of the Loans and request the issuance of Letters of Credit only (a) for the refinancing of existing indebtedness and other obligations under the Existing Credit Documents, (b) to fund strategic acquisitions and mergers (and other similar corporate transactions which have the same effect as a merger or acquisition), in each case that is permitted by this Agreement and the other Loan Documents, (c) for working capital and (d) for other general corporate purposes. SECTION 5.9. Compliance with Environmental Laws. (a) Comply, and exercise best efforts to cause all lessees and other Persons occupying its Properties to comply, in all material respects with all Environmental Laws and Environmental Permits applicable to its operations and Properties; and obtain and renew all material Environmental Permits necessary for its operations and Properties; and conduct any Remedial Action to the extent required by and in accordance with Environmental Laws; provided, however, that none of the Borrower or any of its Subsidiaries shall be required to undertake any Remedial Action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. (b) If a Default caused by reason of a breach of paragraph (a) above or Section 3.20 shall have occurred and be continuing, at the request of the Required Lenders through the Administrative Agent, provide to the Lenders within 45 days after such request, at the expense of the Borrower, a "Phase 1" environmental site assessment report for the Properties which are the subject of such default prepared by an environmental consulting firm acceptable to the Administrative Agent and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or Remedial Action in connection with such Properties. SECTION 5.10. Compliance with Material Contracts. Except as set forth in Section 6.7, maintain in full force and effect (including exercising any available renewal option), and without amendment or modification, each material contract, unless the failure so to maintain any such material contract or replacement contract or contracts thereof (or any amendment or modification thereto) could not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. SECTION 5.11. Ownership of Restricted Subsidiaries; Additional Restricted Subsidiaries. -55- 61 (a) Notwithstanding anything in any Loan Document to the contrary, at all times own, directly or indirectly, through one or more Restricted Subsidiaries, securities or other ownership interests representing 100% of the ordinary voting power or of the general partnership interests of each Restricted Subsidiary. (b) If any domestic organized Subsidiary of the Borrower is formed or acquired after the Closing Date, notify the Administrative Agent and the Lenders in writing thereof within ten Business Days after the date on which such Subsidiary is formed or acquired and cause such Subsidiary to execute and deliver the Guarantee Agreement (or otherwise become a party thereto in the manner provided therein) within ten Business Days after the date on which such Subsidiary is formed or acquired. ARTICLE VI. Negative Covenants The Borrower covenants and agrees with each Lender and the Issuing Bank that, so long as this Agreement shall remain in effect and until the Revolving Loan Commitment has been terminated and the Obligations have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full: SECTION 6.1. Indebtedness of the Borrower and the Restricted Subsidiaries. The Borrower will not, and will not cause or permit any of the Restricted Subsidiaries to, issue any Preferred Stock, or to issue, incur, create, assume or permit to exist any Indebtedness, except: (a) so long as there exists no Default or Event of Default immediately prior to and after giving effect to the incurrence of any such Indebtedness or the issuance of any such Preferred Stock, the Borrower may incur, create, assume or permit to exist unsecured Indebtedness or issue Preferred Stock; (b) Indebtedness of the Borrower or any Restricted Subsidiary for borrowed money, and Preferred Stock issued by the Borrower or any Restricted Subsidiary, in each case existing on the date hereof and set forth in Schedule 6.1, but not any extensions, renewals or replacements of such Indebtedness, and Indebtedness under the Existing Credit Documents (provided that such Indebtedness is fully repaid on or before the Closing Date); (c) Indebtedness of any Restricted Subsidiary owed to the Borrower or to a Wholly-Owned Subsidiary of the Borrower that is also a Restricted Subsidiary, provided that such Indebtedness does not otherwise violate any provision of this Agreement or any other Loan Document; and (d) so long as there exists no Default or Event of Default immediately prior to and after giving effect to its incurrence, Indebtedness (whether secured or unsecured) of any Restricted Subsidiary up to an aggregate maximum amount outstanding at any one time for all such Indebtedness of $15,000,000. -56- 62 SECTION 6.2. Liens. The Borrower will not, and will not cause or permit any of the Restricted Subsidiaries to, create, incur, assume or permit to exist any Lien on any of its property or assets (including stock or other securities of any Person, including any Restricted Subsidiary) now owned or hereafter acquired by it or them or on any income or revenues or rights in respect of any thereof, except: (a) Liens on property or assets of the Borrower and the Restricted Subsidiaries existing on the date hereof and set forth in Schedule 6.2; provided that such Liens shall secure only those obligations which they secure on the date hereof; (b) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Restricted Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition and (ii) such Lien does not apply to any other property or assets of the Borrower or any Restricted Subsidiary; (c) Liens for taxes not yet due or which are being contested in compliance with Section 5.3; (d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business and securing obligations that are not due and payable or which are being contested in compliance with Section 5.3, which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of the Restricted Subsidiaries; (e) pledges and deposits made in the ordinary course of business in compliance with workmen's compensation, unemployment insurance and other social security Laws or regulations; (f) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (g) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of the Restricted Subsidiaries; (h) Liens on assets of the Restricted Subsidiaries securing Indebtedness of the Restricted Subsidiaries that is permitted to be incurred by Section 6.1(d) (i) Liens on the Capital Stock of any Unrestricted Subsidiary, provided that the Indebtedness or other obligations or liabilities secured thereby shall be without recourse to -57- 63 the Borrower or any Restricted Subsidiary, or any of its assets or property (other than such Capital Stock), except as would otherwise be permitted under this Section. SECTION 6.3. Sale and Lease Back Transactions; Off-Balance Sheet Financings. The Borrower will not, and will not cause or permit any of the Restricted Subsidiaries to: (a) Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred; provided, however, that the Borrower or any Restricted Subsidiary may enter into (i) any operating lease, (ii) Equipment Lease Transactions permitted by paragraph (b) of this Section and (iii) Capital Lease Obligations secured by purchase money security interests permitted by Section 6.2(h) to finance the initial acquisition of real property, equipment or other assets. (b) Directly or indirectly enter into or be or become liable with respect to any Equipment Lease Transactions, other than Equipment Lease Transactions, provided that the aggregate amount of Attributable Debt at any time with respect to all Equipment Lease Transactions of the Borrower and all of the Restricted Subsidiaries does not exceed 20% of Consolidated Tangible Net Worth as of the last day of the most recently ended fiscal quarter. SECTION 6.4. Investments, Acquisitions, Loans and Advances. The Borrower will not, and will not cause or permit any of the Restricted Subsidiaries to, purchase, hold or acquire any Capital Stock, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, or make any acquisition of assets of any other Person as a going concern (each an "Investment"), except: (a) Investments existing on the date hereof and set forth in Schedule 6.4; (b) Permitted Investments; (c) Investments consisting of loans or advances to (i) any Wholly-Owned Subsidiary that is a Restricted Subsidiary, provided that such loans or advances are not subordinated to any other Indebtedness or other obligations of such Restricted Subsidiary and rank pari passu with all senior, unsecured Indebtedness of such Restricted Subsidiary, or (ii) employees of the Borrower or the Wholly-Owned Subsidiaries that are Restricted Subsidiaries, provided that such loans or advances are made in the ordinary course of business and in accordance with company policy, and provided further that the proceeds of such loan or advance are used to finance employee related expenses (including relocation expenses and travel and entertainment expenses); (d) additional equity Investments in any Wholly-Owned Subsidiary of the Borrower that is also a Restricted Subsidiary, provided that, immediately after giving effect thereto, the ratio of such Restricted Subsidiary's consolidated liabilities (less borrowings by such -58- 64 Restricted Subsidiary allowed and outstanding under this Agreement, deferred compensation, deferred income and allocation of income to minority interests in earnings of consolidated subsidiaries) to such Restricted Subsidiary's consolidated assets (determined in accordance with GAAP) shall be less than 1.00 to 4.00; (e) Investments consisting of non-cash consideration received in connection with a sale or disposition of assets permitted under Section 6.5; (f) Investments consisting of loans and advances to Jerome Kern in an aggregate principal amount not in excess of $45,000,000, provided that all of the proceeds of each such loan or advance are immediately contributed or otherwise paid to the Borrower in exchange for shares of its common stock; and (g) so long as there exists no Default or Event of Default immediately before and after giving effect thereto, Investments (other than Investments described in clauses (a) through (f) above) to the extent that, immediately after giving effect thereto, the aggregate amount of all such Investments made over the term of this Agreement does not exceed $40,000,000. SECTION 6.5. Mergers, Consolidations and Sales of Assets. The Borrower will not, and will not cause or permit any of the Restricted Subsidiaries to: (a) merge into or consolidate with any Person, or permit any other Person to merge into or consolidate with it, provided that, if there exists no Default or Event of Default at the time thereof or immediately after giving effect thereto, (i) any Wholly-Owned Subsidiary that is also a Restricted Subsidiary may merge into or consolidate with the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) any Wholly-Owned Subsidiary that is also a Restricted Subsidiary may merge into or consolidate with any other Wholly-Owned Subsidiary that is also a Restricted Subsidiary in a transaction in which (A) the surviving entity is a Wholly-Owned Subsidiary that is also a Restricted Subsidiary and (B) no Person other than the Borrower or a Wholly-Owned Subsidiary that is also a Restricted Subsidiary receives any consideration; or (b) sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial part of its assets (whether now owned or hereafter acquired) or any amount of Capital Stock of any Subsidiary of the Borrower, except that (i) the Borrower or any Restricted Subsidiary may sell or dispose of inventory, obsolete equipment and Permitted Investments in the ordinary course of business, (ii) if immediately before and after giving effect thereto no Event of Default or Default shall have occurred and be continuing, the Borrower or any Restricted Subsidiary may sell or dispose of assets (not including Capital Stock in any Subsidiary of the Borrower owned by the Borrower or any Restricted Subsidiary) for fair market value outside the ordinary course of business (each an "Asset Disposition"), so long as the cumulative aggregate non-cash consideration for all Asset Dispositions made in reliance on this clause (ii) after the date hereof shall not exceed $10,000,000 in fair market value, and provided that the aggregate Net Cash Proceeds of all Asset Dispositions made hereunder are, to the extent they exceed 15% of Consolidated Tangible Assets as of the relevant dates of determination, -59- 65 applied in accordance with the terms of Section 2.12(c) to repay the Loans and reduce the Revolving Loan Commitment, (iii) in addition to clauses (i) and (ii) above, if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing, the Borrower or any Restricted Subsidiary may sell or dispose of the Capital Stock of any Unrestricted Subsidiary for fair market value, provided that (A) such sale or disposition shall be on a non-recourse basis (except that the Borrower or such Restricted Subsidiary may make commercially reasonable representations and warranties with respect to such equity interest that are normal and customary and except to the extent of any Guarantee permitted hereunder made by the Borrower or any Restricted Subsidiary in connection with such transaction) and (B) notwithstanding anything in any Loan Document to the contrary, such sale or disposition shall, for all purposes hereof, constitute an Asset Disposition, and (iv) in addition to clauses (i), (ii) and (iii) above, if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing, the Borrower may transfer control, through a sale, corporate transaction or other disposition, of the hotel contracts and related assets for its hotel customers outside of the United States. SECTION 6.6. Dividends and Distributions; Restrictions on Ability of Subsidiaries to Pay Dividends. The Borrower will not, and will not cause or permit any of the Restricted Subsidiaries to, declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares or other units of its Capital Stock or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any Restricted Subsidiary to purchase or acquire) any shares or other units of any class of its Capital Stock or set aside any amount for any such purpose (each a "Restricted Payment"); provided, however, that (a) any Restricted Subsidiary may declare and pay any Restricted Payment to another Wholly-Owned Subsidiary that is also a Restricted Subsidiary or to the Borrower, (b) so long as there exists no Default or Event of Default both before and after giving effect to such Restricted Payment, the Borrower may make redemptions or repurchases of its Capital Stock in connection with employee stock options or incentives upon termination of such employment, for an aggregate amount of consideration paid from and after the date hereof of up to $10,000,000, in connection with any employee stock option or incentive plans, (c) until the later of (i) January 1, 2003 and (ii) such time as the Leverage Ratio is less than 2.50 to 1.00 for three consecutive months and after giving effect to any proposed Restricted Payment, and so long as in each case there exists no Default or Event of Default both before and after giving effect to such Restricted Payment, the Borrower may make Restricted Payments which, in the aggregate for all such Restricted Payments over the term of this Agreement, do not exceed the sum of (A) $10,000,000 plus (B) Free Cash Flow over the term of this Agreement, and (d) after the later of (i) January 1, 2003, and (ii) such time as the Leverage Ratio is less than 2.50 to 1.00 for three consecutive months and after giving effect to any proposed Restricted Payment, and so long as in each case there exists no Default or Event of Default both before and after giving effect to such Restricted Payment, the Borrower may make Restricted Payments. SECTION 6.7. Transactions with Affiliates. Except in accordance with the terms of Section 6.6, the Borrower will not, and will not cause or permit any of the Restricted Subsidiaries to, sell or transfer any property or assets to, or purchase or acquire any property or -60- 66 assets from, or otherwise engage in any other transactions with, any of its Affiliates, except that the Borrower or any Restricted Subsidiary may engage in any of the foregoing transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Restricted Subsidiary than could be obtained on an arm's length basis from unrelated third parties. SECTION 6.8. Limitation on Restrictive Agreements. The Borrower will not, and will not cause or permit any of the Restricted Subsidiaries to, enter into any indenture, agreement, instrument, financing document or other arrangement which, directly or indirectly, prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon: (a) the granting of Liens, (b) the making or granting of Guarantees, (c) the payment of dividends or distributions, (d) the purchase, redemption or retirement of any Capital Stock, (e) the making of any other Restricted Payments, (f) the making of loans or advances, (g) transfers or sales of property or assets (including Capital Stock) by the Borrower or any of the Restricted Subsidiaries, other than restrictions on the granting of Liens on, or the transfer of, assets that are encumbered by Liens permitted under clauses (b) and (h) of Section 6.2 with respect to the property or assets covered by such Lien only, provided that (i) the foregoing shall not apply to restrictions and conditions existing on the date hereof and set forth in Schedule 6.8 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (ii) the foregoing shall not apply to restrictions or conditions imposed on the Borrower by any agreement relating to Indebtedness permitted by this Agreement, (iii) clause (a) of this Section shall not apply to restrictions or conditions imposed on any Restricted Subsidiary by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness, and (iv) clause (a) of this Section shall not apply to customary provisions in leases. SECTION 6.9. Leverage Ratio. The Borrower will not permit the Leverage Ratio as of the last day of any fiscal quarter ending during any period set forth below to be more than the ratio set forth below for such period:
Quarter Ending Ratio -------------- ----- Closing Date through December 31, 2001 3.50 to 1.00 January 1, 2002 through December 31, 2002 3.25 to 1.00 Thereafter 3.00 to 1.00.
Notwithstanding anything to the contrary in any Loan Document, in the event that the Borrower shall complete, directly or through a Restricted Subsidiary, a permitted acquisition or disposition hereunder, or any Subsidiary is designated as an Unrestricted Subsidiary hereunder, the Leverage Ratio shall be determined thereafter, to the extent necessary, by computing such ratio on a pro forma basis as if, in the case of such acquisition or disposition, such acquisition or disposition, as the case may be, had been completed on the first day of the period of four consecutive fiscal quarters ending on the relevant dates indicated above occurring after the date of such acquisition or disposition, as the case may be, and as if, in the case of such designation, the relevant -61- 67 Subsidiary had been disposed of on the first day of the period of four consecutive fiscal quarters ending on the relevant dates indicated above occurring after the date of such designation. SECTION 6.10. Coverage Ratio. The Borrower will not permit the Coverage Ratio as of the last day of any fiscal quarter to be less than 3.00 to 1.00. SECTION 6.11. Amendments to Organizational Documents. The Borrower will not, and will not cause or permit any of the Restricted Subsidiaries to, enter into any amendment of any term or provision, or accept any consent or waiver with respect to any such provision, of its articles of incorporation, by-laws, or other organizational documents, as applicable, in any manner that is material and adverse to the Issuing Bank or the Lenders. SECTION 6.12. Capital Expenditures. The Borrower will not permit Capital Expenditures made or obligated to be made by the Borrower and the Restricted Subsidiaries to exceed (i) $124,000,000, in respect of the fiscal year 2000, (ii) $158,000,000, in respect of the fiscal year 2001, and (iii) $163,000,000, in respect of the fiscal year 2002. ARTICLE VII. Events of Default In case of the happening of any of the following events ("Events of Default"): (a) any representation or warranty made or deemed made by the Borrower or any of its Subsidiaries in, or in connection with, this Agreement or in any other Loan Document, or the borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or written information contained in any report, certificate, financial statement or other instrument prepared by the Borrower or any Subsidiary of the Borrower and furnished by the Borrower or any Subsidiary of the Borrower in connection with or pursuant to this Agreement or any other Loan Document, or in connection with any of the transactions contemplated to occur as of the Closing Date, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished; (b) default shall be made in the payment of any principal of any Loan or any reimbursement obligation in respect of any L/C Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (c) default shall be made in the payment of any interest on any Loan or on any reimbursement obligation in respect of any L/C Disbursement, or any Fee or any other amount (other than an amount referred to in paragraph (b) above) due under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days; -62- 68 (d) default shall be made in the due observance or performance by the Borrower or any Subsidiary of the Borrower of any covenant, condition or agreement contained in Sections 5.1(a), 5.5, 5.8 or 5.11 or in Article VI; (e) default shall be made in the due observance or performance by the Borrower or any Subsidiary of the Borrower of any covenant, condition or agreement contained in this Agreement (other than those specified in paragraph (b), (c) or (d) above) or in any other Loan Document and such default shall continue unremedied for a period of 15 days after notice thereof from the Administrative Agent or any Lender to the Borrower; (f) (i) the Borrower or any Restricted Subsidiary shall fail to pay or repurchase any principal or interest, regardless of amount, due in respect of any Indebtedness thereof in an aggregate principal amount in excess of $10,000,000, when and as the same shall become due and payable, or (ii) there shall occur any default with respect to any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness, which default is not cured or waived within any applicable cure or grace period, if the effect of any such default referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due, or otherwise obligate the Borrower or such Restricted Subsidiary to repurchase such Indebtedness, in each case prior to its stated maturity; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Borrower or any Restricted Subsidiary, or of a substantial part of the property or assets of the Borrower or any Restricted Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar Law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Restricted Subsidiary or for a substantial part of the property or assets of the Borrower or any Restricted Subsidiary or (iii) the winding-up or liquidation of any Restricted Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) the Borrower or any Restricted Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar Law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in paragraph (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Restricted Subsidiary, or for a substantial part of the property or assets of the Borrower or any Restricted Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; -63- 69 (i) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against the Borrower, any Restricted Subsidiary, or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any Restricted Subsidiary to enforce any such judgment; (j) an ERISA Event shall have occurred that, when taken together with all other such ERISA Events, could reasonably be expected to result in liability of the Borrower, any Restricted Subsidiary, or any combination thereof, in an aggregate amount exceeding $10,000,000; or (k) any of the following shall occur: (i) this Agreement, the Guarantee Agreement or any promissory note executed or delivered in connection with this Agreement (collectively, the "material agreements"), or any material provision of any thereof, shall, for any reason, not be valid and binding on any Obligor signatory thereto, or not be in full force and effect, or shall be declared to be null and void; or (ii) the validity or enforceability of any material agreement shall be contested by the Borrower, any Subsidiary of the Borrower, any other Obligor or any of their Affiliates; or (iii) any Obligor shall deny in writing that it has any or further liability or obligation under its respective material agreements; or (iv) any default or breach under any provision of any material agreement shall continue after the applicable grace period, if any, specified in such material agreement; then, and in every such event (other than an event with respect to the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take any one or more of the following actions, at the same or different times: (i) terminate forthwith the Revolving Loan Commitment, (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of each Obligor accrued hereunder and under the other Loan Documents (including the L/C Exposure and the Swingline Exposure), shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by each Obligor, anything contained in any Loan Document to the contrary notwithstanding or (iii) require cash collateral as contemplated by Section 2.21(j); and in any event with respect to the Borrower described in paragraph (g) or (h) above, the Revolving Loan Commitment shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest hereon and any unpaid accrued Fees and all other liabilities of each Obligor accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by each Obligor, anything contained herein to the contrary notwithstanding. Notwithstanding anything in this Agreement or in any other Loan Document to the contrary, to the extent any Default or Event of Default under paragraph (a), (d) or (e) above is due exclusively to the actions, inactions or misrepresentations with respect to any foreign Subsidiary -64- 70 of the Borrower, then such event shall not be a Default or Event of Default unless such event could also reasonably be expected to cause a Material Adverse Effect. ARTICLE VIII. The Administrative Agent In order to expedite the transactions contemplated by this Agreement and the other Loan Documents, The Bank of New York is hereby appointed to act as Administrative Agent on behalf of the Lenders and the Issuing Bank. Each of the Lenders, the Issuing Bank and each assignee of any Lender or the Issuing Bank hereby irrevocably authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are specifically delegated to the Administrative Agent by the terms and provisions hereof, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders and the Issuing Bank, without hereby limiting any implied authority, (a) except as otherwise specifically provided herein, to receive on behalf of the Lenders and the Issuing Bank all payments of principal of and interest on the Loans, all payments in respect of L/C Disbursements and all other amounts due to the Lenders and the Issuing Bank hereunder, and promptly to distribute to each Lender or the Issuing Bank its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders and the Issuing Bank to the Borrower or any other Obligor of any Event of Default specified in this Agreement and the other Loan Documents of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute to each Lender copies of all notices, financial statements and other materials delivered by the Borrower or any other Obligor pursuant to this Agreement and the other Loan Documents as received by the Administrative Agent. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his own gross negligence or willful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by the Borrower or any other Obligor of any of the terms, conditions, covenants or agreements contained herein or in any other Loan Document. The Administrative Agent shall not be responsible to the Lenders or the Issuing Bank for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement, the other Loan Documents or any other instruments or agreements. The Administrative Agent shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders and the Issuing Bank. The Administrative Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper Person or Persons. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall have any responsibility to the Borrower or any -65- 71 other Obligor on account of the failure of or delay in performance or breach by any Lender or the Issuing Bank of any of its obligations hereunder or to any Lender or the Issuing Bank on account of the failure of or delay in performance or breach by any other Lender or the Issuing Bank or the Borrower or any other Obligor of any of their respective obligations hereunder or under the other Loan Documents or in connection herewith or therewith. The Administrative Agent may execute any and all duties hereunder by or through agents or employees and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and under the other Loan Documents and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. The Lenders and the Issuing Bank hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by notifying the Lenders and the Borrower, and may be removed at any time with or without cause by the action of all Lenders (other than Administrative Agent, if it is a Lender). Upon any such resignation, the Required Lenders shall have the right to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. After the Administrative Agent's resignation or removal hereunder, the provisions of this Article and Section 9.5 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. With respect to the Loans made by it hereunder, the Administrative Agent in its individual capacity and not as Administrative Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not the Administrative Agent, and the Administrative Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary of the Borrower or other Affiliate thereof as if it were not Administrative Agent. Each Lender agrees (a) to reimburse the Administrative Agent, on demand, in the amount of its pro rata share (based on its Pro Rata Percentage of the Revolving Loan Commitment hereunder) of any expenses incurred for the benefit of the Lenders by the Administrative Agent, including reasonable counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, that shall not have been reimbursed by the Borrower and (b) to indemnify and hold harmless the Administrative Agent -66- 72 and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against it in its capacity as the Administrative Agent or any of them in any way relating to or arising out of this Agreement or any other Loan Document, or any action taken or omitted by it or any of them under this Agreement or any other Loan Document, to the extent the same shall not have been reimbursed by the Borrower; provided that no Lender shall be liable to the Administrative Agent or any such other indemnified Person for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of the Administrative Agent or such other indemnified Person. Each of the Lenders and the Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent, the Issuing Bank or any Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each of the Lenders and the Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent, the Issuing Bank or any Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement and the other Loan Documents, or any related agreement or any document furnished hereunder or thereunder. Notwithstanding anything in any Loan Document to the contrary, neither the Documentation Agents nor the Syndication Agent, in each case acting in such capacity, shall have any duty or obligation under the Loan Documents. ARTICLE IX. Miscellaneous SECTION 9.1. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at: On Command Corporation 6331 San Ignacio Avenue San Jose, California 95119 Attention: Mr. Paul Milley Telephone No.: (408) 360-4888 Telecopy No.: (408) 360-4747; With a copy to: -67- 73 Sherman & Howard L.L.C. 633 Seventeenth Street Denver, Colorado 80202 Attention: Steven D. Miller, Esq. Telephone No.: (303) 299-8144 Telecopy No.: (303) 298-0940 and; (b) if to the Administrative Agent or The Bank of New York, as Issuing Bank, to it at: The Bank of New York One Wall Street New York, New York 10286 Attention: Ms. Renee Dudley Telephone No.: (212) 635-4975 Telecopy No.: (212) 635-6365; and With a copy to: The Bank of New York One Wall Street New York, New York 10286 Attention: Mr. Stephen Nettler Telephone No.: (212) 635-8699 Telecopy No.: (212) 635-8593; and (c) if to either Documentation Agent, the Syndication Agent or a Lender, to the relevant institution at its address (or telecopy number) set forth on the signature pages hereto or, in the case of such Lender, in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement and the other Loan Documents shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.1 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.1. SECTION 9.2. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrower and the other Obligors herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement and the other Loan Documents shall be considered to have been relied upon by the Lenders and the Issuing Bank and shall survive the making by the Lenders of the Loans, and the issuance of Letters of Credit by the Issuing Bank, regardless of any investigation made by the Lenders or the Issuing Bank or on their behalf, and shall continue in - 68 - 74 full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Revolving Loan Commitment has not been terminated. The provisions of Sections 2.13, 2.15, 2.19 and 9.5 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby or by the other Loan Documents, the repayment of any of the Loans, the expiration of the Revolving Loan Commitment, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, any Lender or the Issuing Bank. SECTION 9.3. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. SECTION 9.4. Successors and Assigns. (a) Whenever in this Agreement or any other Loan Document any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party, and all covenants, promises and agreements by or on behalf of the Borrower, the Administrative Agent, the Issuing Bank or the Lenders that are contained in this Agreement and the other Loan Documents shall bind and inure to the benefit of their respective successors and assigns. (b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Pro Rata Percentage of the Revolving Loan Commitment and the Loans at the time owing to it); provided, however, that (i) except in the case of an assignment to a Lender or an Affiliate of such Lender, (A) the Borrower and the Administrative Agent (and, in the case of any assignment of a portion of the Revolving Loan Commitment, the Issuing Bank and the Swingline Lender) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld; provided, however, that the Borrower's consent shall not be required during the continuance of an Event of Default), (B) the amount of the Revolving Loan Commitment allocated to the assigning Lender that is subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to which such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (or, if less, the entire remaining amount of such Lender's Pro Rata Percentage of the Revolving Loan Commitment) and will not result in the unassigned portion, if any, of the assigning Lender's Pro Rata Percentage of the Revolving Loan Commitment being less than $5,000,000 (provided, however, that the $5,000,000 amounts referred to in this clause (i) shall be reduced ratably in accordance with any reductions in the Revolving Loan Commitment), and (C) each partial assignment shall be made as an assignment of a proportionate part (as provided in clause (i)(B) above) of all of the assigning Lender's rights and obligations under the Loan Documents, (ii) the - 69 - 75 parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (iii) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.4, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (x) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and the other Loan Documents and (y) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement and the other Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement and the other Loan Documents, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.5, as well as to any Fees accrued for its account and not yet paid). The Borrower shall, at its expense, issue to the assignor and assignee new promissory notes, as applicable, in the respective amounts of each such Lender's Pro Rata Percentage in the Loans, each in the form of the promissory notes delivered by the Borrower on the Closing Date. (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Pro Rata Percentage of the Revolving Loan Commitment, and the outstanding balances of its Revolving Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document, or any other instrument or document furnished pursuant hereto or thereto, or the financial condition of the Borrower or any Subsidiary of the Borrower or the performance or observance by the Borrower or any Subsidiary of the Borrower of any of its obligations under this Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in Section 3.5 or delivered pursuant to Section 5.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender, the Issuing Bank or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof and of the other - 70 - 76 Loan Documents, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement and the other Loan Documents are required to be performed by it as a Lender. (d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at its offices in New York, New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Pro Rata Percentage of the Revolving Loan Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Agent Register"). The entries in the Agent Register shall be conclusive and the Borrower, the other Obligors, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Agent Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement and the other Loan Documents, notwithstanding notice to the contrary. The Agent Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Borrower, the Issuing Bank, the Swingline Lender and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Agent Register and (iii) give prompt notice thereof to the Lenders and the Issuing Bank. No assignment shall be effective unless it has been recorded in the Agent Register as provided in this paragraph (e). (f) Each Lender may, without the consent of the Borrower, the Issuing Bank, the Swingline Lender or the Administrative Agent, sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Pro Rata Percentage of the Revolving Loan Commitment and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other entities shall be entitled to the benefit of the cost protection provisions contained in Sections 2.13, 2.15 and 2.19 to the same extent as if they were Lenders and (iv) the Borrower, the Administrative Agent, the Issuing Bank and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents, and such Lender shall retain the sole right to enforce the obligations of the Borrower and the other Obligors relating to the Loans, the L/C Exposure or the Swingline Exposure and to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents (other than amendments, modifications or waivers decreasing any fees payable hereunder or the amount - 71 - 77 of principal of or the rate at which interest is payable on the Loans, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans or increasing or extending the Revolving Loan Commitment). (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.4, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower or any Subsidiary of the Borrower furnished to such Lender by or on behalf of the Borrower or such Subsidiary; provided that, prior to any such disclosure of information designated by the Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 9.15. (h) Any Lender may at any time assign all or any portion of its rights under this Agreement and the other Loan Documents to a Federal Reserve Bank to secure extensions of credit by such Federal Reserve Bank to such Lender; provided that no such assignment shall release a Lender from any of its obligations hereunder or under the other Loan Documents or substitute any such Federal Reserve Bank for such Lender as a party hereto. In order to facilitate such an assignment to a Federal Reserve Bank, the Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to the Borrower by the assigning Lender hereunder. (i) Neither the Borrower nor any other Obligor shall assign or delegate any of its rights or duties hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, the Issuing Bank and each Lender, and any attempted assignment without such consent shall be null and void. SECTION 9.5. Expenses; Indemnity. (a) The Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Swingline Lender and the Issuing Bank in connection with the syndication of the credit facilities provided for herein and the preparation and administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or of any other Loan Document (whether or not the transactions hereby or thereby contemplated shall be consummated) or incurred by the Administrative Agent, the Issuing Bank or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents, or in connection with the Loans made or Letters of Credit issued hereunder, including the reasonable fees, charges and disbursements of Bryan Cave LLP, counsel for the Administrative Agent, and, in connection with any such enforcement or protection, the fees, charges and disbursements of any other counsel for the Administrative Agent, the Issuing Bank or any Lender. (b) The Borrower agrees to indemnify the Administrative Agent, each Lender, the Issuing Bank, each Affiliate of any of the foregoing Persons and each of their respective - 72 - 78 directors, officers, employees and agents (each such Person being called an "indemnitee") against, and to hold each indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement and the other Loan Documents or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto or thereto of their respective obligations hereunder or thereunder or the consummation of the Transactions and the other transactions contemplated hereby or thereby, (ii) the use of the proceeds of the Loans or the issuance of the Letters of Credit, or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any indemnitee is a party thereto; provided that such indemnity shall not, as to any indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of, or breach of contract by, such indemnitee. (c) The provisions of this Section 9.5 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the other Loan Documents, the consummation of the transactions contemplated hereby or thereby, the repayment of any of the Loans, the expiration of the Revolving Loan Commitment, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, any Lender or the Issuing Bank. All amounts due under this Section 9.5 shall be payable on written demand therefor. SECTION 9.6. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower or any other Obligor against any of and all the obligations of the Borrower or any other Obligor now or hereafter existing under this Agreement and the other Loan Documents held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 9.6 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.7. Governing Law; Jurisdiction; Consent to Service of Process (a) This Agreement and the other Loan Documents shall be governed by, and construed in accordance with, the laws of the State of New York, except that each Letter of Credit shall be governed by, and construed in accordance with, the laws or rules designated therein. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of any New York State court or Federal court - 73 - 79 of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Credit Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that, to the extent permitted by Applicable Law, all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by Applicable Law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or any other Obligor, or any of their respective properties or assets, in the courts of any jurisdiction. (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each of the parties hereto irrevocably consents to service of process in the manner provided for notices in Section 9.1. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Law. SECTION 9.8. Waivers; Amendment. (a) No failure or delay of the Administrative Agent, any Lender or the Issuing Bank in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document, or consent to any departure by the Borrower or any other Obligor therefrom, shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or the issuance, amendment, extension or renewal of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time. No notice or demand on the Borrower or any other Obligor in any case shall entitle the Borrower or any other Obligor to any other or further notice or demand in similar or other circumstances. - 74 - 80 (b) Neither this Agreement, any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan or date for the payment of any reimbursement obligation in respect of an L/C Disbursement, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan or on any reimbursement obligation in respect of an L/C Disbursement, without the prior written consent of each Lender affected thereby, (ii) change or extend the Revolving Loan Commitment of any Lender, or decrease the Facility Fees of such Lender, without the prior written consent of such Lender, (iii) amend or modify the provisions of Section 2.16, the provisions of this Section or the definition of the term "Required Lenders", without the prior written consent of each Lender, (iv) change any provision hereof in a manner that would alter the pro rata sharing of payments required by any Loan Document, without the prior written consent of each Lender affected thereby, (v) change the several nature of the obligations of the Lenders, without the prior written consent of each Lender, or (vi) release any Subsidiary of the Borrower from its Guarantee under the Guarantee Agreement (except as expressly provided in the Loan Documents), or limit its liability in respect of such Guarantee, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Bank or the Swingline Lender hereunder without the prior written consent of the Administrative Agent, the Issuing Bank or the Swingline Lender, as applicable. SECTION 9.9. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under Applicable Law (collectively, the "charges"), shall exceed the maximum lawful rate (the "maximum rate") that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all of the charges payable in respect thereof, shall be limited to the maximum rate and, to the extent lawful, the interest and the charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated, and the interest and the charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the maximum rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 9.10. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. - 75 - 81 SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11. SECTION 9.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 9.13. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 9.3. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. SECTION 9.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.15. Confidentiality. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to keep confidential and to use its best efforts to cause its respective agents and representatives to keep confidential in accordance with its customary procedures for handling confidential information the information (as defined below) and all copies thereof, extracts therefrom and analyses or other materials based thereon, except that the Administrative Agent, the Issuing Bank or any Lender shall be permitted to disclose information (a) to such of its respective officers, directors, employees, agents, affiliates and representatives as need to know such information, (b) to the extent requested by any regulatory authority, (c) to the extent otherwise required by applicable laws and regulations or by any subpoena or similar legal process, (d) in connection with any suit, action or proceeding relating to the enforcement of its rights hereunder, (e) subject to an agreement containing provisions substantially the same as - 76 - 82 those of this Section, to any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under the Loan Documents, or (f) to the extent such information (i) becomes publicly available other than as a result of a breach of this Section 9.15 or (ii) becomes available to the Administrative Agent the Issuing Bank or any Lender on a non-confidential basis from a source other than the Borrower. For the purposes of this Section, "information" shall mean all financial statements, certificates, reports, agreements and information (including all analyses, compilations and studies prepared by the Administrative Agent, the Issuing Bank or any Lender based on any of the foregoing) that are received from the Borrower and related to the Borrower, any shareholder of the Borrower or any employee, customer or supplier of the Borrower, other than any of the foregoing that were available to the Administrative Agent, the Issuing Bank or any Lender on a non-confidential basis prior to its disclosure thereto by the Borrower, and which are, in the case of information provided after the date hereof, clearly identified, in good faith, at the time of delivery as confidential. The provisions of this Section 9.15 shall remain operative and in full force and effect regardless of the expiration and term of this Agreement. - 77 - 83 ON COMMAND CREDIT AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BORROWER: ON COMMAND CORPORATION By: Its: 84 ON COMMAND CREDIT AGREEMENT ADMINISTRATIVE AGENT AND ISSUING BANK: THE BANK OF NEW YORK By: Its: 85 ON COMMAND CREDIT AGREEMENT LENDER AND SWINGLINE LENDER: THE BANK OF NEW YORK COMPANY, INC. Address: One Wall Street By: New York, New York 10286 Its: Attention: Mr. Stephen Nettler Telephone: (212) 635-8699 Telecopy: (212) 635-8593 86 ON COMMAND CREDIT AGREEMENT DOCUMENTATION AGENT AND LENDER: TORONTO DOMINION (TEXAS), INC. Address: 909 Fannin Street Suite 1700 By: Houston, Texas 77010 Its: Attn: Ms. Ann Slanis Telephone: (713) 427-8522 Telecopy: (713) 951-9921 87 ON COMMAND CREDIT AGREEMENT DOCUMENTATION AGENT AND LENDER: FLEET NATIONAL BANK Address: One Federal Street By: MA DE 10303H Its: Boston, Massachusetts 02110 Attn: Ms. Sue Anderson Telephone: (617) 346-4356 Telecopy: (617) 346-4346 88 ON COMMAND CREDIT AGREEMENT SYNDICATION AGENT AND LENDER: BANK OF AMERICA, N.A. Address: 555 South Flower Street By: 11th Floor Its: Los Angeles, California 90071 Mail Code: CA 9-706-11-01 Attn: Ms. Vanessa Meyer Telephone: (213) 228-9737 Telecopy: (213) 228-2641 89 ON COMMAND CREDIT AGREEMENT LENDER: THE INDUSTRIAL BANK OF JAPAN, LIMITED Address: 1251 Avenue of the Americas By: 31st Floor Its: Credit Administration Department New York, New York 10020-1104 Attn: Mr. Nelson Rojas Telephone: (212) 282-4064 Telecopy: (212) 282-4480 with a copy to: IBJ Los Angeles Agency 350 S. Grand Avenue Suite 1500 Los Angeles, California 90071 Attn: Ms. Joan Farrell Telephone: (213) 893-6443 Telecopy: (213) 488-9840 90 ON COMMAND CREDIT AGREEMENT LENDER: U.S. BANK NATIONAL ASSOCIATION Address: 918 Seventeenth Street By: CNBB0211 Its: Denver, Colorado 80202 Attn: Ms. Melissa Forbes Telephone: (303) 585-4202 Telecopy: (303) 585-4135 91 ON COMMAND CREDIT AGREEMENT LENDER: SUMMIT BANK Address: 502 Carnegie Center By: Princeton, New Jersey 08543 Its: Attn: Mr. Michael Cerullo Telephone: (609) 627-7812 Telecopy: (609) 799-9262 92 ON COMMAND CREDIT AGREEMENT LENDER: BNP PARIBAS Address: 919 Third Avenue By: 3rd Floor Its: New York, New York 10022 Attn: Ms. Nuala Marley Telephone: (212) 415-9726 Telecopy: (212) 415-9606 By: Its: EX-10.17 4 y48339a1ex10-17.txt AMENDMENT #1 TO THE CREDIT AGREEMENT 1 EXHIBIT 10.17 ON COMMAND CORPORATION AMENDMENT NO. 1 AMENDMENT NO. 1 (this "Amendment"), dated as of March 27, 2001, to the Credit Agreement, dated as of July 18, 2000, by and among ON COMMAND CORPORATION, a Delaware corporation (the "Borrower"), the Lenders party thereto, TORONTO DOMINION (TEXAS), INC. and FLEET NATIONAL BANK, as the Documentation Agents, BANK OF AMERICA, N.A., as the Syndication Agent, THE BANK OF NEW YORK COMPANY, INC., as the Swingline Lender, and THE BANK OF NEW YORK, as the Issuing Bank and as the Administrative Agent for the Lenders thereunder (the "Credit Agreement"). RECITALS I. Except as otherwise provided herein, capitalized terms used herein that are not defined herein shall have the meanings set forth in the Credit Agreement. II. The parties hereto wish to amend and restate the Credit Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the covenants, conditions and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and pursuant to Section 9.8 of the Credit Agreement, the parties hereto hereby agree as follows: 1. The Credit Agreement is hereby amended and restated in its entirety so as to read as presently set forth therein with the following exceptions: 2. Section 1.1 of the Credit Agreement is amended to add the following defined terms in the appropriate alphabetical order: "Ascent Indenture" shall mean the Indenture, dated as of December 22, 1997, between Ascent Entertainment Group, Inc. and The Bank of New York, as Trustee, as the same may be amended, supplemented or otherwise modified from time to time. "Change in Control" shall mean the occurrence of any of the following: (a) the failure of Liberty Media Corporation, at all times, to own, directly or indirectly, at least 25% of the issued and outstanding 2 Capital Stock of the Borrower and (ii) at least 25% of the issued and outstanding Voting Securities of the Borrower, or (b) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), other than Liberty Media Corporation or its Subsidiaries, of shares representing more than the percentage owned, directly or indirectly, at such time by Liberty Media Corporation or Affiliates of Liberty Media Corporation) of the issued and outstanding Capital Stock or Voting Securities of the Borrower. "Collateral" shall have the meaning assigned to such term in the Security Agreement. "Foreign CFC Subsidiary" shall mean a Subsidiary of the Borrower which is a "controlled foreign corporation" within the meaning of Section 957 of the Code. "Leverage Ratio Reduction Event" shall have the meaning assigned to such term in Section 6.9. "MagiNet Settlement Agreement" shall mean the Settlement Agreement and Release, dated as of March 1, 2001, among On Command Video Corporation, the Borrower, MagiNet Corporation, MagiNet International Inc. and Anthony J. Trepel. "Security Agreement" shall mean the Security Agreement, substantially in the form of Exhibit D, by and among the Borrower, the Restricted Subsidiaries of the Borrower and the Administrative Agent, as the same may be amended, supplemented, modified, substituted, increased, replaced or extended from time to time. "Voting Securities" shall mean any class of Capital Stock of the Borrower or any Subsidiary of the Borrower, as applicable, pursuant to which the holders thereof have the general voting power under ordinary circumstances to vote for the election of directors (irrespective of whether or not at the time any other class will have or might have voting power by reason of the occurrence of any contingency). -2- 3 3. Section 1.1 of the Credit Agreement is amended to amend and restate the defined term "Applicable Margin" in its entirety, effective for the period from and after April 1, 2000, to read as follows: "Applicable Margin" shall mean, for any day, with respect to any Eurodollar Loan or any ABR Loan, the percentage set forth below under the caption "Eurodollar Margin" or "ABR Margin", as the case may be, based upon the Leverage Ratio, then in effect for purposes hereof:
Leverage Ratio Eurodollar Margin ABR Margin -------------- ----------------- ---------- Category 1 Greater than or equal to 4.00 to 1.00 2.250% 1.250% Category 2 Greater than or equal to 3.50 to 1.00 but 2.000% 1.000% less than 4.00 to 1.00 Category 3 Greater than or equal to 3.00 to 1.00 but 1.950% 0.950% less than 3.50 to 1.00 Category 4 Greater than or equal to 2.50 to 1.00 but 1.750% 0.750% less than 3.00 to 1.00 Category 5 Greater than or equal to 2.00 to 1.00 but 1.550% 0.550% less than 2.50 to 1.00 Category 6 Greater than or equal to 1.00 to 1.00 but 1.325% 0.325% less than 2.00 to 1.00 Category 7 Less than 1.00 to 1.00 1.100% 0.100%.
-3- 4 Except as set forth below, the Leverage Ratio utilized for purposes of determining the Applicable Margin shall be that in effect as of the last day of the most recent fiscal quarter of the Borrower in respect of which financial statements have been delivered pursuant to this Agreement. The Applicable Margin from time to time in effect shall be based on the Leverage Ratio from time to time in effect, and each change in the Applicable Margin resulting from a change in (or the initial establishment of) the Leverage Ratio shall be effective with respect to all Loans, the Revolving Loan Commitment and Letters of Credit outstanding on and after the date of delivery to the Administrative Agent of the financial statements and certificates required by Section 5.4(a) or (b) indicating such change to and including the date immediately preceding the next date of delivery of such financial statements and certificates indicating another such change. Notwithstanding the foregoing, (i) at all times during the period commencing on April 1, 2001 and ending on September 30, 2001, the Leverage Ratio shall be deemed to be no higher than in Category 2 above (accordingly, Categories 3-7 shall not be available during such period) and (ii) at all times during which the Borrower has failed to deliver the financial statements and certificates required by Section 5.4(a) or (b) and at all times after the occurrence and during the continuance of an Event of Default, the Leverage Ratio shall, in each case, be deemed to be in Category 1 above. 4. Section 1.1 of the Credit Agreement is amended by amending the defined term "EBITDA" (i) to delete the word "and" immediately preceding clause (f) thereof and (ii) to amend and restate clause (f) in its entirety and to add new clauses (g) and (h) thereof to read as follows: (f) expenses incurred during the fiscal years ending December 31, 2000 and December 31, 2001 in connection with the relocation of the Borrower's executive offices to the Denver, Colorado metropolitan area in a maximum aggregate amount of $16,100,000, (g) legal expenses incurred on or prior to December 31, 2000 with respect to the MagiNet settlement in an aggregate amount not exceeding $1,500,000, and (h) legal expenses -4- 5 incurred during the fiscal year ending December 31, 2001 with respect to the MagiNet settlement in an aggregate amount not exceeding $500,000. 5. Section 1.1 of the Credit Agreement is amended by amending the defined term "Loan Documents" to add the following immediately after the words "the Guarantee Agreement,": "the Security Agreement,". 6. Section 1.1 of the Credit Agreement is amended by amending the defined term "Revolving Loan Commitment" to reduce the amount $350,000,000 set forth therein to $320,000,000. 7. Section 1.1 of the Credit Agreement is amended by amending the defined term "Unrestricted Subsidiaries" to replace "25%" contained in clause (b)(ii) thereof with "10%". 8. Section 2.6(b) of the Credit Agreement is amended and restated in its entirety, effective for the period from and after April 1, 2001, to read as follows: (b) Subject to Section 9.9, on the last day of March, June, September and December of each year on and until the date on which the Revolving Loan Commitment shall be terminated as provided herein, the Borrower shall pay, in arrears, to the Administrative Agent, for the account of the Lenders, facility fees (the "Facility Fees") on the average daily amount of the Revolving Loan Commitment at a per annum rate (the "facility fee rate") based on the Leverage Ratio for the most recently completed full fiscal quarter as set forth below:
Leverage Ratio Facility Fee Rate -------------- ----------------- Category 1 Greater than or equal to 4.00 to 1.00 0.500% Category 2 Greater than or equal to 3.50 to 1.00 but 0.500% less than 4.00 to 1.00 Category 3 Greater than or equal to 3.00 to 1.00 but 0.300% less than 3.50 to 1.00
-5- 6
Leverage Ratio Facility Fee Rate Category 4 Greater than or equal to 2.50 to 1.00 but 0.250% less than 3.00 to 1.00 Category 5 Greater than or equal to 2.00 to 1.00 but 0.200% less than 2.50 to 1.00 Category 6 Greater than or equal to 1.00 to 1.00 but 0.175% less than 2.00 to 1.00 Category 7 Less than 1.00 to 1.00 0.150%
Except as set forth below, the Leverage Ratio utilized for purposes of determining the facility fee rate shall be that in effect as of the last day of the most recent fiscal quarter of the Borrower in respect of which financial statements have been delivered pursuant to this Agreement. The facility fee rate from time to time in effect shall be based on the Leverage Ratio from time to time in effect, and each change in the facility fee rate resulting from a change in (or the initial establishment of) the Leverage Ratio shall be effective with respect to the facility fee rate outstanding on and after the date of delivery to the Administrative Agent of the financial statements and certificates required by Section 5.4(a) or (b) indicating such change to and including the date immediately preceding the next date of delivery of such financial statements and certificates indicating another such change. Notwithstanding the foregoing, (i) at all times during the period commencing on April 1, 2001 and ending on September 30, 2001, the Leverage Ratio shall be deemed to be no higher than in Category 2 above (accordingly, Categories 3-7 shall not be available during such period) and (ii) at all times during which the Borrower has failed to deliver the financial statements and certificates required by Section 5.4(a) or (b) and at all times after the occurrence and during the continuance of an Event of Default, the Leverage Ratio shall, in each case, be deemed to be -6- 7 in Category 1 above. Subject to Section 9.9 and Applicable Law, all Facility Fees shall be computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as applicable. 9. Section 2.10 of the Credit Agreement is amended to re-letter subsection (e) as subsection (f) and to add a new subsection (e) to read as follows: (e) Revolving Loan Commitment Reductions Due to Canadian Indebtedness. The Revolving Loan Commitment shall be automatically and permanently reduced by an amount equal to the dollar equivalent of the principal amount of Indebtedness incurred, created or assumed (or if such Indebtedness is in the nature of a revolving credit, line of credit, delayed draw down or similar facility, the aggregate principal amount of the commitment to extend such Indebtedness, whether or not drawn) under Section 6.1(e), such reduction to be effective upon the incurrence, creation or assumption of (or the effective date of such commitment to extend) such Indebtedness. 10. Section 2.22 of the Credit Agreement is amended to delete the phrase: "the date that is one year after the Closing Date" appearing in the first sentence thereof and to replace it with the following: "January 18, 2005". 11. Section 5.11 of the Credit Agreement is amended to (i) replace "100%" with "75%""no less than 75%, in the case of each domestic Subsidiary, and 51%, in the case of each foreign Subsidiary," in Section 5.11(a) and (ii) amend and restate Section 5.11(b) in its entirety Section 5.11(b) and add a new Section 5.11(c) to read as follows: (b) If any Subsidiary of the Borrower is formed or acquired after the Closing Date, notify the Administrative Agent and the Lenders in writing thereof within ten Business Days after the date on which such Subsidiary is formed or acquired and cause such Subsidiary (other than a Foreign CFC Subsidiary) to execute and deliver the Guarantee Agreement (or otherwise become a party thereto in the manner provided therein) within ten Business Days after the date on which such Subsidiary is formed or acquired. Section 5.11 of the Credit Agreement is amended to add a new subsection (c) at the end thereof to read as follows:(c) If any Restricted Subsidiary of the Borrower is formed or acquired after March 27, 2001, notify the Administrative Agent and the Lenders in writing thereof within ten Business Days after the date on which such Restricted Subsidiary is formed or acquired and (i) cause such Restricted Subsidiary (other than a Foreign CFC Subsidiary) to (a) execute and -7- 8 deliver the Security Agreement (or otherwise become a party thereto in the manner provided therein) within ten Business Days after the date on which such Restricted Subsidiary is formed or acquired and (b) promptly take such actions to create and perfect Liens on such Restricted Subsidiary's assets constituting Collateral to secure the Obligations as the Administrative Agent shall reasonably request and (ii) if any equity securities issued by such Restricted Subsidiary are owned or held by or on behalf of the Borrower or any other Restricted Subsidiary, the Borrower will cause such equity securities (in the case of a Foreign CFC Subsidiary, the Maximum Percentage (as defined in the Security Agreement) of such equity securities) to be pledged pursuant to the Security Agreement within ten Business Days after the date on which such Restricted Subsidiary is formed or acquired. 12. The Required Lenders hereby waive any Default or Event of Default that may have arisen under Section 5.11 of the Credit Agreement prior to the effectiveness of this Amendment as a result of the failure of the Borrower to (i) own 100% of the ordinary voting power of Hotel Digital Network, Inc. or any foreign Subsidiary or (ii) notify the Administrative Agent and the Lenders of the acquisition of Hotel Digital Network, Inc. and cause Hotel Digital Network, Inc. to execute and deliver the Guarantee, in each case within the time period required by Section 5.11(b). 13. Section 6.1 of the Credit Agreement is amended and restated in its entirety to read as follows: SECTION 6.1. Indebtedness of the Borrower and the Restricted Subsidiaries. The Borrower will not, and will not cause or permit any of the Restricted Subsidiaries to, issue any Preferred Stock, or to issue, incur, create, assume or permit to exist any Indebtedness, except: (a) so long as there exists no Default or Event of Default immediately prior to and after giving effect to the incurrence of any such Indebtedness or the issuance of any such Preferred Stock, the Borrower may incur, create, assume or permit to exist unsecured Indebtedness or issue Preferred Stock; (b) Indebtedness of the Borrower or any Restricted Subsidiary for borrowed money, and Preferred Stock issued by the Borrower or any Restricted Subsidiary, in each case existing on the date hereof and set forth in Schedule 6.1, but not any extensions, renewals or replacements of such Indebtedness, and Indebtedness under the Existing Credit Documents (provided that such Indebtedness is fully repaid on or before the Closing Date); -8- 9 (c) Indebtedness of any Restricted Subsidiary owed to the Borrower or to a Wholly-Owned Subsidiary of the Borrower that is also a Restricted Subsidiary, provided that such Indebtedness does not otherwise violate any provision of this Agreement or any other Loan Document; (d) so long as there exists no Default or Event of Default immediately prior to and after giving effect to its incurrence, Indebtedness of the Borrower and its Restricted Subsidiaries incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof, provided that (A) such Indebtedness is incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement, (B) the aggregate principal amount of Indebtedness permitted by this Section 6.1(d) shall not, without duplication, exceed $50,000,000 outstanding at any one time; and (e) so long as there exists no Default or Event of Default immediately prior to and after giving effect to its incurrence, Indebtedness of On Command Canada, Inc. which Indebtedness may be guarantied by the Borrower and the Guarantors, up to an aggregate maximum amount outstanding at any one time for all such Indebtedness of the Canadian equivalent of $20,000,000. 14. Section 6.2 of the Credit Agreement is amended to amend and restate subsections (h) and (i) thereof in their entirety and add the following new subsections (j) and (k) at the end thereof to read as follows: (h) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Restricted Subsidiary, provided that (i) such Lien secures Indebtedness permitted by Section 6.1(d), (ii) such Liens and the Indebtedness secured thereby are incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Borrower or any Restricted Subsidiary; (i) Liens on the Capital Stock of any Unrestricted Subsidiary, provided that the Indebtedness or other obligations or liabilities secured -9- 10 thereby shall be without recourse to the Borrower or any Restricted Subsidiary, or any of its assets or property (other than such Capital Stock), except as would otherwise be permitted under this Section; (j) Liens granted pursuant to the Security Agreement; and (k) Liens granted to the holders of the Indebtedness described in Section 6.1(e), which Liens (if on all or a portion of the Collateral) may be pari passu with (but not prior to) the Liens on such Collateral granted to the Administrative Agent pursuant to the Security Agreement, provided that the Administrative Agent and the holders of such Indebtedness (or their representative) have executed and delivered an intercreditor agreement in all respects satisfactory to the Administrative Agent. 15. Section 6.5(b) of the Credit Agreement is amended to delete the words "and (iv)" and to insert the following in their place: (iv) the Borrower may transfer On Command Hong Kong Ltd., On Command Australia Pty. Ltd., OCV Singapore PTE Ltd. (including the Korean branch) and On Command (Thailand) Ltd. to MagiNet Corporation or one or more of its Subsidiaries pursuant to and in accordance with the terms of the MagiNet Settlement Agreement, and (v). 16. Section 6.6 of the Credit Agreement is amended to (i) substitute the date "January 1, 2004" for the date "January 1, 2003" in clauses (c) and (d) thereof, (ii) delete the word "and" immediately before clause (d), and (iii) to add a new clause (e) at the end of Section 6.6 to read as follows: and (e) if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing, the Borrower may redeem its Cumulative Redeemable Preferred Stock, Series B, issued pursuant to the Certificate of Designations adopted March 5, 2001 for an aggregate consideration of up to $15,000,000. For the purpose of determining compliance with this Section 6.6, in the event that a Restricted Payment meets the criteria of more than one of the clauses set forth above, the Borrower, in its discretion, may classify such Restricted Payment or any portion thereof under a specific clause and only be required to include such amount in such clause. 17. Section 6.8 of the Credit Agreement is amended to amend and restate clause (c) thereof to read as follows: (c) the payment of dividends and distributions by any Subsidiary of the Borrower. -10- 11 18. Section 6.9 of the Credit Agreement is amended and restated in its entirety to read as follows: 19. SECTION 6.9 Leverage Ratio. The Borrower will not permit the Leverage Ratio as of the last day of any fiscal quarter ending during any period set forth below to be more than the ratio set forth below for such period:
Quarter Ending Ratio -------------- ----- January 1, 2001 through March 30, 2002 4.25 to 1.00 March 31, 2002 through December 31, 2002 4.00 to 1.00 January 1, 2003 through December 31, 2003 3.50 to 1.00 Thereafter 3.00 to 1.00
provided that if at any time the Capital Expenditures made or obligated to be made by the Borrower and the Restricted Subsidiaries in respect of either fiscal year 2001 or 2002 shall exceed $125,000,000 plus 100% of the net cash proceeds received by the Borrower from its issuance of Capital Stock during such fiscal year (a "Leverage Ratio Reduction Event"), the required Leverage Ratio for the applicable period set forth above during which such Leverage Ratio Reduction Event shall have occurred (and thereafter for each applicable period set forth above during which the required Leverage Ratio is greater than 3.50:1.00) shall automatically be reduced to 3.50:1.00, such reduction to be effective upon the occurrence of such Leverage Ratio Reduction Event. Notwithstanding anything to the contrary in any Loan Document, in the event that the Borrower shall complete, directly or through a Restricted Subsidiary, a permitted acquisition or disposition hereunder, or any Subsidiary is designated as an Unrestricted Subsidiary hereunder, the Leverage Ratio shall be determined thereafter, to the extent necessary, by computing such ratio on a pro forma basis as if (i) in the case of such acquisition or disposition, such acquisition or disposition, as the case may be, had been completed on the first day of the period of four consecutive fiscal quarters ending on the relevant dates indicated above occurring after the date of such acquisition or disposition, as the case may be, and (ii) in the case of such designation, the relevant Subsidiary had been disposed of on the first day of the period of four consecutive fiscal quarters ending on -11- 12 the relevant dates indicated above occurring after the date of such designation. 20. Section 6.12 of the Credit Agreement is amended and restated in its entirety to read as follows: SECTION 6.12. Capital Expenditures. The Borrower will not permit Capital Expenditures made or obligated to be made by the Borrower and the Restricted Subsidiaries to exceed: (i) $124,000,000 in respect of the fiscal year 2000, (ii) $125,000,000 ($158,000,000 in the event a Leverage Ratio Reduction Event shall have occurred) in respect of the fiscal year 2001 plus 100% of the net cash proceeds received by the Borrower from its issuance of Capital Stock during such fiscal year, (iii) $125,000,000 ($163,000,000 in the event a Leverage Ratio Reduction Event shall have occurred) in respect of the fiscal year 2002 plus 100% of the net cash proceeds received by the Borrower from its issuance of Capital Stock during such fiscal year, and (iv) $125,000,000 ($150,000,000 in the event a Leverage Ratio Reduction Event shall have occurred) in respect of the fiscal year 2003 plus 100% of the net cash proceeds received by the Borrower from its issuance of Capital Stock during such fiscal year; provided that the Borrower shall not permit Capital Expenditures made or obligated to be made by the Borrower and the Restricted Subsidiaries in respect of fiscal year 2001, 2002, or 2003 to exceed $125,000,000 plus 100% of the net cash proceeds received by the Borrower from its issuance of Capital Stock during such fiscal year if, immediately before or after giving effect thereto, the Leverage Ratio shall be greater than 3.50:1.00. Notwithstanding the foregoing, Capital Expenditures of the Borrower and the Restricted Subsidiaries may exceed the applicable amounts set forth above to the extent the excess is financed with the net cash proceeds of Capital Stock issued by the Borrower and provided that no Default or Event of Default shall exist immediately before or after giving effect thereto. 21. Article VII of the Credit Agreement is amended to delete the word "or" appearing at the end of subsection (j) thereof and to add the following new subsections (l), (m) and (n) at the end thereof to read as follows: -12- 13 (l) any Lien purported to be created under the Security Agreement shall cease to be, or shall be asserted by any Obligor not to be, a valid and perfected Lien on any Collateral, with the priority required by the Security Agreement (except (i) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under this Agreement or (ii) as a result of the Administrative Agent's failure to maintain possession of any stock certificates delivered to it under the Security Agreement) or any foreclosure, distraint, sale or similar proceedings have been commenced with respect to any Collateral; (m) (i) the occurrence of a Default or Event of Default under and as defined in the Ascent Indenture or in any agreement or indenture refinancing or replacing the Ascent Indenture or (ii) if for any reason the Indebtedness evidenced by the Ascent Indenture has not, prior to September 15, 2004, either (x) been repaid in full or (y) refinanced in full pursuant to an agreement or indenture providing for a maturity date later than October 18, 2005 and no required amortization, sinking fund, redemption, purchase or other principal payments (other than as a result of change of control) prior to such date; or (n) a Change in Control shall have occurred; 22. Article VII of the Credit Agreement is amended by amending clause (i) of subsection (k) thereof to add the following immediately after the words "the Guarantee Agreement": ", the Security Agreement,". 23. Section 9.1(a) of the Credit Agreement is amended and restated in its entirety to read as follows: (a) if to the Borrower, to it at: On Command Corporation 7900 East Union Avenue Denver, Colorado 80237 Attention: Kathryn Hale Telephone No.: (720) 873-3350 Telecopy No.: (720) 873-3393; With a copy to: -13- 14 Sherman & Howard L.L.C. 633 Seventeenth Street Denver, Colorado 80202 Attention: Steven D. Miller, Esq. Telephone No.: (303) 299-8144 Telecopy No.: (303) 298-0940 and; 24. Section 9.8(b) of the Credit Agreement is amended to delete the word "or" immediately before clause (vi) thereof and to add the following immediately after the phrase "or limit its liability in respect of such Guarantee": or (vii) release any Collateral from the Lien of the Security Agreement (except as expressly provided in the Security Agreement or in connection with a transaction permitted pursuant to Section 6.5(b)). 25. The Credit Agreement is amended to add a new Exhibit D in the form attached hereto. 26. The Borrower hereby agrees to deliver to the Administrative Agent on or before April 30, 2001 (i) a revised Schedule 3.8 to the Credit Agreement reflecting each Subsidiary of the Borrower and the owner and ownership interest of such owner in such Subsidiary and (ii) all instruments and certificates representing shares of equity interests owned by or on behalf of the Borrower or any Restricted Subsidiary in any foreign Subsidiary constituting Collateral together with endorsements, instruments of transfer and stock powers, endorsed in blank, with respect to such instruments and certificates. Failure to deliver such documents on or before April 30, 2001 shall constitute an Event of Default. 27. Paragraphs 1-26 of this Amendment shall not become effective until: (a) the Total Exposure shall not exceed the Revolving Loan Commitment as reduced pursuant to this Amendment; (b) the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrower, the Guarantors, the Administrative Agent and the Required Lenders; (c) the Administrative Agent shall have received counterparts of the Security Agreement duly executed by the Borrower, the Restricted Subsidiaries (other than Foreign CFC Subsidiaries) of the Borrower and the Administrative Agent, together with (i) such Uniform Commercial Code and other Lien search reports with respect to the Borrower and the domestic Restricted Subsidiaries as the Administrative Agent shall require, -14- 15 such reports to reflect no Liens (other than Liens permitted under Section 6.2 of the Credit Agreement, as amended by this Amendment) and to be in all respects satisfactory to the Administrative Agent, (ii) all instruments and certificates representing shares of equity interests owned by or on behalf of the Borrower or any Restricted Subsidiary in any domestic Subsidiary constituting Collateral, (iii) endorsements, instruments of transfer and stock powers, endorsed in blank, with respect to such instruments and certificates and (iv) all other documents, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Administrative Agent to be filed, registered or recorded to create or perfect the Liens intended to be created under the Security Agreement; (d) the Administrative Agent shall have received a Supplement to the Guarantee Agreement duly executed by Hotel Digital Network, Inc. and the Administrative Agent, together with such other documents and certificates as the Administrative Agent shall reasonably require in connection therewith; (e) the Administrative Agent shall have received a certificate, dated the date hereof, of the Secretary or an Assistant Secretary of each Obligor (i) attaching a true and complete copy of the resolutions of its Board of Directors or other authorizing documents and of all documents evidencing all necessary corporate or other action (in form and substance reasonably satisfactory to the Administrative Agent) taken by it to authorize the execution, delivery and performance of this Amendment and the Security Agreement and the transactions contemplated hereby and thereby and (ii) setting forth the incumbency and specimen signature of each officer of each Obligor executing this Amendment, the Security Agreement and the other documents executed in connection herewith or therewith; (f) The Administrative Agent shall have received (i) a certificate, dated the date hereof, of the Secretary or Assistant Secretary of Hotel Digital Network, Inc. (A) attaching a true and complete copy of its certificate or articles of incorporation, by-laws or other analogous organizational documents, including all amendments thereto, as in effect on the date hereof, (B) attaching a true and complete copy of the resolutions of its Board of Directors or other authorizing documents and of all documents evidencing all necessary corporate or other action (in form and substance reasonably satisfactory to the Administrative Agent) taken by it to authorize the execution, delivery and performance of the Supplement to the Guarantee Agreement and the transactions -15- 16 contemplated thereby, (C) attaching a certificate as to its good standing as of a recent date from the Secretary of State of the state of its organization, and (D) setting forth the incumbency and specimen signature of each of its officers executing the Supplement to the Guarantee Agreement and the other documents executed in connection therewith; (g) the Administrative Agent shall have received a favorable opinion of Sherman & Howard L.L.C. addressed to the Administrative Agent and the Lenders in form and substance satisfactory to the Administrative Agent. It is understood that such opinion is being delivered to the Administrative Agent and the Lenders upon the direction of the Borrower and the other Obligors and that the Administrative Agent and the Lenders may and will rely upon such opinion; (h) the Administrative Agent shall have received for the account of the Lenders, payment of the accrued Facility Fees on the amount of the reduction of the Revolving Loan Commitment made pursuant to this Amendment; (i) the Administrative Agent shall have received for the account of each Lender executing and delivering (without condition) this Amendment to the Administrative Agent before 5:00 p.m. (New York City time) on March 27, 2001, an amendment fee equal to 0.250% of such Lender's Revolving Loan Commitment on such date after giving effect to this Amendment; and (j) the Administrative Agent shall have received payment, or confirmation of payment, of all legal fees and expenses of counsel to the Administrative Agent in connection with the Credit Agreement and this Amendment to the extent an invoice has been presented to the Borrower. 28. In all other respects the Credit Agreement and other Loan Documents shall remain in full force and effect. 29. In order to induce the Administrative Agent and the Required Lenders to execute and deliver this Amendment, the Borrower and the other Obligors each (a) certifies that, immediately before and after giving effect to this Amendment, all representations and warranties contained in the Loan Documents to which it is a party shall be true and correct in all respects with the same effect as though such representations and warranties had been made on the date hereof, except as the context otherwise requires or as otherwise permitted by the Loan Documents or this Amendment, (b) certifies that, immediately before and after giving effect to this Amendment, no Default or Event of Default shall exist under the Loan Documents, as amended, and (c) -16- 17 agrees to pay all of the reasonable fees and disbursements of counsel to the Administrative Agent incurred in connection with the preparation, negotiation and closing of this Amendment. 30. Each of the Borrower and the other Obligors (a) reaffirms and admits the validity, enforceability and continuing effect of all Loan Documents to which it is a party, and its obligations thereunder, and (b) agrees and admits that as of the date hereof it has no valid defenses to or offsets against any of its obligations to the Administrative Agent or any Lender under any Loan Document to which it is a party. 31. This Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract. Delivery of an executed signature page to this Amendment by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Amendment. 32. This Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. 33. The parties have caused this Amendment to be duly executed as of the date first written above. -17- 18 ON COMMAND CORPORATION AMENDMENT NO. 1 TO CREDIT AGREEMENT ON COMMAND CORPORATION By: Name: Title: 19 ON COMMAND CORPORATION AMENDMENT NO. 1 TO CREDIT AGREEMENT AGREED AND CONSENTED: ON COMMAND VIDEO CORPORATION ON COMMAND DEVELOPMENT CORPORATION SPECTRADYNE INTERNATIONAL, INC. SPECTRAVISION, INC. HOTEL DIGITAL NETWORK, INC. By: Name: Title: 20 ON COMMAND CORPORATION AMENDMENT NO. 1 TO CREDIT AGREEMENT THE BANK OF NEW YORK, as Issuing Bank and as Administrative Agent By: Name: Title: THE BANK OF NEW YORK COMPANY, INC., as Lender and as Swingline Lender By: Name: Title: 21 ON COMMAND CORPORATION AMENDMENT NO. 1 TO CREDIT AGREEMENT BANK OF AMERICA, N.A. By: Name: Title: 22 ON COMMAND CORPORATION AMENDMENT NO. 1 TO CREDIT AGREEMENT FLEET NATIONAL BANK By: Name: Title: 23 ON COMMAND CORPORATION AMENDMENT NO. 1 TO CREDIT AGREEMENT TORONTO DOMINION (TEXAS), INC. By: Name: Title: 24 ON COMMAND CORPORATION AMENDMENT NO. 1 TO CREDIT AGREEMENT THE INDUSTRIAL BANK OF JAPAN, LIMITED By: Name: Title: 25 ON COMMAND CORPORATION AMENDMENT NO. 1 TO CREDIT AGREEMENT U.S. BANK NATIONAL ASSOCIATION By: Name: Title: 26 ON COMMAND CORPORATION AMENDMENT NO. 1 TO CREDIT AGREEMENT BNP PARIBAS By: Name: Title: By: Name: Title: 27 ON COMMAND CORPORATION AMENDMENT NO. 1 TO CREDIT AGREEMENT CREDIT LYONNAIS NEW YORK BRANCH By: Name: Title: 28 ON COMMAND CORPORATION AMENDMENT NO. 1 TO CREDIT AGREEMENT THE BANK OF NOVA SCOTIA By: Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----